Name: Hawaii regulators question Young Brothers on viability
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Hawaii regulators question Young Brothers on viability

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Prices for interisland shipping might need to rise 25% next year to keep tug-and-barge operator Young Brothers LLC solvent even if the company receives a $25 million state bailout.The potential impact on customers was mentioned Wednesday during a state Public Utilities Commission hearing, which represented an opening discussion in an emergency evaluation of the regulated monopoly that claims to be on the brink of shutting down.Young Brothers informed state leaders May 26 that it was in dire financial straits because of that exacerbated existing financial losses that would no longer be covered by the company’s $2.75 billion parent company, Saltchuk Resources Inc., in Seattle.At Wednesday’s proceeding held via videoconference, PUC members raised concerns about potential service cutbacks and the ability of Young Brothers to accurately project revenue necessary for profit.Several requests for information submitted to the company Monday were not immediately addressed, including a request for all communications with Saltchuk regarding a shutdown, and whether Young Brothers has evaluated restructuring in bankruptcy.James Griffin, commission chairman, raised the issue of whether Young Brothers is fit to provide the public service of carrying interisland goods under state regulations given that the firm suffered losses after negotiating two rate increases in recent years aimed at providing a reasonable financial return.“We have granted rate increases based on your projections, with a sufficient level of profitability that your company projected,” Griffin said. “Is there a disagreement on that?”Jay Ana, who was promoted to lead Young Brothers as president in January, said he couldn’t respond because he wasn’t involved in those prior rate cases. But he said the company, which has served Hawaii for 120 years, is committed to extending service for another 120 years.“I’m focused on paving a path forward,” he said.Ana told the commission that the $25 million requested from federal COVID-19 aid for state use would cover company losses through early next year.The company hopes to receive this aid from the Legislature by the end of July, close to when it projects running into cash shortfalls.After that a combination of changes would be needed to keep Young Brothers viable, including a rate increase and a possible reduction or elimination of transporting cargo that doesn’t fill an entire container, Ana said.Such less-than-container-load cargo is labor-intensive and a money loser for Young Brothers, but the service is important to many customers.Young Brothers also is exploring $20 million to $30 million in bank financing, but its ability to repay a loan is an issue.The company, which employs 375 people, also noted that it could not receive a forgivable federal Paycheck Protection Program loan earlier this year because it doesn’t qualify as a small business as a Saltchuk subsidiary.A general 25% rate increase would provide around $18 million to $20 million in additional revenue next year that would likely allow the company to break even financially, according to Ana.Before the pandemic struck, Young Brothers projected losing $12.3 million this year, and in September had requested a 34% rate increase. This request has yet to be decided by the PUC.Young Brothers previously reported losses of $10.4 million last year and $11.4 million in 2018 following profits of $554,068 in 2017, $2.6 million in 2016 and $15.3 million in 2015.Containing costs also would be part of the plan for Young Brothers to become viable, according to Ana, who said changes implemented since March, including tug crew furloughs and altered sailing schedules, should cut costs this year by $7.4 million.Griffin said containing costs seems to be an issue for the company. Over the past five years, Young Brothers’ operating expenses rose 26%.“To me this is the challenge,” he said. “It can’t be all customer rates going up.”Jennifer Potter, another commissioner, added, “This has to come with sacrifices on all sides.”The PUC intends to continue its assessment, which includes input from the state Consumer Advocate, with written follow-up questions and future hearings. Written public testimony also is being accepted.—Comments (86)By participating in online discussions you acknowledge that you have agreed to the . 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. Report comments if you believe they do not follow our .Having trouble with comments? .to see our full coverage of the coronavirus outbreak. your coronavirus news tip.Be the first to knowGet from Star-Advertiser when the next breaking story happens — it's FREE! You just need a supported web browser.Subscriber FavoritesMore BusinessOur Privacy Policy has been updated. By continuing to use our site, you are acknowledging and agreeing to our updated and our .

Prices for interisland shipping might need to rise 25% next year to keep tug-and-barge operator Young Brothers LLC solvent even if the company receives a $25 million state bailout.The potential impact on customers was mentioned Wednesday during a state Public Utilities Commission hearing, which represented an opening discussion in an emergency evaluation of the regulated monopoly that claims to be on the brink of shutting down.Young Brothers informed state leaders May 26 that it was in dire financial straits because of that exacerbated existing financial losses that would no longer be...

Hawaii regulators question Young Brothers on viability

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