Hawaii Superferry is delaying the start of Big Island service by a year and cutting back its Maui sailings in response to the economic downturn and slower demand.

Superferry President and CEO Tom Fargo yesterday said the company is disappointed at having to put off the introduction of its second $95 million high-speed ferry, which was to have started service to Kawaihae early next year, "but this is a prudent business decision."

"When you get into these periods, people don't travel as much and we're seeing that in lots of other industries," Fargo said. "People are saving their money and they're just being very circumspect."

Hawaii Superferry is anticipating delivery of the 370-foot catamaran from Mobile, Ala., shipbuilder Austal USA in late February. Fargo said the company is looking for short-term opportunities to contract the vessel out to an operator outside Hawai'i to generate revenue and defer $10 million in startup costs.

The company has not reached an agreement with any operators to use the second ship, but is inviting all comers, military and otherwise, he said.

Gov. Linda Lingle's chief of staff Barry Fukunaga said the Superferry's actions were "not unexpected based on the upcoming winter season and the current economic challenges facing the nation and our state." He said the administration believes the decision to delay introduction of the second ship "is based on prudent financial management."

Lingle is an ardent supporter of Hawaii Superferry, which she says provides an important interisland transportation alternative for passengers and cargo. The state spent $40 million on barges, ramps and other facilities at four ports to accommodate the ferry.

ALAKAI LAUNCHES

Superferry began service between Honolulu and Maui in December with its 350-foot vessel, Alakai, which can carry 836 passengers and 230 cars. Fargo said the ferry was averaging approximately 400 passengers on each segment in July, but that number dropped to 250 per segment in September, historically a slow travel month.

Passenger counts bounced back in October, he said, largely due to the weeklong school break.

Fargo said use by commercial customers remains "pretty solid," led by Love's bakery, FedEx and a host of small businesses.

The company is expecting lower passenger demand for the rest of the winter, save for holiday periods, and received approval from the Public Utilities Commission to eliminate its Tuesday sailings effective Friday.

Fargo said it would be wrong to interpret the developments as a sign that Superferry's days in Hawai'i are numbered. He noted the company's $250,000 investment in a new whale-detection system that was installed on the Alakai last week as a sign of its commitment to Hawai'i service.

"We've operated every day for seven months, departed on time every day for seven months and we've carried over 150,000 passengers, and the people like it," he said.

"We obviously made a significant investment in the operation and these moves that we're making right now are to ensure that we fortify our position."

Superferry's financial outlook also is being helped by declining fuel prices. Fargo said the company is paying $2.30 per gallon of low-sulphur diesel compared with $4.25 per gallon in July.

Fargo previously said the company's business plan required two vessels in operation to attain profitability.

"We've rewritten the business plan a little bit and we're taking cost out of the company just like every company is, and I think we can get EBITDA positive in May," he said. "EBITDA" is business-speak for earnings before interest, taxes, depreciation and amortization.

"We think we're on track for May of next year," Fargo said.

AGRICULTURAL SETBACK

The delay in service to the Big Island will affect farmers who were considering the ferry as a means to get their produce to O'ahu markets, according to Mark McGuffie, executive director of the Hawai'i Island Economic Development Board.

"Of all the myriad uses cited, such as getting families to go back and forth and those kinds of things, the agricultural community is the one most disappointed," he said. "We're looking forward to an economic turnaround and, hopefully, the Superferry will come on or before 2010."

The delay will give the state Department of Transportation time to make additional arrangements for the new ferry to call at Kawaihae Harbor.

Plans called for the vessel to use Pier 1, but the facility was severely damaged in the October 2006 Kiholo earthquake. Mike Formby, DOT deputy director of harbors, said repairs are about 90 percent complete.

Superferry's second vessel will have a stern ramp that will provide more flexibility in what the ship can be used for and where it can dock. In anticipation of the early 2009 startup, Formby said DOT was seeking permission from the Coast Guard to allow the ferry to use Pier 1 during calm summer months and in the winter when conditions allow, and when that is not possible, to use its stern ramp to dock at Pier 2A.

Pier 2A is used by Young Brothers and other shippers, and Formby said his agency has been meeting with users to figure out how to accommodate Superferry.

"This delay, although unexpected, will give us more time to work through all the challenges at Kawaihae," he said.