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.

60349459_986176444917446_3487696671951814656_n

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.

 

 

The RORO Cargo Ships of Sulpicio Lines Are All Gone Now

When Sulpicio Lines acquired big (by local standards) RORO Cargo ships in the late 1990’s and early 2000’s, I thought they were hoarding some ships that can be later converted in ROPAX (RORO-Passenger) ships in the mold of what Carlos A. Gothong Lines Inc. (CAGLI) did when they were able to come up with the beautiful Our Lady of Sacred Heart and the Our Lady of Medjugorje which were former RORO Cargo ships in Japan (and none would have thought that were their origins) and sister ships. I do not know what truly were their plans but if that was their intention then events soon overtook them when in the new millennium the bottom fell out of passenger liner shipping when budget airlines and the intermodal buses and trucks drew away passengers and cargo from the liners. This was shown when passenger capacities of the newly-fielded liners went down in the new millennium to 2,000 from 3,000 plus before and “carferries” that came had their two cargo decks just retained.

3161695017_35e7a960d1_z

The Our Lady of Sacred Heart by Britz Salih

The RORO Cargo ships of Sulpicio Lines I am talking about were the ships known as Sulpicio Express Uno, Sulpicio Express Dos and Sulpicio Express Tres. The three, if compared to the sister ships of CAGLI which went to WG&A were a little bigger and a little faster although all were single-engined which is the mark of cargo ships including RORO Cargo ships. If they have been converted into ROPAX ships they would have been as big as SuperFerry 1, SuperFerry 2 and SuperFerry 5 although a little slower.

The first of the three to come here was the Sulpicio Express Uno which arrived in 1997. This ship was the former Hokuto in Japan and she was built by Shin Yamamoto Shipbuilding in Kochi yard, Japan in 1980 with the ID IMO 8005733. Hokuto measured 129.9 meters by 20.0 meters with an original gross register tonnage of 4,176 tons and she had a service speed of 17 knots. This RORO Cargo ship has a bridge at the front and cargo ramps at the quarter-bow and at the quarter-stern, all features that will be very good had she been converted into a ROPAX ship.

8107299599_a706277149_z

Sulpicio Express Uno by Aris Refugio

The second of the three to come here was the Sulpicio Express Dos which arrived here five years later in 2002. This ship was known as the Hokuo Maru in Japan and she was built by Shin Kurushima Hiroshima Dockyard Company in Akitsu, Japan in 1988 with the ID IMO 8817265. Her external measurements were 136.0 meters by 20.0 meters with a gross tonnage of 4,433 with a service speed too of 17 knots. She too had a bridge at the front with a cargo ramps at the quarter-bow and at the stern. She looks much like the Sulpicio Express Uno in the superstructure. With the same breadth I even wonder if she and Sulpicio Express Uno were actually sister ships. Even the placements of their ramps were the same.

The last of the three RORO Cargo ships of Sulpicio Lines to come was the Sulpicio Express Tres which also came in 2002. This ship was known as the Honshu Maru in Japan and she was built by Imabari Zosen in Imabari yard, Japan in 1989 with the ID IMO 8817071. She measured 128.5 meters by 20.4 meters and her gross tonnage was 4,695 and she had a service speed of 17 knots too. The ship also had a quarter-bow ramp and a stern ramp. Her difference though from the other two RORO Cargo ships of Sulpicio Lines was in having the bridge amidship. A position of the bridge amidship was not really a disqualification if she was intended for conversion into a ROPAX ship as shown by some local examples here like the Butuan Bay 1 of CAGLI although it might look a little ungainly.

10995727775_8cc53e12bf_z

Sulpicio Express Tres by Aris Refugio

The three were almost of the same size and they had the same service speeds coming from single engines that average 10,000 horsepower which is a little bigger than the engines of the CAGLI sister ships. As built, all had two car decks. If converted all could have had one single cargo deck and three passenger decks with probably a passenger capacity of about 1,500. Like the CAGLI sister ships they might have had a service speed here of 16 knots or maybe a little better. They will be little slower than most big liners then but still acceptable and comparable to some of the newer but slower liners like the SuperFerry 3 of Aboitiz Shipping Corporation and the San Paolo of Negros Navigation Company. Well, the service speed here of Our Lady of Sacred Heart and Our Lady of Medjugorje was also 16 knots so that was acceptable.

