Interisland shipper Young Bros. won approval Friday to raise rates by an average of 16.58 percent in a move partly aimed at shoring up the company’s financial health in the face of declining cargo volumes brought on by the economic downturn.

The increase approved by the Public Utilities Commission is less than the 23.97 percent hike originally sought by the company, which operates barge service between Oahu and the five other main Hawaiian Islands.

Company officials said the decline in Hawaii’s economy since early 2008 has resulted in cargo volumes falling to their lowest level in a decade. Even with the estimated $10.6 million expected to be generated by the rate hike, Young Bros. projects it will still lose money from operations in 2011 after barely breaking even in 2010 and 2009.

"We know that residents and businesses in Hawaii are continuing to manage through this difficult economy," said Glenn Hong, president of Young Bros. "Our focus over the last several years has been to maintain our sailing schedules so as not to disrupt communities across the state that depend on our regular, just-in-time schedule."

The company has taken a number of steps to cut costs in recent years, including trimming its administrative staff by 25 percent, implementing a wage freeze in 2009 and reducing hours for other employees, said Ray Catalani, Young Bros.’ vice president of strategic planning and government affairs. Young Bros. last raised rates by 13.46 percent in 2009.

Young Bros. makes 12 two-way sailings each week between Honolulu and ports on Kauai, Maui, Molokai, Lanai and Hawaii island.

The average amount of the rate increase is 16.58 percent, but the rate will vary depending on the type of cargo being shipped. The rate for standard containers will rise by 11 percent, while the rate will go up by 14 percent for automobiles and "roll-on/roll-off" cargo, 15 percent for refrigerated containers and 26 percent for "less-than-container loads."

The hike will result in higher prices for some goods on the neighbor islands and mean higher costs for farmers shipping refrigerated produce to Honolulu.

With the new rates, the cost to ship a 2,000-pound pallet of frozen chicken from Oahu to Maui will rise to $136.28 from $108.16. The increase of $28.12 works out to 2 cents a pound. The shipping cost for a pallet of canned soda — 2,964 cans — will rise to $63.62 from $50.49 going from Oahu to Kauai. The increase of $13.13 works out to 3 cents per six-pack.

Hong said Young Bros. will continue to offer a discounted rate to local farmers and ranchers under the new rate structure. The discount, ranging from 30 percent to 35 percent, was put in place to enhance food security and sustainability by supporting the local agriculture industry.

Young Bros. plans to file its finalized tariff rate sheet with the PUC on Monday. The rates will take effect upon the PUC’s approval of the rate sheet.