The Current Plight of 2GO Now, Its History and What Could Be Done

According to their released Financial Statement in its Annual Report, 2GO had a Net Loss of PhP 1.349 billion (or a Total Comprehensive Loss of PhP 1.351 billion) in 2018.  In the previous year 2017, they also had a Net Loss of PhP 311 million(or a Total Comprehensive Loss of PhP 296 million) whereas in 2016 the only liner company left in the Philippines still had a Total Comprehensive Profit of PhP 387 million.  The combined losses of 2017 and 2018  were enough for the company to lose a lot in equity and now the only remaining equity of the company is PhP 2.248 billion.

https://www.2go.com.ph/IR/financials.asp

The two years of losses were roughly the period wherein Chelsea Shipping of Dennis Uy and the SM Investment Corporation of the Henry Sy family were already in charge of 2GO after the Sulficio Tagud group of Negros Navigation sold out to them for something like in the tune of PhP 6 billion.

The most likely reason for the losses was the resurgence in the price of fuel. 2GO under former helmsman, Sulficio Tagud also suffered losses (after buying out the most of the shares of Aboitiz Transport System [ATS] and combining it with Negros Navigation) when the price of fuel was high. They only crept back into the black when the world oil price slumped a few years ago.

People and even the more knowledgeable ship spotters were a little surprised when they heard that the SuperCat fleet of 2GO seems to have reliability problems because that did not happen before. Lately, they announced that they were suspending SuperCat trips to Tagbilaran for three months from May 16 to August 16. 2019. Today which is summer is peak season of travel to Bohol and for SuperCat to do that means only one thing — they are in trouble.

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News of unreliability of the SuperCats has been around already this year when apparently for no obvious reason SuperCat has been canceling voyages to Tagbilaran. For that to happen there must be maintenance and availability issues on their High Speed Crafts (fastcrafts and catamarans). It seems they are just concentrating all their available crafts in the Cebu-Ormoc route.

From what I heard, it seems St. Jhudiel and St. Braquiel are out of action because of engine and propeller problems. St. Nuriel, an older craft is also not in good shape as far as passenger accommodations are concerned. And so it seems it is only the new St. Sariel and St. Camael that are available for them and I even heard one of the two cannot reach its design speed. One engine is down?

jhudiel

St. Nuriel had its last trip yesterday as it is going into the shipyard. It is already using just evaporative coolers and fans for its Tourist Class. Now, that is horrible  for a High Speed Craft which is supposed to be comfortable. How did that happen? They are sinking to the level of the old Kinswell?

nuriel

St. Nuriel after her last trip. Photo by Mark Edelson Ocul/PSSS

I heard it had become difficult to requisition parts for the SuperCats and a lot of papers had to be signed. 2GO is now run by non-shipping people from the rank of President/CEO who is also an SM top dog and so he wears many hats. Can he really hack it? The Board of Directors is also full of non-shipping people.

The SuperCats run from just before 6 AM up to 10 PM at times, especially in the Cebu-Tagbilaran route. There are only a few hours to make checks and small repairs before the crafts head out to sea again. If the crew report a problem while sailing and asks for parts and outside service, the paperwork can wait. It is the craft that cannot wait actually. Otherwise, upon company orders, the crafts will sail out again the next day and for sure the small problem will get bigger up to the point where a major service is needed and/or the craft will already be unable to sail. It seems this is what happened to SuperCat, at least in Cebu when cancellations became a li’l bit regular and now the crafts have to head out for major servicing.

Was that rigor in paperwork an acquired culture from SM? It seems that there the level of trust is not what is healthy in the shipping world where a company must pay heed to what the engineers are saying especially in a craft that runs like a bus (maybe in a freighter the parts can wait for coz anyway they don’t sail daily and a reduction in speed or a delay in voyage is not felt by the public).

If rigor is needed I think it should be in the proper servicing of the crafts which need to run safe daily. I just hope that that rigor is not a reflection of the cash position of the company which is losing equity and also cash flow. 2GO is in trouble. It either needs capital infusion or new money in terms of loans. I do not know if their plan to sell the container ships from Negros Navigation is an indication of this problem.

