As 1991 comes to an end, this extraordinary year continues to be characterized by dramatic developments.
Deal is Off
The Overseas Shipholding Group and Kloster Cruise have cancelled plans to set up a joint cruise line. This unexpected turn-around comes only three weeks after it was announced that OSG was planning to invest up to $225 million in a "new" Norwegian Cruise Line.
Neither company would comment officially, but sources suggested that OSG was seeking to limit its risk further by trying to gain more control of the timing of its investment's conversion into ownership.
Trygve Hegnar, Chief Executive of Kloster Cruise, said this week that he had not been seeking a partner but that the company had been approached by OSG. He also said that it was unlikely that he would be willing to enter into similar negotiations with another suitor.
Hegnar underlined that Kloster has been a "purchaser" not a "seller" referring to the company's acquisition of Royal Viking Line and Royal Cruise Line.
Hegnar also noted that OSG has been looking at the cruise market for several years and at one time considered buying RCL.
On the Oslo stock exchange, investors reacted negatively to the cancellation and, at press time, the shares of Vard, parent company to Kloster Cruise, were down.
The collapse of the deal also failed demonstrate the market values of the ships, a case frequently argued by Hegnar, when assessing the value of a cruise line.
In a prepared statement from Vard, released November 6, it was stated that the Board of Directors had decided to seek a partner, either for Kloster Cruise or one or more of its divisions. The statement said that a partnership would result in substantial strengthening of Vard and Kloster Cruise's capital base and serve as solid foundation for the company's further development.
Hegnar, however, said this week that Kloster does not need a partner and that the company is financially sound. He said that the restructuring had been costly, but that the company was now primed for 1992.
Commenting on recent lay-offs at Kloster Cruise in Miami, Hegnar said that the termination of 65 positions must be seen in context of the company's 900 shoreside employees and 5,300 employees including ships' personnel. He said that staff reduction was natural following the sales of the Skyward and the Starward.
Commenting on 1991, Hegnar said it has been a terrible year, but that 1992 looked promising. He said that advance booking for RVL and RCL were strong, but that the Caribbean market was weak.
RCCL Sells Admiral Ships
Royal Caribbean Cruises Ltd. has announced that it is selling the Azure Seas to Dolphin Cruise Line and is negotiating to sell the Emerald Seas to an unidentified buyer.
Richard Fain, Chairman and CEO of RCCL, said in a prepared statement that the two ships no longer fit into the company's long-range plans.
Eastern Cruise Line, Western Cruise Line and Sundance Cruises merged in 1986 and became Admiral. Among the owners were Gotaas-Larsen, then also a partner in RCCL. In 1988, the partners agreed to put both Admiral and RCCL into a new holding company, Royal Admiral Cruises.
In the new company, Admiral became the "budget" operation. Its third ship, the Stardancer, which was built in 1982, has become the Viking Serenade and sails three- and four-day cruises for RCCL out of Los Angeles, after $75 million worth of reconstruction and upgrading. The passenger capacity was increased from 1,000 to 1,500.
A newbuilding which had been contracted for Admiral was transferred to RCCL and became the Nordic Empress.
In 1989, the name of the holding company was changed to Royal Caribbean Cruises, clearly downplaying the Admiral participation. Admiral's President, Bernard Chabot, and its Senior Vice President of Marketing, Robert Mahmarian, later left.
Meanwhile, Admiral continued to operate the Azure Seas, which was built in 1956 and accommodates 734 passengers, and the Emerald Seas, which was built m 1944 and accommodates 960 passengers.
"Outlived its usefulness"
Roderick McLeod, Executive Vice President of Marketing, said that Admiral has outlived its usefulness for RCCL. He said that Admiral had been intended to help pave the way for RCCL into new markets such as three- and four-day cruises.
Furthermore, while Admiral may also have been intended to attract new cruisers who later could be upgraded to RCCL, the heavy discounting in today's market has blurred the distinction between "budget" and "contemporary" cruise markets.
Thus, in today's market, instead of Admiral playing a supporting role, it would more likely compete with RCCL.
Dolphin Cruise Line has said that it will be operating the former Azure Seas as the Oceanbreeze from Aruba, starting in May or June 1992.
Dolphin presently operates the 562-passenger Dolphin IV on three- and four-day cruises from Miami and the Seabreeze on seven-day cruises, also from Miami.
Earlier this year Dolphin announced a new division called Majesty Cruise Line which will be operating a new ship, the 1,056-passenger Royal Majestv. The $220 million vessel, currently being built at Masa Yards in Finland, will be sailing three- and four-day cruises from Miami, starting in September.
Costa sells the Carla Costa
Costa Cruise Lines has announced that it is selling the Carla Costa to an undisclosed buyer. The Costa Riviera will be repositioned to San Juan assuming the Carla Costa's seven-day itinerary to Aruba, Caracas, Grenada, Martinique and St. Thomas, starting January 25.
Clipper Resigns from CLIA
Clipper Cruise Line has resigned its membership in the Cruise Lines International Association. According to Paul Duynhouwer, the resignation "reflects a philosophical and practical difference of opinion over how the cruise industry should be positioned to the consumer as well as the trade." He cited specifically what he called CLIA's unwillingness to clearly define and position the different types of cruises in the forthcoming CLIA-sponsored Newsweek advertorial.
