Q3 2022 Matson Inc Earnings Call
Please also note that the date of this conference call is November <unk> 2022, and any forward looking statements that we make today are based on assumptions as of this date, we undertake no obligation to update these forward looking statements.
I will now turn the call over to Matt.
Okay. Thanks, Lee and thanks to those on the call.
Starting on slide three.
Matt says differentiated open Ocean service.
Third quarter, we achieved lower year over year consolidated operating income as we saw lower demand for expedited Ocean services in the Trans Pacific Trade Lane compared to the high levels of freight demand during the pandemic in the year ago period.
Within Ocean transportation, or CLS, <unk>, plus and <unk> services achieved lower volumes, which contributed to the decline in both business segments and consolidated operating income.
In our domestic trade lanes, we saw higher volume in Alaska, and lower volumes in Hawaii, Guam compared to the third quarter of last year.
In logistics the increase in operating income was due to strength across all of the lines of business as we continue to see favorable supply and demand fundamentals in our core markets.
Today, we announced that we signed approximately $1 billion in vessel construction agreements for three new LNG ready Aloha class vessels.
These new vessels will be purpose built for our <unk> plus.
Excuse me, our CLEC service it will bring meaningful additional capacity to the service and profitability to the company. When the vessels are placed in service Joe will go through the announcement in more detail later in the presentation.
Please turn to slide four.
I wanted to start off by providing our views on the current market environment across the Trans Pacific Trade Lane.
Domestic trade lanes and logistics after which I'll go through the trade Lane performance in the third quarter.
In the third quarter, we saw lower demand for our expedited Ocean services and the Trans Pacific Trade Lane.
With less demand and easing port congestion in southern California. We ended the Ccs service in early September about six weeks earlier than we expected.
As you May recall, we initiated this temporary premium service in August of last year to meet that then extraordinary levels of volume demand, resulting from challenging supply chain and port conditions in southern California by providing a first U S West Coast Port, calling Oakland, followed by a call in long Beach.
With the end of the Ccs service, we moved our kind of lower class vessels back to the Hawaii service.
On our second quarter earnings call, we indicated that we'd seen a gradual decline and transpacific free indices from the high expected earlier this year and this likely signaled that rates had peaked.
In the fourth quarter, we've continued to see freight rates in a transitional decline from the pandemic highs.
Looking forward. We currently expect the next two quarters to be challenging in this trade lane on the demand side, we're seeing retailers adjust their inventories to current consumer demand levels and on the supply side, we've seen ocean liners reduce at least 10% to the vessel capacity in the trade Lane.
And we expect more reductions in schedule changes to meet the lower demand levels.
Just on these factors for the remainder of this year and into the first quarter of 2023, we expect to experience lower year over year freight volume and lower rate environment for our <unk> and <unk> plus services. However, we also expect to continue to earn a significant rate premium to the Shanghai <unk>.
<unk> freight index, as our <unk> and <unk> plus services provide value to our customers with their differentiated destination services reliability and fast speeds on the water.
The Madsen brand was enhanced in the pandemic given the reliability of our services during a chaotic supply chain environment.
Regardless of where we are in the cycle, we're well positioned to help our customers with the fastest and the second fastest ocean services and the Trans Pacific Trade Lane.
Please turn to the next slide.
Within our domestic trade lanes, we continue to see economic growth in Hawaii, Alaska and Guam.
And Hawaii domestic tourism was strong in the first nine months of the year at international tourist arrivals picked up a bit in this past quarter, but total arrivals are still below pre pandemic highs.
You hero is projecting Hawaii visitor arrivals for 2022 to be 90% of the pre pandemic high in 2019, increasing to 95% in 2023.
The strong recovery in Hawaii's tourism industry has led to a rapid decline in the unemployment rate and the labor market remains tight.
In Alaska, we continue to expect the Alaska economy to benefit from increased energy related exploration and production activity as a result of elevated oil prices.
Consumer demand continues to remain strong and the state supported by low unemployment rate job growth and wage growth.
In September the state announced a record permanent fund dividend to residents, which is expected to lead to good consumption in the near term.
And in Guam.
The economy continues to recover from the pandemic low despite the slow return of tourism.
The unemployment rate continues to improve.
And tourism has increased since the beginning of the year, but remains well below pre pandemic levels.
Excuse me, we expect further improvement in tourism arrivals from Asia to support the local economy, but the timing remains unclear.
