KiwiRail has confirmed it is mothballing the Napier-Gisborne rail line, saying the cost of repairing and maintaining it is too high and it's not making enough money anyway.
Freight rail services on the line have been suspended since serious storm damage to the northern section of it in March.
KiwiRail chief executive Jim Quinn says that alone would cost $4 million to fix. He says the line lost $2.4 million last year and a review has shown that keeping it going would lose the company between $5 million and $8 million a year.
Mr Quinn says it's unclear what impact the decision will have on staff numbers but a small number of job losses is likely.
The mothballing was flagged in a business case published on KiwiRail's website a month ago, in which the company said neither the full line nor the southern section from Napier to Wairoa would be commercially viable for the foreseeable future.
It denied at the time that mothballing means closure because, it said, it retains ownership and can carry out minimal maintenance.
More passing lanes planned
Meanwhile, the Government has announced it will spend $4 million on installing more passing lanes on State Highway 2 to speed up traffic between Gisborne and Napier.
Napier mayor Barbara Arnott says people would still prefer the money to be spent on rail rather than road and the chair of the Hawke's Bay Regional Council's transport committee, Alan Dick, says the decision is short-sighted.
With quick restoration, Mr Dick says, the line could have been viable by this summer. He says the two cities are export-driven and need efficient, competitive modes of transport.
The general manager of LeaderBrand Produce, Richard Burke, says KiwiRail's decision is the worst possible outcome.
Mr Burke says rail is more efficient than road and he's disappointed the line's full potential is not going to be realised.
Closure limits options
Gisborne based company Ovation New Zealand exports chilled lamb product, and while it moves stock by truck, it says it wanted to use the rail line, as it would have been a better option financially.
Heinz Watties New Zealand says it also wanted to use the rail line to shift products.
Transport company Mainfreight says the closure is very disappointing and hopes it doesn't signal the beginning of the end for other smaller rail routes.