Wednesday, December 30, 2009

Recession Comes Home To Roost For Transport Giants YRC And JAL

Last Minute Scramble for Support by Two Major Players Whilst Minnows Inevitably Struggle
Shipping News Feature

US – JAPAN –The depressed state of the logistics industry was bound to produce casualties and two of the biggest players in different sectors are currently under immense strain to avoid collapse. This morning Japan Airlines (JAL) shares fell sharply, a massive 24%, when it became clear that the carrier’s bankers were opposing company plans to restructure by way of bankruptcy. On the other side of the world Kansas based less than truck load haulier YRC Worldwide continue their struggle for survival as they again extended the deadline for bondholders to exchange debt for equity.

YRC’s woes have been well documented; the latest known position is that they intend to issue 42 million shares of common stock with 95% of these going to bondholders. In this way they can look to their main bankers to be lenient and they will be able to pay the near $20 million in interest due by New Years Day. It looks like a close run thing as the company is apparently around $25 million short and are dependent on a sufficient quantity of investors to convert their holdings. The trickle of bondholders doing so continues and many analysts predict the company might just make the number required by the deadline. Should they fail, bankruptcy looms and now the Teamsters Union, who represent most of YRC’s workers have stated they believe certain investors are holding out sensing a possible financial gain from not agreeing the deal. The Union called on remaining bondholders to back the equity exchange which has been supported by the company’s staff.

Trucking and Drayage operations throughout the US are struggling to survive the downturn and the casualty list continues to grow. In a week in which we saw Arrow Trucking of Tulsa crash in acrimonius circumstances now Carlen Transport, a Bangor, Maine based outfit, have closed the doors for the last time. The firm which ran over 100 rigs, mostly involved in lumber and paper trade carriage, have laid off approaching 120 people and recalled all equipment.

Passenger and air freight carrier JAL are under great pressure after most Japanese stocks fell sharply yesterday when traders scrambled to offload shares. All talk surrounding the national airline is of bankruptcy and the suspicion is that JAL are currently deciding how to go about this. This situation has been brewing for some time despite the Government statement in September supporting the airline and guaranteeing its integrity.

The demise of some industry groups appears inevitable given the much lower traffic levels seen over the past year. Rationalisation is to be expected in every sector of the shipping industry and the New Year sees many companies world wide reorganising their operations to survive the downturn in traffic. The overcapacity which extends throughout the whole industry, from miles of bulk carriers and container ships moored around the world to lorries sitting idle in yards, will require bold and difficult management decisions for many companies in order to remain viable.