Ukrainian Danube Shipping Company cuts working hours, optimizes staff due to crisis on river transportation market

MOSCOW. Aug 19 (Interfax) - The Ukrainian Danube Shipping Company (UDP) is switching to a shorter six-hour workday and is optimizing its staff due to the crisis on the river transportation market.

"UDP is switching to a six-hour workday. The crisis on the Danube river transportation market is deteriorating. We have to cut expenses," Ukrainian media quoted UDP CEO Dmitry Moskalenko as saying on social media.

The full workday in the shipping company was eight hours, the UDP press service said.

The lack of support for the Danube export routes is cited among the main reasons for the decision. "The Danube ports are capable of competing with the Odessa ports for Ukrainian agricultural products, but we need a discount on rail transportation to Izmail," Moskalenko said.

In addition, the heat wave and shallowing have complicated the movement of barge convoys on the Middle Danube. A number of the company's customers took a pause in August to avoid risks. The owners of goods are not ready for higher freight rates due to lower permissible draught of barges. The reduction in agricultural exports via the Danube River is also due to farmers losing part of their crops because of the heat wave.

"We are often told that there have previously been market slumps on the Danube River as well, but they managed to find cargo somehow. They did, but a large part of the voyages was unprofitable. The company reported more passengers and more tonnes of cargo transported, but UDP in fact was only accumulating debts, which reached 8 million euros in early 2022. It deteriorated and did not pay salaries to the crews for six months. Unlike the previous crises, we purposefully do not work at a loss. We do not generate debts. All of our voyages are profitable. The fleet is working with a surplus," Moskalenko said, adding that the freight rates hit an all-time low amid the absence of large volumes of cargo.

He also said that the shipping company had to optimize its staff under the current conditions. "Under the current conditions, the fleet cannot maintain more than a thousand people. We have implemented digitalization in the management processes and can objectively work with much less staff. Even with a high market, staff optimization could not be avoided," Moskalenko said.

The number of employees in the commercial service has been slashed by several times, he said. Other decisions, including unpopular ones, are under discussion.

Moskalenko said that UDP began to cut costs by halting all of its investment projects except those involving upgrades, rather than by cutting the costs related to its staff. UDP will set up a working group with the primary trade union organization shortly to find a compromise on cutting personnel costs, which currently account for 70% of the company's overhead costs.

In an effort to support the shipping company, the government has reduced the share of dividends, which the state-owned company must pay to the budget, on the condition that some of the funds will be spent on upgrading and building the fleet, Moskalenko said.

Previously, Moskalenko said the situation at the Danube ports deteriorated, with the freight rates falling and a number of investment projects suspended, due to the export flows being redirected to the Black Sea ports.