Young Bros.: Pasha’s aim is cherry-picking

Young Brothers on Monday asked to intervene in the Pasha Hawaii application to the Public Utilities Commission to use its trans-Pacific transporter, MV Jean Anne, to carry vehicles and cargo interisland.

The Jean Anne, with a capacity of about 3,000 automobiles, dwarfs any barge or ocean freighter moving vehicles between the West Coast and the islands, and Pasha Hawaii could use its excess capacity to also move vehicles and palletized freight between islands, if the PUC agrees.

YB President Glenn Hong says Pasha is "cherry-picking" and that its bid does not begin to cover the services that YB is obligated to provide, or all the ports where Young Brothers calls. Competition is fine, Hong said during a visit to Maui on Thursday, if the playing field is level.

Using empty space on the Jean Anne as it moves between Oahu, Maui and Hilo (and occasionally Kauai) "is a convenience for them," he says, that would gain additional revenue.

But Pasha would not be facing the costs YB (and Matson Navigation) are obliged to shoulder in their interisland services. As an ocean service, Pasha has not heretofore come under PUC regulation. Its trans-Pacific service is regulated by the Surface Transportation Board.

Young Brothers is in the midst of a $200 million capital program that is required "to meet the needs with the frequency and reliability that just-in-time business demands," Hong says.

Pasha says in its application for a certificate of public convenience and necessity that it can move vehicles interisland efficiently and reliably, although not as frequently as YB or Matson.

The Jean Anne plies a biweekly round from San Diego to Honolulu, Kahului and Hilo, with occasional trips as customers require to Barbers Point or Nawiliwili.

To support its application, it included a number of letters from customers supporting its bid. These include the Army and a number of heavy equipment leasing firms.

Hong says he believes Pasha also hopes to get business from car rental companies, and it has the endorsement of CATRALA-Hawaii, the nonprofit group representing the car rental business in the islands. (Pasha's general manager, Reggie Maldonado, is a member of the board of CATRALA. He could not be reached for comment.)

"We view it as cherry-picking, they want only the highly profitable lines of business," Hong says.

Should Pasha get PUC approval, he says, YB could not continue to commit to the levels and kinds of service it now provides. It is only an interisland cargo business, calling regularly at small ports like Kaumalapau on Lanai and Kaunakakai, places that do not generate nearly enough traffic to support the frequency of barge service they now have.

"Certain lines are very substantially subsidized," Hong says.

Because warehouse space is concentrated on Oahu, he says, Neighbor Island businesses rely on frequent, just-in-time cargo shipments to maintain their daily operations. He compares his company's 24 calls at Kahului to Pasha's one in any two-week period.

There is also, he says, the issue of reliability. In its application, Pasha emphasizes that it very seldom suspends operations because of the weather, but Hong notes that because it has only one ship, it suspends business whenever that ship is under repair or inspection.

Pasha began serving Hawaii almost five years ago, and it has contracts with several auto manufacturers to bring in autos. Trans-Pacific auto delivery used to be an exceptionally lucrative business. In the 1980s, when American manufacturers were under pressure, they sold immense numbers of new cars to rental companies (which in some cases they owned), which changed their fleets in Hawaii every three months.

Those days are long past, and according to Roy Catalani, YB's vice president of strategic planning and governmental affairs, intrastate cargo volumes dropped 9.6 percent in 2008 and are expected to drop an additional 11 percent this year.

"The economies of scale of Young Brothers' entire operation are essential to its ability to afford the current frequency of sailings to all ports," the company said in a news release Monday.

It also said that the rates in Pasha's application "are not lower than those offered by Young Brothers."

The application covers many kinds of cargo, but for individual autos, the proposed interisland rates vary from $166 to $292 between Honolulu and Kahului, not counting any extras or fuel adjustment surcharges.

* Harry Eagar can be reached at heagar@mauinews.com.