Horizon Lines today said it plans on slashing its trans-Pacific container service, Five Star Express (FSX), between the U.S. West Coast, Guam and China starting in the fourth quarter. The last voyage of the FSX service from China is scheduled to depart Shanghai on November 2, 2011. Horizon Lines said it will also suspend ocean services to Guam and surrounding islands.
“This has been a very difficult decision in light of the tremendous contributions from our associates, and our organized labor and vendor partners, who have worked so hard to make the FSX service a success,” said Stephen H. Fraser, President and Chief Executive Officer. “Our decision to exit this highly volatile market will allow Horizon to focus on our core domestic ocean shipping services, and provide the opportunity to produce a more profitable and stable financial performance over time.”
The company expects to cease all operations related to the FSX service during the fourth quarter and does not expect to reinstate the service in the future.
Horizon Lines added that the five Hunter-Class D-8 vessels operating in the FSX service and leased from Ship Finance International Limited through 2018 to 2019 are planned to be laid up as of now.
Horizon Lines launched the FSX service in December 2010, following expiration of a long-term space charter agreement with Maersk Line. The service offers eastbound transit between Ningbo and Shanghai in China and Los Angeles and Oakland on the U.S. West Coast. The westbound leg of the FSX service provides transit between the U.S. West Coast, Guam, Micronesia and the Northern Mariana Islands.
While the FSX service met volume and vessel utilization expectations, freight rates from China to the United States have fallen more than 37% in the past 12 months to the lowest level since the worldwide recession of 2008-2009. At the same time, the average price of bunker fuel has climbed more than 40% since the launch of the service.
“Given current market conditions and foreseeable future expectations, discontinuing the FSX service is the appropriate decision for the company,” said Mr. Taylor. “It will allow us to focus all of our resources on serving customers in the very solid domestic ocean markets in Alaska, Hawaii and Puerto Rico.”