On a March afternoon in 2023, ferry passengers stood stranded on Picton wharf. Among them was one passenger who was forced to scramble for alternative transport after learning his Interislander ferry had been abruptly cancelled. His visiting relatives from the UK were due to fly out the next day, but with no ferry and no flights available from nearby Blenheim, their only option was a rushed six-hour drive to Christchurch. The ordeal cost that particular passenger more than $2,000—a cost KiwiRail initially refused to cover.
Now, more than two years later, KiwiRail is being legally compelled to pay up.
Commerce Commission Steps In
Following widespread complaints and mounting media attention, the Commerce Commission launched an investigation into KiwiRail’s handling of the 2023 ferry cancellations. The probe focused on a series of mechanical failures affecting the Kaitaki and Kaiārahi ferries between January and April of that year. These included a total power loss on the Kaitaki in late January, a heat exchanger issue grounding the Kaiārahi in February, and a subsequent gearbox failure again halting the Kaitaki from early March through mid-April.
The disruptions were far-reaching. Passengers missed international flights, incurred thousands in unexpected travel costs, and in some cases, had to abandon vehicles on one side of the Cook Strait.
Initially, KiwiRail denied all liability. Its position was clear: mechanical breakdowns were beyond its control, and compensation was not warranted. Customers were told, in no uncertain terms, that “the issues that arose from your cancelled sailing were not foreseeable and were outside Interislander’s control.”
But the Commission found otherwise. It determined that KiwiRail’s stance was likely in breach of both the Consumer Guarantees Act (CGA) and the Fair Trading Act (FTA). Not only had KiwiRail failed to provide a service that was fit for purpose, but it had also made statements that misled customers about their rights to refunds and compensation.
One of the failures—specifically the Kaitaki’s power loss—was traced back to a safety-critical rubber expansion joint that was years past its replacement date, according to the Transport Accident Investigation Commission.
A Binding Commitment to Compensate
As a result of the Commission’s findings, KiwiRail has now made legally binding commitments to compensate all affected passengers. The agreement covers not just ferry tickets, but also reasonable associated costs—flights, accommodation, rental cars, and even pet transport. Passengers whose claims were initially denied will have their cases retroactively reviewed, and new claims are already being processed.
“These commitments will put money back in the pockets of affected consumers,” said Commerce Commission General Manager Vanessa Horne, “and crucially, set out a more straightforward path for getting a refund when a ferry trip is cancelled.”
The Commission has also confirmed it can enforce these commitments in court if KiwiRail fails to follow through.
Changing Course
Facing public criticism and political pressure, KiwiRail has reversed its position. “We apologise unreservedly. We got it wrong,” said Adele Wilson, the company’s Chief Customer and Growth Officer.
Under its updated policy, Interislander will now assume mechanical issues are within its control, unless it can clearly prove otherwise. That means refunds will be proactively offered to passengers as a default, rather than withheld pending technical investigations.
The company has also overhauled its maintenance regime. According to RNZ, “Wilson said KiwiRail had revamped its maintenance regime since 2023, with ferry sailings becoming more reliable since then.”
Finance Minister Nicola Willis acknowledged the significance of the Commission’s ruling, saying it sent a clear message that state-owned enterprises must respect consumer rights. A new deal to replace the ageing ferry fleet by 2029 has also been announced by Rail Minister Winston Peters.
What Passengers Need to Know
KiwiRail is in the process of contacting affected passengers directly. Information on how to submit a claim is available via the Interislander’s website. To be reimbursed, passengers will need to provide documentation—receipts for flights, accommodation, and vehicle-related costs. Those without receipts are encouraged to request copies from providers or use bank statements as evidence.
Consumer NZ also advises using Inland Revenue’s kilometre rate to claim vehicle mileage, including wear and tear, not just fuel.