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

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

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

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

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

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

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

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

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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?

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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 “Seven Sisters”

In the world, there was once what was called as the “Seven Sisters”. These were the biggest oil companies in the world for more than half a century from the 1930’s to the 1980’s when further consolidation happened within their ranks. Five of the “Seven Sisters” were offspring of the forcibly broken-up Standard Oil Company of John D. Rockefeller, the most famous monopolist of the modern era which was hit by anti-trust legislation in the US as it was engaged in practices that restrict free trade. These were Exxon (Standard Oil of New Jersey), Mobil (Standard Oil of New York), Texaco, Socal (Standard Oil of California) and Gulf Oil. The two others were the biggest oil companies of Europe which were Royal Dutch Shell and British Petroleum (BP). Together, the “Seven Sisters” were suspected of collusion in fixing the prices of crude oil and the refined oil products and also in “transfer pricing”. The biggest of the “Seven Sisters” were among the biggest companies in the world in their heydays in the company of General Motors, First National City Bank and General Electric which were held in very high regard for the bigness and in market and financial clout.

In the Philippines, there is also what could be considered a version of the “Seven Sisters” if only for pun. These were the catamaran High Speed Crafts (HSCs) which all came from Macau as the share of Universal of Macau in Universal Aboitiz Inc. The seven catamarans are all sister ships built in Singapore by FBM Marinteknik which arrived in 1995 to 1996 which all but sank the hopes of competition (yes, they were as dominant as the “Seven Sisters” of the oil world). They were not brand-new but they were as good as that. Their names were SuperCat-I (the former Oregrund), SuperCat 2 (former Camoes), SuperCat 3 (former Estrela do Mar), SuperCat 5 (former Lusitano), SuperCat 7 (former Universal Mk. 1), SuperCat 8 (former Magellan) and SuperCat 9 (former Santa Cruz). Formerly, they were used in routes from Macau including Hongkong.

These “Seven Sisters” were the fastest ever to sail Philippine waters in the recent era. Powered by twin waterjets which prevent early cavitation, the seven were all capable of 38 knots sustained. That was almost double of the SuperFerries of the period and more than triple the 11 knots average of the common short-distance ferries then. Early in their careers the passengers marvelled at their very short route transit times like in Batangas-Calapan which just takes them 45 minutes versus the two-and-a-half hours of the regular ferries.

The lengths of the “Seven Sisters” were almost the same and averages 41.5 meters which was more than the average basic, short-distance ferry-RORO (that means they are not really small). Their breadths were all 11.0 meters and their depths between 3.6 to 3.8 meters. The gross tonnages ranged from 449 to 458 while the net tonnages ranged from 151 to 155, all small differences. The passenger capacities, meanwhile, ranged from 306 to 322. But all of them were powered by twin MTU engines with a total of 5,200 horsepower. They were the most powerful High Speed Craft engines ever seen in Philippine waters.supercat-7-marlon-griego

These “Seven Sisters” featured aluminum hulls for lighter weight. All had single masts, raked stems and transom sterns. The sisters had single passenger decks which means they all had low centers of gravity with the pilot house high above that. Aside from the common navigational devices, all had night vision devices, autopilots, joysticks and motion dampening systems. The engine room can also be monitored from the bridge.

Aboard, the passenger compartment featured airline-type seats with seatbelts. There were well-trained stewards and stewardesses to assist the passengers and make them comfortable. There was a perception of space and the passenger compartment floor is carpeted. However, at full speed the hum of the engines were audible (but it was a pleasant hum as they were MTUs) and in exchange of that there is really a perception of speed and great capability in acceleration.

These catamaran High Speed Crafts were fielded in the Batangas-Calapan, Bacolod-Iloilo, Cebu-Ormoc, Cebu-Tagbilaran-Dumaguete-Dapitan (with a Siquijor extension at one time) and Cebu-Maasin-Surigao routes. It was the time when High Speed Crafts were being used from short to long routes that were once done by overnight ferries. The first three routes were successes, the last one was a failure while the fourth was marginal. It was in the shorter routes where the “Seven Sisters” found success.

