Young Brothers seeks $25M in CARES funds to stay afloat

  • West Hawaii Today file photo Kawaihae Harbor is seen in this undated photo.

Interisland shipper Young Brothers is seeking $25 million in federal Coronavirus Aid, Relief and Economic Security (CARES) Act funding from the state to stay afloat amid the ongoing COVID-19 pandemic.

Young Brothers president Jay Ana described the company’s financial situation as “extremely dire” in a Tuesday letter to the state Public Utilities Commission. The $25 million sought would sustain operations through December.

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“Until now, our parent company has graciously and generously covered our losses,” said Ana. “But they are not in a position to continue covering the staggering COVID losses and have told us that we must now find other solutions.”

Ana was recently informed by Young Brothers parent company, Washington-based Saltchuk, that the shipping company will no longer receive cash infusions effective June 1.

“The mounting losses at Young Brothers are more than any parent company can absorb,” said Jason Childs, chairman of Young Brothers’ board of directors. “We’re in a shared crisis that is far from over and are losing more than $3 million a month. This is not sustainable.”

Gov. David Ige in a prepared statement acknowledged every business in the state has been affected by the pandemic.

“(Young Brothers) is part of the state’s critical infrastructure that keeps goods moving to and between the islands,” Ige said. “We will be considering the request as part of the recovery and resiliency efforts underway.”

The financial support is needed to alleviate the impending cash crisis. The company has seen a 30% drop in cargo volumes because of the ongoing outbreak, reporting losing nearly $8 million through April, with losses expected to reach $25 million by the end of the year.

The move comes despite the company’s efforts to cut costs, including saving $7 million from reduced sailings to Maui and Hilo and changes in reducing its tug workforce, among other initiatives such as hiring freezes and salary cuts for senior leadership.

“Young Brothers expects that, absent immediate relief from the state, it will soon be unable to pay its expenses or continue operations,” Ana said, though later noting “Young Brothers will sail on schedule on June 1, 2020.”

To date, Saltchuk has covered more than $21 million in losses incurred in 2018 and 2019.

If unable to secure relief, the company said it will be required to “prioritize revenue-generating lines of service to sustain operations.”

That would be done via a phased approach to service modifications, subject to PUC approval.

If approved, the changes would begin June 8 to “reduce costs and provide continuity of service for as many customers for as long as possible,” stated a company press release.

The first phase would eliminate the shipment of dry and refrigerated less-than-container-load/mixed cargo option to and from the ports of Kahului, Kawaihae, Nawiliwili and Hilo and continue the modified sailing schedule approved May 5 that reduced weekly sailings between Hilo and Honolulu to one, among other changes.

“Unfortunately, in order to achieve immediate and significant cost savings, Young Brothers must suspend a very labor intensive part of our business – shipping goods that do not fill a container,” Ana’s letter to the PUC reads. “The vast majority of our customers who utilize this service have alternatives in freight forwarders and consolidators.”

Less-than-container-load/mixed cargo options will continue for Molokai and Lanai because Young Brothers is the only carrier providing water transport service for those two islands.

The second phase, which does not have a tentative start date, would further reduce sailing frequency to all neighbor island ports, modify tug and barge availability and eliminate all dry and refrigerated less-than-container-load/mixed cargo options to and from all ports and less-than-container-load shipments of livestock.

“We hope to avoid any disruption in service,” Ana said. “Support from the state Legislature would put the company on solid ground while we seek solutions from the Public Utilities Commission to achieve a more sustainable future for the company. Our goal is to ensure Young Brothers is here to serve all of Hawaii beyond 2020 and into the future.”

Ana said in the letter that the company will submit more details to the commission Friday regarding its plan to continue operations beyond Sunday. The plan will lay out the company’s operation under three scenarios: immediate receipt of significant funding, delayed receipt of funding and no funding.

“The neighbor island communities that rely on Young Brothers can rest assured that we are not closing on June 1,” Ana said. “We will serve our customers as long as possible while we pursue every avenue of assistance.”

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In the letter, Ana also noted the company plans to file requests for cost deferral accounting for COVID-19 pandemic related costs and lost revenues and for emergency/temporary rate relief.

Email Chelsea Jensen at cjensen@westhawaiitoday.com.

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