Young Brothers requests rate increase in response to reduced cargo volume and new Pasha service

| December 27, 2010 | 0 Comments

Young Brothers' Molokai office at the Kaunakakai wharf.

In response to anticipated loss of revenues from Pasha Hawaii Transport Lines entering the interisland transportation business, along with a weakened economy, Young Brothers last week applied for a 24 percent rate increase that could go in effect by August.

The application, filed with the Public Utilities Commission on Dec. 22, claims that the decline in business accounts for the majority of the proposed 24 percent increase. Young Brothers said it saw a decline in cargo volume this year and expects the decline to continue through 2011, with modest growth projected for 2012 and 2013. By taking these growth estimates into account, Young Brothers reduced its rate increase request by about 5 percent.

According to a press release issued by Young Brothers, “the dramatic drop in cargo volume accounts for about 18 percentage points of the proposed 24 percent increase. This sharp drop-off is reflected in Young Brothers’ rate of return, which was less than 1 percent in calendar year 2009, with similar results to date in 2010.”

“The company is clearly at a point where either our rates have to increase or our service frequency has to decrease,” wrote Matthew J. Humphrey, vice president and general manager of Young Brothers.

While visiting Molokai Dec. 8, Jeffrey Low, Young Brothers’ manager of planning and facilities, said that the Molokai and Lanai routes both lose money. “If Pasha makes a dent in our service it will impact rates,” said Low, hinting at last week’s rate request. Low also said that Pasha may impact the frequency of barge visits to Maui or possibly the Big Island.

Pasha will not be serving Molokai or Lanai because its ship, the Jean Anne, is too big to dock at either Kaunakakai harbor on Molokai or Kaumalapau on Lanai. For the past six years, the Jean Anne has been transporting vehicles between the Hawaiian islands and the mainland.

In September, the PUC granted Pasha a provisional license until 2013. At the time, Young Brothers testified that the entry of Pasha would hurt its ability to serve all the islands. The PUC will monitor this situation, retaining the right to suspend or revoke Pasha’s license.

Young Brothers’ last rate increase came in August of 2009 when the PUC granted a 13.46 percent increase.

If Pasha has a negative impact on Young Brothers business, the 30 to 35 percent discount to ranchers and farmers may be removed. This would be an issue for the Big Island and for Molokai as well.

With the PUC approval last week of tariffs for Pasha, the new interisland service could begin this week.

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