Introduction:
Following his journey cycling from Auckland to Christchurch, Principal Consultant Joe Brown considered the opportunities to expand rail services on the South Island. Around the time of his trip, Great Journeys New Zealand announced the new Mainlander rail service connecting Christchurch, Dunedin and Invercargill along the Main South Line. The service is only planned to be operated on a number of dates as a tourism experience, rather than a regular transport link. This, along with the Coastal Pacific train which runs from Picton to Christchurch, means there are now passenger rail services connecting the full length of the South Island, but not in a meaningful way to be a regular transport option.
As a commercial rail engineer the question that came to mind was: is there a business case for a regular passenger rail service connecting the main population centres of the South Island? The track exists so the challenge is around upgrading, scheduling, operating, and financing a passenger proposition that provides value-for-money, quality, and can compete with the current air, car and bus provision.
This Insight focuses on the potential for a regular passenger service on the Main South Line between Christchurch, Dunedin, and Invercargill, three of the four largest cities on the South Island.
History:
New Zealand has a long and storied history of rail travel, beginning on the South Island in the 1860s with the Ferrymead railway in Christchurch. Lines were initially built by regional authorities as short, local routes connecting industrial areas and population centres. In the 1870s the central government expanded the scope of rail to span greater distances. Rail was the first form of transport to unlock overland travel in a country dominated by its tremendous landscape, connecting previously isolated settlements. The South Island’s Main Trunk Line, made up of two sections connecting Picton to Christchurch (Main North Line) and Christchurch to Invercargill via Dunedin (Main South Line), was completed in 1879. Construction of the North Island Main Trunk Line began 6 years later, taking 23 years to build before completion in 1908.
The 1920s was the ‘Golden Age’ of rail in New Zealand, with operator New Zealand Railways (NZR) carrying more than 6 million tonnes of freight and 28 million passengers per year, at a time when the country had a population of just over 1 million. By the 1950s there were over 1,350 railway stations across the country, covering a network spanning more than 3,500 miles of track.[1] Compare this to today where, whilst the annual freight volume is 15.4m tonnes, annual passenger journeys are 23.7m (2024 numbers), and the total network is under 2,400 miles and the lack of growth is clear. [2]
The 1950s saw the role of the car become more central to daily life. Along with the growth of domestic aviation, this turned rail’s consistent growth to that point into a steady decline. In 1993 the railway entered a period of privatisation, initially becoming Tranz Rail, then Toll New Zealand in 2004, before returning to public ownership in 2008 and becoming KiwiRail as it is today.
December 1st, 1970, saw the introduction of the Southerner service, a daily passenger service connecting Christchurch, Dunedin, and Invercargill. The service provided a high-quality single class experience, eventually having a journey time of 5hrs 46 from Christchurch to Dunedin, and 3hrs 28 Dunedin to Invercargill. The capacity varied throughout its life, but it could carry approximately 500 passengers per journey. Following the challenges of privatisation and the growth of car use and airlines, the Southerner’s popularity began to wane during the 1990s, eventually leading to its cancellation in 2002.
Figure 1: 1930s South Island rail network. Hocken collection – taken from Anthonietonnon.com
Global comparators:
Research carried out by The Future is Rail highlights the comparison between Finland and New Zealand, two countries with similar populations but very different approaches to rail.[3] In 2025 the national Finnish operator reported over 218 million passenger journeys, of which 16 million were intercity.compares starkly with New Zealand’s national total of 24.5 million passenger journeys, of which 24.1 million are from Auckland and Wellington Metro services.
However, Finland is largely flat, whereas New Zealand is famously mountainous. How much this impacts the business case for rail is debatable. The majority of New Zealand’s population centres, and especially those in focus here, are along the coast. The rail network was built to avoid the mountains, and the growth of cities and towns followed.
Finland does have significant temperature swings to cope with too, where fleets are specified to operate down to -40˚C. While the winters of Dunedin and Invercargill can get cold, made worse by the famous winds, the record lows sit at -9˚C rather than -50˚C.
Finland also has a major rolling stock manufacturer in Skoda Transtech, employing over 650 staff in Oulu, showing that the social benefit goes beyond connectivity to employment.
