Philtranco Always Tried Horizontal Integration

Horizontal integration is the setting up or the acquisition of a company at the same level of the value chain and that is meant to help the company compete. It can be a competitive strategy where economies of scale, more efficiency and increase of market power are the objectives. Companies engage in horizontal integration to benefit from possible synergies. But sometimes the resolution of a problem or a bottleneck prods a company into horizontal integration.

Philtranco Service Enterprises, Inc. (PSEI), the leading bus company in the Philippines then tried this strategy over a generation ago. From running a big fleet of buses from Manila to the southern part of the Philippines up to Davao City, they established their own RORO companies in the San Bernardino Strait crossing that linked Sorsogon and Samar. However, the results were certainly very mixed, to say the least, and controversial.

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The Cardinal Ferry 1. Research by Gorio Belen of PSSS in the National Library.

Since 1979, Philtranco buses (they were still known as Pantranco South then) have been rolling across already to Eastern Visayas via the San Bernardino Strait using the newly-fielded RORO Cardinal Ferry 1 of Cardinal Shipping. Newport Shipping which had ferries and cargo ships from Manila to Samar then followed with their Northern Star and Laoang Bay.

This reaction of Newport Shipping was very understandable as Newport Shipping was not really doing well with their Manila to Samar route and maybe they felt they have to defend their home turf as the owner of Newport Shipping is from Laoang, Northern Samar. They might have also felt that this new intermodal route might kill them in the long term and so they have to join the fun.

"Maharllika 1" Ferry unloading Bus

MV Northern Samar. Formerly the MV Northern Star before she was refitted. Photo by Lindsay Bridge of PSSS.

Before the ROROs arrived it was the motor boats of Bicolandia Shipping Lines (this company has legal-fiction companies like E. Tabinas) which dominated the route across San Bernardino Strait. But with the buses now rolling the passengers no longer have to cut their bus trip to Matnog and they do not take a local bus to Allen, Northern Samar to take the lancha (motor boat). Convenience is what the intermodal system offered. Cargo of the passengers that was once a hassle became less with the bus for it afforded less handling and haggling.

Immediately, there was a surplus of bottoms in San Bernardino Strait as the government-owned Maharlika II (later replaced by Maharlika I whom it replaced earlier) was also plying the official Matnog to San Isidro, N. Samar route. Moreover, the passengers to Eastern Visayas did not immediately shift to the buses especially the passengers to Leyte. They were still content with the liners of Sulpicio Lines and William Lines which had calls in Calbayog, Catbalogan, Tacloban and other ports in Leyte and Southern Leyte. In terms of comfort the bus is actually inferior to the liners which has its own toilets and baths, are equipped with bunks with mattresses and even linen (called “beddings”) plus the meals are free and the rice servings are generous. However, they only call in ports unlike buses which roll through the various towns.

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The Maharlika I. Photo from Edison Sy of PSSS.

In the aftermath of that surplus of bottoms, Cardinal Shipping and Newport Shipping teetered especially when Eugenia Tabinas got into the RORO act starting when she was able to acquire the Northern Star in 1981 which she then renamed into the Northern Samar. Eugenia Tabinas was in a strong position as she dominated the intra-Bicol routes with her motor boats and so she can compete in one of her routes at just break-even.

However, with many buses crossing San Bernardino Strait, Philtranco thought they could save money if they operated their own ROROs where they will always have priority. And so they also got caught in the RORO act (they were still strong then and they have just re-fleeted into Hino) and they thereby acquired the Laoang Bay of Newport Shipping which was renamed into the Black Double. In 1984, this became the Philtranco Ferry 1 of Philtranco Services.

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The Philtranco Ferry I. Research of Gorio Belen of PSSS in the National Library.

It is here that things began to get interesting and lively. Eugenia Tabinas or Bicolandia Shipping smelled that Philtranco was operating without a Certificate of Public Conveyance (CPC) and complained to MARINA, the Maritime Industry Authority which is the country’s maritime regulatory agency and which has quasi-judicial powers. Philtranco countered that since they were only loading their own buses then there is no need for them to get a CPC. Now, if MARINA agrees with that then Philtranco will be the only sea carrier without a CPC and that has great implications.

Along the way, Black Double got unreliable as she was built in 1962 and diesel engines were not yet as reliable (with changes in design and technology that changed in the mid-1960s especially when Daihatsu marine engines became dominant). She was sold to Badjao Navigation and she became the Badjao and she plied a route from Cebu island to Leyte.

While the case was pending (as it reached the higher courts as MARINA quasi-judicial decisions can be appealed in the Court of Appeals and the Supreme Court), Philtranco acquired the salvaged Mindoro Express from Prince Valiant Navigation which then became the Christ The Saviour and Christ The King. The RORO became the Luzvimin Primo because she was now under the Luzvimin Ferry Services, the new ferry company of Philtranco.

Mindoro Express ( now Maharlika Cinco )

The Mindoro Express just before she became the Christ The King and Luzvimin Primo . Photo by Edison Sy of PSSS.

In due time (which means a long time), the Supreme Court sustained the ruling of MARINA that a shipping company cannot carry passengers without a CPC and the ferry service of Philtranco stopped. By that time Philtranco was already toppling and it was fast losing its Hino buses.

