Sunday, September 21, 2003

The Auto Express 101 by Austal Ships is the model being considered by Hawaii Superferry for a new interisland service.

Next exit, Kahului

The partners behind Hawaii
Superferry want to create an
interisland marine highway

Imagine loading the kids in the car and driving to Maui. Or seeing a Kauai farmer hauling produce to market in Honolulu by truck and getting it there in two hours.

Those are very real possibilities according to developers working on a new interisland ferry system to be called the Hawaii Superferry, which they believe will create the "marine highway" that has been talked about for so many years.


Each ferry will carry as many as 900 passengers and 250 vehicles, including cars, trucks, semi-trailers and even buses.

Mike Fitzgerald, president of Enterprise Honolulu, the privately funded economic development promoter, said the drive-on, drive-off ferry will "positively change the equation of the competitiveness and the cost of doing business in Hawaii.

"It will substantially improve the movement of products and people between the islands," Fitzgerald said.

He and John Strom, technology and business development specialist at Enterprise Honolulu, spent about six months studying the concept for the developers.

Just one example of what it will do is carry produce for 2 cents a pound compared to 13 cents a pound for current barge cargo and the ferry will haul items that are too fragile or perishable to go by barge, Fitzgerald said.

Strom said there will be real advantages for both businesses and tourists and goods will move in a totally different way from the present. It will turn Hawaii into a single-market area, rather than separate islands, he said.

Of course there are questions, after so much talk in the past and some failed efforts, said Tim Dick, founder and president of HSF Ltd., a Hawaii company doing business as Hawaii Superferry.

Typical ones would be: Is the market big enough? How much support would there be for ferries? If it is such a good idea, why aren't there ferries running between the islands already?

Dick, a seasoned raiser of venture capital who has spent much of his life in technology- and Internet-related businesses, said he and his partners are convinced there is a market, that capital can be raised and the ferries can operate at a profit at fares and freight rates that will make them competitive with the airlines. Fares are not nailed down yet, but feasibility studies show the ferry could carry a family of five in a family sedan to Maui or Kauai for about the combined cost of air fares, a rental car and parking and fueling the car.

The Superferry partners said the right combination of design and management just hasn't come along before and they are convinced theirs will work where others haven't, and make a profit.

The vessel they want is a "wave-piercing catamaran" some 320 feet long and 90 feet wide with four engines that can keep the vessel cruising at 42 knots (47 miles an hour).

"Investors are pleased with the idea," he said. The group believes that Dick's entrepreneurial experience, coupled with the particular talents of his partners, will make the package work.

With Dick in the project are John Garibaldi, a financing expert who also has interisland transportation experience in the chief financial officer positions at Aloha Airlines and, later, Hawaiian Airlines; and Terry White, a marine transportation expert who has held positions in Hawaii with the Coast Guard and Hawaiian Tug & Barge.

Financing has to be obtained, for about $60 million per ship starting with one vessel and adding one or two more later, but feelers have been getting a positive response, Dick said. "That is a critical hurdle, capital," he said.

But while it has been exploring financing channels, Hawaii Superferry has been pushing ahead with its plans. "We are out to bid with three designer-constructor firms," to see which one comes up with the best design and price, Garibaldi said.

Similar vessels have been built in Australia and are in use around the world. Hawaii Superferry says they can handle the waves in Hawaii's critical channels and will give passengers a comfortable ride.

The beauty of a ship that will carry a lot of cars, trucks and freight as well as people is that it truly turns the ocean into a highway, Garibaldi said. In fact, Hawaii Superferry has licensed the emblem "Interisland H-4" in a blue and red shield as its logo, to stress the "highway" aspect.

The market has already been demonstrated by Seaflite which ran passenger-only jetfoils interisland in the 1970s, Dick said. "Seaflite actually got 6 percent of the market, despite having the wrong vessels in the wrong waters," Garibaldi said.

He was referring to the troubles the jetfoils had maintaining speed in the sometimes large waves in island channels and the frequency with which the vessels failed.

The answer is to go bigger and use the latest technology, the group said.

The partners have been working on the project for more than two years and have made a lot of progress, but Garibaldi said a decision was made early not to go public with the plans until the feasibility was clear.

