THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Monday, May 20, 1996 TAG: 9605180199
SECTION: BUSINESS WEEKLY PAGE: 04 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, BUSINESS WEEKLY
LENGTH: Medium: 75 lines
One proposal to break a logjam in Congress would revive the long-dormant domestic cruise industry by requiring operators to build a new cruise ship in a U.S. shipyard.
Bob Dickinson, president of Miami-based Carnival Cruise Lines, told the trade industry newspaper Journal of Commerce that he wonders if U.S. yards are up to the task.
Cruise ship operators are lobbying Congress to change an 1886 law that requires foreign-flag cruise vessels taking on passengers at a U.S. port to make at least one foreign port call before returning to the United States.
Because of the cost of building in domestic shipyards and employing U.S. crews, also required in the Passenger Services Act for a U.S. flag ship, cruise operators have opted to use foreign-built ships with foreign crews.
That has limited the cruise industry to ports like Miami and Los Angeles that are near foreign ports. And there hasn't been an intracoastal cruise service in years.
Under the proposal, a cruise line operator could use a foreign-built ship in domestic trade if the company registered the vessel in the United States and employed a U.S crew, and agreed to build a new cruise ship at a U.S. yard.
U.S. ports that stand to benefit from domestic cruising, including San Francisco and Baltimore, oppose the proposal because they say U.S. yards can't compete with foreign builders on either cost or quality. The ports propose opening domestic routes to foreign operators.
The Virginia Port Authority is building a limited cruise ship facility at Newport News Marine Terminal to help Hampton Roads get whatever cruise business it can.
Newport News Shipbuilding, which recently reentered commercial ship construction with orders for nine tankers, has said it eventually wants to make cruise ships too. It built the famed passenger liner United States in 1952.
Shipyard executives admit it would take a while to relearn the business, but they believe Newport News can be competitive.
Still, Carnival Cruise's Dickinson questions whether any U.S. yard can do the job. Here's what he told the Journal of Commerce:
``(U.S.) yards haven't built a deep water cruise ship since 1958. That is almost 40 years ago. I'm sure there is (a yard that could produce one), but remember that since the Korean War, the shipyards in this country have been subsidized by the U.S. Navy.
``The contracts have been cost plus, so you build an $80 million destroyer, and it comes in at $120 million and everybody says, `I'm sorry, but these are the bills.'
``That was a very enormous set of de facto subsidies. So now you take that kind of mentality and level of productivity and you build a $300 million cruise ship that might end up costing a billion. The only reason now why there is interest on the part of the shipyards in cruising is that we're not building a lot of naval vessels, and we're cutting back on defense.
``The goose that laid the golden egg has all of a sudden gone sterile. They don't have the experience, they don't have the subcontractors. It is an entirely different business.
``Just the timing of it, if we have a ship (under construction) it can't be six months late. We're selling it while it's being built. You can't go to the public and say, jeez, the first six months, the first 26 cruises are canceled or delayed because the ship was late.
``They'd kill you. You'd be out of business. The thing has to run like a Swiss railroad, so it is not just the dollars and the cost, but it is also being able to get something built on a timely basis.'' ILLUSTRATION: FILE
Newport News Shipbuilding built the cruise liner United States in
1952. Changes in federal law might bring cruise liner business back
to the shipyard.
by CNB