Korean Ferry Operator Relied Increasingly on Cargo

Joseph Keefe
Tuesday, April 29, 2014
Photo courtesy South Korea Coast Guard

The operator of the South Korean ferry that capsized and sank this month with the loss of about 300 lives was apparently being squeezed by competition from budget airlines and had to increasingly rely on its cargo business.

The Sewol ferry sank on a routine voyage south from the port of Incheon to the holiday island of Jeju on April 16.

Investigators have not determined the cause of the accident but media has reported that the ship was overloaded with cargo and it may have been poorly stowed.

The ship was carrying 476 passengers and crew and had a capacity for 956.

The Korean Register of Shipping, which tested and certified the Sewol, stipulated that it should be loaded with no more than 1,070 tonnes of cargo and passengers combined.

It is not clear how much cargo it was carrying. Prosecutors have said determining the weight of the cargo is a key part of their investigation because of suspicion of overloading.

Financial records of the operator, Chonghaejin Marine Co., show cargo had become an increasingly important part of its income in the years since budget airlines stated winning over large numbers of travellers.

"Chonghaejin faced an uphill battle against budget carriers, which led to an shrinking number of ferry passengers," said Kim Gilsoo, a professor in shipping management at Korea Maritime University.

"In contrast, increased shipments of agriculture products from Jeju island to Seoul led to increased cargo demand."

Passenger revenue at Chonghaejin dropped 31 percent last year from the 2008 level, when competition from budget carriers was low, while cargo revenue jumped 64 percent in the same period, according to company filings to the stock exchange.


The cargo business is the company's biggest earnings generator, accounting for 60 percent of Chonghaejin's total revenue in 2013, the filings showed.

Chonghaejin started services on the route from Incheon, near Seoul, to Jeju in 2003. But the number of passengers dropped for the first time in 2009, when budget carriers sharply the number of passengers they were carrying.

The cheapest budget air fare is 40,500 won ($39) for a one-way ticket to Jeju on a weekday. The ferry cost 71,000 won ($68)and took 12 hours longer than the flight.

The number of people going from Seoul to Jeju by plane jumped 72 percent from 2008 to last year, to 12.2 million. The number going by ship dropped 7 percent to 118,717, port and airport data showed.

The company reported a 785 million-won operating loss last year as it battled rising costs.

Chonghaejin chief executive Kim Han-sik appeared to the prosecutors' office on Tuesday for investigation.

Reuters made calls to several company officials but no one was available for comment.

The Korea Shipping Association (KSA) and coastguard, which are responsible for checking ships are meeting cargo loading and stowing guidelines, are also being investigated.

The KSA, whose head offered to resign at the weekend, declined to comment, citing the investigation.

The Sewol's captain and other crew have been detained on negligence charges. Lee was also charged with undertaking an "excessive change of course without slowing down".

By Hyunjoo Jin and Meeyoung Cho

Maritime Reporter February 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Nabors Posts Quarterly Loss as Drilling Activity Slows

Offshore driller Nabors Industries Ltd reported a quarterly loss, hurt by lower drilling activity amid a slump in global crude prices.   The company posted a net loss of $891.

Crowley Ships Massive Electrical Equipment

Crowley Maritime Corporation’s liner services group recently transported two massive electrical equipment enclosures with a combined weight of 196,000 pounds to San Juan, Puerto Rico.

Maersk Drilling Secures Contract for Newest Drillship

Maersk Drilling was awarded a contract from eni Ghana Exploration and Production Ltd. for employment of the newbuild drillship Maersk Voyager.   The contract


Green Groups Sue Port of Seattle

A coalition of environmental groups has sued the Port of Seattle over a leasing agreement to host Shell Oil’s Arctic drilling fleet, claiming the deal was negotiated

Strip Club Barge Accused of Dumping Sewage into Harbor

Owners of floating Kodiak strip club indicted by Federal Grand Jury; Wild Alaskan operators accused of dumping raw sewage into Kodiak Harbor, Alaska   A federal

MOL Expands Container Fleet

Mitsui O.S.K. Lines, Ltd. has signed a deal for construction of four 20,000 TEU containerships with Samsung Heavy Industries. MOL also concluded an MOU for long-term chartering of two 20,


Nabors Posts Quarterly Loss as Drilling Activity Slows

Offshore driller Nabors Industries Ltd reported a quarterly loss, hurt by lower drilling activity amid a slump in global crude prices.   The company posted a net loss of $891.

Cheap Oil Threatens Debt Squeeze for Smaller North Sea Producers

Small and mid-sized independent oil producers in the British North Sea could face a financing squeeze this year as banks cut lending linked to the value of oil reserves,

Royal Caribbean to Sell Splendour of the Seas

Royal Caribbean Cruises Ltd. announced that it has entered into an agreement to sell its cruise ship Splendour of the Seas to TUI Cruises in the second quarter of 2016.

Passenger Vessels

Royal Sells Splendour to Tui Cruises

Royal Caribbean International is saying sayonara to yet another of its older vessels. Its cruise ship Splendour of the Seas will join the Thomson Cruises’ fleet from Summer 2016.

Corvus Energy Wins Order for Battery Hybrid Ferries

Scandlines ferries designed with battery hybrid propulsion to operate on the Rostock-Gedser commercial route.    Corvus Energy, Siemens AS and Scandlines have

Her Majesty The Queen to Name Britannia

Her Majesty The Queen, accompanied by His Royal Highness The Duke of Edinburgh, will name the new P&O Cruises vessel Britannia in Southampton on March 10, 2015, P&O Cruises announced.


Mariner Medevaced in Alaska

An ailing mariner was medevaced from a fishing vessel in Beaver Inlet, approximately 13 miles southeast of Dutch Harbor, Sunday, the U.S. Coast Guard reported.   The

USCG Free Boat from Ice Near Woods Hole

A Coast Guard crew responded to a fishing vessel trapped in ice in Woods Hole Passage, Woods Hole, Massachusetts, Saturday. At about 3 p.m., the crew of the fishing boat Capt.

Tug Boat Owner Jailed After Crew Man Dies

A tug boat owner was today was given an 8 month custodial sentence after his crew member died trying to reattach a tow line in a violent storm. During today’s hearing at Southampton Crown Court,

Government Update

Manila Port Congestion Eased: Palace

Malacañang has declared that the congestion at the Port of Manila has been resolved, noting the various measures that the government and the private sector have implemented to address the problem.

Canadian Navy Delays Opening of Arctic facility

Canada's military has again delayed the opening of a major new Arctic port, a sign the government is struggling to assert sovereignty over a remote resource-rich region.

Zeroing in on Zukunft

The U.S. Coast Guard Commandant addresses a packed Passenger Vessel Association meeting and outlines both the challenges and opportunities facing his organization.

Maritime Careers / Shipboard Positions Maritime Standards Naval Architecture Navigation Pod Propulsion Port Authority Ship Repair Ship Simulators Shipbuilding / Vessel Construction Sonar
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1441 sec (7 req/sec)