End of Guam pact
will cut Matson’s profit
Alexander & Baldwin Inc. said yesterday that its ocean cargo-sharing alliance to provide weekly service to Guam likely will not be renewed, cutting annual operating profit by $10 million to $20 million when it expires.
The agreement between A&B subsidiary Matson Navigation Co. and American President Lines Ltd. ends in February 2006 and A&B said in a filing with the Securities and Exchange Commission that discussions it had last month with APL indicated the agreement won't be renewed in its present form.
Under the 10-year agreement, which began in February 1996, the two companies use each other's ships to haul cargo between Hawaii and Guam. APL charters three containerships from Matson and reserves a designated number of container slots for Matson on those ships. In turn, APL reserves two of its own vessels for Matson to use.
Matson spokesman Jeff Hull said A&B will continue to serve Guam on a weekly basis and is exploring other options.
A&B said that any new agreement with APL would be on less favorable terms to Matson and any alternative arrangements would not make up fully for the profit it received from the alliance. A&B also said the profit reduction could be higher immediately after the end of the agreement.
"It benefited (APL) economically to have freight on the vessels because they don't have much volume as they move westbound (from Oakland) to the Far East, and it benefited us financially because we don't have much coming back from Guam," Hull said.
Matson generated approximately $35 million a year from the agreement, in addition to other revenue it gets from its Guam trade, the filing said.