After years of financial trouble, Horizon Lines has announced plans to sell off its routes in Alaska and Hawaii.
Horizon started moving cargo in Alaska 50 years ago. Back then, the company was still known as Sea-Land. And they hadn’t gone through the string of mergers and sales that have become common in the shipping industry.
As it’s changed hands, Horizon has been stacking up debt — now more than half a billion dollars’ worth. Chief financial officer Michael Avara says they tried refinancing and restructing, but it just wasn’t sustainable.
That’s why Horizon has decided to shut down their operations in Puerto Rico and sell the rest.
In Hawaii, a shipping line called the Pasha Group has offered $142 million to pick up Horizon’s service. And for $69.2 million, Matson will get the Alaska operations and all of Horizon’s stock.
Avara says they’re in a good position to take it on.
“Matson is a large, profitable company with roots tracing back 150 years or so to Hawaii,” Avara says. “They have an excellent balance sheet and I think they’ll be a very good steward of the Alaska service.”
Until now, Matson’s mostly been focused on shipping in Hawaii and the South Pacific. They wanted to expand north. But spokesperson Jeff Hull says there wasn’t room — until Horizon fell on hard times.
The company was part of a long investigation into price fixing in the cargo industry. In 2011, Horizon pleaded guilty to inflating their rates and agreed to pay a $15 million fine.
The Justice Department also asked Matson to produce records, but they were never charged with a crime.
Even though Horizon’s been on shaky footing, they’ve still been a major player in domestic shipping under the Jones Act. The law says that operators have to be American-owned, using domestically-built vessels and American crews, in order to move cargo between U.S. ports.
Horizon has more than a dozen vessels that meet those standards — including three in Alaska. They provide regular service between Tacoma, Anchorage, Kodiak and Unalaska.
“And basically they are carrying our fresh produce, our groceries, household goods,” says Peggy McLaughlin, Unalaska’s ports director.
Horizon has been using the same municipal dock in Unalaska for more than 20 years. For most of that time, they operated under a special contract. But since it lapsed in December, Horizon has been paying tariffs to the city government to move cargo.
For reasons beside revenue, McLaughlin says the route is important.
“We hope that Matson recognizes that that domestic line haul service is really critical to Unalaska and our supply chain — and that the service level remains at least status quo,” McLaughlin says.
While there could be some personnel changes in Alaska, Jeff Hull says Matson will leave the actual shipping services intact.
In Unalaska, that means Matson will try to step into a partnership with Maersk, the international shipping giant.
Maersk exports seafood using Horizon as its local agent, with laborers from the International Longshore and Warehouse Union. Matson already has a contract with the union at other ports on the West Coast, according to Hull.
The one thing that could change is Horizon’s fleet. At almost 40 years old, the vessels are showing their age. And Hull says it might take some work to bring them up to speed with new air emissions regulations.
It wouldn’t happen until after the deal between Matson and Horizon is approved by federal trade regulators. The companies are expecting to hear back next year.