Along with the SuperCat 6 and SuperCat 10 which were of different designs, these SuperCats were so successful in a very crowded High Speed Craft field that included competitors like the fastcrafts of the Viva Shipping Lines combine, the fastcrafts of Bullet Express, the two High Speed Crafts of Oceanjet, the SeaCats of ACG Express Liner, etc. that their very direct competitors, the Sea Angels of Negros Navigation Company and the catamarans of Water Jet Shipping Company folded and merged with them to form the Philippine Fast Ferry Corporation (PFFC).

Their fielding, however, nearly coincided with the 9/11 attack in the New York City towers and the subsequent launching of the US with retaliatory wars and interventions in the Middle East which slowly but consistently rose the price of oil. With nearly 17 horsepower per person, the highest ratio in local waters, the local “Seven Sisters” soon found their fuel consumption was simply too high. Incidentally, all merged Sea Angels and Waterjets also had the same powerplants as the “Seven Sisters”, the 5,200-horsepower MTUs. Moreover, the waterjets proved a little troublesome for the unclean waters of our ports when trash sometimes get sucked by the waterjets which threw schedules awry (they can’t run well with the waterjets clogged thus voyages were cancelled because maintenance has to be made first).

The Philippine Fast Ferry Corporation then had a policy decision to shift away from waterjets and the thirsty MTU engines. One by one, the merged Sea Angels, Waterjets and the Seven Sisters were sold and all to foreign buyers. By the mid-2000s none of them were left. SuperCat 3, 5, 7, 8 and 9 were sold to Jadrolinija of Croatia while SuperCat-I was sold to Tahiti and SuperCat 2 was sold to South Korea. SuperCat 3 became the Karolina, SuperCat 5 became the Judita, SuperCat 7 became the Novalja, SuperCat 8 became the Dubravka and SuperCat 9 became the Bisovo. Meanwhile, SuperCat-I became the Normandie Express (later as Moorea Express) and SuperCat 2 became the Korea Express. What replaced them in the SuperCat fleet were smaller High Speed Crafts of less power and speed, none were waterjets and some were fastcrafts. Except to that were the trimarans Tricat 50 and Tricat 2.

Later on, there were still some changes of ownership among the “Seven Sisters”. But rest assured all seven are still alive although they are elderly now (they are nearing 30 years of age) and might be nearing their end.

Still, they were fun when they were here. Even to just watch them make their run.

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Photo Credits: Masahiro Homma, Marlon Griego, Vinz Sanchez, Nowell Alcancia, PSSS

When SuperCat Ruled The Waves

SuperCat as a brand of Aboitiz Shipping Corporation started in the summer of 1994 in the Batangas-Calapan route with the fielding of the SuperCat 1. She was not the very first High Speed Craft in the route as Bullet Express 1 beat her by a day. However, SuperCat immediately made a very big splash and impact. It was super-fast compared to the local ferries and would only take 45 minutes for the 24-nautical mile route when other ferries in the route normally took 2.5 hours. And being a catamaran it made a lot of visual impression. She was also very comfortable considering there no airconditioning in any of the ferries in the route. There was also a smooth and true passenger service. I myself was there in Batangas port when the SuperCat 1 was formally launched and it was impressive.

Bullet Express 1 was also outclassed, overwhelmed and very soon it quit the route because they can’t match SuperCat and they went to the Visayas. Meanwhile, the old kingpin of the area, the Viva Shipping Lines immediately purchased two second-hand fastcrafts of Japan origins from the Sun Cruises of Manila to say they also have a fast one. It charged cheaper but they were not as fast as they took one hour for the route.

However, in about 4 months time, SuperCat 1 met a mishap and was wrecked on the western side of Verde Island soon after MARINA ruled she should take that route (before she took the route east of Verde Island and between the “Mag-asawang Pulo”). She hit an underwater obstacle and the superstructure completely deformed. There were suspicions of sabotage but the investigation ruled it was an accident. Whatever, Aboitiz had already sensed High Speed Crafts (HSCs) will be successful in the Philippines since SuperCat 1 had good patronage and many were impressed. Well, it was peak season when she came (a summer when many are going home) and the Batangas-Calapan route really lacked bottoms then and no ferry there had airconditioned accommodations and good service.

