Tugboat strike served as a wake-up call for Islands
By Dan Nakaso
Advertiser Staff Writer
The Inlandboatmen's Union of the Pacific strike against Young Brothers Ltd. and Hawaiian Tug & Barge instantly severed the supply chain to Neighbor Island communities and at the same time highlighted the O'ahu-centric, fragile nature of commerce among the islands.
Neighbor Island communities that have come to rely on a decades-old system of barges and tugs were stunned by how quickly they were cut off from their usually reliable shipment of goods from O'ahu.
"This particular work stoppage makes you start thinking about issues we should have been thinking about all along," said Paul Brewbaker, chief economist of Bank of Hawaii.
"Can we break out of the 19th century and get into the 20th century? Or are we stuck in this model that everything comes into Honolulu, then longshoremen put everything onto a barge and then the barge goes to another pier and then other longshoremen take it off the barge?"
The island of Lana'i, a good illustration of the issues, depends on the single barge delivery it receives every week. The people there grew nervous in a hurry when their only barge service was canceled immediately after the strike began Thursday morning.
Matthew Hart, vice president of Castle & Cooke Resorts on Lana'i, said the strike "caught everyone off guard."
Lengthy island history
Young Brothers was founded by Herbert, William and Jack Young and incorporated in 1913. Since statehood, Hawai'i has relied on Young Brothers to deliver most of its goods over the ocean.
Today, Young Brothers calls itself the lifeline of the Hawaiian Islands and provides interisland-freight operations to the ports of Nawiliwili on Kaua'i, Kahului on Maui, Kaunakakai on Moloka'i, Kaumalapau on Lana'i, Hilo and Kawaihae on the Big Island and Honolulu on O'ahu. Its sister company, Hawaiian Tug & Barge, conducts harbor operations and charter activities.
The companies are owned by Saltchuk Resources Inc. of Seattle and operate a combined fleet of 13 tugs and 10 barges.
For nearly half a century, Young Brothers has received Certificate of Public Convenience Necessity permits from the state Public Utilities Commission to provide regular, intrastate service. Its shipping rates are regulated.
"Young Brothers is the only one with that license," said Kris Nakagawa, chief counsel of the state PUC. "No one else has applied to come in."
With its long history in the Islands, Young Brothers maintains a clear advantage in the shipping market.
One of the company's main competitors, Sause Brothers, said it could not take over Young Brothers' shipments during the strike because it only has one barge to move goods between the islands.
"Hawai'i's still a relatively small economy," said Glenn Hong, president of Young Brothers and Hawaiian Tug & Barge. "So everyone's always searching for economies of scale."
Air shipments aren't a feasible alternative for the long term because of limited air-cargo space, which is also five to six times more expensive than sea-going charges.
Competition rising
Like other historic Island companies, Young Brothers and Hawaiian Tug & Barge face modern-day pressures from inside and out.
The vehicle transport side of Young Brothers' business faces potential competition from California-based Pasha Hawai'i Transport Lines LLC. The company wants to bring in two car-carrying freighters to deliver vehicles from California to Ho-nolulu, also putting it in direct competition with Matson Navigation Co. and Horizon Lines.
Matson also cuts into Young Brothers' share of the market by sailing directly to Maui and Hilo.
Perhaps a greater threat will come from two, 345-foot "superferries" under construction in Mobile, Ala., for Hawaii Superferry Inc. The company believes the ferries' capability of transporting people, their cars and goods quicker between the islands will change Hawai'i's business climate and increase competition for Young Brothers.
The emergence of big-box retailers on the Neighbor Islands, to some degree, has created less reliance on the regular shipments of goods from O'ahu because they can store more goods for longer periods.
But last week's strike reminded people of how much they still depend on Young Brothers barges.
"In the industry, we say that 80 percent of what we consume in Hawai'i has to be imported," Hong said. "Of that 80 percent, 98 percent comes by water.
"A lot of the public is not really focused on that. But if you live in the Neighbor Islands, most of them have been down to the pier and waited for the barge to come in, even relative newcomers. ... On O'ahu, you don't have that."
Then 60 members of the Inlandboatmen's Union of the Pacific went on strike, nearly crippling Young Brothers and Hawaiian Tug & Barge operations along the Honolulu waterfront. The striking workers include cooks, seamen, deck hands, first and second mates, engineers, dispatchers and operators.
Wake-up call
Hawai'i residents haven't been pounding on politicians' doors for solutions to the state's heavy reliance on Young Brothers and Hawaiian Tug & Barge.
Many of them are like Lloyd Nishima of Kula Produce Co., who has long gotten used to barge deliveries on Maui. "We weren't prepared," Nishima said. "We woke up and it was, 'the barge is not coming ... what?' "
But the political will to change the way Hawai'i moves cargo has yet to emerge in any unified way.
Bank of Hawaii's Brewbaker said preventing similar problems requires an expensive and complete overhaul of the way the state distributes goods.
Reinventing the current system would involve massive investments in Neighbor Island ports to accept shipments directly from the Mainland or Asia, bypassing Honolulu just as airlines have begun skipping O'ahu, Brewbaker said.
Brewbaker said, Neighbor Island highways would have to be upgraded to carry cargo on land.
Brewbaker worries that critical services such as interisland cargo will continue to be disrupted as long as unions take advantage of a transportation network that provides few alternatives.
Sea shipping is not the only sector that offers few options in a walkout. Other key unionized workers have crippled their industries by going on strike in the past three years — most notably the concrete workers, teachers, nurses and bus drivers.
Brewbaker has heard the argument that unions might be more willing to strike as Hawai'i's economy improves and rank-and-file members seek a share of the good times.
"I would certainly expect them to take a shot at it," Brewbaker said. "But that dog won't hunt unless there's productivity growth attached to the argument. ... Is the company doing better because workers are becoming more productive? That's the basis for higher compensation."
Leroy Laney, a Hawai'i Pacific University economics professor, however, believes that a better economic climate may encourage other unions to stage walkouts for better pay and benefits.
"Things like bus strikes and construction strikes, we're probably getting more than our share of it," Laney said. "As an economist, I think the improving economy has a lot to do with it. (Unions) think there's more to go around and they can get more. And that's usually the case."
Each strike in the past few years has caused immediate financial hardships that have rippled throughout the economy. But the damage typically gets absorbed in the months that follow, Laney said.
"You feel it acutely when there's no toilet paper in the stores," he said, "but it's not something over a long period of time that has much economic impact."
Advertiser staff writers Kelly Yamanouchi and Christie Wilson contributed to this report. Reach Dan Nakaso at dnakaso@honoluluadvertiser.com or at 525-8085.
