Friday, November 16, 2007

HI Superferry: An Analysis of the New Superferry Prices


"The Hawaii Superferry will resume service to Maui on Dec. 1 with $29 special one-way fares from Dec. 1 to Dec. 20."

"The Superferry said after its initial $29 fare it will offer $39 one-way fares beginning Dec. 21 and through March 12, 2008."

"The company said a reduced passenger vehicle fare will also be offered at $55 each way. Motorcycles, scooters, and mopeds are $35. All promotional fares are subject to applicable Hawai'i taxes and fees. The fuel surcharge has been waived for these promotional fares."

I also reference:

HI Superferry...Would Lose Money w/Private Sector Business Only

Based on both of the above information I did some quick calculations and come to some interesting conclusions.

Under these new prices, doing 14 trips to and from Maui, the Superferry will lose as much as $400,000 per week under the early reduced fares without a fuel surcharge. Under the later fare after Dec. 20, the losses would be at least $300,000 per week.

I am assuming a generous 50 % (people) to 100 % (autos) demand increase under the lower prices to still come to these losses. I am assuming that Superferry will use the same workforce, but they might be able to save as much as $150,000 a week with less employees. I am also assuming that Superferry's marine diesel fuel source would still be the private market, but if the Superferry has been able to secure a deal with the U.S. Navy for lower cost marine diesel fuel, then they may be able to save as much as $75,000 a week on fuel.

The Superferry can try to sell lots of merchandise and refreshments on-board, but that would not amount to much more than $200,000 per month. Superferry can also make a big push to get more motorcycles, scooters, and mopeds on-board at $35 each, but I am already factoring that in with a generous 100% increase in autos revenue over the averages that the Superferry was expecting.

All things considered, with only 14 trips per week, losses would be at least a $1,000,000 a month under these prices with no fuel surcharge. The only benefit for the Superferry is that this gives them short-term working capital (cash) to service their loans in the immediate short-term while their other expenses might be able to be delayed a few weeks, but these low prices cannot be maintained even in the intermediate-term. It just goes to show how desperate a situation the Superferry already is in.

From a fiduciary responsibility standpoint the board of directors and corporate officers of Hawaii Superferry should be charging a fuel surcharge otherwise they are just giving away money.

Aloha, Brad

No comments: