Venture may monopolize inter-island ship routes

MANILA, Philippines - A company that will soon control the Philippines’ largest and second-largest shipping firms is expected to enjoy a near monopoly on long-haul routes. Once it secures ownership of Aboitiz Transport System Corp. (ATSC)—currently the country’s leading vessel operator—KGLI-NM will serve nearly all passengers traveling between the Philippines’ three largest islands. KGLI-NM is also the owner of Negros Navigation Co. Inc. (Nenaco), the Philippines’ second largest shipping company. Taken together, KGLI-NM will dominate the passenger market since Aboitiz Transport has a market share of 70 percent while Nenaco has an estimated 30 percent. Smaller shipping operators serve short-haul routes, especially those which have Roll-On, Roll-Off ports. Respective market shares of both companies were further enhanced in June when vessels of another rival, Sulpicio Lines, were temporarily grounded after one of its ships sank off Sibuyan Island in Romblon province. Besides continuing to serve the same routes, “excess vessels may expand to areas not served by ATSC and Negros, particularly those vacated by Sulpicio Lines," Sulficio O. Tagud, Nenaco Chairman and Chief Executive Officer. However, vessel operations will have to be modified to come up with daily departures to select destinations and prevent redundancies, Tagud said in a Wednesday press conference. Tagud also clarified that the shipping business will not be competing with low-cost carriers as airlines attract a different market segment. “The C, D, E segments remain in shipping. Fortunately for us, that is the biggest segment of our people," Tagud said. He added that KGLI-NM may consider running cruise lines in domestic and regional seas in the future if it proves to be a profitable venture for the company. On Tuesday, the Aboitiz group agreed to sell its 93 percent stake in Aboitiz Transport to KGLI-NM for P4.66 billion. The purchase will be financed by a mix of debt from local banks, and equity. Earlier, Aboitiz Equity Ventures Chief Operating Officer Erramon I. Aboitiz on Tuesday said proceeds of the sale will be used to finance the company’s investments in more profitable sectors like power generation and distribution. Shares of Aboitiz Transport fell by P0.10 during Wednesday’s trading at the Philippine Stock Exchange to P1.80. - Anna Barbara L. Lorenzo, GMANews.TV