Aboitiz immediately sought a replacement to the wrecked SuperCat 1 and within months a new one arrived in the route and this was named the SuperCat I. Many thought this was a repaired version of SuperCat 1 but actually this was a different ship. Since Aboitiz thought High Speed Crafts will be successful in the Philippines and wants to jump the gun on the others, so to say, it partnered with a Macau operator of High Speed Crafts and the company Universal Aboitiz Inc. was born. In a short time, catamarans started arriving for SuperCat and Aboitiz fielded them to different routes. Aside from the Iloilo-Bacolod route, it based catamarans in Cebu for different routes to the near islands like Leyte (Ormoc), Bohol (Tagbilaran), Negros (Dumaguete) and it even had far routes like Surigao (via Maasin) and it has an extension to Dapitan in Zamboanga del Norte.

With this move for partnership with the Macau concern, Aboitiz was the first in the Philippines to have many High Speed Crafts and in the process they overtook Bullet Express which was backed by combined Zamboanga-Malaysia concerns. In just the years 1995 and 1996, eight catamarans arrived for Universal Aboitiz and they practically swamped their competitors which were also new to High Speed Crafts. These were the Sea Angels of Negros Navigation Company and Waterjet Shipping Company. With Bullet Express, Viva Shipping Lines (and its legal fiction companies Sto. Domingo Shipping and DR Shipping), Royal Ferry, Florinda (RN High-Speed Ferries), Oceanjet (Ocean Fast Ferries), Sea Cat (ACG Express Liner) and a half-dozen other minor operators in the mix, very soon it became a veritable dogfight in the High Speed Craft world here as in matira ang matibay (only the strong will survive).

Not long after, the Sea Angels and Waterjet both gave up and merged with SuperCat. That will happen as there were just too many High Speed Crafts for the passengers willing to pay their higher fares which were double or so the regular ferries. With that suddenly SuperCat had 13 high-speed cats, the SuperCat I, SuperCat 2, SuperCat 3, SuperCat 5, Supercat 6, Supercat 7, SuperCat 8, SuperCat 9, SuperCat 10. The St. Raphael and St. Gabriel of the Sea Angels became the SuperCat 11 and SuperCat 12, respectively and the Waterjet 1 and Waterjet 2 became the SuperCat 17 and SuperCat 18, respectively. These were just too many for some 5 profitable routes (Batangas-Calapan, Cebu-Ormoc, Cebu-Tagbilaran, Cebu-Dumaguete and Iloilo-Bacolod (I am not sure if Cebu-Dapitan is really profitable) and to think the competition has even more High Speed Crafts than SuperCat (though admittedly not as good).

Except for SuperCat 6 and SuperCat 10 which were smaller and not that fast, all the other SuperCats had 2 x 2,600hp MTU engines with two waterjets as propulsion and all were capable of 38 knots, a speed not reachable by propeller-driven High Speed Crafts because of the phenomenon called “cavitation”. All of them were true sister ships and all were built in Singapore but by different manufacturers. All had aluminum alloy hulls for light weight. While the catamarans from Macau were not brand-new (but still very good), the former Sea Angels and Waterjets arrived here brand-new. All were built by Kvaerner Fjellstrand and were all true sister ships (together with the Stella Maris of Grand Seaways that also came here too). The rest that came from Macau were built by FBM Marineteknik.

In 1999 and 2002, the trimarans TriCat 50 and TriCat 2 also joined the SuperCat fleet. Later the tricats were renamed the SuperCat 2001 and SuperCat 2002. Both also had 2 x 2,600hp MTU engines with twin waterjets but being bigger their speed were a little lower at 36 knots. The two were true sister ships and they were the biggest ever High Speed Crafts that plied Philippine waters. Aboitiz, being a partner in FBM-Aboitiz (FBMA) which built them in Balamban, Cebu surely would have had to purchase one of their products even just for showcase purposes.