While there are positive drivers supporting further growth in our core domestic markets weakening economic conditions in the U S and global economies could negatively affect tourism and consumer spending.
In addition, the combination of higher inflation higher interest rates and lower personal income with the end of the pandemic era stimulus is likely having a negative impact on household income and consequently consumer goods demand.
And logistics.
We continue to see a solid level of activity at span Alaska, consistent with our Alaska trade Lane business.
Our transportation brokerage business as to continued to perform above expectations, but is seeing softer freight volumes due to higher customer inventory levels softness in truckload spot market rates and other macroeconomic trends.
Lastly, our supply chain business is trending consistent with the demand for our China service.
I'll now go through the third quarter performance of our trade lanes.
SSAT and logistics. So please turn to the next slide.
Hawaii container volume for the third quarter decreased seven 1% year over year, primarily due to lower retail related demand the year over year decline was impacted by the difficult comparison to the pandemic demand spike in the year ago period.
Volume in the third quarter of 2022 was two 7% higher than the volume achieved in 2019.
The Hawaii economy continued to show growth in the quarter supported by strong domestic tourists arrivals and unemployment rates that remain near the pandemic lows.
Moving to our China service on slide seven.
Message volume in the third quarter 2022 was 15, 1% lower year over year due to lower demand for our seal ex CLS, plus and <unk> services and one less selling.
<unk> continued to realize a significant rate premium over the Shanghai Containerized freight index in the third quarter of 2022 and achieved average freight rates that were higher.
Then in a year ago period.
For the fourth quarter of 2022, we expect lower year over year volume as I mentioned previously we ended our temporary <unk> service in early September so there'll be no contribution from this service in the fourth quarter.
Turning to slide eight.
In Guam Matson container volume in the third quarter 2022 decreased one 8% year over year the.
The decrease was primarily due to lower retail related demand.
Volume in the third quarter of 2022 was higher than the level achieved in the third quarter of 2019.
Please turn to slide nine and.
In Alaska massive container volume for the third quarter 2022 increased 10, 6% year over year.
The increase was primarily due to higher export seafood volume from the AA ex service higher northbound volume due to higher retail related demand and volume related to a competitors' drydocking and higher southbound volume primarily due to higher domestic seafood volume.
Turning next to slide 10.
Our terminal venture.
Our terminal joint venture SSAT contributed $23 4 million in the third quarter 2022, compared to $13 million in the prior year period.
The higher contribution was primarily result of higher other terminal revenue.
Turning now to logistics on slide 11.
Operating income in the third quarter came in at $20 1 million or $4 $1 million higher than the result in a year ago period.
The increase was primarily due to higher contributions from all services as we continue to see favorable supply and demand fundamentals in our core markets.
And with that I will turn the call over to Joel for a review of our financial performance.
Thanks, Matt.
Let's turn to slide 12 for review of our third quarter results.
For the third quarter consolidated operating income declined $42 $6 million year over year to $335 3 million with a lower contribution from ocean transportation of $46 7 million, partially offset by a $4 1 million increase from logistics.
The decrease in Ocean transportation operating income in the third quarter was primarily due to lower volume in China higher operating costs and expenses, primarily in the <unk> plus service and higher fuel related expenses, partially offset by higher average freight rates in China, and a higher contribution from SSAT.
Yeah.
As Matt noted the increase in logistics operating income was primarily due to higher contributions from all services.
We had interest income of $1 3 million in the quarter due to higher cash investment rates on our cash and cash equivalents as compared to no interest income in the prior year period.
Interest expense increased $5 million from the second quarter results, primarily due to the premium paid in deferred fee write off related to the prepayment of outstanding debt.
Lastly, the effective tax rate in the quarter was 24% compared to 24, 4% in the year ago period.
Slide 13 shows how we allocated our trailing 12 months of cash flow generation for the LTM period ended September 30, we generated cash flow from operations of approximately $1 5 billion from which we used $115 4 million to retire debt.
$179 1 million on maintenance and other capex.
$26 8 million on new vessel, capex, including capitalized interest and owners' items.
$565 million to deposit into the capital construction funds and 22 5 million on other cash outflows, while returning $429 million to shareholders via dividends and share repurchase.
Please turn to slide 14 for summary of our share repurchase program and balance sheet.
During the third quarter, we repurchased approximately one 1 million shares for a total cost of $88 4 million.
On August 23rd we announced that we added an additional 3 million shares to the existing share repurchase program.
