EDITORIAL: Eagle Invests Big Money In Crew Crisis Solutions

M/V Stamford Eagle. Photo via EagleShips.com

by Captain John Konrad (gCaptain) Over 300,000 seafarers are stuck at sea in what the Pope has called one of the biggest crises ever to face the maritime industry but – despite declining profits, difficult market conditions, and crushing global travel restrictions – one company, Eagle Bulk Shipping, has found a two-prong solution: expend effort and spend money.

For the last twelve years shipping companies have been struggling to recover from pre-2008 market highs. The outlook for profit improved significantly this year as market factors like uncertainty about future bunker fuels have limited new building while the rate of older vessels being scrapped has increased. Then came COVID19. Along with nearly every other stock in the market, shipping company stock tumbled in March of this year.

Eagle Bulk Shipping (EGLE), the well known US-based fully integrated drybulk shipowner-operator, is no different. From January 1st to April 15th its stock price tumbled from over $30 to under $11 per share. Under these market conditions, it’s easy to understand the industry’s need to tighten the belt, especially when faced with problems – like the crew crisis – which the IMO says is the responsibility of nations (not companies alone) to solve. It’s easy for them to say the problem is too big and the solutions too expensive for them to pay alone.

Great companies, however, find a way.

“This year seafarers have endured a great deal due to COVID19.” said Gary Vogel, CEO of Eagle Bulk, in a conference call this morning with shareholders. “The government imposed travel restrictions made it almost impossible to crewchange seafarers. Thankfully some of those restrictions have eased but it’s estimated that more than 300,000 seafarers are still waiting to go home. This is simply not acceptable.”

But rather than using words to express frustration and demand government action, Eagle Bulk CEO Gary Vogel, took action and got his crewmembers home. As of November, the vast majority of Eagle Bulk crewmembers who were overdue for relief have been changed over, with just 26 seafarers (out of ~1000) beyond their contractual working period. “We are now fully focused on those 26.” said Vogel.

While Vogel did not discuss specific tactics the company used to solve the problem, we do know that repatriating mariners has cost the company countless man-hours. Additionally, the Company incurred $0.7 million in costs relating to COVID-19 for procurement of personal protective equipment, test kits, and crew changes. Crew change costs alone have increased 50% due to the virus.

In addition to direct costs, Vogel committed the two biggest sins for any shipowner: diversion and off-hire costs “To solve this problem we had to divert ships and put ships off-hire.” said Vogel. “During the last quarter, we incurred 40 off-hire days. This increased our OPEX significantly.”

Now we know that changing crew is possible, the question remains, how many other shipowners are willing to pay the price that Vogel and his team have?

In the light of recent increases in incident rates globally and the importance of seafarer mental health and welfare to the bottom line… the better question is how many ship-owners can afford NOT to follow Eagle’s lead and solve the crisis “Acta Non Verba“… with actions (including cash) not words.

Editorial Disclosure

The market punished Eagle with a 4.27% decline in stock price at the open of the market this morning. I don’t invest in shipping stocks but I do invest heavily in great leadership teams that invest in their people. Upon hearing Vogel’s investment in his seafarers I purchased stock in EGLE and I’m very bullish on the prospects of this high-value investment.

-John

Updated: November 10, 2020 (Originally published November 6, 2020)

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