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.

Maharlika I

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 Batangas-Caticlan Route

Once, as we were ship spotting Pier 4, me and Vinz noticed that there seems to be a ceremony involving Cebu Ferry 1 and Cebu Ferry 3. Asking the guard who is his friend, Vinz learned it was despedida (farewell ceremonies) for the two Visayas-Mindanao ferries which will be transferred in Batangas. We learned later that the Batangas manager of 2GO said he can make the two ferries earn more there than in Cebu. That was already the era of the retreat of Cebu Ferries Corporation (CFC) when to think that in the late 1990’s they were bullying the Visayas-Mindanao ferry companies which led to the demise of some. This time around, Cebu Ferries Corporation can no longer keep with their competition. What a reversal of fortune!

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The despidida for two Cebu Ferry ships

Vinz asked me how the two ferries will fare in Batangas. I told him it is a different ballgame there. What I meant was in Cebu it was a matter of attracting passengers and loose cargo, I told Vinz the game in the intermodal ports of Luzon (and Batangas is one) is in attracting the buses and the trucks and I told him discounting (called “rebates”) is the name of the game there (and that also includes freebies). That means whichever has the biggest discount will have the rolling cargo and for the regulars long-term agreements apply so it is not the decision of the drivers what ship to board. I told Vinz the new “Batangas Ferries” (my monicker) will have to learn the new game.

The new “Batangas Ferries” plied a direct Batangas to Caticlan route compared to their competitors which ply both the Batangas-Calapan route and the Roxas-Caticlan route and let the buses and trucks roll from Calapan to Roxas in Oriental Mindoro, a distance of about 120 kilometers or so or about 3 hours of rolling time. The “Batangas Ferries” can easily sail that route as an overnight ferry because they have the speed to do it in less than 12 hours (and as overnight ferries they are already equipped with bunks). In fact, early on they tried a round trip in a day for the Batangas-Caticlan route. Then they found out they don’t have enough load because many of the buses and trucks are already tied to their competitors and there is no load yet in the early morning in Caticlan as the buses and trucks are still rolling from many parts of Panay and will still arrive at noon or in the afternoon.

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A “Batangas Ferry” sailing into the coming night by Nowell Alcancia

In reality, even the slower ferries of their competition can do a Batangas-Caticlan route should they want to do it. It will take more than 12 hours but they will still be able to sail the next night. Even at the usual 11 knots they can do that route in no more than 16 hours. Their faster ferries than can do 14 knots can do the route in about 14 hours. Their ferries will just have to become overnight ferries+ instead of being short-distance ferries.

That then was the first rub. The ferries of Batangas are not used to and are even loath to operate overnight ferries. For one, they will have to convert their ferries to have bunks. That means expenses, that means lessening the passenger capacity. Now for shipping companies that are even loath to adding scantlings and were just content to have the unofficial “Stairs Class”, that is a difficult sell. Good overnight ferries also must be able to provide a restaurant and hot food. Well, nothing beats the ease and profit margins of overpriced instant noodles where the only capital is hot water. Now what if MARINA obliges them to provide free meals if the voyage time is over 12 hours like what Administrator Pacienco Balbon required then of Viva Shipping Lines? That could be disaster.

Well, it seems nothing will beat requiring the rolling cargo and its passengers two ferry rides within the same night (for some that leave Manila late). They will earn twice and anyway the rolling cargo won’t go to “Batangas Ferries” because many are tied to them with discounting and rebates. And they won’t just transfer because the rates in the sea is high for the same distance and the distance of Batangas-Caticlan is high and so it is not cheap and Batangas Ferries is not used to discounting (actually, the reason they eventually lost in Visayas-Mindanao is they were the more expensive).

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Passengers can’t be aboard the bus during the voyage and in loading and offloading

The buses won’t go along with “Batangas Ferries” too. If they ride on a Batangas-Caticlan ferry they would have to forego the fare for 120 kilometers or so and that is not peanuts. It has long been held by the LTFRB that a bus cannot charge for the distance traveled at sea (of course, secretly they will try to do it since anyway most passengers don’t know how to compute the fare nor do they know of the number of kilometers). And they will have to pay higher for the longer sea distance crossed. Does anyone need a nail to the head?

And so the buses will rather have their passengers ride two ferries at night. That connotes all the trouble of disembarking and boarding again plus the queues for the various tickets. And never mind if it is raining. In that route, that can be the definition of “passenger service”. Is there a difference between passengers and cattle?

And so until now it is still just 2GO, the renamed “Batangas Ferries” which do the direct Batangas-Caticlan route. Montenegro Shipping Lines, Starlite Ferries, Archipelago Ferries Philippines, Super Shuttle Ferry (Asian Marine Transport Corporation) and Besta Shipping Lines never did that direct route. Who said they will walk the extra mile for their clients?

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“Batangas Ferry 3”

Anyway, passengers are appreciative of the superior accommodations of the 2GO ferries. They have never seen such ferries in Batangas before (and they haven’t been to Cebu either, the home of good overnight ferries). They never ever thought that their ropaxes are actually just cattle carriers. And they have never seen a true restaurant in a ship before which the 2GO ferries have. And oh, plus true, polite passenger service (they have been too used to masahista ng bakal in T-shirts before pretending as stewards).

Will Archipelago Ferries Philippines do a direct route since their catamaran ROROs are faster (theoretically they can do the route is just 10 hours but they will have to do it at daytime since they don’t have bunks)? Well, I don’t think so. I heard they are even happy with the farther Bulalacao-Caticlan route since their sister company bus rolls farther and thus earns more from fare.

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A catamaran RORO of AFPC by Jon Erodias

And that is the situation of the Batangas-Caticlan route. Now I wonder when the Panay passengers will demand for something better.

Are they just content to get up at night and disembark even if it is raining and continue the trip with their heads hanging out from seats and their bodies contorted in search of sleep?

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