Aurizon selling intermodal business to PN/Linfox

 
  Fatty Assistant Commissioner

Location: Melbourne
Aurizon have announced today that they are selling their Queensland intermodal business to a PN/Linfox consortium, selling Acacia Ridge to PN and shutting down their interstate intermodal business.

The sale includes the transfer of staff and rollingstock. It will be interesting what rollingstock goes with the sale. Rumour is that all the 2800s are to go. That would make life easy for PN who will need locos for the Burdekin sugar next year.

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  1771D Junior Train Controller

Sounds like more trucks on the road to me.
  Fatty Assistant Commissioner

Location: Melbourne
Aurizon have announced today that they are selling their Queensland intermodal business to a PN/Linfox consortium, selling Acacia Ridge to PN and shutting down their interstate intermodal business.

The sale includes the transfer of staff and rollingstock. It will be interesting what rollingstock goes with the sale. Rumour is that all the 2800s are to go. That would make life easy for PN who will need locos for the Burdekin sugar next year.
Fatty

Decision on Aurizon intermodal business announced todayThis morning we have released our FY2017 results to the market including an announcement on the future of our Intermodal business.
Details of today’s announcement related to Intermodal are:
       Aurizon has signed a binding agreement to sell its Queensland Intermodal business to a consortium of Linfox and Pacific National. The transaction includes the transfer of approximately 350 employee positions as well as assets and commercial and operational arrangements to the Linfox and Pacific National consortium.
       Separately Aurizon has signed a binding agreement with Pacific National to sell its Acacia Ridge Intermodal Terminal. That transaction includes the transfer of approximately 30 employee positions, as well as assets and commercial and operational arrangements.  It is also subject to approval by the Australian Competition & Consumer Commission and the Foreign Investment & Review Board.
       Aurizon is aiming to finalise the transactions by the end of FY2018, subject to approval from the Australian Competition & Consumer Commission and approval from the Foreign Investment & Review Board.
       Approximately 350 Aurizon employees in Queensland Intermodal will transfer to the Pacific National and Linfox consortium, and 30 employees at the Acacia Ridge terminal will transfer to Pacific National. Related rollingstock and assets will transfer with the business as an ongoing concern. Consultation will commence today with affected employees.
       Aurizon will exit the Intermodal market, and close the remainder of its national intermodal business outside of Queensland. Aurizon will cascade rollingstock to other parts of its business where appropriate.
       A consultation process, including respective redundancy and entitlements provisions, will commence with the 250 employees impacted by the closure of the interstate business. There may be opportunities for redeployment.
As you are aware we have been looking closely at the future of our Intermodal business as part of our Freight Review.
Unfortunately, over the years we have continued to see significant financial losses in this part of the business.
The reality is that in a market serviced by a number of well-established transport providers, we have been unsuccessful in establishing a significant scale and customer base to make it profitable.
Exiting the Intermodal business is clearly not a decision we have taken lightly but one we had to make if we are to provide certainty and value for our shareholders.
There is now a clear plan for the divestment and closure of Intermodal, and looking forward, our Company will focus on opportunities and market segments that best fit with our core strengths and capabilities.
We understand these decisions will be difficult for affected employees and local leadership who have worked very hard to create a viable business.
I also acknowledge the efforts of Andy Jakab and his senior leadership team in driving business improvements in recent months. They will guide the transition for the Queensland and Acacia Ridge sale and the interstate closure, with a focus on supporting employees and maintaining safety and customer service levels.
Andy and his team will be communicating in more detail with affected employees in Intermodal today and over coming months as we work through the process.

  james.au Chief Commissioner

Location: Sydney, NSW
Lets see what the ACCC has to say about PN being involved.....
  Fatty Assistant Commissioner

Location: Melbourne
Sounds like more trucks on the road to me.
1771D
I don't think so. Linfox are a big customer of both Aurizon and PN. I think PN just pushed the home player out of business in less than 15 years.
  Fatty Assistant Commissioner

Location: Melbourne
Lets see what the ACCC has to say about PN being involved.....
james.au
That's exactly what I thought. I don't know if they'll allow PN a monopoly.
  james.au Chief Commissioner

Location: Sydney, NSW
Lets see what the ACCC has to say about PN being involved.....
That's exactly what I thought. I don't know if they'll allow PN a monopoly.
Fatty

Could Linfox become a rail operator in their own right?



