Hawaii's World
By A.A. Smyser
Thursday, April 11, 1996
It will be slower than air but a lot cheaper. The "brute lifting capacity" of ships is such that less than 2 percent of all cargo to Hawaii arrives by air. Matson Navigation Co. sails four giant ships weekly from the West Coast to Hawaii.
In 1989 industry sources did a calculation for me showing that Matson deliveries could fill up the insides of the 25-story office building adjoining Ala Moana Center thrice every week! The 1,500 cars a week Matson then was bringing in could come close to filling up the center's Coral Level parking. Matson carries some 70 percent of all mainland freight to Hawaii.
The new high tech customer service center in Phoenix, where Matson also has a cargo depot, is part of the running Matson has to do just to stay in place. For instance, the West Coast longshore labor cost to handle a ton of cargo stayed almost stable over 30 years - $4.94 in 1960 versus $4.90 in 1993. But hourly wages went up from $3.83 to $44.90. Thus, "staying in place" was achieved only through modernizations that brought tremendous reductions in the needed work force.
In 1950 an average commercial cargo vessel operated with a crew of 45. It carried 10,000 tons at a speed of 16 knots. The average ship in 1990 had a crew of 21, carried four times as much cargo and moved at 23 knots. Fuel savings have been immense, too.
Matson executives boast that - because of these and many other added efficiencies - their per ton cargo charges to Hawaii in the past 10 years rose less than half as fast as the state's consumer price index (23 percent versus 59 percent). An additional 3.8 percent was tacked on this year, however.
Matson and other cargo shippers are under attack for charging more than it would cost if foreign vessels were allowed to compete be tween U.S. ports. This undoubtedly is true. It would take a change in a century-old federal law, the Jones Act, to permit such competition. Matson points out it is national policy to also protect our airline, telecommuications and public utility industries. Foreign vessels al ready are free to serve us from foreign ports.
Foreign competitors can cut costs by not meeting the many regulations, Social Security taxes, unemployment insurance, workers' com pensation and other costs that U.S. businesses must meet. Matson recently concluded a 10- year cargo-sharing agreement with American President Lines, which serves ports in Korea and Japan. It capitalizes on the fact that Matson has strong westbound volume but light east bound loads, and APL is the reverse.
As part of the deal Matson has resumed service to Guam and serves Micronesian islands from there. It also has bought six APL ships to add to its previous nine. The APL ships are among the most modern cargo carriers on the sea. They carry designations of C-8 and C-9, suggesting the number of design advances from the C-3 fleet that was Hawaii's primary reliance after World War II.
Matson in the future will consider Hono lulu the hailing port for all 15 ships. This means that Honolulu will be lettered on their sterns instead of San Francisco. Matson's head quarters stay in San Francisco, but its parent company, 125-year-old Alexander & Baldwin, is based here. A&B was a longtime part owner of Matson, founded in 1882. It bought full control in 1969 to settle an antitrust suit alleging that common ownerhip of Matson by Hawaii' "Big Five" companies stifled competition.
Due to its high tech improvements Matson has not been as big a contributor to the high "price of paradise" as often alleged. But now, like sugar, deregulation forces are lining up against it and the rest of the U.S. shipping industry. I wonder whether deregulation would work to the advantage or disadvantage of Hawaii consumers. What now is a fast, regular, dependable, quasi-public utility ser vice to all four counties might be disrupted by competitors wanting only the cream of the cargo and disinterested in the rest.