‘Extremely dire’: Young Brothers seeks $25M in CARES funds to stay afloat

  • Kawaihae Harbor is seen in an undated file photo. (West Hawaii Today/file photo)

Interisland shipper Young Brothers is seeking $25 million in CARES Act funding from the state to keep the nearly 120-year-old company 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 Public Utilities Commission. The $25 million sought would sustain operations through December.

ADVERTISING


“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. We know they have deep aloha for Young Brothers – and for Hawaii – and we are grateful to them for carrying us through the challenging times. But we must now find a cooperative solution with the state that allows YB to continue to operate.”

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

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

The financial support is needed from the state Legislature and Public Utilities Commission to alleviate the impending cash crisis. The company has seen a 30% drop in cargo volumes due to the ongoing outbreak, reporting losing nearly $8 million through April with losses expected to reach $25 million by year’s end.

“And the numbers seem to get worse every week,” Ana wrote in the communication to the PUC.

The move comes despite 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 like hiring freezes and salary cuts for senior leadership.

“However, no amount of cost-cutting can make us viable in the short-run,” he wrote.

Ana stated he was also recently informed by Young Brothers’ parent company, Washington-based Saltchuk, that it will no longer receive cash infusions effective June 1.

“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.

“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.”

If unable to secure relief, the company said that 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 on June 8 to “reduce costs and provide continuity of service for as many customers for as long as possible,” a press release from the company stated.

The first phase would eliminate shipment of dry and refrigerated less-than-container-load/mixed (LCL/Mix) 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. The vast majority of our customers who utilize this service have alternatives in freight forwarders and consolidators,” Ana’s letter to the PUC reads.

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 two islands.

“After June 8, Young Brothers is committed to continue providing the specialized services and delivering the gas, groceries, and other critical supplies that Molokai and Lanai need to survive and thrive,” Ana said.

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 LCL/Mix cargo options to and from all ports and LCL shipments of livestock.

“We hope to avoid any disruption in service,” said Ana. “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 it will submit more details to the commission on Friday regarding its business 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. We will serve our customers as long as possible while we pursue every avenue of assistance,” said Ana.

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.

ADVERTISING


“I and my colleagues would be heartbroken if Young Brothers were forced to stop operating. Young Brothers has been serving Hawaii since 1900 and we employ approximately 370 residents spread across all major islands of the State,” Ana wrote in closing. … “We want to keep going and we’re confident we can weather this crisis, but we can only do it with help and support from the State and the Commission.

In 2019, Young Brothers filed a request with the PUC to increase its rates to offset rising operating costs and pre-COVID estimated losses of approximately $13 million. That request remains pending further action by the PUC.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

By participating in online discussions you acknowledge that you have agreed to the Star-Advertiser's TERMS OF SERVICE. An insightful discussion of ideas and viewpoints is encouraged, but comments must be civil and in good taste, with no personal attacks. If your comments are inappropriate, you may be banned from posting. To report comments that you believe do not follow our guidelines, email hawaiiwarriorworld@staradvertiser.com.