Also, the withdrawal from the rest of the interstate means that SCT MB/BM services will probably get a boost in their bookings.
  x31 Chief Commissioner

Location: gallifrey
Story not on the Aurizon website.
  BrentonGolding Chief Commissioner

Location: Maldon Junction
Lets see what the ACCC has to say about PN being involved.....
james.au
Will be interesting, there are plenty of other players and potential players in the market, SCT, Qube are both serious competitors so monopoly won't be a problem. The hurdle could be that the combined market share is considered too high by the ACCC.

I doubt it though, the ACCC don't have a great track record on this front and if the consortium agreement with Linfox is set up to the ACCCs liking they may even see Linfox as a new player in the market as well.

BG
  james.au Chief Commissioner

Location: Sydney, NSW
Lets see what the ACCC has to say about PN being involved.....
Will be interesting, there are plenty of other players and potential players in the market, SCT, Qube are both serious competitors so monopoly won't be a problem. The hurdle could be that the combined market share is considered too high by the ACCC.

I doubt it though, the ACCC don't have a great track record on this front and if the consortium agreement with Linfox is set up to the ACCCs liking they may even see Linfox as a new player in the market as well.

BG
BrentonGolding

Id say combined market share will be the big issue.

ACCC were pretty strong when it came to Glencore's sale to GWA in the Hunter no?
  x31 Chief Commissioner

Location: gallifrey
Lets see what the ACCC has to say about PN being involved.....
james.au

The devil is in the detail

"There is now a clear plan for the divestment and closure of Intermodal, and looking forward, our Company will focus on opportunities and market segments that best fit with our core strengths and capabilities."

means only "iron ore" and "coal" will be core business?
  bingley hall Minister for Railways

Location: Last train to Skaville
Lets see what the ACCC has to say about PN being involved.....
Will be interesting, there are plenty of other players and potential players in the market, SCT, Qube are both serious competitors so monopoly won't be a problem. The hurdle could be that the combined market share is considered too high by the ACCC.

I doubt it though, the ACCC don't have a great track record on this front and if the consortium agreement with Linfox is set up to the ACCCs liking they may even see Linfox as a new player in the market as well.

BG

Id say combined market share will be the big issue.

ACCC were pretty strong when it came to Glencore's sale to GWA in the Hunter no?
james.au

Not really - while the ACCC were certainly making rumbling noises they never had to make a hard decision as in the end the GWA/Macquarie bid was far superior to the others.

IMHO the QLD intermodal business is not big enough to warrant more than passing attention from the ACCC - but I could be wrong.

EDIT - on reflection the sale of Acacia Ridge to PN is a bit dodgy.
  james.au Chief Commissioner

Location: Sydney, NSW
Not really - while the ACCC were certainly making rumbling noises they never had to make a hard decision as in the end the GWA/Macquarie bid was far superior to the others.

IMHO the QLD intermodal business is not big enough to warrant more than passing attention from the ACCC - but I could be wrong.

EDIT - on reflection the sale of Acacia Ridge to PN is a bit dodgy.
bingley hall

Their words were pretty strong in their initial investigative documents - but agreed, these were never tested as GWA came along anyway.


QLD intermodal is a duopoly between PN and AZ.  Of course the ACCC is going to have a good hard look at this...

Id say so is the Queensland Government too on reflection.  They're not going to want to have to fund road maintenance if additional trucks go onto road...
  1771D Junior Train Controller

They couldn't care less as the highways are mostly federally funded.
  Sulla1 Chief Commissioner

As far as the Queensland rail freight market is concerned, this may actually be a good news story. As a single operator on the North Coast Line corridor, PN will have the capacity to operate multiple daily departures from key regional cities throughout the day rather than the current scenario where PN and Aurizon intermodal services depart almost right behind each other. Multiple daily services will give customers more departure time choices, just like they have when they use trucks. The Mt Isa line corridor may also see a shift back to rail with PN suddenly finding itself equipped with the rollingstock it previously tried to buy from Aurizon when the former won the Glencore contract. This additional rollingstock and employee base will also provide PN with the "operational mass" to tender for additional contracts that thus far it has had to pursue with rollingstock and staff procurement as part of the tendering cost. As for the ACCC involving itself, the Darwin line precedent with a G&W monopoly will no doubt be exploited by PN as evidence Northern Australian freight distribution does not need multiple competing rail operators when already competing with the trucking industry.

