Interislander could reduce its business to two ships or provide only a seasonal service within two years to cut costs, KiwiRail chief executive Jim Quinn says.
Mr Quinn spoke frankly last week of the company's woes in a staff newsletter, obtained by the Marlborough Express.
The Cook Strait freight and passenger transport service issued a lock-out notice to staff on November 16, disrupting all sailings from December 1 to 8.
The action was in response to a notice of strike action issued on the same day from the Aviation and Marine Engineers Association and the New Zealand Merchant Service Guild which represent 70 engineers and 54 deck officers against proposed pay cuts. Union members are to vote on a new proposal from KiwiRail today. If accepted, the strike will not go ahead.
In the staff newsletter, Mr Quinn says some Merchant Service Guild and Marine Engineers Association staff had received pay increases of between 43 per cent and 51 per cent since 2004. "If we continue as we are, Interislander will be heading into loss-making territory within two years."
Rates for carrying freight had dropped by 40 per cent over the last decade and foot passenger traffic declined 42 per cent.
"These are only options at the moment. But regardless of which side you are on, options like reducing our operations to two ships or operating on a seasonal basis, don't look appealing."
- The Marlborough Express