KiwiRail could cut up to 220 jobs as it looks to slash spending in the face of tough trading conditions and the effect of the Christchurch earthquakes.

The company said its infrastructure and engineering (I&E) business had reassessed its operations and budgets and, as a result, planned expenditure of $950 million would be reduced by $200 million over the next three years.

Proposed measures include a cut of between 170 and 220 staff from the 1000 current I&E staff numbers.

I&E general manager Rick van Barneveld said a consultation process with staff was under way and was in its "very early stages". All costs across the I&E business were being assessed.

"While I&E has made solid progress over the last couple of years in upgrading the national and metropolitan rail networks we are now operating in tough trading conditions compounded by the Christchurch earthquakes," van Barneveld said.

"Reducing our network spend over the next three years helps to bring our investment curve back behind our earnings growth. Making these changes to our original plan will help ensure KiwiRail remains on target to achieve financial sustainability by 2020."

KiwiRail made the comments after New Zealand First said it had obtained a consultation document which suggested the company planned to make the job cuts by October. The cuts would save $14m a year in wages.

State-owned Enterprises Minister Tony Ryall said he had been informed KiwiRail was consulting staff over possible staff reductions "as one of a number of measures".

"This is a decision for KiwiRail."

Rail and Maritime Transport Union national president Aubrey Wilkinson said KiwiRail's announcement wasn't expected and the union would try to convince it to make its savings target another way.

"There are other ways one can save costs apart from jobs," he said.

KiwiRail started holding consultation meetings with employees last week, which would end in Invercargill later this week. During those meetings the union would raise alternative ways to save money, Wilkinson said.

These would include possible changes to the management structure, the cost of legal advice, and whether the company could defer its time frame to become self-sufficient.

The Canterbury earthquakes were just one of several factors which have had an economic toll on KiwiRail's performance, Wilkinson said.

Others include the Pike River mining disaster, because KiwiRail was "heavily involved in the movement of cargo", a declining tourism market and the Interislander's Cook Strait ferry Aratere, which hadn't bought as much business to the company as expected.

"The cut back in revenue is putting pressure on KiwiRail to become self-sufficient...which means something significant needs to happen," Wilkinson said.

Earlier this year KiwiRail announced it was selling its Hillside railway engineering workshop in Dunedin, where 130 people are employed.

Last month KiwiRail announced it would restructure and shift its land holdings to a new entity, with a write-down of about $6.7 billion.

Under changes coming into effect in January next year, its freight, infrastructure, passenger and ferry businesses, rolling stock, rail infrastructure, plant and equipment will be transferred to a new state-owned enterprise.

Labour's state-owned enterprises spokesman Clayton Cosgrove said moves to split the company and the proposed job losses were part of the Government's plan to "prep Kiwi Rail for sale".

"You could argue quite clearly that in splitting it out, you've got the good assets and the assets that might not be so good. This is all about stitching this thing up for a sale in the future," he said.

KiwiRail was a difficult infrastructure asset, Cosgrove said, but is "essential to our economy both in terms of competition with road transport for cargo but also accessing products and services for many of our regions."

The Government was "hell bent on flogging off assets", Cosgrove said. "To lose 200 workers is appalling.

- © Fairfax NZ News