Back at Aurizon headquarters, I personally believe this decision will ultimately be recorded as an expensive and short-sighted folly a future Aurizon CEO and board will spend hundreds of millions of dollars trying to correct at some point in the next two decades. Of course, with the unknown impact of driverless longhaul trucks on the intermodal market on the horizon, maybe it won't seem such a dumb decision in the 2020s, but I doubt it.
  james.au Chief Commissioner

Location: Sydney, NSW
As far as the Queensland rail freight market is concerned, this may actually be a good news story. As a single operator on the North Coast Line corridor, PN will have the capacity to operate multiple daily departures from key regional cities throughout the day rather than the current scenario where PN and Aurizon intermodal services depart almost right behind each other. Multiple daily services will give customers more departure time choices, just like they have when they use trucks. The Mt Isa line corridor may also see a shift back to rail with PN suddenly finding itself equipped with the rollingstock it previously tried to buy from Aurizon when the former won the Glencore contract. This additional rollingstock and employee base will also provide PN with the "operational mass" to tender for additional contracts that thus far it has had to pursue with rollingstock and staff procurement as part of the tendering cost. As for the ACCC involving itself, the Darwin line precedent with a G&W monopoly will no doubt be exploited by PN as evidence Northern Australian freight distribution does not need multiple competing rail operators when already competing with the trucking industry.

Back at Aurizon headquarters, I personally believe this decision will ultimately be recorded as an expensive and short-sighted folly a future Aurizon CEO and board will spend hundreds of millions of dollars trying to correct at some point in the next two decades. Of course, with the unknown impact of driverless longhaul trucks on the intermodal market on the horizon, maybe it won't seem such a dumb decision in the 2020s, but I doubt it.
Sulla1

That is if the existing PN and PN/Linfox entity are allowed to cooperate.  I am not sure that would happen as the entities would still be separate.  PN is not doing a proper takeover here.   But there would be the potential for influence from PN over both entities.

I think that the Darwin/GWA example isn't the most relevant, there is largely nothing in the middle of that line from an intermodal perspective.  I think a better regulatory example would be the NSW Regulated Air routes where it is argued that limiting one airline to the route allows that airline to deliver the best service.  (Now, as to whether that is the case, that has yet to be really examined, the regulated air routes exist because it is politically expedient for them not to deregulate them and because Qantas and Virgin don't want to compete on them - they are deregulated when the big players want to compete).

As I've mentioned before, I think that this could be a strategic move from AZ.  Get rid of a high cost base business, then reenter it in 5 years or so (when the non compete clause expires) and remake the business with a lower cost base...
  x31 Chief Commissioner

Location: gallifrey
Does the announcement mean PN will take over all intermodal in queensland also including to far reach destinations like the Mount Isa line?
  MetroFemme Chief Train Controller

Might be helpful for SCT who could gain some market shsre on Brisbane to Melbourne.

Howcould auruzon gave been making a loss on the intermodal business?
  neillfarmer Chief Train Controller

I don't think the ACCC will cause too much trouble, as PN could argue that they are in the freight business and there is ample road competition.
  neillfarmer Chief Train Controller

Might be helpful for SCT who could gain some market shsre on Brisbane to Melbourne.

Howcould auruzon gave been making a loss on the intermodal business?
MetroFemme
Because they have too many employees for the task and didn't transition well from a government owned to a privately owned operation. An executive in a competing rail operator said to me they have "5 men for every one of ours".
Those who observe PN and Az operations on QR's NCL will know that there are few empty slots on PN's services, a lot more on Az's. I think their biggest fail was in marketing and attracting freight. PN is much more successful at this.
There are some other implications down the track, like what will happen to the grain and cattle services?
  traintram Beginner

Aurizon have said they are handing back at least the RRTSC (northweststar yesterday) on dec 17 when both RRTSC & LTSC expire. trouble is PN/Linfox dont get control till end FY18 so appears they are not interested. Leaves Qube with those contracts, expect announcement soon.
  james.au Chief Commissioner

Location: Sydney, NSW
Can you expand what the RRTSC and LTSC are?  I can't work them out sorry.
  traintram Beginner

Regional Rail Transport Services Contract
Livestock Transport Services Contract
  james.au Chief Commissioner

Location: Sydney, NSW
Regional Rail Transport Services Contract
Livestock Transport Services Contract
traintram
Thanks!

Interesting. Where is it that they've said they're handing the contracts back?  And what will QUBE be using to operate the services?
  1771D Junior Train Controller

Trucks most likely.

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