Seacor Holdings Inc. (NYSE: CKH) operates a fleet of helicopters, cargo barges, and offshore support vessels used to supply and support offshore oil rigs. The damage left by Hurricanes Katrina and Rita in 2005 left Seacor’s services in high demand, as oilfield services companies in the Gulf needed supplies and support crews transported to and from their rigs. Its aviation and offshore marine services segments also benefit from rising oil prices, which lead to increased investment in offshore oil and gas projects.
Competition in Seacor’s water transportation businesses is scarce, with the Jones Act requiring that all domestic seafaring vessels be owned, operated, and manned by U.S. citizens. Unfortunately for Seacor, the Jones Act also requires all domestically operated vessels to be built in the U.S., driving barge construction costs through the roof. On the plus side, Seacor’s inland river transportation segment replaced most of its aging barges before rising steel prices began to increase construction costs further, giving it a one-up over competitors.
Furthermore, over half of its revenue comes from wheat transportation contracts. Domestic wheat supply has been falling as many farmers switch to growing corn, for which demand has been rising quickly due to rising demand for ethanol, and because of poor weather. Seacor has been able to outmaneuver competitor American Commercial Lines and avoid the negative impact that the falling wheat supply would have on its barge utilization by shrinking its wheat transportation fleet.
In 2009, Seacor earned a net income of $145.1 million on $1.71 billion in total revenues. This represents a 34.1% decrease in net income on a 3.3% increase in total revenues from 2008, when the company earned $218.5 million on $1.66 billion.
Hurricanes Katrina and Rita, in 2005, struck 75% of the oil and gas platforms in the Gulf Coast. The boost to Seacor’s offshore business far outweighs any damage caused to its aviation and transportation segments. Needing rapid repairs, energy companies in the area pushed the rates of Seacor’s offshore marine segment 50% higher. That year, the segment’s operating income also increased 136.7%. Demand for Seacor’s environmental cleanup and aviation services also rapidly increased.
The Jones Act mandates that all domestic cargo vessels be built, owned, operated and manned by U.S. citizens. The Jones Act protects a large portion of Seacor’s offshore marine services, marine transportation services, and inland river services from competition, as 48% of Seacor’s revenue is generated in the U.S.  However, the Act also raises vessel construction costs, as there is a virtual duopoly in the barge manufacturing industry - Trinity Industries (TRN) and American Commercial Lines (ACLI) combined have 99% of the industry's market share. Rising steel prices and poor competition coupled with many barges hitting retirement and needing replacement caused construction costs to increase significantly.
Competition in this industry is based primarily on price and the availability of particular helicopter classes.
Seacor’s inland river segment is a minor player in its industry, facing competition from many companies 2x-3x its size.
Seacor Inland River Services does not have the advantages of its large competitors, like fast ship availability and economies of scale of in purchasing ships and equipment.
Competition in this industry is based primarily on price and the availability of particular vessel types.
Seacor’s marine transportation segment faces competition from larger companies, like Frontline, Overseas Shipholding Group, General Maritime Corporation, but also one of more comparable size, Double Hull Tankers.