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Hawaii News

Young Brothers seeks emergency increase in rates

                                Jay Ana


    Jay Ana

Young Brothers LLC, which has been seeking a $25 million bailout from the state to avoid insolvency, has ratcheted up its plea for aid by filing a motion with the Hawaii Public Utilities Commission for an emergency rate increase that would boost the company’s revenue by about $30 million and keep its interisland cargo transport services afloat.

The request, filed Tuesday, follows a rate increase motion that Young Brothers filed with the PUC in 2019 to offset rising operating costs and pre-COVID-19 estimated losses of approximately $13 million. Now with the pandemic escalating, Young Brothers is asking the PUC to expedite the process and temporarily authorize a revenue increase of about $30 million that the company forecasts will be required to break even.

The filing also asks the PUC to approve a continuation of cost-saving measures that includes a reduced sailing schedule to Hilo and Maui County. The streamlining marks the latest steps taken by Young Brothers to curb projected losses of more than $25 million that have mounted due to the COVID-19 pandemic.

“If approved, this temporary rate increase will provide critical revenue we need to maintain current levels of service and continue operations, and we will only be able to recover part of the $30 million we are projecting to lose this year,” Young Brothers President Jay Ana said in a statement. “I want to be clear that this proposed rate increase would only allow the company to break even in 2020 if the rates were in place for a full year — we are not seeking an allowed rate of return or any sort of profit as part of this request.”

In May, Young Brothers requested that the state Legislature give the company $25 million from Hawaii’s share of federal COVID-19 emergency funds to sustain operations through this year. But to this point the lawmakers have not provided that assistance. Seattle-based Saltchuk Resources Inc., the parent of Young Brothers, has said it will quit putting cash into the interisland shipping company to cover operating shortfalls after covering losses for the last two years.

Young Brothers, which has 370 employees statewide, attributed its expected losses this year to the decline in cargo volumes and higher operating expenses due primarily to the increase in labor and labor- related costs. The company said cargo volumes fell 30% following government stay-at-home orders and a steep decline in tourism.

In April, Young Brothers streamlined its operations by temporarily reduced sailing schedules for Maui and Hawaii counties, reducing gate hours for nonbarge days in all major ports, implementing a hiring freeze, cutting salaries for senior leadership, suspending nonessential travel, eliminating discretionary expenses and deferring nonessential maintenance and related activities.

“We know our customers and small businesses across Hawaii are struggling to cope with the unprecedented challenges brought on by COVID-19,” Ana said. “That’s why we pursued all available avenues of relief before making the difficult decision to accelerate our request for higher rates, but this request is vital for Young Brothers to stay in business and continue connecting our island economies.”

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