Mario Brault, president of the Cape Breton and Central Nova Scotia Railway, said Wednesday that an application to stop using the Cape Breton portion of the line will be made with the province's Utility and Review Board once a subsidy agreement with the province runs out Sept. 30.
Brault said service will continue until regulatory approval is given.
He said the $2-million annual subsidy is no longer enough to make up for a continued decline in traffic along the Cape Breton portion of the line, which runs from St. Peters Junction to Sydney.
"It doesn't stand on its own feet in terms of profitability," said Brault.
He said the company would continue talks with the province about possible alternatives, but said there wouldn't be a request for more money.
"We do not believe ... it's sensible to ask the government for more subsidies and more grants to maintain this line."
Brault said the company would continue to operate the rest of the 395-kilometre line, which runs from Truro to Sydney.
Transportation Minister Geoff MacLellan said while the province is willing to maintain the current subsidy, it can't afford to offer more money over the long term.
"That's something that as a province we can't take on," MacLellan said.
He said while talks will continue with the company, discussions will also take place with Cape Breton businesses and municipal officials about next steps, including finding another rail operator.
The railway is owned by Genesee and Wyoming, which also owns short-line and regional freight railroads in Canada, the United States, Australia, Belgium and the Netherlands.