THE RAILWAYS

Southland Times, Issue 22158, 28 October 1933, Page 10

THE RAILWAYS

REPORT OF BOARD A DIFFICULT YEAR SATISFACTORY RESULTS The annual report of the New Zealand Railways Board, which was presented to the House of Representatives yesterday, states, inter alia:— The Board has to record with the greatest regret the death, on November 1, 1932, of Mr P. G. Roussell, General Manager of Railways. The Board had found Mr Roussell to be a most painstaking and capable officer, and coming, as his death did, without warning, it was all the more severely felt by members of the Board. Mr G. H. Mackley, previously Assistant General Manager, was appointed to the position of General Manager, while Mr E. Casey, Chief Engineer, was promoted to the position of Assistant General Manager.

The past year has presented many difficulties in connection with the Department’s operations, the principal factor, of course, being the prevailing depression in trade and industry. Notwithstanding this, however, the results obtained from the year’s operations may be regarded as satisfactory when compared with the previous year’s figures. The revenue for the year was £6,034,403, as compared with £6,508,948 in the previous year, a decrease of £474,545. On the other hand, however, the expenditure was reduced to £5,183,859, as compared with £5,670,955 for the previous year, a decrease of £487,096. The satisfactory result on the expenditure side was achieved by the statutory reductions in salaries and wages and by a systematic and careful pursuit of every practical means of economy.

The net revenue for the year was £850,544, as compared with £837,993 for the previous year, an increase of £12,551. The net revenue has increased progressively over the last two years to an aggregate extent of £161,817, equal to 23.50 per cent.

The improvement in the net results achieved over the last two years has been secured chiefly by the reductions which have been obtained in the expenditure. There is a definite limit to which this process can go, and having regard to what has been already done in this direction it will be recognized that further reductions in expenditure will be progressively difficult to obtain. The board will continue the policy of keeping costs down to the lowest figure compatible with a reasonable standard of service to the public and with due regard to the legitimate interests of its large staff. Further comment on the finances of the Department will be made later in this report under appropriate headings.

Branch Lines. In its report for last year the Board stated that its policy was to take action in the direction of closing nonpaying branch lines without the most patient consideration, and that it would aim to make its decision in each case in the light of the fullest information that could be obtained as to the traffic possibilities of each line. The Board did not, however, delay the bringing into operation of economies that could be made in the working of the branch lines, and it took every practical step to stimulate traffic over the lines. The Board is now able to report that its action has resulted in a certain measure of improvement in the net results obtained from the operation of several of the branch lines during the past year as compared with the previous year, and to that extent its policy has been justified. The grand total of revenue from the branch lines showed a decline of £B,427 on the previous year’s figures. This represents a drop of 2.73 per cent, in the branch-line revenue as compared with a drop of 7.29 per cent, in the revenue for the whole system. The total of expenditure on the branch lines showed a reduction of £65,148, or a 14.03-per-cent. drop, as compared with a drop in expenditure over the whole system of 8.59 per cent. The operating loss on branch lines was £98,997 which, with interest £412,125 added, made a total loss of £512,122. The main-line revenue from traffic to and from the branch lines, however, amounted to £418,988, or in other words, the main-line revenue from branch-line traffic was £319,991 greater than the operating loss on the branch lines. It is not reasonable, however, to assume that the whole of this main-line revenue would be lost to the Department in respect, of any such line that might be closed, for, no doubt, the main line would hold on its own section a proportion of it. In the consideration of this problem the proportion that would be retained can only be assessed according to the best judgment of the Board as applied to the circumstances of each case, and the Board makes due allowance for this factor.

The Board has felt that the improvements which have been achieved in the net results from the operation of the branch lines still justify the policy which the Board adopted of taking no precipitate action on this question, but of working patiently along the lines of endeavouring to secure the best possible net results before coming to judgments regarding the closing of lines. There are still some lines as to which there is a prima facie case for closing but for the reason stated, as well as for the reason that the ultimate development of competitive road traffic as it will be affected by the operation of the Transport Licensing Act has a material bearing on practically every case, the Board feels that some further patience might well be exercised in the handling of the branch-line situation. The development of competitive road traffic is very intimately connected with the operation of the Licensing Authorities which have been constituted under the Transport Licensing Act, 1931, and which have now commenced to function. At the risk of some repetition the Board cannot too strongly emphasize the responsibility which rests with the people in the various localities concerned to interest themselves in the transport problem, because the Board must inevitably be largely guided in its decision regarding the branch lines by the attitude of the people themselves, and the Board must take as affording very strong evidence of the sincerity of their desire to justify the retention of their branch line the steps which the people take in connection with the licensing of road services that are competitive with the branch lines and the support which they accord their line.