This was the time that SuperCat completely ruled the waves. They were the fastest, they were the most comfortable, they had the best passenger service and they have the best booking system. They even had the best, owned passenger terminal in Cebu port (which was shared with WG&A and Cebu Ferries Corporation ferries). In speed it was only the Weesam Express (1) and Weesam Express 5 of SRN Fastcrafts which can give any semblance of challenge but still the MTU-powered SuperCats were slightly faster. They dominated the High Speed Crafts routes and even bullied the opposition a bit (well, isn’t that what alpha dogs are supposed to do?).

But speed has its cost which is higher fuel consumption. And waterjets might give better speed especially at ranges where propellers begin to lose efficiently because of “cavitation” but waterjets also needs more maintenance. The dirty waters of our ports can easily clog them especially since many people just throw their trash in the water and the rivers that empty into the sea also contains garbage and these can be sucked by the waterjets. And one fouling costs money and moreover it throws a monkey wrench on the schedules, trips are lost and tempers and the patience of passengers are tested.

With the merger with Sea Angels and Water Jet, SuperCat actually found themselves with many excess catamarans especially since it was already found out then that the routes where one can field High Speed Crafts are limited since many others do not have enough patronage. The successor company to Universal Aboitiz, the Philippine Fast Ferry Corp. soon realized that. There was also the late realization that their catamarans were overpowered and that waterjets are actually not too well suited for local waters. Soon SuperCat began selling their MTU and waterjet-powered catamarans. And slowly they began buying High Speed Crafts that were not that powerful, not propelled by waterjets and some were actually not catamarans but fastcrafts which are monohulled vessels. Their first non-MTU, non-waterjet HSC, the Supercat 20 was actually a fastcraft.

Soon all their MTU and waterjet-powered catamarans and trimarans (which are triple-hulled vessels) were gone and sold abroad. One of the factors that forced them was the steady rise of the world oil prices starting in 2001. They then had a mix of catamarans and fastcrafts which were equipped with propellers. Their next favorite powerplant after MTU was the Caterpillar brand. With those changes, the SuperCats became just a fast as the competition and there were Weesam Express fastcrafts which invaded the Visayas that can already beat them in raw speed.

They were also not so as numerous as before as SuperCat slowly pruned down the number of units because of over-competition. Moreover, their parent company WG&A was split asunder and had to sell ferries to pay for the shares of the partners that were divesting. And the paring down of vessels included that of SuperCat too. With that situation the number of SuperCat HSCs shrank by a half and they no longer had showcase units which will show they have the best High Speed Crafts. Along this way the company’s name was changed to SuperCat Fast Ferry Corporation.

So, once at the apex of the High Speed Craft field, their rule of the waves slowly vanished in the new millennium. They then just became one of the few survivors of the High Speed Crafts wars here where most HSC companies sank. They initially still had a slight lead though but then their controlling stockholders, the Aboitiz family got more interested in the power generation industry and tried to sell the Aboitiz Transport System (ATS), the successor of WG&A. This was consummated later and SuperCat became a brand of 2GO under Negros Navigation Company.

With the number of units not growing and getting older, SuperCat slid further and the mistake of acquiring SuperCat 36 and SuperCat 38 did not help. Currently their best units are just the sister ships St. Jhudiel and St. Braquiel, the former SuperCat 30 and SuperCat 32, respectively. Though still using SuperCat as a brand since that is already an established brand, their High Speed Crafts have already been renamed to saints in the tradition of Negros Navigation Company. And yet this did not arrest the slide of SuperCat and they have HSCs whose engines that are already getting tired.

In this situation, Oceanjet began their challenge for the top of the High Speed Craft field. The company embarked on continuous addition of vessels to their fleet with their own-assembled fastcrafts and by acquisitions of the High Speed Crafts by the competition that quit the HSC field. And before the middle of this decade, Oceanjet or Ocean Fast Ferries already overtook SuperCat in sheer number. And then they were also overtaken in speed and newness by Oceanjet which aside from assembling their own fastcrafts also continuously changes the tired engines of HSCs in their fleet.

Most people including the tourists have no idea of these developments. Many think, wrongly, that SuperCat is still on top. They do not know that SuperCat is now just a shadow of its former self that once ruled the waves. However, Super has ordered two new HSCs in Austal Balamban recently but I doubt if it can overtake Oceanjet and rule the waves again.

[Photo Owner: Masahiro Homma]