NCL America: Flying the Flag

| June 13, 2005

Of the thousands of American passengers boarding ships in U.S. ports day after day, did you know that 99% of them are sailing upon foreign vessels -- built outside of the U.S., registered in foreign countries, and staffed by non-U.S. citizens?

Look closely at any Carnival, Royal Caribbean, Holland America, Princess, Celebrity, NCL or Crystal Cruises ship sailing out of Miami, Los Angeles or New York, and you will see the name of a city in the Bahamas, Panama, Holland or elsewhere painted on its stern. The name represents the nation in which that ship is registered.

Almost every cruise ship of any size in today's fleet was built in Europe (a few in Asia), is staffed largely by Europeans and/or Asians (Filipinos, Indonesians and others), and is registered in a small country that caters to the cruise industry with favorable laws and regulations.

This has happened mainly because of two U.S. laws -- one enacted in the 1880s, the other in the 1920s -- that place stringent restrictions on all U.S.-flagged ships, making it difficult to operate a U.S.-registered cruise ship at a profit. One company has taken exception to this conventional wisdom, however: NCL- America (NCLA), a subsidiary of Norwegian Cruise Lines.

NCLA's Pride of Aloha is the largest cruise ship ever to fly the U.S. flag. It is now joined by a second NCLA ship, the Pride of America, this month. A third, Pride of Hawaii, will debut in 2006. All three ships will be U.S.-registered and will sail solely in the Hawaiian Islands.

Other cruise ships visiting Hawaii are required by law to visit a non-U.S. port, usually embarking in Canada or Mexico, and thus can only reach the islands after several days at sea. But because they are registered in the U.S., NCLA ships can sail on seven-day Hawaiian Islands itineraries round-trip out of Honolulu, remaining in U.S. waters throughout the entire voyage. While other cruise ships are crewed by a virtual United Nations of nationalities, the voices on NCLA ships ring out with the lilt of Los Angeles, the nasal of New York and the twang of Tennessee.

A Short History of U.S.-flag Cruise Vessels

The Passenger Vessel Services Act, enacted in 1886 to promote and protect the transportation business of the United States and still in force, states:

"No foreign vessel shall transport passengers between ports or places in the United States, either directly or by way of a foreign port, under a penalty of $200 for each passenger so transported and landed."

Another law was enacted in 1920: Section 27 of the Merchant Marine Act of 1920, popularly known as the "Jones Act." This law further defines a foreign vessel as a ship that is not "U.S.-built, U.S.-owned, and U.S.-crewed to be used to transport merchandise (including human beings) in U.S. domestic trade".

There is a U.S.-flagged cruise industry, but until last year it was confined mostly to much smaller vessels. For 20 years, a modest but successful cruise line called American Classic Voyages ran a small U.S-flagged ship, the SS Independence, out of Honolulu. Early in the new millennium, it added a second ship, the Patriot (nee the Holland America Nieuw Amsterdam). During this period the company also included two U.S.-flagged subsidiaries -- Delta Queen Steamboat Co., and Delta Queen Coastal Cruises. (Delta Queen Company was acquired by, and after reorganization is operated by, the Delaware North Company of Buffalo, N.Y. They operate three original Delta Queen vessels today -- the original Delta Queen, the Mississippi Queen and the American Queen, all registered as U.S.-flagged vessels.)

In 2000, American Classic Voyages announced "Project America," a plan to build two 72,000-ton ships at the Grumman Ingalls shipyard in Pascagoula, Miss. -- an ambitious $1.1billion project backed by U.S. taxpayers. These were to be the first passenger ships of size (1,900 passengers each) built in the U.S. in more than 50 years.

Sadly, American Classic Voyages declared bankruptcy 30 days after the tragedy of 9/11. Tourism to the Hawaiian Islands dropped dramatically as the American public became afraid to fly. The new ships remained unfinished until 2002, when Norwegian Cruise Lines (NCL) acquired an exemption from Congress and purchased the rights to finish their construction in foreign shipyards. The hulls were transported from Pascagoula to shipyards in Bremerhaven, Germany.

Pride of America sailed out of the German shipyard this month - June 2005 - and its sister ship, Pride of Hawaii, will debut in 2006. NCLA ships are flagged in the U.S. and are completely U.S.-crewed, but they were not built in the United States. It required a special exemption by Congress to allow NCL-America to register these foreign-built vessels with the United States flag. The agreement also allowed NCL to re-flag one existing, foreign built NCL vessel as a U.S.-flagged ship, and the Norwegian Sky was selected to fill that role.

For more information on the U.S.-flagged cruise industry:

NCL-America's First Ship: Pride of Aloha

From its inception NCLA was not a typical cruise line, especially compared to the cookie-cutter approach to ship building and cruise operations of the other major cruise lines. It started out ambitious, and was about to get even more complicated.

The first setback occurred January 12, 2004, when the hull of the original Project America ship, Pride of America, with 15 decks already completed, sank at its berth in Bremerhaven. Three of the 15 decks were under water and there was extensive damage to the hull and electrical systems. Since this ship was already scheduled for deployment with cruises booked and sold, NCLA decided to take advantage of the right to re-flag one of its existing foreign vessels. Hence, the Norwegian Sky, built in 1999, was re-flagged as the Pride of Aloha and had its inaugural sailing July 4, 2004.

The next challenge was recruiting the first American crew for a ship the size of Pride of Aloha. The line was required to hire an all- U.S. crew, something NCL had never tried before. The initial effort did not go well.

According to local reports, the first all-U.S. crew was recruited via ads shown to island locals, emphasizing the fun and excitement of sailing on a luxury cruise ship. A number of young sun-worshippers took the bait, but before long decided it tasted a little fishy.

After considerable time and expense, nearly 1,000 people were certified with the Coast Guard and flown to San Francisco to take over the newly-christened Pride of Aloha. They sailed a few coastal voyages before heading out on the five-day trip to Honolulu. During this first month, especially the first two full cruises in the islands, many crewmembers discovered there was not going to be nearly as much free time as they had hoped. Something akin to a crew/passenger rebellion took place, and many crewmembers walked off the ship without notice or were fired.

Suddenly NCLA was faced with sold-out cruises on an understaffed ship. Replacing crew members was not easy, since it took time to recruit them, train them and get them Coast Guard-certified. There were some very troubled cruises during the fall of 2004. Much of NCL's top brass flew to ship to get a firsthand look; they made changes in procedures and management.

Around January 2005, the reports of onboard management issues starting getting better; some people even reported having very good cruises. There were a few continuing problems -- mostly a shortage of tables in the buffet area and less than stellar housekeeping -- but for the most part, reports continued to improve.

Today, NCL-America has established a crew training center in Piney Point, Md. Potential crewmembers receive three weeks of training there, and get an introduction to the "dorm-style" life aboard a cruise ship. Some 10% of applicants are weeded out here and never make it aboard a ship. NCLA also claims to be overstaffing their current two ships in order to assure an adequate supply of crew for the future. They are going to need them as the Pride of Hawaii is scheduled to join NCLA sometime in 2006. Pride of Hawaii is the sister ship to Pride of America, and was the second vessel originally slated to be built under Project America.

More history behind the acquisition of American Classic Voyages and Project America here:

A commentary on the U.S. workforce:

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