The disclosure from Sir James Sherwood comes as plans to privatise BR are questioned by two former Cabinet ministers.
Lord Whitelaw, a former deputy prime minister, and Lord Ridley, a former Secretary of State for Transport, warn of the problems caused by loss-making lines on BBC 1's Panorama tonight.
Sir James, who as president of Sea Containers has expressed interest in bidding for some BR routes in the South-east, says he would want scope for rationalisation. He names the Coastway route between Southampton and Eastbourne and the North Downs route between Reading, Guildford and Tonbridge. 'Those routes cannot be justified commercially,' he says, adding that Coastway in particular is 'a very heavy money loser'.
Of government assurances that subsidies would continue, and closures be allowed only after public inquiries, Sir James says it would be 'hopeless' to try to run the railways as they had been in the past. 'The buyer or the franchisee has got to be given the scope to make the business profitable and that means he's going to have to rationalise services and reduce costs and adjust fares.'
Lord Ridley tells the programme: 'I myself never believed it was really possible to do very much with the railways, if anything at all, because basically they are loss-making. They are not an industry, they're a service.'
Lord Whitelaw says: 'If you say to me, 'Am I absolutely sure it will be a success?' No, I'm not.'
John MacGregor, Secretary of State for Transport, says the Government is seeking to get the advantages of privatisation while continuing to have subsidies. 'I believe it is practical,' he says.