Intra-Hawaii carrier seeks 24% rate hike

Intra-Hawaii carrier seeks 24% rate hike    A weak economy and more competition for roll-on/roll-off cargo may lead to higher rates for Hawaii shippers.
   Young Brothers, which operates barge service between the Hawaiian Islands, said it is asking the Hawaii Public Utilities Commission (PUC) for an average 24 percent rate increase effective August 2011.
   In a Dec. 22 letter to customers, Matthew J. Humphrey, Young Brothers vice president and general manager, said, “the rate increase is being driven by a sharp decline in cargo volumes since 2008, in line with the overall decline in Hawaii's economy, and by the entrance of Pasha Hawaii Transport Lines” between the islands.
   On Tuesday, Pasha Hawaii said the PUC had “issued approval of Pasha Hawaii's intrastate tariff and granted final authorization for Pasha to commence service among the major Hawaiian Islands.”
   'We can now deliver on a promise made to a segment of our clientele who require a cargo capability between the islands that is not currently available in the marketplace. We are proud to have created a superior offering for shipments between Hawaii and the mainland, and look forward to beginning a new niche service,' said George Pasha IV, Pasha Hawaii chief executive officer.
   Young Brothers, which last increased rates in August 2009, had argued against allowing Pasha to carry cargo between the islands, saying it would take business from it and deprive it from earning a reasonable return on its capital investments — saying from 2005 and 2008 its rate of return ranged from 1.6 percent to 6.96 percent, well below the 10.76 percent to 11.06 percent rate of return authorized by the Hawaii PUC.
   Since 2005 Pasha has operated a fortnightly ro/ro service using the Jean Anne between California and Hawaii with a standard rotation of San Diego, Honolulu, Kahului, Hilo and San Diego. Pasha has faced increase competition of its own since Matson Line added garage decks to its containership Mokihana at the end of 2007.
   In its letter to customers, Young Brothers said “the dramatic drop in cargo volume accounts for about 18 percentage points of the proposed 24 percent increase. This sharp drop-off is reflected in Young Brothers' rate of return, which was less than 1 percent in calendar year 2009, with similar results to date in 2010. Even though intrastate operations are barely exceeding breakeven and cargo volumes have continued to fall, Young Brothers has maintained our frequency of service. The company is clearly at a point where either our rates have to increase or our service frequency has to decrease.”
   Young Brothers said Pasha's entrance accounts for about 6 percentage points of the overall increase and the commencement of service by Pasha will result in loss of a certain percentage of Young Brothers' profitable automobile and ro/ro cargo and an increase in Young Brothers' cost of capital or rate of return.
   Young Brothers said from 2006 to 2010 it spent more than $100 million on barges, cargo-handling equipment, and customer service systems.
   “Failure to attract investor capital will result in decreased or no service to small ports, and lesser frequency and higher rates to all ports. In addition, local farmers and ranchers could lose discounted rates currently provided under Young Brothers' rate structure. Farmers and ranchers currently receive a 30- to 35-percent discount,” it said. ' Chris Dupin