One intriguing comparison I saw was with the Ozamis Bay 1, also of CAGLI. This former RORO Cargo ship that was converted into a ROPAX ship has external measurements of 130.3 meters by 20.0 meters with an original gross register tonnage of 4,545 tons which are almost the same as the three Sulpicio Expresses. I even wonder if she was a sister ship of Sulpicio Express Uno and Sulpicio Express Dos. However, her bridge was amidship and she was not converted beautifully. Hence, she did not look good and her passenger capacity was small at 601 persons. However, since she had 13,400 horsepower on tap she had a higher design speed at 19.5 knots.

6037026662_0581a40a01_z

Ozamis Bay 1 by James Gabriel Verallo

The three Sulpicio Express ships were not converted into ROPAX ships and so they just served as RORO Cargo ships and doing what a container is doing except that she takes in container vans RORO (Roll on, Roll Off) in trailers compared to the LOLO (Lift On, Lift Off) method of the regular container ships. The three were in the container van trade and were never used to take in vehicles that were crossing the islands. But being faster the three really deserved a new series in Sulpicio Lines that is apart from the old Sulpicio Container (Sulcon) series of cargo ships.

In such method of carrying container vans, the three RORO Cargo ships became inefficient compared to the regular container ships. One, using trailers which are called “chassis” in the trade is additional investment and expense (and that also includes the trailer caddies). Second, unlike the regular container ships the RORO Cargo system of stowage takes more space as the container vans can’t be stacked one atop the other with no space in between the container vans. The loading and unloading might have been faster but all types of container ships here don’t really rush from port to port. Moreover, the engine sizes of the RORO Cargo ships are significantly larger than the regular container ships for the same length. They might have been faster but as mentioned before they don’t really rush as having enough cargo really takes time because there are simply too many bottoms. So the speed advantage is just negated.

14434803650_ea36e82552_z

Sulpicio Express Dos as Span Asia 15 by Mike Baylon

When they were not converted into ROPAX ships, I was even wondering what was the reason Sulpicio Lines kept them for too long, in my view. Well, of course, Sulpicio Lines has no penchant for selling ships and especially to the breakers for as long as it still has economic value. Their only consolation then was they had the fastest cargo ships hereabouts (before the arrival of the faster RORO Cargo ships of Asian Marine Transport Corporation or AMTC).

Two of the three still passed to the new name of Sulpicio Lines, the Philippine Span Asia Carrier Corporation (PSACC) where the Sulpicio Express Dos became the Span Asia 15 and the Sulpicio Express Tres became the Span Asia 16 in 2013.

The three was a good view when they are in port or near the port. They were bigger than the regular container ships, they were taller and they look different and even their long cargo ramps seem to be an attraction. Maybe a few even had in their minds that the superstructure is near that of a ROPAX ship (and they were not wrong).

9076391297_f7cc29f662_z

Sulpicio Express Uno not sailing before her sale

When Sulpicio Lines began selling their passenger ships in the aftermath of the sinking of their Princess of the Stars and began buying container ships in their place, I somehow felt that the three RORO Cargo ship will also go somewhere down the line. With the size of the new container ships of Sulpicio Lines, it was obvious they were going for efficiency. They were no longer competing for the biggest or the fastest like before. Some container ships of Oceanic Container Lines were even bigger than theirs.

In October of 2013, the oldest of the three, which had already reports of engine trouble, the Sulpicio Express Uno was beached and broken up in in the ship-breaking capital of the world which is Alang, India. Then, in November of 2015, the Sulpicio Express Dos and Sulpicio Express Tres were broken up in Chittagong, Bangladesh. The two did not even reach 30 years of age and there were not yet reports of engine troubles from them. Sulpicio Lines just wanted to change ships for more efficiency and they had to go, sadly.

Now, the new Philippine Span Asia Carrier Corporation (PSACC), the new name of Sulpicio Lines doesn’t have a RORO Cargo ship anymore. All they operate and all they have now are smaller container ships that are just fit for the container demand on them.

Sad to see the three go.