Co-ordination of Transport As mentioned in the last report of the Board, the Licensing Authorities set up under the Act had commenced to function with regard to passengerservices just prior to the close of the last financial year. A large number of applications for licenses has been heard and adjudicated upon by the various Licensing Authorities, and wherever the circumstances were appropriate the Board' has been represented at the public licensing hearings, and has caused to be placed before the Licensing Authorities full information regarding. railway timq«.

tables, fares, and facilities, as well as other information likely to be of value in assisting the authorities to come to proper decisions. The majority of applications dealt with in 1932 were of the automatic class—that is to say, the operators having been able to satisfy the Licensing Authorities that their services had been continuously carried on since some date not later than April 1, 1931, a license could not be refused, and was granted automatically pursuant, to the provision in that behalf contained in the Act. Accordingly, the consideration of these services on their merits could not take place until the second licensing period, which in the North Island commenced in March, 1933, and in the South Island in September, 1933. That does not mean that the public or the operators did not derive any benefit from the operation of the Act during the first licensing period. Some measure of stabilization in the transport industry was obtained by reason of the fact that new services could not be commenced unless . the Licensing Authorities were satisfied that the proposed services were necessary or desirable in the public interest. Licensing Authorities found it desirable in the public interest to alter the time-tables of road services in some cases to prevent unnecessary overlapping of services, whether of road or rail. With the same' object they, in some cases, eliminated certain trips, while in a number of instances the fares to be charged by road operators have been raised slightly so that their services might be placed upon a somewhat fairer competing basis with the railways or with other road services. For example, the shorter-distance road services with frequent time-tables have generally been afforded fare-protection against long-distance services. The reason for this is, of course, that the short-dis-tance service is recognized as essential for the needs of the district to which its activities are confined, whereas the service rendered to that district by the long-distance operator is merely incidental to his main object of linking distant points. Similarly, where the essentiality of the railway has been recognized, some degree of protection in the matter of fares has been afforded in a number of cases.

Duplication Opposed.

The first licenses to be issued in the North Island were granted for a period of twelve months, while those in the South Island were granted for a period of eighteen months. This was to enable the North Island hearings with respect to licenses for the second licensing year to be completed before those for the South Island came up for consideration. A number of appeals to the Transport Appeal Board were made from the decisions of the Licensing Authorities, some being lodged by road operators and others by the Railways Board. In very few cases did the Board press for the entire elimination of road services running parallel with the railway. The Board’s desire with respect to the regulation and control of road transport is to be reasonable and broad in its representations, while at the same time contending firmly for the proper application of the principles of the Act; and its representatives before the Licensing Authorities have acted in accordance with such desire. The Board, as it conceives it to have been its duty, firmly opposed the running of roadservice trips that were duplicating ana therefore in wasteful competition with passenger and express trains or with existing co-ordinated road and rail services, and, in essentials, its attitude has been sustained by the Transport Appeal Board. In these appeals every phase of the public need was examined, including the requirements of intermediate passengers as well as of through passengers and those travelling by connected services beyond the termini of the services being considered. Where road-service trips were eliminated it was shown beyond all question that the quantum of public convenience and necessity associated with those trips was small, while, on the other hand, a preponderating degree of service was being given by the trains or other road services which the disputed trips duplicated. It is interesting to note that in giving its decision upon an appeal made by the board against a decision of a Licensing Authority which authorized the running of certain road-service trips at times approximating those of fast passenger and express trains the Transport Appeal Board said:—

“It is unfortunate that there has been a tendency in this country to develop motor-transport services along routes paralleling the railway routes, instead of along routes not servied by the railways. In our opinion, there is room for commercial motor services, and we are satisfied that the purpose of the Legislature, as expressed in the Act, is to define their sphere, and so to bring about the elimination of wasteful, destructive, and uneconomic competition. Broadly, the primary functions of motor services are to serve areas not served by a railway and to feed the railways; but they have a proper function also in supplementing (but not supplanting) a railway service that is not fully adequate, and in extreme cases, in duplicating an entirely inadequate and inefficient railway service, even if such duplication may amount to supplanting it. Question Of Necessity.

