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 September 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Nordic American Offshore Declares Dividend

Nordic American Offshore Ltd. today announced that its board of directors has declared a dividend of $0.45 per common share for the third quarter 2014. This is the same as for the second quarter 2014.

Bollore Africa Logistics Sees Profit Plunge in H1

First half 2014 profit at shipping company Bollore Africa Logistics plunged to 5.89 billion CFA francs ($11.48 million) from 9.45 billion CFA francs in the same period last year,

Ocean Rig, Petrobras Agree to $1.1b Drill Ships Lease

Cyprus-based Ocean Rig UDW Inc said on Monday that it signed a $1.1 billion three-year contract with Brazil's state-run oil company, Petroleo Brasileiro SA, to

Legal

ITIC Measures against Ebola

The International Transport Intermediaries Club (ITIC) has issued the following general advice related to the outbreak of Ebola. Vessels that have recently

ClassNK's Guidelines for Exhaust Gas Cleaning Systems

Leading classification society ClassNK announced that it has released Guidelines for Exhaust Gas Cleaning Systems. These guidelines cover class safety requirements

China, Vietnam Pledge Maritime Cooperation

China and Vietnam have agreed to "address and control" maritime disputes, state media said on Friday, as differences over the potentially energy-rich South China

Finance

Nordic American Offshore Declares Dividend

Nordic American Offshore Ltd. today announced that its board of directors has declared a dividend of $0.45 per common share for the third quarter 2014. This is the same as for the second quarter 2014.

Bollore Africa Logistics Sees Profit Plunge in H1

First half 2014 profit at shipping company Bollore Africa Logistics plunged to 5.89 billion CFA francs ($11.48 million) from 9.45 billion CFA francs in the same period last year,

Maduro Says Venezuela's 2015 Budget to Put Oil at $60

Venezuela's 2015 budget will be based on a target oil price of $60 dollars per barrel, President Nicolas Maduro said on Friday night, but he repeated expectations that prices will recover.

Passenger Vessels

Cruise Ship Returns to Texas after Ebola Concern

The Carnival Magic cruise ship was en route back to the United States on Saturday with a passenger from Texas who might have handled specimens of the first Ebola

Obama Appoints Ebola 'Czar'; Texas Health Worker Isolated on Ship

President Barack Obama appointed a former White House adviser as U.S. Ebola "czar" on Friday as the global death toll from the disease that has hit mostly three

Kiel's 2014 Cruise Shipping Season Ends

Expanded terminal capacities created at Berth 1 This year’s cruise shipping season in Kiel closes on the evening of October 18 when the AIDAcara sets sail for the Canary Islands.

Casualties

Simushir Under Tow by Barbara Foss

Foss Maritime's ocean-going tug, the Barbara Foss, is towing the Russian cargo vessel, Simushir, which lost power late Thursday night off the west coast of Haida Gwaii.

USCG Search For Boater Missing 50 miles South St Marks, Florida

The Coast Guard is searching for a missing boater 50-miles south of St. Marks, Florida, Sunday. Missing is George Taylor, 60, from Tallahassee, Florida, who

Saudi Oil Pipeline Set Alight

A "limited fire" broke out on a subsidiary oil pipeline in eastern Saudi Arabia on Saturday after assailants fired shots at a security patrol, the state news agency SPA said.

Government Update

India to Develop Iran's Chabahar Port

India will float a company to develop Iran's Chabahar Port, a government statement said on Saturday, as New Delhi aims to take advantage of a thaw in Tehran's relations with world powers.

Shadrin is D.G. of Gazprom Investholding

On October 13 the Gazprom leadership acceded to Alisher Usmanov's request for releasing him from his position as Director General of Gazprom Investholding. At the meeting Alexey Miller,

ITIC Measures against Ebola

The International Transport Intermediaries Club (ITIC) has issued the following general advice related to the outbreak of Ebola. Vessels that have recently

Ferries

Ferry Vital Link for Island off Taiwan

Nearly 13,000 people inhabit the four-by-two-kilometer Linqiu Island located about 7.5 nautical miles southwest of the Donggang on the main island of Taiwan. Primarily fishermen,

For Ferries, Commercial Light at End of Regulatory Tunnel

A review of the ferry industry’s latest challenges and opportunities attracted a record 340 delegates to Vancouver last week for the 39th annual Interferry conference.

Bore and P&O Ferries JV add RoRo Vessel

Bore and P&O Ferries announces today that they have agreed to add a further RoRo vessel to the long-standing partnership in the North Sea. M/V Estraden will

Logistics

Missouri River Basin is Booming

The U.S. Army Corps of Engineers Missouri River Basin Water Management Division is maintaining above normal releases at the four lower dams on the Missouri River.

Bollore Africa Logistics Sees Profit Plunge in H1

First half 2014 profit at shipping company Bollore Africa Logistics plunged to 5.89 billion CFA francs ($11.48 million) from 9.45 billion CFA francs in the same period last year,

GAO: Ending Crude Export Ban Could Ease 'Price at the Pump'

As the energy profile of the U.S. continues to improve and evolve daily, fresh debate in favor of exporting oil and gas products -- which would have a significant impact on the U.

 
 
Maritime Security Maritime Standards Navigation Offshore Oil Pipelines Port Authority Ship Electronics Ship Repair Shipbuilding / Vessel Construction Winch
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: 0.2095 sec (5 req/sec)