Container Ships Also Sink Our Liners

In the past, before 1980, there was no conflict between the our liners and the container ships. First, container ships did not exist before the late 1970’s. Second, before that time, general cargo ships were not many as it is our liners that were mainly carrying the inter-island cargo that should be transported fast and were not in bulk. That was the reason why even though our production and the number of people were not yet as high like today, there were so many liners existing with as high as 90 liners at its very peak.

8668223232_ec249aa045_z

Gorio Belen research in the National Library

In the early 1970’s, the Sea Transport Company came into existence. What was notable for this new company is they offered regular express cargo service to Mindanao which means a direct service and aside from loose cargo, their ships were able to carry small container vans which were non-standard as in they were offering 8-foot containers which they themselves designed (it was rectangular in shape). In due time, they also shifted to standard container vans and they fielded pure container carriers.

In 1976, Aboitiz Shipping Corporation converted one of their general cargo ships, the P. Aboitiz into a container carrier. Conversion like this was not difficult because only some internal structures need to be modified so a container van can be slot in and that also means modifying the holds and the hatches. The grabs of the booms also have to be modified by a bit so it can handle a container van.

8005824839_7883222fb7_z

Gorio Belen research in the National Library

In 1978, containerization was already in full swing when Aboitiz Shipping Corporation added more container ships and William Lines Incorporated followed suit. The next year, in 1979, Sulpicio Lines Incorporated also joined the bandwagon to be followed in the next year by Lorenzo Shipping Corporation which had already split from its merger with Carlos A. Gothong Lines Inc (CAGLI). Negros Navigation Company also joined this new paradigm in 1980. In 1981, Sweet Lines Incorporated also followed suit but they used their old company name Central Shipping Corporation. Among the major liner companies then, it was only Compania Maritima which did not join this new paradigm.

8656151661_9f1d5845df_z

Gorio Belen research in the National Library

These new container services offered direct sailings as in there were no intermediate ports. With direct service, the container ships might be a little slower than the liners (except for the fast cruisers) but their transit times were not worse than the liners (except to Cebu) because they don’t lose time in an intermediate port or ports. With the speed, convenience, security (no pilferage), lack of damage and contamination, soon the shippers were already shifting en masse to the new container services.

In the liner crisis of 1980 when many liners were deactivated and laid up, it seems the main cause of that was the emergence and immediate success of the container ships and container shipping. Maybe the liners suddenly found they don’t have enough cargo and hence they can’t maintain the old sailing schedule and from the outside it looked like that suddenly there was a “surplus” of bottoms (actually the liners complained of that).

6938229623_5a9a747e91_z

Gorio Belen research in the National Library

In December 1979, the first RORO liner, the Dona Virginia of William Lines came. This RORO and those that came after her were capable of carrying container vans especially the XEU or 10-foot container vans that can be loaded aboard by the big forklifts. Soon even the fast cruiser liners were also carrying container vans atop their cargo holds especially at the bow of the ship. Some can also carry container vans on a platform in the stern.

Locally, I did not see a new paradigm take hold as fast as container shipping. The ROROs even took longer to be the new paradigm. In containerization, there was even a rush to convert general cargo ships into container ships. All the “new” container ship of Lorenzo Shipping Corporation were converts at the start. The other container shipping companies bought general cargo ships from Japan and converted them into container carriers. Our first container ships looked like general cargo ship unlike the modern container ship which does not look like general cargo ships (and nor can they handle loose cargo).

1979-sep-wilcon-i-iv

In just a little over a year William Lines had 5 container ships (Gorio Belen research in the National Library)

The emergence of the RORO liners even pushed containerization faster as that new kind of ferry is ready-made not only for vehicles or rolling cargo but also for container vans, wheeled in atop chassis (which means atop trailers) or not (if not wheeled then big forklifts “wheeled” them in). There were not yet reach stackers in the early years of our containerization to handle the container vans.

In the 1980’s and the 1990’s, the liners can still hold off the container ships. The reason was there were no budget airlines yet (Philippine Airlines fares then were really stiff) and there were no intermodal buses yet in the bulk of the islands (it was only strong in Eastern Visayas, their pioneer area). And liners can still pack in the passengers (even up to “overloading” or overbooking point) because people has already learned how to travel and there was a great push for migration to Metro Manila (which later led to the overcrowding of this metropolis).

