UASC’s Vitarana: Industry needs path to profitability

JOC.com: In 20 years as head of United Arab Shipping Co.’s North American business, Anil Jay Vitarana saw growth in ship sizes and container volume. But he says one thing hasn’t changed: Carriers’ profitability remains too low to ensure needed investment and to attract bright young people.

Vitarana, who retired last month as President of United Arab Agencies but remains a senior adviser for the company, identifies profitability as container shipping’s biggest challenge. Container ship lines overall have had only one profitable year in the last five. Even many lines that are profitable aren’t earning their cost of capital.

However, Vitarana sees hopeful signs. He applauded Maersk Line CEO Soren Skou for recognising that carriers must continue to trim costs in an era when intensive competition makes it difficult for ship lines to raise rates. Vitarana said he expects other carriers to follow Maersk’s lead.

The trick is maintaining good service while controlling costs. “It requires a good organisation,” he said in an interview with JOC.com. “You can have the best ships but ultimately it’s your people who determine the quality of your service.”

UASC has joined its alliance partners in ordering large new ships. The company is building 17 ships that will carry 15,000 to 19,000 20 foot equivalent units and operate on either low sulphur diesel or liquefied natural gas. The carrier’s ships in on US routes are smaller than those vessels but considerably larger than the 1,200TEU ships UASC operated in the US in the 1990s. UASC now operates ships of 7,000 TEUs on the East Coast and 9,000 TEUs on the West Coast.

The company’s annual US volume exceeds 500,000 twenty foot equivalent units.

Last year, UASC moved its US headquarters from New Jersey to an Atlanta suburb.

Vitarana said that after the company decided to consolidate six North American offices, it chose Atlanta because of the area’s low costs, proximity to customers, and high quality workforce.

He said potential recruits look more closely at a company’s profitability than they once did. 

“Young people now research companies and industries, because they have options. They look for an industry that has shown a fairly consistent return on investment.”

Vitarana began his career in his native Sri Lanka with the country’s Central Freight Bureau, which was roughly akin to the Federal Maritime Commission, the US federal maritime regulatory agency. He later was CEO of Ceylon Shipping Co., and in 1989 joined UASC in Kuwait. He became head of UASC’s US operation in 1995. 

Along the way he earned a law degree in the UK and a Ph.D. in maritime law. He said his legal training has been useful in navigating regulations and ensuring compliance. His tenure at UASC coincided with seismic changes in US and European antitrust regulations for container shipping.

Vitarana sees a need for US policy changes to improve port and inland infrastructure to keep pace with larger ships that carriers are deploying to meet rising demand. He’d like to see the Department of Transportation take the lead in formulating policies to clear shipping bottlenecks.

“Everyone appears to be working in isolation,” he said. “The leadership should come from the government.” Vitarana said the US needs a comprehensive national port study that would encourage public private partnerships and provide a basis for allocating port funding in a less scattershot fashion. “The DOT is the agency that’s in the best position to do this,” he said.

Another change he’d like to see is a change in the Jones Act to allow non US flag carriers to provide feeder services to regional ports. He said such a change would allow the act’s sabotage restrictions to continue for purely domestic services, but that allowing foreign flag feeders could relieve pressure on congested highways.