WHO SAID THE big ships are headed for the scrap heap, doomed by fuel, labor and other expenses?
Shock waves were felt in the cruise industry after the Norwegian Caribbean Lines' surprise announcement that the S.S. France, largest passenger ship in the world, would sail again "by early 1980."
And there was a frothy wake following the equally unexpected news from a Seattle businessman that the U.S. United States, "America's premier luxury liner," would soon be taken out of mothballs in Norfolk and again carry the U.S. flag around the world, beginning "in late 1980."
The major question: Can these Leviathans pay their way at a time of soaring operational costs? Even Cunard's mighty Queen Elizabeth 2 has had problems with red ink despite the British vessel's consistently strong bookings.
And what about speculation that the smaller liners Santa Rosa and the Independence might sail again under U.S. registry? (No passenger ship in regular cruise service now flies the U.S. flag.)
NCL, which bought the France from a Saudi Arabian financier for $18 million, has since moved the vessel from Le Havre, France, to Bremen, West Germany, where it is being refitted at a cost of $54 million. Renamed the S.S. Norway, she is 1,035 feet long and will carry 2,000 passengers on seven-day, year-round cruises from South Florida to St. Thomas and the Bahamas Out Islands. The staff will number "almost 800."
Since 1974, the 66,348-ton France had been mothballed at the aptly named Quay of the Forgotten because the ship had been losing $20 million a year despite her enviable worldwide reputation for luxury, fine food and first-class service. The French government refused to continue paying subsidies, and French workers failed in subsequent efforts to prevent the floating national symbol from leaving Le Havre.
United States Cruises Inc., one of a number of companies operated by Richard H. Hadley, has agreed to pay the Commerce Department's Maritime Administration $5 million for the S.S. United States, and plans to spend an additional $30 million next year to remodel the ship. The vessel is 990 feet long and will accommodate 1,200 passengers on her projected maiden, around-the-world voyage with a crew of 550.
Later she is scheduled to make regular cruises to Hawaii from Los Angeles, and also sail from her home port of Honolulu to "exotic places." (Designed with troop ship duty in mind, she can slip through the Panama Canal; the France won't fit.)
The government had purchased the 53,329-ton ship, which last sailed in 1969, for $12 million from United States Lines Inc. in 1973, under the Passenger Ship Sales Act. She had cost $79.5 million to construct, sailed on her maiden voyage in 1952, and still holds the passenger liner record for the fastest Atlantic crossing in both directions. But she could not keep pace with rising costs.
Hadley has made a downpayment of $500,000, with the balance now due by Nov. 23. Under terms of his contract with the government, the purchase may be contingent upon congressional passage of a bill that would modify a current law prohibiting the S.S. United States from carrying passengers between American ports because it had received federal subsidies in the past. Such legislation may be acted upon this month. The bill is also expected to wipe out restrictions that now prohibit any U.S. vessel once sold to a foreign company from again flying the U.S. flag in domestic service after being resold to U.S. interests. Only ships of U.S. registry are eligible to apply for subsidies, if available.
United States Cruises is not seeking a subsidy, a spokesman explained. And there has "never been any provision for operating subsidies for U.S. vessels in domestic service," according to an official of the Maritime Administration. However, "in theory," the official added when questioned, a passenger vessel cruising to foreign ports would be eligible for subsidies "while in essential service in the foreign commerce of the United States." But, he added, subsidies could not be paid to any vessel more than 25 years old and thus beyond its statutory life, without "a special administrative finding."
The pending legislation concerning domestic operation would also affect at least two other cruise ships that are now laid up.
The Santa Rosa, owned by an American firm, Vintero Corp. based in New York, may be operated as part of a "joint venture" with another firm, according to a spokesman for the corporation. It would be required to pay back to the government a portion of past subsidies because the vessel is still within its statutory life period. The Independence, which is registered in Panama and was owned by a Liberian firm, Atlantic Far East Lines Inc., has just been sold to American Hawaiian Cruising Lines Inc. of New York, according to an official of that firm. The Independence is more than 25 years old.
The Monterey and the Mariposa, last operated by the Pacific Far East Line under the U.S. flag and also past the 25-year mark, were purchased in June by World Airways, but a spokesman indicated the airline intended to sell the vessels rather than operate them.
Neither Norwegian Caribbean Lines, which has had a long, successful record of operating smaller cruise ships out of Miami, nor United States Cruises' Hadley, whose other firms continue to design and construct major buildings in Hawaii, is unaware of the problems, risks and financial rewards involved.
So many tourists are beuing passage to the Caribbean, Mexico, Alaska, South America and other far-flung ports that ship operators have been hard-pressed to find enough berths. Though a few new vessels are in the works, construction costs have become so inflated that some lines have chosen to add needed cabin capacity by "stretching" -- slicing the existing vessel in half and inserting a new mid-section.
