Horizon may change transpacific service

Horizon may change transpacific service    Horizon Lines is considering changes to its Five Star Express (FSX) transpacific service less than a year after launching it in December 2010.
   “While we expect to continue our transpacific service in the near term and to fulfill our obligations to deliver cargo to all port and inland destinations, we are closely monitoring the financial performance of the service,” the company said in a presentation included in a filing with the SEC on Monday.
   “If we do not experience near-term financial performance improvements, we will consider all strategic alternatives available,” the company said. “Such alternatives may include, but are not limited to, changing the existing service offering, exploring a vessel sharing agreement with other transpacific carriers, or transitioning out of the transpacific service in its entirety.”
   The FSX service employs five ships that call Guam on their westbound voyages, then pick up cargo in Ningbo and Shanghai before returning to Los Angeles and Oakland.
   The company cited soft container rates in the transpacific and high fuel prices among factors in reporting a $7 million loss in the second quarter of this year compared to a $4.1 million profit in the same 2010 period.
   Prior to last December, Horizon operated only in the westbound transpacific and chartered space on its eastbound transpacific voyages to Maersk Line.

Fraser

   Its decision to start up its own transpacific service last year “coincided with one of the most challenging periods in the history of the trade lane,” noted Stephen H. Fraser, president and chief executive officer. “Revenue shortfalls and costs associated with this service negatively impacted adjusted EBITDA by about $16 million in the second quarter, or by $10.6 million when compared against the previous year’s performance under the Maersk agreements, which ended in December.”
   In a presentation related to the company’s announced financial restructuring, the company gives financial projections through 2015 including and excluding its so-called FSX service, whose ships move cargo to Guam on their westbound voyage and back from China on their eastbound transpacific rotation. The projection shows the FSX service contributing about $220 million in operating revenue this year.
   Horizon is one of several carriers that have found transpacific services can be money losers in the current environment.
   Earlier this month Matson said it would stop one of its U.S./China services a year after it was launched, citing sustained high fuel prices, downward rate pressure and overcapacity in the transpacific trade.
   Matson said it would discontinue its expanded China/Long Beach Express service (CLX2), which includes service between Hong Kong, Yantian, Shanghai and Long Beach.
   Matson emphasized that discontinuing the CLX2 would not affect Matson’s five-year-old CLX1 service, nor the company's Hawaii and Guam services. It said the CLX1 service, which has a rotation of Long Beach, Honolulu, Guam, Xiamen, Ningbo, Shanghai and Long Beach, continues to be profitable and benefits from round trip economics because of the outbound cargo moving to Hawaii and Guam.