For its part, the state Department of Transportation isn't planning to fund any suck project, according to DOT spokesman Scott Ishikawa.

"While the DOT supports a roll-on, roll-off interisland ferry, we would not be able to provide any subsidies or financial assistance to an individual private ferry company," he said.

"We are studying port-design changes to accommodate other shipping companies that are looking at roll-on, roll-off delivery of vehicles," he said. "When we get a firm financial commitment from a private ferry company is when we will start building infrastructure to accommodate ferry service."

One step that will help Hawaii Superferry is the action the Legislature took last year to remove a law that required lien-holders, such as finance companies, to give their permission every time a rental car was taken off an island. Now renters will be able to drive on to the ferry and go where they please.

Hawaii Superferry wants to sell itself as a "mini-cruise" and said there will be a full-service restaurant, a coffee house, fast-food operations and a full bar. For those who don't want to pay for those extras, there will be free self-serve coffee, tea and soft drinks.

Seating will range from restaurant-type groupings around table to reclining aircraft-style arm chairs.

The company said it will employ some 350 people and another 550 jobs will be created in businesses that provide services to the operators.

One of the great champions of an interisland ferry system, E. Alvey Wright, a retired admiral and a former state transportation director, welcomed the Superferry announcement but at age 94 is a little skeptical of the technology.

"The whole problem is speed and rough water. None of these catamarans and twin hulls will handle that," he said.

But he agreed with the Superferry people that size is important. "I reached the conclusion that you need one hull in the water but it has to be large," certainly larger than the Seaflite vessels, Wright said.

A ferry needs to be able to take vehicles as well as passengers, he said.

While he doesn't agree with the design, he is willing to help. "I'm not looking for returns or anything," he said. Wright said he has done financial studies and is convinced that travel costs using a drive-on, drive-off ferry would be at least 60-65 percent lower than air travel.

A "wave-piercing" large catamaran ferry called the Lynx plies Cook Strait in New Zealand, a notoriously rough and deep channel some 20 miles wide between the country's two main islands.

The Lynx does the trip in two hours and 15 minutes, including a winding scenic cruise through fjords.

An Internet check of fares shows that a family of five -- parents and three kids -- in a typical family car can make the run for a total of $NZ310 each way, equal to about $184 in U.S. currency.

Hawaii Superferry plans

What: Wave-piercing catamaran, 320 feet long, 90 feet wide.
When: To go into service late in 2006
Where: Pier 19 in Honolulu Harbor to Kahului, Maui; Nawiliwili, Kauai; and later, Kawaihae, Hawaii
Frequency: Daily
Capacity: 900 people and about 250 cars, trucks and buses
Speed: 42 knots (47 miles an hour)

The Partners

Timothy W. Dick

The founder and president, Dick raised venture capital and founded a hi-fi speaker company, Origin Audio in 1980. He worked with Beckman Instruments as a development engineer on new medical electronics products. He held key positions at consulting firms Booz-Allen & Hamilton and the Boston Consulting Group before founding a new Internet white and yellow pages business, He founded Grassroots, an Internet political and advocacy software business in San Francisco, raising $35 million in capital. He left as president and chief operating officer in 2000 and founded Hawaii Superferry in 2001.

John W. Garibaldi

Garibaldi worked in accounting and joined Aloha Airlines in 1985 as vice president and chief financial officer. He directed the financing of the airline and its parent Aloha AirGroup, including the leveraged buyout that took it private in 1986. Garibaldi was a trustee of the Queen Emma Foundation and in 1992 left Aloha to become vice president and CFO of the Queen's Health Systems. In May 1996 he joined Hawaiian Airlines as executive vice president and CFO. He helped turn the airline around financially and completed a $40 million equity offering in 1996. He joined Hawaii hurricane-risk insurer Zephyr Insurance Co. as president and CEO in July 2001.

Robert E. "Terry" White

White was a Coast Guard marine inspector and marine engineer from 1967-76, when he went into business as a marine surveyor with Behan & White in Honolulu. From 1981-88, White was director of engineering and planning at Hawaiian Tug & Barge Co., and from 1988-95 he was vice president of marine operations at American Hawaii Cruises. He is publisher of Hawaii Ocean Industry and Shipping News and a marine consultant with Maritime Specialists Inc. in Honolulu.


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