The 40-years-dormant U.S. cruise-ship construction business has experienced a string of encouraging developments in recent weeks:

• As expected, American Classic Voyages (AMCV) signed a letter of intent for two 71,000-ton, 1,900-passenger ships with an option for four more with Mississippi-based Ingalls Shipbuilding.

• AMCV's Delta Queen Steamboat Co. is currently considering bids from nine yards for its order of five 200-passenger coastal cruisers. A decision will be made in the next 30-60 days, said AMCV CEO Phil Calian, adding that future plans call for an overall fleet size of 10 to 20 vessels.

• Newcomer Seaamerica Cruises has received interest from NASSCO, Avondale and Ingalls for its plan to build three 41,800-ton, 950-passenger, business-traveler-oriented vessels, according to president David Turner. He said a letter of intent is possible by year's end.

• Finally, Sen. John McCain's Passenger Vessel Services Act reform bill (S. 2507) - considered seriously detrimental to U.S. shipbuilding interests was never introduced, due to a lack of support.

American Hawaii Newbuilds

The new ships for American Hawaii Cruises will be priced at $400 million each and will be 840 feet in length. According to Calian, the final contract should be signed in early 1999. The delivery date for the first vessel has been set for late 2002, with the second ship to be delivered nine to 18 months later.

Ingalls will be building the American Hawaii ships in four separate sections, which will then be joined together. According to an Ingalls spokesperson, "One feature of Ingalls' design and production facilities that lends itself to cruise-ship construction is the land­ based modular construction which allows for a high level of outfitting prior to vessel launch. Ingalls intends to leverage that technique by building the vessel in a few large modules that will be outfitted with cabins and public space material prior to joining."

Kvaerner Masa-Yards, which has been on the building team with Ingalls throughout the bidding process, will reportedly be heavily involved in the ships' development, according to sources. The design team for the ships will be led by Sweden-based Tillberg Design (handling 40 percent of ship space), with additional work by Norway's Yran & Storbratten (40 percent); and Scotland's John McNeece (20 percent). Tillberg Design is currently expanding its Florida office to accommodate new U.S. cruise-building business.

The final design for the American Hawaii ships will not be as "nostalgic" as Tillberg's earlier design for AMCV, the Queen of the Americas, which featured twin funnels and aft terraces harkening back to the line's 1951-built Independence. According to Tomas Tillberg, "The new design is more contemporary, while not being too much of a modem steel-and-glass vessel. At the same time, the design will reflect the American­ ness of the ship, and will fit in with its Hawaiian surroundings."

The fact that AMCV ordered six ships - more than had been expected - reflects the company's belief that the Hawaii market can sustain that tonnage, according to Calian. He admits that legally, there is no stipulation requiring all six to sail in Hawaii (although the first two must do so to secure AMCV's special non­ compete preference), but Calian said there were no plans to sail the latter four vessels elsewhere in U.S. waters.

When the contract is finally signed in early 1999, AMCV will then be in a position to finalize negotiations for the purchase or charter of an interim vessel which can be reflagged U.S. and is scheduled to begin sailing in Hawaii in late 1999. On this front, there is once again speculation that AMCV is talking with the major cruise lines to work out a deal for the interim vessel.

As for financing, AMCV is entertaining a number of options to raise money, said Calian. Sources expect the funding to come through Title XI financing with additional money raised via Capital Construction Funds (CCFs), financial devices which allow investors to shield money from taxation by investing in U.S. shipbuilding.