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Alliances key to small lines' survival: Ron Widdows

Alliances key to small lines' survival: Ron Widdows
Scale has become a much more significant factor than before and smaller carriers will be forced more into alliances to survive, said World Shipping Council chairman Ron Widdows.

"When you're competing against a carrier that is four to six times your size, the economies of scale from a cost standpoint are not even remotely close," said the former NOL president and ceo. The difference between the largest carriers and the others has grown significantly over the past five years especially, Widdows said, adding that the spread in fortunes between the carriers is unlikely to narrow in future.

"The scale game is effectively over for many of these companies, you just can't invest enough billions in assets organically to get enough scale to be competitive from a cost standpoint," he said.

"That's driven the coalescence around alliances; for the smaller carriers you have no choice but to operate within an alliance structure unless you can find a really unique niche," Widdow said.

But along with this comes incredible complexity as well, that may not have been thought about. "Fundamental structural change has taken place within the industry and it will be what drives the outcome for some time to come," Widdows said, referring to the huge imbalance between supply and demand. Lack of cooperation among industry players in coordinating these two variables is part of the reason for the problem, he noted.

The expansion of the alliances has also created an exponential increase in complexity, Widdows said. This has made the collaboration that carriers need to work towards to become more cost-competitive, harder to achieve, he concluded.