So, Finland is showing that a rail industry can thrive in a country with a similar population size and distribution to New Zealand. Let’s apply that mindset to Aotearoa.
A South Island Service
A regular passenger service between Christchurch and Invercargill would connect over 630,000 people, 51% of the South Island population. This is a population that is growing too, at a rate of 1.4% per year just surpassing the North Island at 1.3%.[5] For comparison, the UK is around 1.1%, which is closer to the global average of 0.85%. This growth will need investment in social infrastructure to support it, in areas such as housing, healthcare, and most importantly here, in transport. Figure 2 shows the population distribution of the South Island, highlighting the prevalence around the East and South of the island, between Christchurch, Dunedin, and Invercargill. This pattern fits very nicely with our potential service.
Figure 2: Population distribution across South Island. https://datafinder.stats.govt.nz/data/
The public demand for a rail service in New Zealand has been steadily growing. An online petition in July 2025 calling for the permanent return of the Southerner gained over 12,000 signatures.[6] The inaugural Mainlander service in January sold out its 130 capacity, with the Rail and Tourism Group Chief Executive claiming they could have sold out twice over. While this doesn’t prove there would be sufficient demand for a regular service, it does show that the demand surpasses the current supply.
Compared with other intercity rail projects like Britain’s HS2 or Australia’s HSR line, a service between Christchurch, Dunedin and Invercargill has a significant head start in that the track infrastructure is already in place. Upgrades would be expected for items such as the track, power, and signalling, but the project costs would be far lower than for a greenfield project.
Fleet
The recently procured 5-car BEMU Tūhono fleet on order with Alstom for Greater Wellington Regional Council would be an obvious candidate product to run this service. The fleet is based on Alstom’s Adessia Stream platform, a re-brand of the X’trapolis platform currently in service across the globe but notably for the Australasia region in Melbourne and Perth.
It has been designed to be compatible with NZ infrastructure, and making use of an extension order would greatly reduce the project costs required to procure a new fleet. However, the Battery-Electric traction isn’t suitable for the infrastructure here due to the distances involved and lack of electrification, and realistically a diesel multiple unit would be needed. This shouldn’t be a problem for Alstom as they are already in the process of building a DMU version of the Adessia Stream for Trenes des Norte in Mexico, and for PTA Western Australia.
From a passenger perspective, the interior is mostly suitable for our needs, but it could be optimised with minor modifications. Our South Island service would ideally have an intercity style layout with catering facilities, greater luggage storage, end-body single-leaf doors and greater seating capacity. The current design has mid-body dual leaf doors which enable level boarding at platforms and provide good passenger flow at stations. While not traditional for an intercity service, it really isn’t a major concern and is beneficial for accessibility. Interior vestibule doors could be added to provide an intercity interior feel similar to Greater Anglia’s intercity FLIRT units. Catering on the Tūhono fleet is limited to vending machines which, while adequate for a 2-hour journey, would need to be upgraded to a café/bar for our journey times. This would need some re-design from the manufacturer but could easily be introduced in place of one of the flexible areas.
The fleet has a seating capacity of 220 per 5-car unit which, as we outline in the top-down analysis later on, wouldn’t quite be sufficient for the proposed service. This could be solved by adding additional vehicles to the consist or by re-designing the interior to prioritise seating capacity.
So, we can see that while the Tūhono is not a perfect design for the service, it could be adapted to make it really well suited.
The options for maintaining the fleet on our service are positive and wouldn’t require major capital investment. Hillside workshops in Dunedin provides an ideal heavy maintenance depot for the fleet, and its use for a regular service would unlock additional benefits from the recent $105m redevelopment programme. The new Waltham Mechanical Hub in Christchurch could be used for stabling and light maintenance at the North end of the route. Plenty of space exists at Invercargill station for stabling, although some investment may be required for security and staffing.
Bottom-up analysis
The basic ingredients are there then, but in terms of a regular regional service, what could demand look like? Let’s start by looking at the demand on other transport modes and then consider the opportunity for modal shift.