“We think that the words ‘in the public interest’ are intended to mean, in the broadest sense, a balance of benefit in favour of the public. If a railway service is completely adequate for the reasonable needs of a particular district, the licensing of a motor passenger-service is obviously unnecessary. If the railway service is not adequate, the licensing authority must consider whether the reasonable necessity or desirability of a supplementary motor passenger-service is established. In doing so it should weigh the needs of the districts to be served and the convenience of the travelling public against the probable loss in public revenue and a possible consequent reduction in the existing railway facilities. The considerations involved when a license for a motor passenger-service is applied for in respect of a route already served, or substantially served, by a railway do not differ very materially from the considerations involved when an application for a license for a second motor passenger-service is made in respect of a route on which an existing licensed motor passenger-service is operating. Does the existing service cope adequately and efficiently with the traffic? Does it meet the reason-, able requirements of the public? The principal difference is in respect of the weight to be given to the relative necessity of the railway service for the transport of peak loadings, and to the possible effect that road competition may have in reducing essential railway facilities not only in the particular district affected, but in adjoining districts. We have not referred, except in passing, to the provision that a Licensing Authority is to have regard to the needs of the district or districts as a whole in relation to passenger transport. We take that to mean that an area is to be considered as a whole, and that the effect of the granting of a pas-senger-service license, to meet the needs of one part of the area, on the other services in the area, must be carefully weighed.” Process of Adjustment ,

A point the board wishes to bring out is that when decisions are made by the Transport Licensing Authorities it becomes the board’s duty to adjust the business of the railways as far as practicable to those decisions, and ti#Jg9C!eM of has inp-.

plications which the board feels may may not be fully understood or appreciated. In the case of the suburban traffic in the Auckland area, for instance, the board finds that by the duplication of the transport services by railways and road vehicles the traffic has largely fallen in the way that the road services are catering for and attracting the higher-fare traffic while the railways are being left with the lower-fare traffic. Investigations which the board has made show that with the traffic divided as at present if the board could cease entirely to cater for suburban traffic in the Auckland area a substantial improvement in the railway financial position could be made. There is, however grave difficulty in the way of making such an adjustment. It would not be difficult to visualize the disturbance that would result from a decision of the Railway Board to cease to cater for the suburban traffic, but it can be doubted whether it is appreciated that one type of transport—namely, the road service—mainly has the profitable traffic while the other type of transport—namely, the rail,ways—is expected to cater for the traffic which involves losses. This is an apt illustration of a point connected with the transport industry that is too often overlooked —namely, that it is an economic impossibility to divide transport into water-tight compartments. Some portions of transport service that are considered to be essential to the community, such as the transport of workers between the suburbs and the cities, cannot be directly remunerative to the transport operator. The operator should, however, by having opportunities of making profits on the other types of traffic to counterbalance his particular losses, be able, on the total, to obtain such a remuneration as to justify his continuing to operate. Especially with a publicly-owned service, discontinuance of operation, in circumstances analogous to those of the workers' suburban traffic, scarcely enters into the public mind as a practical possibility. The object of the board in its present comment is to bring out the significance of these facts in relation to the service-value of the railways, and to the financial results which the board has bean able to achieve during the past year and which it may be able to achieve in the years to come. Settlement Of Differences.

In concluding its comment regarding the Transport Licensing Act the Board desires to reaffirm its belief that the principle of judicial action to settle the differences within the transport industry and in the relationship of the industry to the public is the only one that holds out any reasonable hope of attaining the desired objective—namely, the stabilization of the industry on an economic basis. Accordingly, the board holds that to the extent that the Licensing Authorities are allowed to and do function in a judicial way progress will be maintained and that the contrary proposition holds with equal force. The board has, in its approach to the work in which the railways have been involved in connection with the operation of the Transport Licensing Act, steadily pursued the policy of giving every possible assistance to the Licensing Authorities to develop a set of principles, founded on the Act, which will be logical and consistent. In that way only can disputes be prevented, for it is plain that, as with law in general, the best preventive of disputes will be to make it possible for those involved themselves to know the principles on which the judicial authorities will act, thus enabling the parties to really make their own decisions without the necessity of resorting to the tribunals. The board is deeply imbued with the absolute necessity, while the tribunals are maintained as purely judicial and function accordingly, of respecting and endeavouring to enhance the judicial status and dignity of the tribunals. In the pursuit of this policy the board has steadfastly refrained from indulging in anything savouring of propaganda directed towards influencing the tribunals in their decisions either in a particular case then under notice or in any subsequent action the tribunals might take. The board has noted with regret that this policy has not been universally pursued either in the industry itself or by others who may, directly or indirectly, have interests affected by decisons of the tribunals. The board cannot too strongly deprecate such action. It believes that it is not calculated to expedite in any way the attainment of the objective which was in view when the Act was passed, and it thinks that any such line of action as has been described herein is out of place and to be as strictly avoided as any attempt that may be made by propaganda or other extra-judicial action would be if directed to the functioning of the Supreme Court or any of the other established legal tribunals of the Dominion. The board desires to repeat and cannot too much emphasize the opinion that, to the extent that the Transport Act is based on the principle of judicial action, no better method can be devised for meeting the problem which the Act was designed to meet; and in all the comments that the board has heard in criticism of the Act it has not yet found any suggestion of any better method by which the same objective might be reached.

