Norwegian & it's rare U.S.-flagged ship

[Jason]

Norwegian Cruise Line prepares to launch rare U.S.-flagged ship

By JOHN PAIN AP Business Writer

May 25, 2004

MIAMI- Despite recent setbacks, Norwegian Cruise Line Ltd. is on track for this summer's launch of the first modern oceangoing cruise ship under a U.S. flag in about half a century, company president and CEO Colin Veitch said Tuesday.

Norwegian is part of the world's third-largest cruise company, Star Cruises plc of Malaysia, and is trying to create a niche for itself against the top two lines, Carnival Corp. and plc and Royal Caribbean Cruises Ltd. Star and Norwegian have about 9 percent of the global market, while the other two have almost 75 percent combined.

Before the announcement last year to have the ships run Hawaiian cruises, Norwegian was "hoping that we would graciously be allowed to eke out a living," Veitch said in an interview.

The new project will not only help the company, it "is the revival of U.S.-flagged passenger shipping. This is going to create domestic jobs and domestic economic benefit," he said.

Norwegian subsidiary NCL America will eventually operate two U.S.-flagged ships, which will have all American crews.

The Norwegian Sky, to be called the Pride of Aloha under a U.S. flag, is still set to begin weekly cruises in the Hawaiian islands on July 4, Veitch said. It will temporarily replace the Pride of America, which partially sank after a storm in January in Bremerhaven, Germany, where it is undergoing a $350 million refurbishment. That delayed its launch until next year.

Miami-based Norwegian is bucking the trend whereby most cruise companies, including itself, register their ships outside the United States, which lets them hire foreign workers at lower wages. Norwegian has 10 foreign-flagged ships.

The company and Congress members from Hawaii pushed federal budget legislation last year that let the ships use U.S. flags even though they aren't built in the United States. That excludes the ships from long-standing U.S. law that forces foreign ships to travel to overseas ports if they stop in America. In Hawaii, that means extra trips of more than 1,000 miles, or five days of travel.

The law was designed to protect U.S. shipbuilders, but most cruise companies instead have turned to shipyards in Europe or Asia to build their vessels and just sailed to a foreign port.

The exemption requires Norwegian to hire U.S. crews for the ships, but it was still harshly criticized by the Shipbuilders Council of America, an industry group, and Sen. John McCain, R-Arizona. A foreign-owned company was given an effective monopoly of cruise travel in Hawaii, McCain said in February. McCain's office did not return a call seeking comment Tuesday.

Still, shipbuilders council president Allen Walker said Tuesday that if Norwegian is successful, it could eventually order American-built ships. Norwegian must use U.S. shipyards for maintenance work, Veitch said.

Norwegian can afford to pay the higher costs of registering the ships in the United States because Hawaiian cruise fares are higher than other areas, Veitch said.

"You couldn't run U.S. flag out of Miami and the Caribbean against the mainstream cruise brands," where the best bargains are found, he said.