The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Crowley’s decision to exit the Bahamian shipping market was driven “110 per cent by competition”, the Arawak Port Development Company’s (APD) chief executive said yesterday, while revealing that the collective cargo capacity to Nassau was currently 52 per cent empty.

Michael Maura told Tribune Business that Crowley’s pull-out had been prompted by its “deeper pocketed” rival, Mediterranean Shipping Company (MSC), starting a direct Jacksonville-Nassau service of its own two weeks ago.

Disclosing that Crowley had informed him it had not made a profit on its Nassau services since 2006, Mr Maura added that the company had not been able to grow its Bahamas’ shipping market share beyond 17-18 per cent during 19 years.

Noting that Crowley had also admitted to him that its shipping rates were now 4 per cent less than they were in 2006, the APD chief indicated that overall market conditions, together with the increased competition from MSC, were responsible for its move.

And, dismissing suggestions that APD and its new rates have been responsible for the exit of Crowley and three other shipping carriers in recent years, Mr Maura pointed out that all were paying the same rates.

They had each increased their own rates to adjust to the APD fees, yet Mr Maura said MSC - in contrast to Crowley - was thriving and had managed to double its Bahamas market share.

“In my opinion this is 110 per cent competition, and at its best,” Mr Maura told Tribune Business of Crowley’s move. “It doesn’t get any more easier than this.

“If, like MSC, you have an asset the size of a 900 twenty-foot equipment unit (TEU) vessel, and put that into service between Jacksonville and Nassau, you’re going to do everything to fill it up.

“Crowley’s competitive advantage had been Jacksonville up until the point MSC put their ship in there.”

Noting that competition for clients between shipping companies was especially brutal, with deep discounts offered to importers to switch their business, the APD chief suggested MSC had employed such a strategy in entering “Crowley’s back yard”.

As a global shipping company, he suggested MSC had the ‘deep pockets’ to absorb such discounts and offer better rates, which Crowley was unlikely to match.

“Crowley, after 19 years, was not able to get past 18 per cent market share,” Mr Maura said. “MSC, in the last year, has seen their market share double.

“They’ve very aggressively beefed themselves up from a service perspective to be ready for Baha Mar.”

Explaining that Baha Mar was expected to increase TEU volumes coming into the Nassau Container Port by 5,000 in the coming months, Mr Maura said MSC had claimed 50 per cent of this business.

While both it and Tropical were set to serve Baha Mar’s needs, Crowley had been unsuccessful in getting a piece of the action.

Expanding on this theme, Mr Maura added: “MSC chose to introduce a vessel that can carry 900 loaded TEUs, which is far more than the demand anticipated from Baha Mar.

“In an effort to maximise the utilisation of this vessel, MSC is making sales calls on suppliers in the north Florida and Southeast US and offering rates likely lower than the rates previously offered by Crowley. Be reminded that the customer always says ‘give me a reason to move my business’.”

And he added: “In my opinion, MSC has pockets so deep that the start of a MSC schedule from Jacksonville would be financially challenging to any carrier attempting to defend their turf.

“Crowley’s vessel costs are likely over $90,000 per week and may present a real obstacle. As noted in their press release the market isn’t prepared to pay for the service provided.”

In confirming its Bahamas exit to Tribune Business, Crowley said it had been unable to cover “significant” cost increases on its Nassau route, thus making it “unsustainble”.

Pointing out that MSC was the world’s second largest shipping company, and hard more connections than “Crowley and Tropical could ever dream of having”, Mr Maura emphasised: “This change is the result of aggressive competition, plain and simple.

“It often doesn’t make sense, but in shipping carriers will often choose to chase market share rather than profits. Crowley wanted profit at a time when its competitors are focused on market share. There will be a point in the future when MSC or Tropical adopts a profit focus.”

The APD chief, meanwhile, dismissed the notion that the Nassau Container Port and its charges were responsible for Crowley’s exit.

“A year ago, the Port opened its doors and we introduced our fees,” Mr Maura told Tribune Business. “All the carriers introduced their own general rate increase to adjust.

“All foreign carriers pay the same port fees, so it is not a situation where one has a significant financial advantage over the other. MSC and Crowley pay exactly the same fee, but MSC has doubled market share.”