Goods Services. The licensing of goods-services has now been taken in hand by the Licensing Authorities and a large number of applications has already been dealt with. Of these, many are for services which feed the railways, but there are many purely competitive services. As in the case of the passenger-services, provision has been made in the regulations for the grant of a license automatically to certain operators—namely, to those who have been operating services continuously since the passing of the Act. Accordingly, the task of the Licensing Authorities is a comparatively simple one for the first year. The types of license which may be issued in respect of goods-services are (a) a route license—i.e., point to point —generally granted with the right to deviate up to a specified distance; (b) an area license—i.e., the right to run anywhere within the area specified in the license.

Generally speaking, it may be said that the licenses so far granted are such as will enable operators to carry on substantially the same service as they have regularly carried on during the period November 11, 1931, to May 31, 1933, but, as in the case of pas-senger-services, the test of justification for the continued running of these services will be applied before licenses are granted for the goods-licensing year commencing on June 1, 1934. Commercial Activities.

The year so far as the activities of the commercial branch were concerned has, unfortunately, not been marked by any amelioration of the adverse conditions which have been experienced throughout the. Dominion during recent years. The further decline in the overseas market value of the principal primary products of the Dominion has had a restrictive effect on the internal trade of the Dominion, which, in turn, has had an adverse reflection on the volume of traffic available for transport. This condition has naturally resulted in a stimulation of effort on the part of the various transport services with the object of securing the. maximum share of the business offering, and it is in this connection that the organization of the commercial branch, by maintaining a close contact with customers and potential customers, has been able to render valuable service to the department. ' Faced jyith the necessity fpr.

reducing costs in order to offset losses brought about by the falling-off in their normal business, there has been evidence of a growing tendency on the part of transport users to patronize competitive services for their higher-rated goods and at the same time avail themselves of the benefit of the cheaper railway rates for their low-grade traffic. Based as it is on the wide classification of goods under scheduled rates, so regulated as to best facilitate the movement of the goods, the railway tariff is peculiarly susceptible to exploitation of this nature. The principle underlying this method of charging is that each commodity is classified according to its capacity to bear the rate allotted to it, and it is only by reason of the fact that proportionately higher revenue is derived from the transport of commodities in the higher classes that lower-rated commodities such as fertilizers, coal, etc., can be accorded the benefit of the cheaper rates which are necessary to promote their movement. The trades and industries of the Dominion have to a substantial degree been assisted in their development by this system of assessing transport costs, and there is no doubt that the national interests would be best served by adherence to this system. It is, however, obvious that the survival of such a method of charging is dependent on the railway receiving the transport of a reasonable proportion of the higher-rated goods, and to the extent that these are diverted to alternative forms of transport so is the capacity of the board to continue to grant cheap rates for the lowerrated goods lessened. There are many industries in the Dominion which are dependent for their existence on cheap transport costs, and if the shrinkage of railway revenue due to the above causes places the board in such a position that it cannot continue to grant these cheap rates it will inevitably follow that in many cases goods will cease to move and the industries engaged in their production will go out of existence.

Road Competition.

Notwithstanding the efforts which have been made in the direction of meeting the activities of competitive services by instituting reduced rates for general merchandise traffic in certain areas, it is known that some volume of this class of traffic has been diverted from the rail to road transport. To meet these conditions provision has been made in some localities for the conveyance of goods in truck loads at a flat rate per truck. The arrangement is subject to a minimum number of trucks being utilized each week. All loading and unloading to and from railway wagons is undertaken by the owners of the goods, and the service performed by the Department is merely one of haulage from point to point. Whilst the system has not been sufficiently long in operation to enable any definite conclusion to be drawn as to its effectiveness in eliminating wasteful competition, the experience so far gained indicates that it has much in its favour.