Philtranco then fell into the hands of transportation mogul Pepito Alvarez who then equipped Philtranco with his new MAN and Nissan buses. Soon, he was able to reach a deal with the administration of President Fidel V. Ramos to operate the already-weak Maharlika ferries which in that time consisted only of Maharlika I and Maharlika II (this one was not in San Bernardino Strait but in Surigao Strait).

After settling in, Pepito Alvarez added the Maharlika Tres, Maharlika Cuatro and Lakbayan Uno (this was later sold to Millennium Shipping). And then the Luzvimin Primo became the Maharlika Cinco. Later, the Maharlika Seiz and Maharlika Siete were also also added to be followed by the Grand Star RORO 1 and Grand Star RORO 3 which came from Phil-Nippon Kyoei. This time Philtranco was already careful about the CPC. In these moves, Pepito Alvarez worked through his protégé Cristopher Pastrana.

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Maharlika Cinco and Maharlika Seiz. Photo from the PPA.

The horizontal integration of Philtranco was not necessarily beneficial for the passengers unless maybe in its early years when the dominant Bicolandia Shipping Lines engaged in what is locally-known as “alas-puno” system of departures when a ferry will only leave if it was already full of rolling cargo (and that was the cause of their downfall later). With that system, the buses and its passengers lose time and it could be in the hours.

But when ROROs bloomed in San Bernardino Strait, horizontal integration became a negative because Philtranco buses have to wait for the ferries (Maharlika ferries were not so reliable and it tried many routes in the country including in Catanduanes, Masbate, Marinduque, Batangas and Panay and so its presence in San Bernardino Strait and Surigao Strait was actually diluted and trips were few) as Philtranco buses have no freedom to sail in competing ferries.

I was once a passenger aboard a Philtranco bus from Davao. Our driver was driving fast so we can board the morning RORO of Maharlika in their Dapdap port (owned by sister company Philharbor). We arrived at 8:30am only to see the ferry has just left. There was only one Maharlika RORO then there and we waited for its return. Finally, we left Dapdap port at 1:30pm and everybody was so pissed up including the drivers as we saw several ferries leaving the competing BALWHARTECO port ahead of us. If our Philtranco bus had freedom, we would have been aboard the first of those that left BALWHARTECO port and saved several hours of waiting time.

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Grand Star RORO I and Maharlika Tres in Dapdap port. Photo by Mike Baylon of PSSS.

The Philtranco driver/conductors also didn’t like that they have no freedom to load the buses in competing ROROs. The reason is they can’t avail of the “rebates” offered by the competing shipping companies. This comes in the form of free ferry tickets that can be sold by the driver/conductors to their passengers. Even if only half the tickets are free that can come up to an average of P1,500 for the driver/conductors in additional income.

When Archipelago Philippine Ferries, the name of the shipping company established by Pepito Alvarez) weakened and they just had a limited number of ROROs running, Philtranco finally allowed its buses to ride the competing ferries as passengers began to shun them. However, when the FastCat ROROs came for Archipelago Philippine Ferries, the Philtranco buses were no longer allowed that again. There was also the experiment where the Philtranco buses were no longer boarded aboard the FastCat ROROs and only the passengers and their cargo were loaded. In that system, a Philtranco bus will be waiting at the opposite port.

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Philtranco buses that disembarked from a FastCat. Photo by Mike Baylon of PSSS.

Now, Philtranco’s fleet is whittled and it is already far from its number in the 1980s after they re-fleeted from Leyland to Hino. And the tables turned already. It is so-many FastCats that needs them now and not the other way around.

Now, did you know that founder A.L. Ammen tried horizontal integration too?

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The King Frederick and Nelvin Jules

The King Frederick and Nelvin Jules of Santa Clara Shipping Corporation are actually sister ships which look like each other save for some minor differences. When trying to identify them I try to look for the name lest I might be mistaken in the identification (anyway, one of the two has a longer name).

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Both of these ships arrived in the country in 1999 and they were the opening salvo in the challenge of the newly-established Santa Clara Shipping Corporation in the Matnog-Allen route long dominated but badly served by Bicolandia Shipping Lines and its legal-fiction companies like E. Tabinas and Eugenia Tabinas. When the sister ships arrived they were not larger than the bigger ships in the route. However, they were the newest and the fastest and even newer than the government-owned Maharlika I which was built in 1982.

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With such an advantage the reigning Bicolandia Shipping Lines immediately cried foul and tried all the legal means to drive out King Frederick and Nelvin Jules because their old ships which were mainly acquired from other local shipping companies and were built in the late 1960’s and early 1970’s were clearly inferior already in all respects. And Bicolandia Shipping Lines has the dead weight of a bad reputation originating from their ships having the wont of not sticking to departure times and trying to get full as much as possible before departure. Plus, of course, clients always want the new.

Bicolandia Shipping Lines failed in their opposition at the level of MARINA (Maritime Industry Authority), the maritime regulatory agency and which has quasi-judicial function and all the way to the Court of Appeals and the Supreme Court. And so the King Frederick and Nelvin Jules were not driven out from route and began to beat their opposition (there were other players in the route aside from Bicolandia Shipping and Maharlika I) until the day came when Bicolandia Shipping Lines surrendered and sold itself to Sta. Clara Shipping Corporation and became the Penafrancia Shipping Corporation.

