Introduction

The privatization of South Island to North Island transport, particularly ferry services, has been a significant issue in New Zealand's transport industry. Prior to the 1980s, New Zealand Railways (NZ Railways) held a monopoly over key ferry services, effectively controlling inter-island trade. This monopoly ended in 1987 when railway deregulation was introduced. This article examines the challenges and implications of this privatization process and how it unfolded.

Regulatory Environment and Entry Barriers

Under Roger Douglas's leadership in 1987, the legal monopoly held by NZ Railways protecting it from competition from long-haul trucking was revoked. While this opened the market for trucking services, significant barriers remained. The continuing existence of the regular inter-island rail alternative also limited the potential for competitive rivalry from coastal shipping. However, by the mid-1990s, these barriers began to weaken.

Freightways' Entry into the Market

In 1992, Freightways (then known as Otorohanga Transport Ltd, OTL) acquired a small RoRo (roll-on/roll-off) vessel called Straitsman 1481 GT. This was a pivotal moment, as Freightways used this vessel to transport livestock from the South to the North Island, fulfilling the feed requirements of North Island abattoirs. This marked the first major entrant into the inter-island transport market, but it was not until 2001 that this venture expanded significantly.

Expansion and Competitor Dominance

By 2001, Freightways had acquired two more vessels and had established a RoRo truck ferry service from Nelson to Wellington. In 2002, this service was further expanded to incorporate a ROPAX (ro-ro/passenger) service, later renamed Bluebridge. Despite this expansion, the rail ferry service, now known as Interislander, still dominated the market, but it now faced a reduced monopoly with two significant competitors.

Challenges to Coastal Shipping and Private Entrants

Several attempts were made to challenge the existing monopoly in the coastal shipping sector. For instance, Pacifica Shipping attempted to launch a rival RoRo truck ferry service over longer distances, from Wellington to Christchurch Port Lyttleton or from Auckland's Onehunga Wharf to Lyttleton. However, these efforts were unsuccessful due to the slow speed of the vessels and the rough seas in the region. Eventually, Pacifica Shipping shifted its focus to pure container feeder services.

Efficiency and Logistics Challenges

The transportation of freight between the two islands presents unique challenges. Goods heading south are typically road-freighted to the coast and then transported as break bulk parcels or pallets. Conversely, north-bound exports often use containerized transshipment via Tauranga. This mismatch in truck types and consolidation methods results in inefficiencies, such as trucks coming back north empty on ferries, as well as empty containers returning south, creating a significant logistical challenge.

Regulatory and Economic Impacts

The deregulation of coast-hugging rights (cabotage) allowed visiting international vessels to offer ad-hoc coastal freight services, effectively undermining traditional domestic transport monopolies. Additionally, the introduction of larger container vessels (VLCCs) and the need for deeper harbor channels (over 14 meters) have placed further pressure on the existing inter-island freight services. As the industry becomes more constrained, the unique geographical challenges of Cook Strait continue to shape transport policies and practices.

Conclusion

The privatization of New Zealand's transport industry, particularly in the inter-island sector, has been a complex process fraught with challenges. While deregulation opened the market, it also created new inefficiencies and logistical hurdles. These issues underscore the need for ongoing regulatory adjustments and innovative solutions to address the unique geographies and economic dynamics of the region.