Department of Transport warns that CIÉ faces a looming cash crisis

Government advised that further funding cuts could lead to bankruptcy

Recent analysis had demonstrated “the urgent need to address the ongoing viability of CIÉ, particularly Irish Rail, in the context of a significant reappraisal of the existing rail network”

Recent analysis had demonstrated “the urgent need to address the ongoing viability of CIÉ, particularly Irish Rail, in the context of a significant reappraisal of the existing rail network”

 

There is a looming cash crisis in CIÉ, the State-owned transport group, the Department of Transport warned the Government’s comprehensive review of expenditure earlier this year.

The department, according to documents released yesterday in connection with the review, said the financial position in the group continued to deteriorate despite significant efficiency gains which had been put in place in the various companies over recent years.

Recent analysis had demonstrated “the urgent need to address the ongoing viability of CIÉ, particularly Irish Rail, in the context of a significant reappraisal of the existing rail network”.

Irish Rail represented “the most significant challenge” in terms of long-term viability - the rail operator had incurred losses of €148 million in the past six years which was “unsustainable”.

The department warned there was no scenario by which any further cut to the State’s annual subvention to the rail company would not “precipitate bankruptcy or a radical set of rail service closures or curtailments on loss-making lines”.

The Government last week in the budget decided to maintain the level of subvention for public transport. However the Department of Transport had maintained beforehand that even with this level of funding, and given the financial difficulties at Irish Rail, “challenging options will have to be considered involving revenue generation, further cost reductions and service changes in order to avoid another crisis in CIÉ”. Funding cuts over recent years had left land transport “chronically underfunded”, it said. Continued underfunding presented a very real risk of impeding economic recovery.

The gains from previous significant investment was being eroded, particularly on the State’s road network, “as maintenance milestones are not being adequately met”, the department advised the Government.

To maintain the existing rail network, about €247 million in capital investment was required annually of which just under €200 million had to be found in funding from the Department of Transport.

In 2014, however, only €125 million was allocated, with the company having to borrow €12 million and defer the rest of the work. The department said Irish Rail had now realistically exhausted its borrowing capacity for this purpose and the deferral of works could not continue indefinitely.

“The only remaining options are for this funding to be found from elsewhere or to completely review the extent of the rail network in Ireland such that a strategic rail network that would represent best value for money is identified.

“Significant upfront costs may arise through such a rationalisation. Furthermore, a substantial investment programme is required to bring three critical lines – Dublin- Cork, Dublin-Belfast and Dart – to an acceptable state.”

Last week Minister for Transport Paschal Donohoe said he was “confident” his department’s budget allocation would be enough to tackle Irish Rail’s cash problems. The Department of Transport, Tourism and Sport will have a budget of €950 million in 2015, with €210 million set aside for targeted investment in bus and rail companies through public service obligation contracts.

Mr Donohoe said he intended discussing how this money would be spent with the board of CIÉ. “I am confident that we will be able to deal with the many difficulties in Irish Rail, ” he added.