K Line to trim fleet to weather crisis

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Kawasaki Kisen Kaisha (K Line) has unveiled one of the most radical fleet reduction plans so far announced as an urgent step to cope with the current economic crisis.

Under its medium-range management plan K Line Vision 100, the company planned to boost the fleet under its operation to 573 units by the end of fiscal 2009 and to 640 units by the end of fiscal 2011. However, it decided to slash its planned fleet scale by 77 units to 496 units by the end of fiscal 2009 and by 61 units to 579 ships by the end of fiscal 2011. It also projects that the ships that it will lay up or idle will total 25-40 units, centering on containerships and pure car/truck carriers (PCTC).

In light of the worsening state of cargo traffic worldwide, K Line will adjust its fleet scale and postpone completion dates of newbuildings. It will also advance the early return of the ships chartered at high rates and examine its ship-related expenditures in a bid to build a highly competitive fleet.

It plans to have a fleet composed of 496 ships at the end of fiscal 2009, 522 units by the end of fiscal 2010 and 579 units by the end of fiscal 2011, representing reductions of 77 units, 86 units and 61 units, respectively, compared to the company’s initial plans.

As regards completions, K Line expects to take delivery of 43 newbuildings in fiscal 2009, 41 ships in fiscal 2010 and 51 units in fiscal 2011. Though the volume of completed ships will slip by five units each in fiscal 2009 and 2010 compared to the company’s initial plans, the number of ships to be completed in fiscal 2011 is envisioned to increase by nine units from the initial projection.

With regard to bulkers, K Line will steadily expand the volume of ships that are chartered under long-term deals.

K Line predicts that 25-40 ships will be laid up or idled in fiscal 2009, comprising 10-20 containerships, 15-25 PCTCs and 1-3 LNG tankers. Furthermore, it projects that around 15 boxships and about 20 PCTCs will be sold off or returned to their owners in fiscal 2009.

Aside from the above, K Line also unveiled its cost reduction measures and profit improvement schemes totaling Y45 billion (Y30 billion for containerships and Y15 billion for trampers and other vessels) as its emergency measures to deal with the prevailing economic crisis. As for its profit enhancement measures, K Line will save Y21 billion (Y16.5 billion and Y4.5 billion) through the revision of charter rates/cancellation of charters and rationalization of ship deployment scheme by reducing the number of ships assigned to services and modifying the ship types and routes applied. It also aims to slash operation costs by Y13.5 billion (Y10 billion and Y3.5 billion) by reducing feeder/drayage/empty container costs and cargo/port costs, cut ship-related expenditure by Y3.5 (Y1.5 billion and Y2 billion), lower fuel costs by Y5 billion (Y1 billion and Y4 billion) and contract the general management costs by Y2 billion (Y1 billion and Y1 billion).