Car
This is by far the most popular form of transport currently available for our route. An analysis of Waka Kotahi’s average annual daily traffic (AADT) shows that roughly 11,000-16,000 people travel between Christchurch and Dunedin, and 8,000-12,000 between Dunedin and Invercargill on a daily basis.
The journey time by car between Christchurch and Dunedin is roughly 5 hours, and roughly 3 hours for Dunedin to Invercargill. This is similar to the Mainlander times, which are around 5.5hrs for Christchurch-Dunedin and 3.5hrs Dunedin-Invercargill. Car fuel cost would be around $140 for the first leg and $80 for the second leg[1], so rail ticket pricing would need to be relatively low to compete.
How much of this traffic that could be abstracted is difficult to work out. Given the convenience of driving, particularly at the journey ends, and the nature of the journey being point-to-point and the low cost of fuel, rail would need to be more competitive on journey time as well as journey experience to be a viable alternative. Rail is a much more comfortable journey which would enable business travellers to work and students to study for example, but that alone won’t sell tickets.
Evidence from the introduction of high-speed rail in China has shown modal shift numbers from private car journeys between 10-30% depending on regional and economic factors[2]. Research from the US estimates only 3-6% overall and leaning towards the lower end for journeys under 150 miles. Considering the scale of population involved we have taken a conservative estimate for our shift, of 2% for a low conversion, 5% for medium, and 8% for high conversion.
Bus
The bus operator InterCity provides regional bus services across the country, including between Christchurch, Dunedin, and Invercargill. They operate two daily services each way between Christchurch and Dunedin and one between Dunedin and Invercargill, each transporting around 50 passengers.
The superior comfort and quality of a train journey is likely to abstract a large proportion of the bus market, if the pricing is competitive, so we have used estimates of 10% for a low conversion, 30% for medium, and 60% for high conversion.
Air
A sample week of 02 to 08 March 2026 showed 80 flights per week operating between Christchurch and Dunedin, and 84 between Christchurch and Invercargill. The flights are typically operated by an ATR72 with a capacity of 68 seats. Air New Zealand average seat occupancy on domestic and short haul flights for FY25 was approximately 85%.[3] The table below shows the weekly passenger numbers between the three cities.
The ease of travel (Dunedin’s airport is 30 minutes’ drive outside of the centre) and environmental benefits mean that rail would abstract a good level of passengers from air, even in a low conversion scenario. The overall time of travel is an important factor here too. An estimate for the time to travel from the centre of Christchurch to the centre of Dunedin is:
- Christchurch centre to airport: 15-30mins
- Pre-departure arrival: 1 hour
- Flight time: 1 hour
- Disembark and luggage collection: 15-30 mins
- Dunedin airport to centre: 30 mins
- Total: Approx 3.5 hours
The current rail travel time is about 2 hours slower than this, but a faster rail service with increased linespeeds could get much more competitive.
For air abstraction we have used estimates of 10% for a low conversion, 30% for medium, and 60% for high conversion.
Total
Table 3 shows the summary of these numbers on a per week basis. In the low scenario we estimate 620 passengers per week, reaching up to 3,160 for the high scenario.
These numbers are conservative, but if we considered two services per day in each direction it could generate revenue between $3.2m-$16.4m per year.
Top-down analysis:
An analysis from the UK and Australia gives a range for regional/intercity operating costs of $35-55 per train km.[1] As a New Zealand example the Capital Connection between Wellington and Palmerston North operates at $45 per train km. A twice daily Christchurch-Invercargill service would operate ~820,000 train-km per year, leading to an operating cost of $28-45m.
Working backwards from this number we can calculate what subsidy would be required to support the service.
Comparing the high revenue scenario of $16.4m per year and the lowest operating cost (the best-case scenario) gives us a gap of approximately $12m that would need to be subsidised. So how does this subsidy level compare with other transport services in New Zealand and internationally?
Farebox recovery
Based on the operating costs and revenue estimates we’ve calculated the farebox recovery ratio for our service falls in the range of 9-36%. While this feels low, if we compare it with public transport services in the region, we’re in the right ballpark for a viable service.
Our best-case scenario of 36% sits closely with other services across Australia and New Zealand, supporting the idea that this could be a feasible service, if it is delivered successfully.
