Big Island Sen. Lorraine Inouye said Wednesday she is confident the state Legislature will allocate CARES Act funding to Young Brothers to ensure there is no disruption in shipping services to the neighbor islands.
“There’s going to be some relief coming out of the (upcoming) session to assist Young Bothers,” said Inouye, a North Hawaii Democrat and chairperson of the Senate Committee on Transportation. “We need to do it and we must do that.”
On Tuesday, Young Brothers announced in a letter to the Public Utilities Commission that it needed $25 million in CARES (Coronavirus Aid, Relief, and Economic Security) Act funding from the state to keep the nearly 120-year-old company afloat amid the COVID-19 pandemic. Describing the company’s financial situation as “extremely dire,” president Jay Ana said the $25 million would sustain operations through December.
Without a bailout, the company stated it will be required — with PUC approval — to make additional cuts and maintain a sailing schedule approved in early May that reduced weekly sailings between Honolulu and Hilo from two to one.
The Legislature is set to reconvene Monday, during which Inouye expects a proposal will be provided by Gov. David Ige’s administration for CARES Act relief for the state’s lone interisland shipper. That will follow Young Brothers on Friday providing the commission more details regarding its operations beyond Sunday based on three scenarios: immediate receipt of funding, delayed receipt of funding and no funding.
“There’s an opportunity, perhaps, but it has to exactly come out of the administration and (we’ll) see what the governor has decided to do,” Inouye said. “I was pleased that he did say that he is looking into it as well and looking at some assistance, looking at the portion of monies that we have in the CARES Act that we have at the Legislature, right now.”
Inouye said the shipping company wasn’t eligible to secure CARES Act funds directed for transportation sectors affected by the pandemic. The majority of the relief applies to the aviation, passenger rail, and public transit industries with maritime, among others, not being specified.
“That was pretty unfortunate for Young Brothers because otherwise they probably would have qualified for the period of COVID-19 and the expenses they are incurring now,” she said noting the industry should be included as it is an “essential service.” “The last resort was (to ask) for assistance from the state.”
While Young Brothers isn’t the only ocean cargo carrier providing service to neighbor islands, it is the only one that serves Molokai and Lanai among its weekly port calls from Honolulu that includes shipping agricultural products between islands.
Tuesday’s request for financial assistance came as “no surprise,” Inouye said, adding Young Brothers had been in contact with House and Senate leadership and the governor over the past few days. She also pointed to cutbacks and service changes the company made with PUC approval in early May and a pending rate increase dating to 2019.
“We were aware already of their dilemma back before they did the application for rate increase. They were already sort 0f in debt previously,” Inouye said.
In its request for financial support, Young Brothers cited a 30% drop in cargo volumes and losses expected to reach $25 million by year’s end. That’s despite efforts made to cut costs, including saving $6 million from reduced sailings to Maui and Hilo and another $1 million by through workforce reductions, hiring freezes and salary cuts for senior leadership, among other initiatives.
Young Brothers also noted it was recently informed by its parent company, Saltchuk, that financial support would cease effective May 31. Over the past couple of years, Saltchuk had covered $21 million in losses incurred by Young Brothers.
If unable to secure relief, the company said that it would be required to make more changes that would implemented via a phased approach subject to PUC approval.
If approved, the first phase starting June 8 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.
Inouye said she had been working with the company to get the now once-a-week shipment between Hilo and Honolulu back to Monday instead of the current Thursday.
Having shipments out of Hilo on Thursdays is not working because perishables and fresh produce do not make it to Honolulu by Wednesday and on to the neighbor islands in time for weekend markets, she said. The modified schedule has also forced some in East Hawaii to truck their products — including milk and produce — to Kawaihae for shipment, creating additional costs.
“I understand Young Brothers are coming around to addressing that change but I think as of this week they haven’t yet,” Inouye said.
Contacted Wednesday afternoon regarding the possibility of changing days, Young Brothers pointed to its Tuesday news release stating no further adjustments would be made to the sailing schedule and additional sailings requested by Hilo and Molokai farmers would not be reinstated.
The second phase, which did 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.
Regarding the community’s concern over a shutdown of the shipping service, Inouye said “we will do the best we can to assist them in their survival and that’s a given.”
“Our people can feel confident that we’re working hard to make sure we continue the services for Young Brothers,” she said.