However, when budget airlines and the intermodal buses came in droves, the passengers of the liners dropped. The 2,000 to 3,000 passenger capacity slowly became “too big” and hence the national shipping companies no longer fielded liners with capacities such as this in the new millennium. Aboitiz Transport System (ATS) also tried to reduce passenger capacity and increase cargo capacity by converting some of their liners to have two decks for rolling cargo like what they did in SuperFerry 12, SuperFerry 9 and SuperFerry 2.

Superferry 12

Photo by Edison Sy

Can the liners compete with container ships when the passenger demand dipped? The answer is a plain “No way”. Liners usually have more than three times the horsepower of a local container ship (and it is single-engined which means less spare parts are needed) and yet the local container ship usually have three times the container capacity of a RORO liner. This even became more pronounced when the regime of high oil prices came in the first decade of this millennium. Per fuel prices alone, the container ships can carry each container van much cheaper than what a liner can.

Container vans also do not need the amenities needed by the passengers. Moreover, it does not need the service expected of the passengers which need to be fed and be given more than decent accommodations plus some entertainment. Because of that, the crewing needs of a liner is far higher than that of a container ship. All of those means more expense of the part of the liner company. Besides, a RORO liner is more expensive than a container ship for the same size and its insurance is higher.

Ever since the 1980’s, even when the passenger demand was still great, the national shipping companies were earning more from cargo than their passengers. That is true even today when 2GO admits that almost 70% of their revenues are from cargo (and to think under their roof is SuperCat which widens the passenger revenues). Definitely their investment for liners is greater than their cargo ships. Maybe it was only loyalty to their passengers and passenger shipping why they were not quitting this segment. Maybe it is also because of inertia which means just keeping doing the old things.

Lorcon Dumaguete assisted by tugs

If we look at the recent years we can see that for every liner acquired at least 7 container ships were acquired and this is even a conservative estimate. If we look at the last 10 years starting from 2006, only 11 liners came to our shores and that includes the 3 Cebu Ferries, two of which are still used as overnight ships although already converted into small liners. Meanwhile, MARINA registered 80 or more newly-arrived container ships in the same period. These are the container ships of Oceanic Container Lines, Sulpicio Lines/Philippine Span Asia Carrier Corporation, Lorenzo Shipping Corporation, NMC Container Lines, Solid Shipping Lines, Negros Navigation/Caprotec Corporation/2GO, MCC Transport Philippines (MCCTP), Moreta Shipping Lines, Meridian Cargo Forwarders, Seaview Cargo Shipping Corporation, Escano Lines/Loadstar Shipping Company and West Ocean Lines and Transport acquired in the last ten years. Now how many container lines is that compared to a sole passenger liner company?

There are few liners sailing now and all are under just one company which is 2GO (since Romblon Shipping Lines has already quit). Meanwhile, container ships are still mushrooming and more container shipping companies are joining the field. Even 20 years ago there were already more container ships than liners. Now the container ships are already outstripping the liners in number. And the trend holds true year after year.

The question is why? Well, the simple answer is the shipping companies won’t invest in liners as it does not make sense. More revenues can be earned from container shipping at less investment with less hassles from regulations and supply needs (like the food needed by the passengers). So why would they enter passenger liner shipping? Better “pets” like containers vans rather than people like the passengers who can raise a ruckus and if the ship sinks then goodbye to all the advertising and service spent for the goodwill. If a cargo ship sinks, the uneducated public and the media almost won’t mind at all.

LCT Raenell

A Cargo RORO LCT by Asian Shipping Corporation

If cargo is the bread and butter of shipping it will now go to the container lines because they can actually offer the lower shipping rates. If not it will go to the intermodal trucks which has even lower rates. And arriving now recently are the Cargo RORO LCTs which carry container vans (even from Manila) like those of Roble Shipping Incorporated, Ocean Transport and Asian Shipping Corporation. This new paradigm can offer even lower rates than the container ships.

Sometimes it looks like liners are already passe. But I don’t want them to go because I prefer them over planes and the intermodal buses are sometimes too tiring especially those who are no longer young.

Will the liners survive? Now, that is one question I would not like to answer.