The King Frederick,  the newer of the two sister ships was supposedly named after the top gun of the combine owning Santa Clara Shipping Corporation, Frederick Uy. She and the Nelvin Jules are ROPAX (RORO-Passenger) ferries built by Kanda Shipbuilding Co. in their Kawajiri yard in Japan. The two ferries both measured at 58.6 meters in Length Over-all (LOA), 55.5 meters in Length Between Perpendiculars (LPP or LBP) with a Beam or Breadth of 14.0 meters. Originally, the sister ships had a similar Gross Tonnage (GT) of 699 with a Deadweight Tonnage (DWT) of 308 tons. By the way, the King Frederick was the last ever ship built by Kanda Shipbuilding in their Kawajiri yard.

The King Frederick‘s original name was Sagishima and she was built in 1987 and the Nelvin Jules’ original name was Kurushima and she was built in 1985 making her the elder ship of the two. When the two arrived in 1999 they were still both relatively young at 12 years and 14 years old, respectively. King Frederick has the IMO Number 8704315 while Nelvin Jules has the IMO Number 8504404 which both reflects the year when their keels were laid up. The sister ships have a steel hull, a box-like housing at the bow which protects against the rain when loading and unloading and also keeps the car deck less wet and muddy when it is raining. They both have a transom stern and ramps at the bow and at the stern. The ships both have two masts and two funnels at the top of the ship.

The sister ships are powered by two Daihatsu marine engines with a total of 2,400 horsepower and these gave them a sustained top speed of 13.5 knots when still new. In their 11-nautical mile Matnog-BALWHARTECO (Allen) route, the sister ships were capable of crossing the San Bernardino Strait in just under one hour when newly-fielded if the notorious waves of San Bernardino are not acting up. BALWHARTECO port was the choice of Santa Clara Shipping in Allen as it was a shorter route than the official Matnog-San Isidro route of the government. The San Isidro Ferry Terminal is the official government RORO port while the BALWHARTECO port is a private port and along time Santa Clara Shipping Corporation (SCSC) had a hand-and-glove relationship with the management of BALWHARTECO (Balicuatro Wharfage and Terminal Corporation).

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BALWHARTECO Port, the original home of King Frederick and Nelvin Jules

Before fielding here a new passenger deck was built on the bridge level of both ships. However, the Gross Tonnages (GT) of the sister ships dropped to 694 which is more likely an under-declaration. The declared Net Tonnages (NT) of the two ships is 357 (a clarification, both the GT and the NT have no units). The passenger capacities of both ships are 750 persons reflecting their almost similar internal arrangements. The Depths of the two ferries are both 3.8 meters which is about average for ships their size.

The new passenger deck became an all-Economy accommodation with fiberglass seats. On the lower deck, at the front portion was the old accommodation in Japan which became the Tourist section as it was air-conditioned and had better foamed seats. That section is also where the canteen was located. All passengers have access to that canteen.

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The canteen inside the Tourist section of the King Frederick

When the gusts are up in San Bernardino Strait along with its wind-driven rains and this can be often in the peak of the habagat (the southwest monsoon) and amihan (the northeast monsoon) that section is a welcome cover especially for the more vulnerable passengers like the small children, the pregnant and the old. The habagat and amihan are both fierce in San Bernardino Strait, it affects the area more than half of the year and ships crossing the strait sometimes have to take a dogleg route lengthening the transit time and producing seasickness in many passengers.

Behind this Tourist section is another Economy section with fiberglass seats also that were built in a former promenade deck of the ship when it was still in Japan. Many prefer this in inclement weather as it does not rock as hard as the deck above and it seems the winds can be less fierce here. Of course there is one less deck to climb or descend and that matters maybe in a short route when some passengers like me don’t bother to sit at all (too many views to enjoy from the ships to the seascape to the mountains and of course the ports and its activities). Maybe the reason they put the karaoke in the upper deck is to enjoin passengers to climb there.

Below this passenger accommodation is the car deck of the RORO ships. One advantage of the two sisters is the wide beam of 14.0 meters which allows four lanes of trucks or buses on either side of the “island” in the middle of the car deck which actually houses ladders going up and down and below the car deck are crew accommodations and the crew mess which are all air-conditioned.

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A crowded Nelvin Jules. See the “island” in the middle of the car deck

With 55.5 meters in LPP up to five rows of trucks and buses can be accommodated. Of course, though trucks and buses dominate the load in their routes, still smaller vehicles like cars and utility vehicles will normally be in the rolling cargo mix. These ships will normally be full because Santa Clara Shipping mastered the art of giving discounts and pay-later schemes, the reason a lot of trucks and buses are tied up to them. Tied-up buses which carry passengers that cannot be delayed even have priority in loading in them. The sisters have ramps front and bow but normally it is only the bow ramps that are deployed and employed, the reason vehicles have to board the ship backwards. One thing I cannot understand with the sister ships’ bow ramp is they are off-center. I do not know what is the advantage of it. Actually in cargo loading it only tends to affect the balance of the ship.

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King Frederick in Masbate. See the off-center ramp.

Along time especially with the arrival of other ROPAXes for Santa Clara Shipping Corporation, King Frederick and Nelvin Jules were also assigned to other routes of the company especially their new Masbate-Pio Duran route. There is no permanent fielding for them and the sister ships generally rotate between the two routes. Another route where King Frederick has been fielded is to their newest route, the Lipata-Liloan route which became a Lipata-Surigao route when a quake damaged the Lipata port (however, they are back now recently to Lipata Ferry Terminal).