Despite the efforts made by competitive services to secure the transport of dairy produce, it is pleasing to record that the Department has been successful in retaining the bulk of this traffic. The total tonnage of butter and cheese handled during the year under review was 241,703 tons, representing an increase of 32,196 tons as compared with the previous year.

The ability of road operators to successfully compete with the railway for the conveyance of general merchandise from towns to country districts is contingent largely on their success in securing suitable back-loading, and experience has shown that they are generally prepared to accept traffic at very, low rates rather than be forced to run their vehicles empty on the return journey. In such circumstances dairy companies in many areas served by rail have at their disposal the alternative of road transport at rates which, in ordinary circumstances, must be regarded as quite uneconomic. The serious decline in the market values of butter and cheese has impelled a number of these companies to seek means of reducing transport costs, and in • some cases it has been necessary to adjust our rates to meet them. This, it should be noted, is not a matter of the board “cutting rates,” but in these cases is a policy of meeting the rates of competitors in order to retain the business of the Department’s customers, thereby holding traffic that had previously been carried by rail.

Wool Traffic.

Somewhat similar conditions apply in connection with wool traffic. During recent years competition from road services for the conveyance of wool has developed in intensity in practically all districts throughout the Dominion, and special efforts have been made to maintain our position in this field. Prior to the commencement of last season an intensive canvass of wool-growers was undertaken and where necessary competitive rates for the complete service of transport from wool-shed to woolstore were quoted. A review of the traffic handled during the year discloses an increase of 533 tons, or 2,665 bales, as compared with the previous year. The question of providing door to door services has engaged the attention of the board, and the board has already gone to considerable lengths in the direction of improving its services in this connection. The policy of undertaking the delivery of rail-borne goods to consignees’ premises in certain localities was decided on some years ago and since that time the-system has been extended where the circumstances have justified the provision of this service. In all, a total of forty-eight towns now enjoy this facility. The collection of parcels traffic from business houses within a defined area, originally instituted in Wellington and later extended to Auckland, has been further extended to Christchurch where the system is operating successfully. . The handling of household removals including, in addition to transport by rail (and sea when necessary) packing, cartage to and from rail, and unpacking, has also been provided for, and a large number of transactions of this nature are being deal with. During the year the Government arranged with the board to reduce the freight charges on certain classes of primary produce by 15 per cent., the Revenue Account of the Department being reimbursed by the Government from the Consolidated Fund.

Financial.

On March 31, 1933, the capital invested in the lines open for traffic, including the steamers and plant on Lake Wakatipu and other subsidiary services, was £51,480,949, as compared with £51,424,883 on March 31, 1932. The additions to the capital account totalled £390,996, and comprised maintenance branch, £72,878, chiefly in bridge strengthening and reconstruction; signals branch, £20,750, in new telephone lines and extension of train control; Public Works Department, £118,042, expended on Tawa Flat deviation; and £179,326, expended on the

construction of new rolling-stock and workshop machinery. During the year loan-moneys amounting to £334,930 were repaid to the capital account, of which amount £323,423 was provided from revenue on account of depreciation. The net addition to capital for the year was therefore £56,066. The financial results of the operations for the year ended March 31, 1933, were as follows:— Year Year ended ended March 31, March 31, Variation. 1933. 1932. Gross-rev- £ £ £ enue 6,034,403 6,508,948 —474,545 Gross expenditure 5,183,859 5,670,955 —487,096 Net revenue 850,544 837,993 + 12,551 Interest charges 2,230,655 2,221,465 + 9,190 Excess of interest charges over net revenue 1,380,111 1,383,472 — 3,361 The gross earnings for the year were £6,034,403, a decrease of £474,545 (7.29 per cent.) compared with the previous year, and a decrease of £1,537,134 (20.30 per cent.) compared with the year ended March 31,1931. The shrinkage of revenue was due to the continuance of the depression in trade and industry. The gross expenditure totalled £5,183,859, r decrease of £487,096 (8.59 per cent.) compared with the previous year, and a decrease of £1,698,951 (24.68 per cent.) compared with the year ended March 31, 1931. * Interest charges totalled £2,230,655, an increase of £9,190 compared with the previous year. ononooK During the year the sum of £229,835 was charged against revenue for renewals, and the amount expended from this fund for electric equipment, overhead lines, and track renewals was £138,779. The credit balance at March 31, 1933, in the renewals fund was £565,562’. , During the year the sum of £470,405 was charged against revenue on account of depreciation.