The MOU applies to stevedoring and terminal services provided to Horizon Lines by APMT in Jacksonville, Florida; Houston, Texas; Los Angeles, California; Tacoma, Washington and Elizabeth, New Jersey, through 2015, with an option to extend for two years. Horizon Lines has the option to exclude the Elizabeth terminal from the agreement if it chooses to serve the Northeast market from a port not located in New York or New Jersey.
At the same time, Horizon Lines announced plans to commence in December 2010 its own weekly trans-Pacific liner service between Asia and the U.S.
West Coast. The new service will utilize the company's five 2,824 twenty-foot-equivalent-unit (TEU) capacity, 23-knot, U.S. flag Hunter-class containerships that currently call on Guam and continue on to China as part of a space-charter agreement with Maersk Line. In preparation for these plans, Horizon Lines and Maersk Line have mutually agreed not to renew their current Asia space-charter agreement when it expires on December 10, 2010.
APMT and Maersk Line are divisions of the A.P. Moller-Maersk Group.
"We are thrilled to continue to work with APMT as a trusted partner of 10 years, serving both our continued dedication to our Jones Act trades and our new Asian expansion," said Chuck Raymond, Horizon Lines Chairman, President and Chief Executive Officer. "Our extended agreement provides both favorable financial terms and a framework for continuous process improvement. We share similar cultures and look forward to continuing to work with APMT as one of its largest customers in North America."
Eric A. Sisco, President of APM Terminal Americas, stated: "We have enjoyed a long and valued relationship with Horizon Lines and are delighted to have renewed our terminal services agreement. For the past 10 years, our teams have worked solidly together developing a strong coordinated approach to operations, and we will continue to look for ways to optimize our joint processes. We look forward to working with Horizon Lines as the company furthers its growth strategy in North America and elsewhere in our global network."
Regarding Horizon Lines' new Asia strategy, Mr. Raymond said: "We are excited about the prospects of providing an expedited ocean service between Asia and the West Coast. We carefully weighed various options, engaged the assistance of industry experts, conferred with our customers, and thoughtfully assessed our current service capabilities. This represents the best possible utilization of our Hunter-class vessels, which are already calling on Guam and ports in China.
"Our study of the market reveals an opportunity for a niche player that can offer quick transit times with the highest levels of service excellence,"
Mr. Raymond continued. "We believe the time is right. Container rates in the Pacific tradelane have bottomed out and are rebounding. China's economy is showing solid signs of recovery and many major importers have reported that their service needs are not being met."
The company projects that the terminal agreement renewal and new Asia service will provide an additional stream of cost savings, revenue growth and resulting earnings improvement in future years. This outlook is based on cost efficiencies and continuity of service expected through the extended agreement with APMT, combined with what the company considers to be reasonable volume and rate assumptions for the new service. The company currently estimates a breakeven impact on profitability in 2011, relative to its previous APMT agreement and Maersk Asia space-charter agreement, with potential for accelerating growth in future years.
"Maersk Line has been an outstanding business pa
