Cargo rate might rise by 5.5%
Young Brother Ltd. cites rising fuel costs in seeking approval
Young Brothers Ltd., the largest interisland cargo shipping company, wants to raise its interisland shipping rate by 5.5 percent for the second year in a row.
Company President Glenn Hong cited rising fuel costs as the company applied yesterday for Public Utilities Commission approval for the rate hike.
Shippers said the increase would affect not only island businesses, such as vegetable and free growers, but consumers who will see the higher shipping cost passed on in higher produce prices in the markets.
"Any increase will have ramifications for farmers," said Alan Takemoto, executive director of the Hawaii Farm Bureau Federation. "Any time there's an increase in rates, it does concern us and how it will affect the industry."
The rate increase application comes as the Farm Bureau and other shippers are trying to resolve an earlier Young Brothers application to stop shipping "less than a container load" of cargo to and from Maui. The company asked for the change because its dock space in Kahului Harbor will be cut to make room for the Superferry, a passenger service scheduled to begin serving several islands by mid-2007.
Takemoto said Young Brothers and the Farm Bureau, which represents 1,600 farm families, have been meeting to seek ways that the small agricultural businesses, whose cargo might not fill a container, can be accommodated. "We are working on ways to consolidate and find locations to consolidate" the goods from small shippers.
He said the prospect of a rate hike "has been on radar. ... It's not a surprise. A lot of things are happening in transportation sector."
"What Young Brothers needs is to cope with higher fuel costs and continuing to serve the LCL (less than container load) market," said David Cole, chairman, president and chief executive officer of Maui Land & Pineapple Co.
"There has been lot of angst about the LCL issue, so Young Brothers may not be getting out of the LCL business as soon as they thought. It's vital for them to find a way to stay in the LCL market," said Cole. "The effort to raise rates will help to ameliorate the cost of serving smaller customers."
He added, "Anything that boosts cost to us, we need to be attuned to it."
Cole said when the Superferry goes into business next year, "We will have an alternative method for moving our goods. The Superferry will allow us to move cargo faster. Choice is important here. Now there is a monopoly, not a lot of options. We have the air option, but it's a poor one because it's so expensive."
The Young Brothers rate application also described rising repair and maintenance costs, increased equipment leasing expenses and rising labor costs. "Although Young Brothers continues to work and apply new technology to make its operations more efficient, fuel costs continue to rise," said Hong in a written announcement. He was not available for comment last night.
The announcement said the rate increase is expected to take effect Sept. 18 after the PUC reviews the filing.
The company's last rate increase of 5.5 percent went into effect in July 2005 with PUC approval. It was the first raise in eight years for containerized cargo.