Over-all, the sister ships proved very successful and became proven moneymakers for Santa Clara Shipping. Although 18 years sailing now locally, the two are still very sturdy and very reliable and almost no breakdown can be heard from them. What I only wish is Santa Clara Shipping make some sprucing in the ships so they will come back to like when they were still new here.

Even when the two sister ships are in San Bernardino Strait, they are no longer docking now in BALWHARTECO port as their company has a new, owned port now in Jubasan in the same town of Allen, Northern Samar. However, when this article was written none of them were there as Nelvin Jules was in the Masbate-Pio Duran route pairing with the ship Jack Daniel of the same company and they with their cargo RORO LCT Aldain Dowey are dominating the Masbate route.

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Nelvin Jules leaving Masbate port

I see many, many more years of sailing and service for the two sisters if the gauge is how sister company Penafrancia Shipping Corporation is taking care of the older ferries acquired from Bicolandia Shipping Lines. Both are equipped with tough and lost-lasting Daihatsu marine engines and simply put their company has the revenues and moolah to take care of them well. It has even a stake in Nagasaka Shipyard in the Tayud row of shipyards in Cebu where they are given priority.

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Nelvin Jules in Nagasaka Shiyard

If 50 years is the gauge now of longevity of ships, they will still be around in 2035, knock on wood.

The Biggest Shipping Combine in Bicolandia

The Bicol Region has a handful of shipping companies of significant size and that includes the Candano Shipping Lines that is probably the most well-known before and it has clout because they also own the only significant shipyard in the Bicol region, the Mayon Docks in Tabaco, Albay. But among this handful, the biggest is the shipping combine of Sta. Clara Shipping Corporation and Penafrancia Shipping Corporation which have practically the same group of partner-owners. This handful does not include the Archipelago Ferries Philippines Corp. which no longer acts as a Bicol shipping company and is in fact willing to forget and shut the doors on their Bicol roots because they know it is not something they cannot be proud of.

Sta. Clara Shipping Corporation, like Penafrancia Shipping Corporation is into RORO ferries and not cargo ships. Sta. Clara Shipping Corporation antedates Penafrancia Shipping Corporation because of the peculiar circumstances wherein they were born. Sta. Clara Shipping Corporation was formed in 1999 in order to challenge the then-dominant (dominant as in a near-monopoly) Bicol ferry company, the Bicolandia Shipping Lines which was known by other names like Eugenia Tabinas, E. Tabinas or Eugenia Tabinas-San Pablo (well, using legal-fiction companies is not uncommon in inter-island shipping). When Sta. Clara Shipping Corporation came into the Bicol shipping picture with its superior ships, Bicolandia Shipping Lines argued they are entitled to “protection” using what was known as the “prior operator rule”. That was interpreted by shipping companies being challenged as an equal to a near- and legalized monopoly — they argued that nobody else can enter their routes (ahem! ahem! and wow!). If there is a need to increase ships, they argued that they should be the ones that should add ships (hey, aren’t the saying they “bought” the route already?).nm-dominic-san-juan

In this fight, Sta. Clara Shipping Corporation had the backing of the Eastern Visayas mayors especially those from Leyte because their populace had already enough of the lousy service of Bicolandia Shipping Lines which practiced the “alas-puno” system wherein ships depart when it is already full or near-full, in contravention of the published times of departures. However, the Bicolandia Shipping Lines lost in the sala of the maritime regulatory agency, the Maritime Regulatory Agency or MARINA which actually has quasi-judicial powers and can become the court of first instance in maritime cases. That was the turn of the decision because that time the liberalization policy of Fidel V. Ramos on shipping was already the new norm.

Bicolandia Shipping Lines then appealed to the higher court, the Court of Appeals and upon losing again there they brought the case to the highest court of the land, the Supreme Court which also ruled against them. The Supreme Court held any incentive given by government does not mean a company gaining monopoly rights (obviously, I say). Having lost in the courts and being also losing in the seas of Bicol not only to Sta. Clara Shipping Corporation but also to other newcomers like Regina Shipping Lines (which also has deep pockets, heavy political clout and a bus company) and 168 Shipping Lines, Bicolandia Shipping Lines offered to sell themselves lock, stock and barrel. Maybe it was a good move instead of finding themselves depreciated or worse bankrupt in the long run. Sta. Clara Shipping Corp. was losing because its ships were already older than competitions’ and besides having tried the patience of the customers with their always-delayed departures they had already lost the goodwill of the public.

