World City Corporation has filed an application with the U.S. Maritime Administration for Title XI loan guarantees for approximately $1.1 billion to build the 250,000-ton, 5,600-passenger Phoenix World City.
The loan guarantee, if approved, would cover 87.5 percent of the contract cost over 25 years. The total building cost is $1.2 billion, according to John Rogers, Vice Chairman and CEO of World City, who also said that the total project cost is $1.4 billion.
World City plans to raise the remaining $300 million through private placement.
A decision by MarAd can be expected within four months and no later than six months. The OECD agreement to end shipbuilding subsidies will go into effect in January 1996.
Rogers said that if the application is approved, he expects the Phoenix World City to enter service in 1998 and to be followed by two more sister ships.
Rogers pointed out that just one ship of this size would propel World City up among the leading cruise lines, and two ships would make it the fourth largest cruise company by the year 2000.
Economies of Scale
While, World City would benefit from economies of scale from the very beginning, Rogers also outlined other operating advantages.
These include cabins in different price categories, ranging from economy to standard, premium and luxury price points. which would allow the ship to appeal to a broad market based on price and avoid defining the ship by the standard market segments.
The Phoenix World City would also move seasonally to different sailing regions thus always saliing in "high season" and hence avoiding discounting based on seasonality. "Every season will be high season for us," Rogers said.
Rogers pointed out that the Phoenix World City is not a cruise ship but a "city ship concept."
"We are not going after the $5 billion a year cruise market. but the $50 billion a year meetings and conventions market," Rogers underscored.
"We are probably bigger and offer more facilities than any hotel." he added. "Built in the United States, we will also offer tax deductibility."
Rogers said that the Phoenix World City would serve multiple markets full time simultaneously.
While Port Canaveral has been designated as homeport for the Phoenix, the ship will also sail from and call at other U.S. ports as well as ports in the Caribbean.
"We can call at any port on the East Coast and in the Gulf." Rogers said, adding that the giant ship only has a 33-foot draft (less than the 76,000-ton Norway) with beam of 252 feet and length of 1.268 feet.
In addition, the giant ship's 400-passenger day cruisers will allow passengers to "fan out" to several ports of call at the same time within a radius of 50 miles.
But the Phoenix World City should be regarded as the destination itself, Rogers said.
According to Rogers, plans call for a three-year construction period for the Phoenix World City. He said he hoped to have the ship in Sydney for the Olympic Games where the vessel would increase that region's first-class hotel capacity by 25 percent.
Contrary to comments by other industry sources, Rogers also said that the design of the Phoenix including safety aspects were approved by the U.S. Coast Guard.
"Among the strengths of our MarAd application is the fact that we offer not only shipyard jobs, but also jobs at sea, and tax revenue," Rogers said. "While loan guarantees for ships built for export for foreign owners provide short-term shipyard jobs only."
Rogers repeated the previously announced concept of the "virtual shipyard" whereby several yards work together and no single yard is totally tied up with the massive project.
Plans call for the hull to be built by several yards with the modules assembled at one shipyard.
The new twist is that the complex work bas been taken away from the yards, according to Rogers, who said that the hotel building has been assigned to the Centex Rooney Construction Company of Fort Lauderdale.
The construction company will build and install the superstructure, public spaces and all accommodations - representing more than half of the construction and outfitting of the ship - at a 30-acre land site to be provided by Port Canaveral.
Described by Rogers as being the second large st U.S. builder, Centex Rooney has spent the past year working with marine industry and classification society experts to establish its ability to do the work to marine standards and on a cost- and time-effective basis. Centex Rooney also will serve as project manager of the overall construction.
With a building cost of $1.1 billion. the 5,600-passenger ship will have a per-berth-cost of approximately $196,000 which puts the Phoenix in the cost range of other new ships, taking overseas subsidies into account, according to Rogers.
"We can build at a competitive price in the United States and will build a revolutionary product." Rogers said.
Rogers noted that the Phoenix World City will generate over $5 billion in tax revenues to the federal and state governments over the 25-year loan guarantee period; provide over $1.1 billion in work for U.S. shipbuilders over a three-year period; create more than 2,200 new seagoing jobs for Americans for the life of the ship and support more than a $33.5 million annual payroll for shipboard officers, crew and staff.