NCL is refitting the France "to transform her from an enclosed trans-atlantic express liner to a wide-open, spacious Caribbean ship." NCL presently carries about 156,000 passengers a year on four ships. The S.S. Norway alone could handle no more than 100,000 additional cruise buffs annually. Reservations are now being accepted "for spring 1980 onward."
Anticipating the industry's primary questions -- how can ships be made to pay their way today and how can such a large number of passengers be brought ashore on a Caribbean island in a reasonable time span -- NCL explained:
The France's (now the Norway's) 160,000 horsepower turbines, "which drove her easily at upwards of 31 knots in transatlantic service, are being updated for maximum fuel efficiency. She will use only 30 percent of her original fuel consumption.
"Special passenger tenders and multiple gangways are being designed so those aboard can be 'ferried' easily and quickly ashore at St. Thomas and the Bahamas, where her deep draft forbids her to tie up at docks. She will have a modern bow thruster system for docking in Florida that will maneuver her sideways."
Providing one-class "luxury but casual" cruising, the refurbished Norway will offer many new features, including its promenade deck -- longest in the world -- redesigned "as an air-conditioned walking street" with stores, boutiques, lounges and cafes.
United States Cruises also expects to turn the S.S. United States into a one-class ship, reducing the total number of passengers and crew by about 40 percent and remodeling the 11 decks. The work is expected to be finished about one year after purchase arrangements are completed.
"Fast, diesel-powered shore tenders will be built to transport passengers from the vessel to ports of call, when the ship must anchor off shore," according to a company fact sheet. Instead of tipping there will be a service fee based on the fare paid, averaging 10 percent.
In addition, Hadley has formed the United States Cruising Society, which would take the time-sharing vacation plan (heretofore limited to resort and condominiums) out to sea.
"Each member has the opportunity, each year for 20 years, to purchase one or more passenger tickets, which entitle him, his family or guests to accupy a stateroom of the category purchased for a total of 14 cruise days annually," Hadley explained. Members will have 60 percent of the published fare, he said with the cost ranging from $11,500 for inside single staterooms to $149,500 for a two-bedroom suite. Member fares would be frozen for the first five years of operation. There are additional provisions.
United States Cruises is already accepting reservations for the Cruising Society, but not for regular passengers who want to book passage on specific future sailings. Hadley said 2,500 memberships are being offered initially, which would commit "about one-sixth of the ship's annual stateroom capacity." The balance of the berths would be sold by travel agents.
Society members may request that their payments be placed in an escrow account with funds to be released to the company only "after 95 percent of refurbishment is completed," according to an official. If, however, they permit the company to use the funds for current expenses, members can obtain special "financing benefits and additional travel rights," the official said.
Under the law, the S.S. United States, as an American flag ship, would be required to hire only American crewmen and pay union wages. "American labor is flexible and has expressed a spirit of cooperation," said a spokesman for the company. "Most Americans would prefer an American crew."
Rising prices for food, docking fees, and other operational expenses -- especially (in recent years) fuel -- have been blamed for forcing a number of vessels to up anchor permanently. Cruise line management, particularly some American officials, have often pointed an accusing finger at salaries paid to their crews, admittedly a major expense of operating large passenger ships designed for a different era.
But although foreign cruise operators (including the Russians) have been able to stay afloat in recent years with smaller ships and generally pay their crews lower wages than received by U.S. counterparts (one reason the U.S. government has paid subsidies to passenger ship lines in the past), the competition can still take its toll.
As Robert H. Dickinson, senior vice president for sales and marketing of Carnival Cruise Lines, a successful operator, pointed out last month in Travel Weekly:
" . . . passenger shipping is an expensive and risky business" and "the typical cruise ship breaks even at 80 percent to 90 percent occupancy," compared with about 50 percent for an airline and 45 percent for a resort hotel.
Cunard Line Ltd., for example, has just allayed fears about the future of the QE2, currently billed as "the last of the great liners." Cunard, marking its 140th year of transatlantic service, announced that the QE2 "will operate more days than ever before on a schedule which combines transatlantic crossings with a wide variety of cruises" in 1980. Reservations are being accepted.
The liner's schedule "is the result of months of careful analysis to provide the most efficient operation . . . " accordingly to the company.
Because the QE2 has been losing millions of dollars -- she burns more than $16 million worh of oil a year -- there were strong rumors that the vessel would be sold to a foreign buyer. It is possible that the rumors may also be a bargaining chip to be used by Cunard in trying to reduce its payroll for an all-British crew of 1,300.
Obviously, though the travel business has been booming this summer ("it's almost as if people are pulling out all stops now because they're afraid they won't have any money for vacations tomorrow" said a local travel agent), the cruise industry is nervously aware of the delicate nature of its profit margins.
As prices continue to rise, no official is sure how much the traffic will bear. The advent of a severe recession, coupled with the addition of a number of jumbo vessels, could result in an embarrassing overcapacity.
Meanwhile, it's full speed ahead and damn the economists.