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By Dennis Oda, Star-Bulletin file
Higher fuel costs prompted Matson Navigation Co.
to increase its fuel surcharge to 2.25 percent.

Matson’s resolve
tested in ’99

The company's CEO says
a labor dispute hurt the firm's
ability to maintain a reliable
shipping schedule

By Russ Lynch
Star-Bulletin

Last year was a tough one for Matson Navigation Co., which saw its fuel costs double and a labor dispute disrupt service on the West Coast, but 1999 also had its good points, C. Bradley Mulholland, Matson president and chief executive, said today.

Mulholland said Matson intends to post an additional half-percent fuel surcharge on Hawaii freight tomorrow to go into effect Feb. 20. He said fuel costs hit an "unbelievable spike" last year, rising from $10 a barrel in March to $22.08 by year-end.

"We burn 1.8 million barrels of fuel a year," he said, and the fuel spike lifted Matson's costs by $20 million a year.

Matson imposed a 1.75 percent fuel surcharge in October and that will go to 2.25 percent, Mulholland said.

"Our container volume rose 5 percent and our auto volume jumped 37 percent," San Francisco-based Mulholland said at the shipping line's annual briefing for the Hawaii media at the Hilton Hawaiian Village. "Both increases are largely a result of competitive gains and reflect customer support," he said.

But Mulholland said Matson had a hard time delivering the service that customers expect in its West Coast-Hawaii trade. Work slowdowns related to labor contract negotiations with the International Longshore & Warehouse Union "made it virtually impossible to maintain any schedule integrity for a good portion of the year," Mulholland said.

The ILWU slowdowns also added significantly to Matson's operating costs, as did the contract that resulted, which includes pay increases worth 7.8 percent over three years, lifting the average pay of full-time dockworkers to more than $99,000, he said.

On top of those costs, Matson's budget through 1999 and 2000 calls for spending $30 million on new container equipment, $13 million on information technology, $13 million for fleet improvements and $1.3 million to improve the company's Honolulu terminal at Sand Island, he said.

All those costs add up to the reason for a 3.9 percent across-the-board rate increase, which will go into effect Feb. 14, he said. That increase is being matched by Matson's competitor in the West Coast-Hawaii freight business, CSX Lines, formerly Sea-Land Service.

Matson is the main subsidiary of Honolulu-headquartered Alexander & Baldwin Inc.