VSAs versus mergers - which one wins?

Are vessel sharing agreements (VSAs) no longer sustainable – and are we likely to see more mergers? That question arose in the international shipping arena as the merger between the German carrier Hapag Lloyd and the Chilean line CSAV got closer to completion. But the current practice in the global shipping industry, international media reports, and feelings of FTW contacts in SA shipping, would all appear to combine to express a resounding “NO” as the answer. “Hapag Lloyd and CSAV have both been in serious financial troubles in recent time,” a former shipping executive told FTW. “The case here would appear to be more a financial concern than one of competitive operational convenience.” According to another FTW source, VSAs – which have been part of the historic fibre of the shipping industry – make more sense. Peter Besnard, previously a senior vice-president of Evergreen Agency in SA and now CEO of the SA Association of Ship Operators and Agents (Saasoa), said that his personal opinion was that VSAs were here to stay. They are a convenient way of rationalising services and adding economies of scale when times are tough, he told FTW. “And, when things improve, the lines can easily go their own ways again. “I don’t see mergers taking their place.” Hapag Lloyd itself has displayed the subtle distinction between a merger and a VSA. It has just informed FTW that it is launching a new Japan- Singapore-Jakarta service (JSJ), commencing March 12. The JSJ service will be jointly operated by Hapag- Lloyd, NYK and “K” Line with four vessels with a nominal capacity of 4 200 TEUs each. Hapag-Lloyd will deploy one vessel on this service. Meantime, as we have already reported in our electronic sister publication, FTWOnline, standalone carriers – such as Evergreen, United Arab Shipping Company and China Shipping – may well consider forming alliances to compete with the other giant alliances on the Asia-Europe and Asia-North America trades, as reported by the Shipping Gazette. CAPTION 'VSAs make more sense'