"Considering the scope of today's cruise industry, we feel it's imperative that product variety is clearly and objectively defined," Duynhouwer said. He said that the upcoming advertorial is dominated by the advertising of the mass-market, resort-style lines and will reinforce the image of cruising as totally inappropriate to Clipper's passengers.
Duynhouwer also said that another reason for Clipper's decision to disassociate itself from CLIA is "a growing disenchantment with the poor quality of marketing, i.e., the selling of price rather than product."
Duynhouwer said that he had tried to have a chart presenting the different types of cruises, i.e., "mass, luxury and adventure/specialty," included in the advertorial, but had been ignored. "This (the chart) would help consumers and agents determine which cruise line would be an appropriate match vis a vis personal preferences, lifestyles, etc.," Duynhouwer said.
Carnival Cruise Lines trimming?
In a favorable evaluation of Carnival Cruise Lines, one analyst's report also included speculation that Carnival is considering retirement of the Festivale and the Mardis Gras. They would be replaced by one of Carnival's newbuildings sailing from Port Canaveral.
Tampa and Aruba
Two ports which have recently benefited in all the turmoil are Tampa and Aruba.
Tampa, which has seen its cruise business taper off, is seeing the return of Holland America Line's Nieuw Amsterdam this season. ln addition, Regency Cruises will be offering 19 sevenday sailings aboard the Regent Star. Next summer Starlite Cruises plans to start five- and two-day service from Tampa with the 1,200-passenger Rainbow.
The Nieuw Amsterdam and the Regent Star will sail from HAL's Tampa cruise ship terminal, while the Rainbow will operate from the Port of Tampa's Garrison Channel Cruise Terminal, near Tampa's new convention center. The terminal is part of the planned Garrison Seaport Center, home of the $94-million Florida Aquarium, scheduled to open in 1994.
Aruba, which has been homeport to the new Seawind Cruise Line and its vessel the Seawind Crown, will also be seeing the addition of Dolphin's newly acquired 756-passenger Oceanbreeze, starting service in May or June of 1992.
While many Caribbean islands have suffered from cutbacks in airlift, Aruba benefits from direct American Airlines service as well as direct flights by Antillean Airlines and Air Aruba.
In addition, Aruba also offers pre-clearance for U.S. immigration.
Pan American World Airways stopped flying on December 4 after more than 64 years in the airline business. A bankruptcy rescue effort that started in spring of last year finally failed.
The sudden shutdown sent some cruise lines scrambling for airlift. Pan Am was a carrier into San Juan and Montego Bay, although it had recently reorganized its operations in Miami and was planning to focus on South America. With the possible exception of Regency, Pan Am was not a major carrier for any of the cruise lines. But with the shortage of air seats, any seat going into the Caribbean these days is valuable.
Pan Am's demise follows Midway Airlines, while America West Airlines and Continental Airlines operate under Chapter 11 bankruptcy protection and TWA may be on the brink of filing as well.
In 1989, the sudden shutdown of Eastern Airlines, due to a strike, disrupted the travel plans of thousands of passengers as Eastern was a major air/sea carrier.
The events of the last few days follow an extraordinary 11 months affected by the Gulf War and the recession. Earlier this year, NCL started a two-for-one discount program that soon had most of the other cruise lines jumping on the bandwagon.
Kloster Cruise, parent company to NCL, also completed a streamlining of its divisions that left Royal Viking Line with one 740-passenger ship, the RVL Sun, compared to 2,870 berths a year ago. Two ships were transferred to NCL and the third to RCL. NCL's original fleet also underwent changes as two of its white-fleet ships were sold.
In spring, Carnival Cruise Lines announced that it had reached an agreement with Dial Corporation to buy its Premier Cruise Lines. But just as that deal was about to be consumed, it fell apart. The two cruise lines are continuing to battle it out in a fiercely competitive Central Florida market.
Carnival meanwhile took delivery of a new ship, the Ecstasy, and without wasting much time completed a second public offering while announcing two more newbuildings. Shortly thereafter, Carnival entered into talks with Seabourn Cruise Line to acquire up to a 50 percent interest in this upscale operation.
Also during 1991, Commodore Cruise Lines acquired the Crown Cruise Line name, and has made Crown its upscale division.
Costa Cruise Line is emerging as a new company, shedding its own image along with its older fleet, and introducing a fleet of new, expensive cruise ships under the tagline of "Euro-Luxe." It plans to position itself right at the top of the market.
Dolphin Cruise Lines took over a building project at Kvaerner-Masa and launched a new upscale division under the name of Majesty Cruise Line.
Epirotiki Lines lost two ships, one to fire, while the other sank during a storm. The company also acquired a vessel from NCL and formed a partnership with Kloster for its operation.
Renaissance Cruises suffered for months while its owners where going through bankruptcy proceedings. The cruise line was eventually acquired by an Italian, American and Norwegian partnership and is now back on course.
Society Expeditions was unable to take delivery of its newbuilding and cancelled sailings only days before the maiden voyage. The company is still in the process of returning deposits to passengers.
Start-ups, Starlite and Seawind both struggled through their initial months, with Starlite putting a seven-day ship into La Paz, Mexico, only to transfer her to San Diego, and then to the Far East. Starlite, meanwhile, is operating one-day cruises from San Diego and is determined to stay in the longer-cruise market in the U.S.
After an August start-up. out of Aruba, Seawind cancelled several cruises, citing soft bookings. The company later went through ownership changes while continuing service.