Shipping industry sinks in crisis

Aside from the tragic sea accident that made waves in the headlines of various local and international press, soaring oil prices in the first half of the year and the glooming effects brought by the recent global financial crisis took toll on Cebu’s thriving shipping industry this year.

But nonetheless, the shipping industry players collectively remained optimistic that their sector will still be able to face up to these challenges more than ever.

During the first half of the year, the inter-island shipping in the Visayas recorded one of the worst sea accidents in the country with the capsizing of the MV Princess of the Stars of the Sulpicio Lines in Romblon due to typhoon Frank that hit the country last June.

The incident resulted to the grounding of Sulpicio Lines’ passenger vessels which eventually opened the instigation of plans from the government to explore the creation of the so-called PNI Club.

Visayan Association of Ferryboat and Coast-wise Service Operators (VAFCSO) president and Trans-Asia Shipping Lines, Inc. president and CEO Arthur Kenneth L. Sy said that the P and I club’s regulations have been continuously drafted this year and currently their association is still closely coordinating with the proper authorities regarding its regulations.

He said that they are writing the authorities to be granted another dialogue so that the shipowners can discuss and be well-informed about the club to create a “win-win” proposition for the government and the private sector regarding the matter.

George and Peter Lines Inc. port captain Gerry D. Enjambre and finance officer Edward Y. Labata both shared in a separate interview that in as much as there are advantages with the creation of the P and I Club to the industry, there are also several disadvantages especially to smaller players.

They said that there will be many small shipping industry players who cannot pass the rigid requirements of the club as its coverage would reach to millions of US dollars.

He also said that they are looking at putting separate tiers for different categories so that small players will not have difficultly complying with the regulations if it will be implemented next year.

“If it will be implemented to everyone there will be several small players who cannot cope with the regulations and right now there are no insurance providers who can offer this kind of insurance because the regulations are very strict,” said Sy.

After the MV Princess of the Stars tragedy, shipowners learned several things on dealing with depressions and natural calamities taking into note that the most major accidents at sea could be caused by natural hazards and human errors.

VAFCSO past president and Cokaliong Shipping Lines founder, CEO and COO Chester Cokaliong though said that even before the accident happened, they have already been practicing heightened safety measures in their operations.

He said that the accident which recently happened is not a reason to only begin looking at safer sea travel because it’s a prerequisite and shipping companies should always put safety first.

“We have long been practicing safety so it’s not only because the accident happened. We in the shipping industry, we always try our best to avoid accidents from happening. The incident also caused as fear and we were threatened that what could happen to Sulpicio could also happen to us so we constantly remind our crew to be extra careful,” said Cokaliong.

This year, the Marina had been ordered by the palace to review vessel safety standards and seafarers’ pay to raise the industry at par with the international standards and so that the domestic shipping industry will not continue to lose competent seafarers.

Since the previous years, most shipowners lament on the shortage of both deck and engine officers because most of them are now going abroad to work and look for greener opportunities and bigger compensation.

“The shortage of deck officers and crew has been felt by our sector for the past three to four years already and we have been talking to the proper authorities about this but we cannot compete with the international shipping companies because they earn dollars and usually people will look for bigger opportunities to uplift their living conditions so we can’t stop them from going out,” said Sy.

Captain Enjambre said that there is already a draining manpower and the Marina’s circular on additional upgrading of courses only made it worst.

Meanwhile, the "roll-on, roll-off" segment of the domestic shipping industry also lamented about the arbitrary imposition of fees by some local government sectors.

Philippine Roro Shipping Association, Inc. (PRSAI) Cebu Chapter vice president and Lite Shipping Corporation president Lucio Lim, Jr. previously said that even if some of the major ports have been funded by other private companies, some local government unit (LGU) officials still impose arbitrary fees that have become a burden to Ro-Ro players especially smaller companies.

Competition against airlines has also become a great challenge for the shipping industry.

When Cebu Pacific converted itself into a low-cost airline in 2005, the company dramatically dropped fares for various domestic destinations in which other local airlines eventually followed suit and now, PAL Express, Asian Spirit, and Southeast Asian Air (Sea Air) are offering more affordable plane fares to local and international destinations.

With its competitive rates versus sea travel fares, budget airlines have been attracting inter-island hoppers as well who were used to travelling at sea which is one reason cited to have decreased passenger volume for the country’s shipping industry.

And due to the weak passenger revenues resulting from fierce competition from airlines as well as skyrocketing fuel costs, SuperFerry’s parent firm Aboitiz Transport System Corp. (ATS) reported a net loss of P49.4 million in the first nine months this year, a reverse over last year’s profit of P480.8 million while its passage revenues fell 6 percent to P2 billion from P2.1 billion last year.

And just this September, Aboitiz Equity Ventures Inc. (AEV) and the Aboitiz and Company (ACO), the majority shareholders of ATS sold stakes to foreign consortium owned by KGLI-NM Holdings Inc., a 60-40 joint venture between local shipping firm Negros Holdings Management Corp. and Dutch company, KGL Investment BV.

“Airlines are terribly dropping their air fare prices and it has been affecting everybody in the industry. For us in our sector, we cannot easily lower down our prices because our operating expenses are very high,” Sy said.

But despite these big changes in passenger utilization, Sy is still confident that the shipping industry will not be discarded as one of the country’s major mode of transportation.

 Aside from airline competition, technological advancements in communication has also become sophisticated that people no longer find it necessary to travel that much often compared to several years back.

“Communication is very much high-tech nowadays and one can see their loved ones in other parts of the country without actually travelling through the use of computers and subscribing to a network they can talk anywhere and anytime,” said Sy.

Sy added that passenger traffic dropped 20 percent yearly for the past years and this could be attributed to the fact that prices have increased which included fares.

The Cebu Port Authority website registered that the shipping industry this year carried 3,327,538 passengers in the first quarter which increased from last year’s 3,314,804 passenger volume.

In the second quarter of the year, the number grew to 3,891,372 passenger volume but is still considerably lower over last year’s 4,243,771 passengers.

During the third quarter, passenger volume continually slumped to 3,014,108, which is also significantly lower compared to the third quarter of last year with 3,126,722 passengers.

The target for the fourth quarter this year is around 3,381,139 passengers, which is still significantly lower compared to last year’s fourth quarter actual passenger volume of 3,440,730.

Cokaliong said that the skyrocketing fuel price increases made the year 2008 so far the worst year in their 19th year history because for more than 20 times in around five to six months this year, high fuel prices has affected not only the shipping industry but as well as the riding public.

“The prices of fuel only dropped in November but even with the recent price drops the prices for spare parts are still high and we still spend for high maintenance of our vessels like painting, refurbishing, and dry docking which has increased rates and even salaries for our people has also increased,” said Cokaliong.

He said that the sector should be looking forward to lower or if not maintained fuel prices until next year.

He said that to cope up with the constant soar of oil prices, most of the players in the sector has been practicing cost cutting measures while some have also reduced the frequency of their trips in certain areas.

“Oil prices are not under our control and our sector is the most badly hit by the fuel price increases since oil compose our biggest operational cost. Everybody is doing belt tightening and multi-tasking to cope,” said Sy.