As of the end of the third quarter. There were approximately 3 million shares remaining in the repurchase program.
Turning to our debt levels, our total debt at the end of the quarter was $538 1 million.
And during the third quarter, we prepaid $50 4 million of outstanding principal on the 416% Prudential series C. Two notes due 2027 and the $4 three 1% Prudential series C. Three notes due 2032, which represented all of the remaining principal.
Outstanding for both notes.
I'm now going to walk through our new vessel analogy projects. So please turn to the next slide.
Yesterday, we signed agreements with Philly shipyard for the construction of three new LNG ready Aloha class vessels.
For a while now we have talked about the two options for re fleeting. The Alaska vessels. Later this decade, and we have chosen to move forward with the three new vessels for the select service and to shift three existing <unk> vessels into the Alaska service when our new vessels come into service.
The new Aloha class vessels will have dual fuel engines and be LNG ready, meaning each vessel will come fully equipped with the tanks piping.
Cryogenic equipment to run on LNG upon delivery.
The vessels will also be designed with other state of the art Green technology features and a fuel efficient hall.
These new Aloha class vessels allow us to upsize the CLEC service by approximately 500 containers of capacity per vessel and we expect this additional trade lane capacity to be meaningful net income operating income and EBITDA contributor when the vessels are placed into service.
Currently expect the vessels to be delivered in the fourth quarter of 2026.
The second quarter of 2027 in the fourth quarter of 2027.
The total contract costs of the new vessel program is about $1 billion. We made our first milestone payments on the capital construction fund of approximately $50 million upon signing the agreements yesterday.
The table on the right hand side of the slide shows the current expected schedule of milestone payments by year.
We are off to a great start in funding. This newbuild program with over half of the project cost paid for with a $565 million deposit we made into the CCF fund in the third quarter.
We expect the CCF deposit to lead to a significant refund of a portion of the approximately $242 million in cash taxes paid in 2021.
Please now turn to slide 16.
The three new Aloha class vessels and these LNG projects are important steps towards achieving masses 2030 greenhouse greenhouse gas emissions goal.
As a reminder, our 2030 environmental stewardship goal is to reduce scope one greenhouse gas emissions from our owned fleet by 40% by 2030, using 2016 as a baseline year.
The LNG installation projects on the Daniel K Inouye and to monetize remain on track for next year with Daniel K Inouye planned to enter a dry docking in the first quarter of 2023, and monetize plan to enter and to enter a dry docking in mid year 2023.
The current estimated cost to make Daniel K Inouye, LNG ready is approximately $35 million.
The current estimated cost to reengine moniker with a dual fuel LNG and conventional fuel engine is approximately $60 million.
We have also made the decision to move forward with the LNG installation project on the kimono Hela. We currently estimate the cost for this project to be approximately $35 million and for the vessel to enter dry dock in the second quarter of 2024 for about five months of installation work.
We continue to evaluate LNG installations on the <unk> and that Sonya, Although no decision has been made at this time if.
If we move forward beyond the LNG installations would be in 2024 and 2025 for our current estimated cost of approximately $85 million for both vessels.
And with that I'll now turn the call back over to Matt Okay. Thanks Joel.
Please turn to slide 17, and I'll go through some closing thoughts.
<unk> is well positioned to capitalize on future opportunities in ocean transportation and logistics, where we can leverage the Madison brand in our portfolio of essential high quality businesses. The Madsen brand has never been better and I'm confident we have the right assets and services to grow with our customers support our customers in a high quality.
<unk> and maintained vessel schedule integrity.
Within the Trans Pacific Trade Lane, we expect our <unk> and <unk> plus to continue to create value over the long term based on their fast speeds and unique destination services.
We continue to expect the post pandemic environment to be an evolving journey and.
And we will adapt like we've always done to support the lifeline communities we serve.
Furthermore, although OSB some degree of uncertainty in the macroeconomic environment, we will maintain our disciplined and stick to our capital allocation strategy.
We invest for the long term to create value for shareholders. In some cases, we're making capital investment decisions that span decades, like our new $1 billion build ship build program for the three new Aloha class vessels that we expect will be with us for 40 years.
We're always on the lookout for opportunities to extend the Madison brand and drive organic growth as an example, we initiated the <unk> plus service during the pandemic off the success of our <unk> service, which also helped drive additional opportunities for our logistics segment.
We will look to acquire businesses as an extension of the great collection of assets we have today.