Wider benefits
One of rail’s greatest strengths is its environmental credentials, and this is particularly relevant for the South Island. New Zealand has committed to net zero greenhouse gas (GHG) emissions by 2050, in line with the IPCC global targets, but its short-term policies and targets are unlikely to achieve this. According to the Ministry of Transport, transport accounts for 20% of New Zealand’s GHG emissions and the country currently ranks 4th in the world for per-capita domestic aviation emissions[10]. Rail produces over 85% less carbon per kilometre than domestic aviation, and almost 80% less than diesel cars.
As the population grows the pressure on State Highway 1, the main highway through the spine of NZ, will grow to a point where it needs investment. Taking up to 20% of passenger traffic off the road and increasing freight modal shift will reduce the burden on the road, reduce congestion, reduce the need for investment, increase road safety, and reduce emissions in a country that prides itself on environmental protection.
The social benefits beyond reducing road traffic are clear. This service would directly create jobs across the region in the shape of drivers, maintainers, operating staff, and administration and management. Opportunities for local manufacturing businesses in the supply chain would be created. It would widen job access by better connecting towns outside the main hubs of Christchurch and Dunedin. Regional railways provide wider community benefits by providing travel options to isolated populations, non-workers such as pensioners, reducing social exclusion.
Summary
The demand currently being seen for a rail service connecting the major hubs of the South Island is supported by the initial analysis carried out here, which shows that there is potentially a business case that could compete with other public transport services in New Zealand. To make it a success would require a high level of abstraction from the competing transport modes, which would require a wider transport network overhaul beyond just a new service introduction.
New Zealand’s modern rail culture is relatively small due to the prevalence of cars and the industry’s general focus on freight, but this was a country built on rail, so the potential is there. It would take some time to change the mindset of the general population to consider rail as a regular mode of intercity transport. Additional measures would need to be introduced, such as the Christchurch Mass Rapid Transit project or a similar initiative for Dunedin, to provide effective door to door connectivity.
The full value of rail connectivity is difficult to quantify when looked at through a purely financial lens. Social inclusion, job creation, emissions reduction, increase in road safety; these are all valuable to the public and to national and local governments. There is a business case here, but further work needs to be done to put a value on these benefits and prove that passenger rail is viable on the South Island in the 21st century.
[1] Neill Atkinson, Railways, Te Ara – the Encyclopedia of New Zealand, https://teara.govt.nz/en/railways (accessed 19 February 2026).
https://www.kiwirail.co.nz/communities/rail-heritage/rail-history/
[2] ARA, The benefit of Rail to New Zealand, August 2024
[3] Callister, Paul & Stepanek, Petr. (2025). Low emission long distance travel in Finland and New Zealand. Accessed at: https://www.researchgate.net/publication/396895368_Low_emission_long_distance_travel_in_Finland_and_New_Zealand
[4] VR Annual report 2025, accessed at: https://2025.vrgroupraportti.fi/en/
[5] https://www.stats.govt.nz/news/north-island-population-passes-4-million-while-south-island-population-grows-faster/
[6] https://www.odt.co.nz/news/dunedin/support-grows-return-southerner
[7] Based on typical fuel economy of 8.5L/100km and average fuel price of $2.66/litre
[8] Hu, H., Shen, J., Gu, H. et al. Evolution of inter-city transportation modes in China from cars to alternatives. npj. Sustain. Mobil. Transp. 2, 25 (2025). https://doi.org/10.1038/s44333-025-00044-6
[9] https://www.listcorp.com/asx/aiz/air-new-zealand-limited/news/air-new-zealand-investor-update-op-stats-november-2025-3295553.html
[10] These numbers were generated by a Copilot analysis of benchmark information, and detailed verification would be required for further work.
[11] Australian information sourced from: Urban public transport: updated trends, Bureau of Infrastructure, Transport and Regional Economics, accessed at: http://www.bitre.gov.au/publications/2014/files/is_059.pdf
New Zealand information sourced from: The Future is Rail, Preventing another Te Huia extinction, 28 January 2026, accessed at: https://thefutureisrail.org/reports