It was Sta. Clara Shipping Corporation that had the pockets deep enough to buy Bicolandia Shipping Lines lock, stock and barrel. They might be new but their stockholders were already established in other businesses and that even included shipping. But instead of buying Bicolandia Shipping Lines and integrating its fleet with theirs, Sta. Clara Shipping Corporation decided to form the Penafrancia Shipping Corporation for said acquisition. Penafrancia Shipping Corporation has almost the same ownership group as Sta. Clara Shipping Corporation. When the acquisition was complete Sta. Clara Shipping Corporation and Penafrancia Shipping Corporation acted just like one company much like one or the other is a legal-fiction company. Their scheduling are united and their ticketing, berthing, crewing and supplies are unified too. That also goes through for their customer relations, the corralling of vehicles to contracts, negotiations and arrangements with the different ports and LGUs (local government units) and the maintenance of friendly relations with MARINA, the maritime regulatory agency. Drydocking and repairs are also unified.dh

Sta. Clara Shipping Corpo and Penafrancia Shipping Corporation operates four routes which are all short-distance ferry routes using ROROs. Their primary one is the Matnog-Allen route and the other routes are the Tabaco-Virac route, the Masbate-Pio Duran route and the Liloan-Lipata route, their recent expansion. In serving these routes, Sta. Clara Shipping Corp. has six ROROs and Penafrancia Shipping Corp. has four ROROs. The two companies do not operate cruisers and practically all their load are rolling cargoes which means trucks, buses, panel trucks, jeeps, cars and SUVs and even long vehicles and heavy equipment (though they don’t prefer the last two).

The six ROROs of the Sta. Clara Shipping Corp. are the following:

King Frederick: IMO 8704315. Built in 1987 by Kanda Shipbuilding Co. in Kawajiri yard, Japan. 58.6m x 14.0m x 3.8m. 694gt, 357nt, 304dwt, 750 pax. 2 x 1,200hp Daihatsu, 13.5kts when new.

Nelvin Jules: IMO 8504404. Built in 1985 by Kanda Shipbuilding Co. in Kawajiri yard, Japan. 58.6m x 14.0m x 3.8m. 694gt, 357nt, 304dwt, 750 pax. 2 x 1,000hp Daihatsu, 13.5kts when new.

Hansel Jobett: IMO 7927075. Built in 1979 by Kanda Shipbuilding Co. in Kawajiri yard, Japan. 51.1m x 14.0m x 3.4m. 610gt, 288nt, 208dwt, 580 pax. 2 x 1,000hp Daihatsu, 13.5kts when new.

Mac Bryan (ex-Ever Queen of Pacific): IMO 7034452. Built in 1970 by Shimoda Dockyard Co. in Shimoda yard, Japan. 54.0m x 12.0m x 3.8m. 499gt, 239nt, 2 x 900hp Niigata, 14kts when new.

Nathan Matthew (ex-Asia Japan): IMO 7326582. Built in 1973 by Naikai Zosen Corp. in Taguma yard, Japan. 64.0m x 13.1m x 3.3m. 1,030gt, 359nt, 443dwt. 2 x 2,000hp Daihatsu, 16kts when new.

Jack Daniel: IMO 8848604. Built in 1990 by Fujiwara Zosensho Co. in Omishima yard, Japan. 65.0m x 14.0m. 965Gt, 252dwt. 2 x 2,150 Niigata, 17kts when new.

The four ROROs of Penafrancia Shipping Corp. are the following:

Don Benito Ambrosio II (ex-Princess of Mayon): IMO 7629520. Built in 1967 by Hashihama Zosen in Imabari yard, Japan. 64.0m x 11.3m x 3.6m. 1,010gt, 686nt, 175dwt, 494 pax. 2,000hp Daihatsu + a Yanmar replacement engine, 13kts when new.

Don Herculano (ex-Princess of Bicolandia): unknown IMO Number. Built in 1970 by Shin Nihon(?) in Japan. 46.4m x 12.0m x 2.8m. 1,029gt, 454nt, 855pax. 2 x 1,000hp Daihatsu, 13.5kts when new.

Eugene Elson (ex-Eugenia): IMO 6601517. Built in 1965 by ImabariShipbuilding Co. in Imabari yard, Japan. 41.7m x 14.6m x 3.0m. 488gt, 118nt, 138dwt, 484 pax. 2 x 550hp Daihatsu, 11.5kts when new.

Anthon Raphael: IMO 8921781. Built by Naikai Zosen Corp. in Setoda yard, Japan. 61.4m x 14.0m x 3.2m. 1,093gt, 688nt, 270dwt, 400pax. 2 x 1,700hp Daihatsu, 15.5kts when new.

Note: Sta. Clara Shipping Corp. and Penafrancia Shipping Corp. do not use single-engined, single-screw ships because of its weakness in handling the strong swells of Bicol especially during the habagat (southwest monsoon) season.

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Sta. Clara Shipping Corporation and Penafrancia Shipping Corporation are very good in locking in the buses. That means the buses are contracted to be loaded in them in contracts. That also means these buses are paying what is called in the trade as “special rates” or even “super special rates” or even better. In this trade, the charge on buses are way lower than the published rates because the fares of the passengers makes additional revenue. With these contracts, the buses have guaranteed loading even in peak season and the ships will even wait for them if they are a little late. The driver/conductors need not even go to the windows to transact. The “Super Angels” of Sta. Clara Shipping Corporation will then just go to them inside the car deck of the ship and if it is a company account then all they have to do is just sign and it will be settled company-to-company.

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Sta. Clara Shipping Corporation also gives the driver/conductors what is called in the trade as “rebates”. That consists of complimentary tickets that can then be sold to the passengers and the equivalent money will go to the driver/conductors as extra income for their kabuhayan (meals and many other things for their upkeep and pleasure). This practice is recognized and tolerated by the bus companies as incentives to their their driver/conductors but the general riding public does not know that (that, however, is open knowledge in the ports). So even without a contract the driver/conductors themselves will herd their buses to Sta. Clara Shipping Corporation and Penafrancia Shipping Corporation except for Philtranco driver/conductors who are locked in to Maharlika ships without the discount their counterparts in other companies enjoy. In this world, the greatest advertisement is actually cold cash.

