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.

CHEAP TICKETS


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

People & Company News

Hapag-Lloyd Adds 6,000 Reefer Containers

In order to profit from the growing reefer markets in South America and Asia, Hapag-Lloyd has ordered 6,000 cutting-edge reefer containers – more than ever before in the company’s history.

Imtech Germany to Be Sold in November

The German unit of bankrupt Dutch engineering services company Imtech is expected to be sold in November, according to Imtech Germany's insolvency administrator.

Neander Deal Sees Yanmar Return to Diesel Outboards

Marking its return to the diesel outboard market, engineering company Yanmar Marine International (YMI) has reached an agreement for exclusive distribution rights

Legal

Timing in Doubt on Hapag-Lloyd IPO

German container shipping group Hapag-Lloyd has taken further steps in preparation of a stock market listing and has mandated more banks for the move, but it remains

Rosneft, Gazprom to Receive Four Arctic Fields

Ministry of the Environment sent to the government documents on the transfer of "Rosneft" and "Gazprom" licenses for the development of four more fields on the Arctic shelf,

Virginia-Class Submarine Named USS Iowa

Secretary of the Navy Ray Mabus hosted a ship-naming ceremony today in Ames, Iowa to announce that SSN 797, a Virginia-class attack submarine, will bear the name USS Iowa.

Finance

Imtech Germany to Be Sold in November

The German unit of bankrupt Dutch engineering services company Imtech is expected to be sold in November, according to Imtech Germany's insolvency administrator.

US Oil Drillers Cut Rigs as Crude Prices Collapse

U.S. energy firms cut a surprisingly sharp 13 oil rigs this week, the first drop in seven weeks, as a renewed slump in prices this summer forced drillers to make a second round of cut-backs.

Timing in Doubt on Hapag-Lloyd IPO

German container shipping group Hapag-Lloyd has taken further steps in preparation of a stock market listing and has mandated more banks for the move, but it remains

Passenger Vessels

Arctic Cruise Ship Brings High-tech, Green Design

A new vessel has been designed as a luxury expedition cruise vessel for worldwide operation including Arctic and Antarctic regions for itineraries up to 21 days with 300 passengers aboard.

ISS Appoints Holmes as VP, Cruise Solutions

Inchcape Shipping Services (ISS) said it is embarking on a plan to develop its cruise business with the appointment of Grant Holmes as Vice President, Cruise Solutions.

Palmer Johnson Yatchs Shuts Sturgeon Bay, Moves to Europe

Luxury yacht manufacturer Palmer Johnson Yachts is closing its production facilities in Sturgeon Bay because of dwindling sales and competition from overseas.   In

Casualties

Mississippi River Closed Due to Collision, Spill

A unified command team continues its response Friday to an oil spill in the Mississippi River following a collision between two towboats at mile marker 937 in Paducah

Ailing Crewman Medevaced from Cable Lay Ship off US

A crew member reportedly suffering from a heart attack was air lifted by a U.S. Coast Guard helicopter crew from a cable-laying vessel 80 miles west of Coos Bay, Ore.

U.S. Coast Guard Responds to Collision Near Paducah

On-scene assessment teams have reported the maximum estimated potential clarified slurry oil released from the tug collision is now 250,000 gallons, Thursday. The

Government Update

Timing in Doubt on Hapag-Lloyd IPO

German container shipping group Hapag-Lloyd has taken further steps in preparation of a stock market listing and has mandated more banks for the move, but it remains

Australia's New Shipping Laws Threaten Loss of Jobs

The planned changes to Australia’s shipping laws would cause a 93% loss of Australian seafaring jobs a new report says.   More than nine in 10 domestic seafarers

Proposed Shipping Legislation to Jeopardise$100-million Investment in Australia

Australian-owned Bass Strait shipping operator SeaRoad Holdings has warned the Federal Government that its proposed Shipping Legislation Amendment Bill could jeopardise

 
 
Maritime Security Maritime Standards Naval Architecture Pipelines Port Authority Salvage Ship Electronics Ship Repair Shipbuilding / Vessel Construction Winch
rss | archive | history | articles | privacy | 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: 0.1855 sec (5 req/sec)