We want to ensure that any business, we acquire complements one or more of our existing businesses.
<unk>, a unique or differentiated value proposition to customers fits culturally with ours. It is purchased at a double digit cash on cash yield with good long term cash flow characteristics and last but not least we will continue to return capital to shareholders. After funding our maintenance capex.
<unk> long term investments and dividends.
From August 3rd of last year through the end of the third quarter of 2022, we've returned nearly $550 million in capital to shareholders in the form of dividends and share repurchases.
Going forward, we expect to be a steady buyer of shares.
We may or may not be headed into a recession, but we remain focused on things that we can control and doing what we've always done and that is to maintain vessel service reliability provide world class customer service and allocate your capital to its highest and best use to create value over the long term.
And with that I will turn the call back over to the operator and ask for your questions.
Okay.
Thank you Matt at this time, we will conduct the question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced please.
Please stand by while we compile the Q&A roster.
Alright.
First question comes from the line of Jack Atkins of Stephens.
Your line is now open okay, Okay, great Matt.
Matt Joel Leigh good afternoon, and thanks for taking my questions.
Hi, Jack So I guess, Matt if I could go back to a comment that you made in your prepared comments. It was around you're seeing capacity come out of the Trans Pacific Lane I think you said about 10%.
Capacity has been announced in terms of reductions here to address the lower levels of rates.
That's a tough question to ask but I guess.
Would you guys ever consider making some adjustments to capacity I know, it's difficult with the way you are sailing schedule works, but.
What sort of backdrop would you maybe.
Need to see before you'd consider doing something like that or is that just not something you would considered under really any circumstances.
Yeah. Thanks, Jack for the question.
Think the firstly I think we have already <unk>.
We removed in the Ccs service call.
All it 20, 25% of our capacity once we saw the expedited market, which of course is the space that we focus on.
As market demand waned as.
Many of our customers had canceled purchase orders or did not issue new ones and we are starting to see the falloff in demand for the expedited market, which is very similar to the other markets. Both the airfreight markets and the more conventional ocean markets and so we I think have taken a meaningful step towards reducing the capacity in line with the lower demand in the marketplace.
We find ourselves in the cycle.
We expect other carriers as I said.
Have done or will do in the in the.
Coming months to reduce capacity to the market demand level I think that process is just underway now.
Many were surprised by the pace or the slow pace of the.
The reduction in demand and we will be adjusting their fleets I think accordingly over time, but with regard to back to your question about mattson.
We continue to believe that the capacity that we have now deployed with the CTX now terminated it will be about right for the market that it will be about right for all of our domestic markets and the trans Pacific capacity will be sufficient to be able to allow us to continue to operate both the <unk> and the <unk>.
<unk> plus okay. Okay, now that makes that makes sense and thank.
Thank you for that.
Would be curious maybe.
To give you a sense for.
Maybe.
Do you think your customers are in terms of their process Destocking inventories.
We began first kind of hearing about this in may.
It sounds like it's going to be a weak peak season.
How I guess is this something that's going to go on for another couple of quarters or is this something that could persist.
Yes, it's a great question, Jack and I think from what we're hearing from our customers and let me make a general comment first I think.
What we've heard really is the peak season with the benefit of hindsight arrived early in the first half of the year such that when.
The customers saw the inventories on their balance sheet they made.
Rather dramatic cancellations have ordered of existing pose and didn't issue new ones and so we saw a disruption in the marketplace.
I think the the.
The view.
Here Jack is that.
While we.
We're hearing anecdotally from customers that.
Purchase orders I think ultimately are going to depend on what the level of end demand is and the pace at which our customers are making progress on reducing their inventory overhangs as they try to manage themselves through.
And increasingly risky or signaling signs of a recession. So we're.
We're hearing some people, saying, yes, there is some warehouse space some of our wholesalers are saying there is theyre looking forward to hearing and.
In discussion with their customers order for spring merchandize those kinds of things and so that's why we said we think for the next couple of quarters.
It'll be there'll be cargo movement, certainly, but just at a lower level through there I think ultimately what happens after that.
Not really commenting on it perhaps it will be partly decided by whether we enter a recession and what's the depth and duration of the recession and other geopolitical factors lots of other things, but at this point.
We're at this point, we're expecting to see cargo continuing to flow.
And the pace at which is yet to be determined I guess, that's the best way to answer that yes, I know its tough its tough to kind of to know that.