And I give respect to Sta. Clara Shipping Corp. for developing this practice of rebates to the bus companies and drivers/conductors. With it, development of routes is easier because the bus company need not shoulder all the expenses of bringing the bus across the strait since by rules and previous decisions they cannot charge that to the passengers. Oh, well, only slyly in case, in such a way that passengers won’t notice. But how can the passengers there in Bicol notice when fares are discounted almost whole year round? Well, with this practice the ships of Sta. Clara Shipping Corporation and Penafrancia Shipping Corporation are almost always full of vehicles. This duo really knows their business.

The duo are also very good in locking in the trucks. The system works the same as in buses but the discounts are not that steep because there are no passengers as additional revenue. And in terms of priority in loading they come second to the buses because unlike the buses they don’t have that tight schedule to meet and there are no passengers that will complain when a ferry is missed. There are also company accounts where only the signature of the driver is needed (no payments are made) and it is settled company-to-company. There are discounts for the suki (regular customers) which can be enjoyed by the truck crew especially by the driver. As suki these trucks get priority boarding over other trucks and private vehicles.hj

This then brings us to the complaints of the driver-owners of private vehicles which only cross during vacations. When they arrive in the port they think the system is on a first-come, first-served basis and they grit their teeth and vent their frustration even over the media when they see buses and trucks that came later than them board first. Their charge is “favoritism” but they do not understand that like in many other things reservations trump their case and these suki or company accounts are just like reservations. Actually, dozens of kilometers away these priority boardings already confirm their coming arrival and in case of buses or panel trucks the reservations can be year-round and if it will not be availed they cancel the reservations over the cellphone so their space can be given to others. Reservations works in the airlines, the shipping industry, in theaters or concerts, in restaurants and in many other industries. It is otherwise called as “bookings”.

Sta. Clara Shipping Corporation and Penafrancia Shipping Corporation are very good in cultivating the drivers. Aside from rebates, they can arrange a lot of personal services aboard the ships be it massage, manicure, services that are more personal, a good sleeping place and that also include free meals that are good. When I had access to their hospitality area inside Hansel Jobett I saw three viands for lunch including sugpo (tiger prawns) and those were free and the mess was airconditioned. That area was beneath the car deck on the engine level and I was surprised it existed. If Hansel Jobett has that then King Frederick and Nelvin Jules also have that since the three ships are related in design. It is not accessible to ordinary passengers but I was a VIP then (ehem! ehem!) and they gave me use of one the cabins. It was the equivalent of a first-class cabin of a liner although smaller.

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Sta. Clara Shipping Corporation are also very good in cultivating relationships with owners. Aside from hefty discounts and priority boardings with their trucks (and no hours lost waiting in ports means extra available trucks, satisfied customers and less labor cost) there are other benefits too like company-to-company singilan (reconciliation of accounts) which in effect means a loan. I heard settling takes months and that is extra working capital for forwardersand truckers while that might just be empty space for the ship otherwise. Even if the truck crew has no more money to board the ship they will not be denied boarding. Now that is one big utang na loob.

Sta. Clara Shipping Corp. had a long, beneficial and mutually supportive relationship with BALWHARTECO, the operator of the premier port in Allen, Northern Samar which is a private port. They grew together and had a relation like brothers. Sta. Clara Shipping Corp. and Penafrancia Shipping Corporation brought in traffic to BALWHARTECO not only because they had the most number of ships but with the support of the duo to buses and trucks the traffic volume increased and BALWHARTECO earns with wharfage and other port fees.

With their cooperation together, the duo and BALWHARTECO were able to trump the other ports in Northern Samar that link to Matnog. First to be defeated was the official government port, the San Isidro Ferry Terminal. Though vehicles see San Isidro first it had an Achilles heel — it was by far the most distant port from Matnog at 15 nautical miles compared to the 11 nautical miles of BALWHARTECO and the 12 nautical miles of the Dapdap port of Philharbor which was the second to be defeated and not by distance alone since the distance difference is not significant.dba-nj-edsel

In port and ferry patronage, one that wins is the one with the most number of ships because that means there will be no long waits before departures. And it is reassuring to drivers if there are always ships in port and with multiple ones (which means a choice). That became the weakness of San Isidro port and Dapdap port even though they come into view earlier as the vehicles won’t come to them if it sees that there are no ships in port. The driver soon had the mentality to go straight to BALWHARTECO since there are always ships there.

With the acquisition of Bicolandia Shipping Lines plus other ship acquisitions, Sta. Clara Shipping Corp. became the dominant shipping company in Bicol engaged in RORO operations. They defeated the Archipelago Ferries+Philharbor Ferry combine which were more known as the Maharlika ships. That duo had no focus, were lousy in maintaining ships and were also lousy in competing, all the diseases prevalent in former crony companies. That combine supported another lousy sister company, the Philtranco Service Enterprises Inc. but their pairing actually doomed them both. Philtranco buses would wait in the port even though there are no Maharlika ships in port thus losing hours, And with a captive bus company, Archipelago Ferries+Philharbor Ferry did not learn how to play well the rebate-vehicle locking game (in fact they never seemed to learn it).