I have also heard that 2GO liners run slower compared to before. Was there an order to reduce the MCR to save fuel and parts and to lengthen the life of the engines and avoid breakdowns? What was that incident I heard about St. Pope John Paul II?

2GO is a little pompous in its Annual Report. Of course, they can boast how much they of the passengers from Manila as they are the only liner left in the country. Or boast too of their share of the container market. They are No. 1 after all in capacity. But almost everybody who knows shipping says their market share is falling for the have the highest cargo rates in the country.

These high container rates are not entirely of their own making but unfortunately for them, the public does not know the reasons or the history. Actually, sometime in the 1980’s MARINA, our maritime regulatory agency decided that passenger-cargo liners can charge more for cargo. After all, it is express cargo because liners are faster than the container ships which can even have more ports of call and higher in-port hours. But the bigger rationale was that in truth container/cargo shipping was actually subsidizing the passenger rates. In the 1990s, I think this policy was reaffirmed during the Ramos regime when rates were adjusted.

That policy was okay when the liner companies were also the main operators of the container ships. Sulpicio Lines, William Lines, Aboitiz Shipping, Negros Navigation, Gothong Lines and Sweet Lines dominated not only liner shipping then but also container shipping. There were very few shipping companies before which were into pure container shipping and they were all weak then. Those were basically the original Lorenzo Shipping of Jose Go (before it was sold to the Magsaysay Group), Escano Lines (which still had passenger ships in the 1980s), Sea Transport Company (which then folded up) and Solid Lines which was just small then.

But the “Great Merger” of 1996 came but then it ultimately failed. Along with its carcass, only Aboitiz Transport System remained. The great and fabled William Lines disappeared and for Gothong Lines, only Gothong  Southern Shipping and Carlos A. Gothong Lines Inc. remained although the latter is much smaller than the first and in the recent decade, they were no longer in passenger shipping. The family of Jose Go reincarnated as Oceanic Container Lines and Lorenzo Shipping is still around plus the Magsaysay Group re-established the National Maritime Corporation which they acquired from the Government and it became NMC Container Lines. All the named three are not into passenger shipping. And, of course, MARINA drove out Sulpicio Lines (now Philippine Span Asia Carrier Corporation) from liner shipping after the sinking of the Princess of the Stars.

A host of new container lines also emerged. One was formerly in passenger shipping but when this business of theirs was already losing they reinvented themselves in container shipping and this is the Moreta Shipping. Ocean Transport, a new shipping company also became a player and they are notable for using LCTs in carrying container vans. Among other new players in container shipping are Meridian Shipping, Seaborne Shipping and Seaview Cargo Shipping Corporation (the shipping company that uses the name “Fiesta” in their container vans). Asian Shipping Corporation is also chartering their LCTs to others to carry container vans.

General Romulo

Where before we have about 60 liners, now that is the number of our container ships almost a decade ago. And 2GO is the only liner company left. They might have good offices and service but they will always lose to these container shipping companies which can always offer lower cargo rates for they do not carry passengers. In passenger shipping, a motley of personnel is needed to service the passengers especially in hotel services (mainly feeding and cleaning services).

2GO simply cannot compete in this uneven field. But I don’t think MARINA realizes the field is uneven. The current people there might not even realize the wherefores and if they have old decisions and policies. They might not even realize that their decision to chop Sulpicio Lines in passenger shipping was a mistake. The medicine was simply too strong that the horse died, so goes the American saying.

If we have to have more liners it is not enough to encourage new players in the liner field as MARINA and the Department of Transportation tried to do in recent years. These container shipping companies existing now knows they are better off just moving cargo (not much people to hire, not that high cleanliness required, not much insurance to buy, limited food to stock too and they can be un-prompt in departures and arrivals). But of course, they won’t admit to that.

Maybe what is needed is to require these companies to operate liners too if they want to continue container operations. A certain ratio to container ships could be found and the size of the liner could be defined too. That is the only way to level the playing field for 2GO and for the country to have liners again. If not, I wonder how 2GO can exist in the long run with the high price of fuel of which nobody has control of. I will not be surprised if the day without liners will come.

A comprehensive study of our shipping must be done (but do we have true experts on shipping?) and this is a piece in that direction.

 

 

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