Maybe shifting gears to think about.
Sure.
Wireline for a moment.
Across the sort of the lower 48, I know there was a fair amount of pull forward of goods consumption.
I was just kind of be curious to get your sense for the degree to which that also happened in Hawaii and.
With with visitor arrivals there is still a bit below 2019 levels.
Do you think it could be a tough couple of maybe a few quarters in Hawaii.
The Hawaii Lane, as we sort of digest that.
That pull forward of demand that may or may not have happened. There just would be curious to get your thoughts yeah. It also is a good question Jack Thanks, but from my point of view most of what we carry into <unk>.
Hawaii, and Alaska as one for that matter, our grocery store items.
Personal consumption and their individual economic drivers that are slightly different in Alaska, Hawaii and Guam, but.
And I know you know this but we generally see less dramatic swings in those.
Economies because of their dependents on ocean freight just to get the daily goods.
And out of the market. So if there is a reduction we would see.
History has shown they expect to see those as much more modest reductions than we have seen.
Other other end markets.
We're continuing to see relatively strong demand in those trade lanes.
As we mentioned in our prepared my prepared remarks, a very strong 2021, but we're still seeing relatively healthy demand and in talking to.
Businesses, they continue to be short of workers.
<unk> continues to bode well for the basic underlying strength of the economy.
Okay got it got it and then maybe one last question I'll hand it over.
But when we think about the the slowdown that we're seeing in sort of the data in the transpacific, whether it's rates or what's coming into the ports.
I know there can sometimes be a lag in terms of how that affects your business.
Do you feel like that that really what's showing up.
In terms of the effect of the decline in rates through the third quarter in your business in the third quarter or do you feel like that's something that could be more pronounced in the fall.
Fourth quarter, just maybe we're just going to see in the fourth quarter.
What.
And your business, while we were seeing in sort of the spot rate data in the third just wondering just curious if there is some lag timing there at all.
Consider yes.
Yes, I think that's a good way to look at it Jack I think we saw the beginnings of it and we called it in this in the second quarter earnings call. We have peaked.
Declines.
As we went through the quarter, but it was sort of weighted towards the peaking and then the beginning of the reduction.
And it wasn't until September that we decided to terminate early the Ccs and so I think youll get a FERC full quarter in the fourth quarter.
The clients that began and then that's a specific case less revenue and cost because we've terminated the Ccs service, but I think those rates continued all the way through the fourth quarter. So we'll see I think just because of the timing and the nature of where things turned a more full force impact in the fourth quarter compared to the third.
Okay, great. Thank you for the comments, Matt really appreciate it.
Jack Thanks.
Thank you Jack please hold for the next question.
Alright.
Next is Benjamin Nolan from Stifel. Please proceed with your question.
Hey, Good afternoon. This is Nick Hiller Rogers on for Ben. Thank you guys for taking my questions I appreciate the time.
As it relates to.
Turning specific.
Softening and subsequently maybe Rev.
<unk> from Trans Pacific trade softening.
We were kind of wondering is there any capacity to adjust down costs as well.
Yeah. So.
What we had done Makayla is in the in September we removed one of our three trans Pacific strings, the CCF service called from China.
So we've made that adjustment in September so that will not be included in our fourth quarter volume.
The other two services to select service in this <unk> plus services, we believe that the expedited market will be large enough for us to continue both of those services.
And into the future so the cost reductions that.
That are in place really are focused or centered around the elimination of the <unk> service.
Thank you that's helpful color and if we could ask another one.
As the spot market and transpacific rate has declined.
And obviously you know your rates have fluctuated with that but obviously you guys have been able to maintain your premium.
Have you seen any compression of the premium.
As it relates to rate softening or any insight into that would be helpful.
Yes clear.
Clearly the market was in transition or reset mode and so what we what we saw were spot rates.
<unk> had come down during the quarter as it is published under the <unk>.
<unk> International Shanghai International freight index or <unk>.
As a publicly public data.
And so.
And of course, not all of <unk> business moves under that.
Spot or short term rates and neither does much of the other trade for our competitors.
On the contract side of the business, but our rates were reduced in sympathy with the <unk>, but with.
With regard to the spread I won't specifically comment on it other than to say our rates were pulled down in sympathy with the reduction in the <unk>.
Thank you very much that's helpful and maybe just one last one to round it out if that's okay.
As we're kind of seeing.