The stockholders of Sta. Clara Shipping Corporation+Penafrancia Shipping Corporation might not really need to take profit, so to speak. They are very good in their other businesses and their owners are established businessmen with some dominant in their regional sphere. Some are even engaged in shipping too. In shipping, I glimpse the method they use in their other businesses especially the locking game.

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Soon, the duo’s owners engaged in horizontal expansion. They were able to establish a partnership with the Villono Shipyard in Tayud, Cebu. With the creation of that partnership, they withdrew patronage of the Mayon Docks in Tabaco City, Albay and brought their ships for drydocking and maintenance in the far-off Tayud. Maybe one of the benefits of this partnership is they then had a reputation of taking care well of of their old ships. Well, with a profitable operation and well-heeled owners that might not be a surprising thing.

The duo has also shown they can defend and hold turf and can also expand. The stronger Montenegro Lines (Montenegro Shipping Lines Inc. of Batangas) came but they did not buckle. At the same time they were also able to expand like when they tried the Pasacao-Masbate route being promoted by MARINA (they soon withdraw from this route). The also tried the Bulan-Masbate route which made no sense for bus passengers and for the trucks as it is farther from Manila (they can’t operate in the Pilar-Masbate route because they have no basic, short-distance ferry-ROROs and the Pilar port is shallow). However, they struck gold in the Masbate-Pio Duran, Albay route. With rebate support the buses were able to roll into Masbate even though the land kilometerage within Masbate island is short to be able to recoup the rolling cargo rate (this was the failure of the Maharlika ferries + PSEI attempt a decade before them). Recently they also went to Liloan-Lipata route.

In recent years, the duo tried another horizontal expansion, the building and operating of a port in Allen, Samar too where BALWHARTECO is also located.

This led to the split of Sta. Clara Shipping Corporation+Penafrancia Shipping Corporation and BALWHARTECO. Sta. Clara Shipping Corporation said they resented the coming of 168 Shipping in BALWHARTECO (or was it the entry of Montenegro Lines that broke the camel’s back actually?) which supposedly was against an agreement (sorry, I cannot verify this). Or maybe they also saw how profitable is a port operation and the formula they already saw in the operation of BALWHARTECO. And so they built their own port in Jubasanbut this was stopped by the Mayor of Allen who happened to be the owner of BALWHARTECO. Construction continued even though the gates were shuttered and the knowledgeable knew the Mayor will lose since a Mayor’s permit can be demanded thru a court mandamus (or even ask the Department of Interior and Local Government for his suspension). The Mayor actually has no legal leg to stand on and jurisprudence said they always lost. And so Sta. Clara Shipping Corporation was able to finish the port and it is now operating.

However, I have doubts if that is a good move in the long term. They no longer have the backing of BALWHARTECO and the Mayor of Allen town and it might just lead to a war between them. After all they both know the formula and bad blood exists now. Admittedly, Sta. Clara Shipping Corporation might have the edge as they have the ships and can do transfer pricing, that is, charge low in the rolling cargo to attract the vehicles and they can “correct” in port charges. Both of them know how to make a port attractive – loading even if the truck has no budget (but here Sta. Clara Shipping Corporation can do it both ways not only in port charges but also in shipping charges), diesel fuel loan, other rebates, the presence of shops along with eateries, lodging and a blaring disco along with many personal services to the drivers.

The problem of the two is they are not competing in a vacuum. They actually have a threat in the Fastcats, the big Montenegro Lines and the new Cargo RORO LCTs. Montenegro Lines will always be around as it has a big fleet and a deep bucket and probably supported by a heavyweight (literally and figuratively) former powerful figure, a “patron saint”. Recently, it was able to get a franchise for the Masbate-Pio Duran route and that can cut into the income of Sta. Clara Shipping Corporation and Penafrancia Shipping Corporation. Montenegro Lines can also apply for the Tabaco-Virac route especially since Regina Shipping Lines abandoned this in favor of the Tabaco-San Andres route (hence, there is an apperance of a “monopoly”). After all this is the era of liberalization. And Sta. Clara Shipping Corporation can find itself in the shoes of Bicolandia Shipping Lines before, that is defending turf via the “legal” way. Actually they are already doing the denial game with their blocking of the entry of FastCats in Allen.

The FastCats could be the more serious threat in the long run as it has new ships, a new paradigm that could be dangerous if it is able to run many trips a day which they will certainly do. What they are showing is they will not play the old game of running just a few trips a day. It seems they will try to run to the ground the opposition because that is the only way they can win because they are carrying a lot of amortization weight.

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Actually it seems duo lacks the ships now especially since they have to respond to the moves of Archipelago Philippine Ferries Corporation with its FastCats which is a different animal than they competed with in the past. Montenegro Shipping Lines presence in Bicol is also increasing as Archipelago Ferries collaborated with them and recently they even were able to get a franchise in the Masbate-Pio Duran route. In Liloan-Lipata route they had to bring a better RORO to be able to compete with the speed and newness of FastCats. The will have to respond in Masbate-Pio Duran by maybe with also plying a route to Pilar port which is improved now. They will need three ships in Masbate, one in Liloan, two in Tabaco and that will leave them with just four ships in Samar and not all might be running because of drydock requirements and the sometimes trouble like what happened to the Nathan Matthew recently which is docked in San Isidro port for repairs. Remember one of the most important factor to attract drivers is the always-presence of ships waiting in the port. They might be stretched too thin now unless they acquire new ships (they have the financial capability for that).

Another new threat also and a possible paradigm change is the new Cargo RORO LCTs that are plying routes in Matnog-Allen and in Liloan-Lipata. NN+ATS (euphemistically called “2GO” but that is near the truth) operates them by chartering big China-made LCTs. Cargo RORO LCTs is the recent bane of short-distance ferry-ROROs and overnight ferry-ROROs because these can offer rates as much as half off the current rates because they have no investment in passenger comfort and service, they are fuel misers albeit slow and they have to discount to gain rolling cargo.

What I see is a lot of labu-labo (free-for-all) in Bicol in the coming years. Many will be bruised and I don’t know which will fall to the ground. Well, I just wish it will not turn out that Sta. Clara Shipping Corporation bit more than what it can chew.

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Photo Credits: Dominic San Juan, Edsel Benavides, Aris Refugio, Mike Baylon, PSSS

M/V Northern Samar

Editor’s Note: We would like to apologize for the delay in posting due to technical problems.

M/V Northern Samar ©lindsaybridge
It is not usual for one to write about a dead ship if such ship is not remarkable or historical. But the M/V “Northern Samar” is one such ship and maybe even more.
The M/V “Northern Samar” is probably the first true RORO that came to our shores (the LCTs not counted) and it is also the oldest-by-birth RORO that ever served here.
M/V “Northern Samar” started life as the “Sakurajima Maru No. 6”. She was built by Taiyo Zosen in their Nagasaki yard upon the order of the first owner Nishisakurajima and she was completed in August of 1960. That was remarkable because RORO building in Japan started in earnest only in 1958 and in that period it was not yet in vogue so she is actually one of the earliest ROROs in Japan! At completion she was 49.0 meters over-all length with a breadth of 12.4 meters. She was 496 gross tons and she had a speed then of 9 knots on her two Hanshin marine engines developing 1,400 horsepower. Her IMO ID number was 5307520 and she was home ported in Kagoshima, Japan.
In 1977 when the new “Sakurajima Maru No. 6” arrived she was put on the bidding block and on 1978 she came to Newport Shipping of the Philippines as the “Northern Star”. That company was only recently formed then but it was already expanding and looking for new routes despite the lingering effects of the oil crisis then. The 1970’s was the decade when there were incentives to re-fleet and expand as there was a national leadership that understands shipping.
It is a wonder why Newport Shipping came into an area where other shipping companies were in retreat, the Samar island plus the provinces on the way to it which are Romblon and Masbate. Well, they have the better and newer ships and maybe they mistook the retreat as an opportunity. What it only showed was they didn’t understand the intermodal threat which in a few years was already ruling Samar. Newport then tried to join the Matnog-Allen route too and “Northern Star” became the “M/V Northern Samar”.
In due time with the arrival of more ROROs in the route the competition heated up in the ’80s under a condition where the ships were actually growing gray already. Consolidation then came into the scene and Newport Shipping went out of business. But one trademark of this route is ships never go away — they just fall into the hands of competition (except maybe for the cruisers which were already proving inferior to the ROROs in terms of earning revenues. Well revenue from a truck or bus can easily be the equivalent of 30-40 passengers and for a ferry with a passenger capacity of just several hundred that is huge and rolling cargo income can easily top the gross from passengers.
She then came to Bicolandia Shipping/E. Tabinas Enterprises of Eugenia Tabinas which retained her name, a not-uncommon practice to save on fees and to think of it why change a name with a distinctive name? And after all Eugenia Tabinas names ships after provinces anyway. She was re-engined to two Yanmar Marine diesels developing 1,500 horsepower total giving her a maximum speed of 15 knots and able to run with the Sta. Clara Shipping ferries. She then served the Matnog-Allen route many more years.
M/V Northern Star at Matnog. ©Janjan Salas

With the coming of additional competitors and more comfortable ferries and the opening of the RORO route between Tabaco City and Virac, Catanduanes she was transferred there. Having a respite from powerful competition she still served many more years successfully.

All that changed on May 12, 2006 when Typhoon “Caloy” (Severe Tropic Storm “Chanchu” internationally) came visiting Bicol. It was a weak typhoon that was just intensified by the hardheadedness and obtuseness of the captain of the “M/V Northern Samar”. Ordered to proceed to the traditional and historical ship shelter of Sula Channel between the Albay mainland and Cagraray island he instead left the ship moored in Tabaco port. At the height of the typhoon she repeatedly struck the wharf, developed a hole in the hull and capsized. The incident actually also impacted the fortunes of Bicolandia Shipping which quit the shipping business soon as it can no longer fend off the competition.
Later, the remains of “M/V Northern Samar” was dragged further to sea to free up wharf space. She was later salvaged for scrap.
“M/V Northern Samar” was remarkable even in her final chapter. She was actually the first Bicol-based steel-hulled ferry that ever sank and the only one until now if the “Lady of Carmel” is excluded as she is not a Bicol ferry but a Leyte ferry.
Adieu, “M/V Northern Samar”. Whatever the failure on you of your master you have served a long time — 46 years! Few ferries can ever claim that longevity.
M/V Northern Samar at Tabaco. ©Edsel Benavides