Environment, maybe normalizing despite volume still being relatively high how are you guys thinking about the SSAT contribution on a more normalized basis moving forward.
Yeah, it's a.
Good question first of all.
For medicine.
Our joint venture with SSAT <unk> provides.
Two important benefits first of course is that it allows us to through our joint venture control the marine terminals on the West coast, and which we call, which gives us a lot of ability to influence the way in which.
And the priority in which the cargo is discharge, which provides us these destination services that we've mentioned several times.
In our discussion today that benefit is significant and it allows us in part one of the reasons why we're allowed to.
To charge a premium to the markets.
But the other element of the question. It also provides mats and important level.
The level of income both because of our operation and the stevedoring of other international Ocean carriers, and so that that has contribution has gone up dramatically through the cycle.
The pandemic and supply chain congestion, we expect that joint venture to moderate the earnings from the from that joint venture to moderate both because of lower volumes and lower congestion will will lower the contribution from the joint venture, but still at levels that we think.
Or in a very.
Adequate return on our investment.
Great. Thank you so much and as always I appreciate the time.
Okay, Matt Taylor Thank you.
Thank you Mikael.
Again as a reminder to ask a question. Please press star one one on your telephone to join the queue.
Moving on we will now have.
Jack's Jake lacks I'm, sorry from Wolfe research.
Please proceed with your question.
Hey, guys. Thanks for your time.
Okay, Hey, Jake.
So I just wanted to touch on expenses for a little more it looks like <unk> expenses increased on a sequential basis, despite lower volumes and you mentioned the <unk> plus as a cost driver. There is that primarily charter costs or is there something else in there yes.
Yes.
That is one of the significant constant creases that charter costs. The other of course is fuel fuel has gone up rather significantly quarter over quarter because of the geopolitical events that we're all familiar with those are the two main cost drivers.
Got it and so there's been a lot of volatility on both the pricing and the cost structure as it relates to <unk>.
Can you give us a sense as to where the economics of the strengths Dan now and maybe how it compares to the CLS service.
Yeah.
I can.
Part of that.
We don't publish or disclose segment information.
But what I can say is that the <unk> plus service.
Has.
Higher charter expense as we renew the charters we have as you may know we have charters for seven vessels in our current fleet three of those expire in 2023, 3% and 25 and 126 of those are those are disclosed in the K.
So those those expenses.
One element of the <unk> plus of course, then fuel an important stevedoring services those are all there as rates.
Do are in reset mode of the profitability of the <unk>, plus service and select service or being reduced.
But we continue to be confident that this there is a.
Long term demand for both our <unk> plus services that.
We will continue to be able to charge a premium to the market prices.
And are very much committed and we believe the expedited trade will allow us to continue to fill both services. So we're we remain very optimistic about the <unk> and <unk> plus services as long term value drivers for our shareholders.
Got it that's helpful and then.
I just wanted to touch on potential impacts of IMO 2023, I'm curious if you think this will have a big impact on supply and will it impact any of your vessels.
Yes, so like most ship owners were actively.
Planning for.
The EMA.
Oh 2023 changes that are that are just around the corner.
For Matt.
Who operates a series of expedited vessels. It is important to us that we remain differentiated in terms of speed and cargo availability that have allowed us to position ourselves as the fastest the second fastest and thats. Both in terms of ocean speed, but also cargo availability once it hits the west coast. So we're doing active planning around that.
I think we've got a good plan and we think that it will allow us to continue to operate the fastest and second fastest services in the Trans Pacific.
And we feel good about our position there with regard to your question about capacity.
There are ranges.
For many ship owners their decision may be to slow their vessels down in order to comply with the IMO regulations.
<unk>.
Various ranges of estimates that how much vessel capacity that's in the trade today will be absorbed by slowing the vessels down and we've seen as low as none no impact of vessel capacity to as much as 15%, we're not exactly sure, but we feel good about our own planning and we continue to expect to.
Have the fastest continue to have the fastest and second fastest service in the Trans Pacific moving forward.
Alright, thanks, Thanks for the time.
Okay, Jake thanks very much.
Alright, Thank you Jake and thank you all for the questions at this time I would like to meet them.
Send it back to Matt for closing remarks.
Well, thanks for your interest and participation today.
We will look forward to catching everyone on our year end earnings call Aloha.
Thank you for your participation in todays conference. This does conclude the program you may now disconnect.
Yeah.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Okay.
Okay.
Sure.
[music].
Sure.
[music].