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NCL Update: New Investors, New Crew, New Ships and New Partners

An update on all the changes taking place at the most fun, innovative, and of-the-moment of the mainstream cruise lines.

Ever wanted to read a cruise line's corporate history in one short paragraph? Here's NCL's: Norwegian Cruise Line (tel. 800/327-7030; was the first major cruise operation out of Miami, created in 1966 through the combined efforts of Norwegian ship-owner Knut Kloster and Israeli marketing man Ted Arison, who later started Carnival. After its initial heydey, the line fell way behind Carnival and Royal Caribbean in the '70s and '80s, and didn't start pulling itself up by its bootstraps again until 1997. In 2000 it was bought by Asia-based Star Cruises, and in the last seven years it's built six (soon to be seven) great new megaships, started the first U.S.-flagged cruise operation in decades, and led the cruise industry's casual trend with its Freestyle Cruising program. Today it's the most fun, innovative, and of-the-moment of the mainstream cruise lines, but for every giant step forward comes the potential to be rocked back on your heels. In May, the company reported a net loss of $60.8 million for the first quarter of 2007, largely attributable to setbacks in its one-of-a-kind U.S.-flagged Hawaii program (see below).

So what do we do when we fall off the horse? We look for . . .

Mo' Money, Mo' Money, Mo' Money

Here's the newest news: Last week, the giant private equity group Apollo Management invested $1 billion in NCL, becoming a 50 percent co-owner of the line along with Star Cruises. The proceeds of the investment will be used to repay existing NCL debt and increase the line's liquidity to fund construction of future vessels.

"To have an investment on this scale by one of the very top names in the private equity world is a huge vote of confidence in the new NCL we have created since Star Cruises became the owner in 2000," said NCL Corporation's president and CEO, Colin Veitch.

Official word is that Apollo plans no big changes to the NCL product, but is instead focused on the company's "growth potential."

In March, Apollo invested $850 million to buy a large stake in Oceania Cruises. According to official statements, Oceania "is expected to remain a separate investment and a separate operating company." Emphasis on expected, though we can imagine a scenario in which the two brands could be managed separately under one corporate umbrella. Emphasis on imagine.

NCL News, Pt. 2: Cruise Line Gets Exemption to Federal Law . . . Again

Hawaii: Tropical paradise, scenic wonder . . . and epicenter of maritime turmoil, where legal buccaneers trade blows with a semi-protectionist statute enacted more than 120 years ago.

Here's the history: In 1886, the U.S. Congress passed the Passenger Vessel Services Act, which forbids passenger ships from operating itineraries entirely within U.S. waters unless they're built in the United States, owned by a U.S. entity, registered and flagged in the U.S., and manned by a U.S. crew. The law was designed to protect U.S. shipping interests from foreign competition, but in modern times -- with U.S. cruise lines commonly building, flagging, and manning their vessels overseas -- its effect has been that vessels sailing to U.S. ports have had to visit a foreign port too as part of their itineraries. This makes Hawaiian itineraries particularly difficult, requiring that they either depart from or end in a foreign mainland ports (such as Ensenada, Mexico) or sail from the islands themselves but make a multiday detour to a foreign port in the middle of an otherwise all-Hawaii itinerary.

Enter NCL. In late 2002, the company acquired the unfinished hulls of two ships whose construction had been started in the U.S. by now-bankrupt American Classic Voyages under the name "Project America." Intense lobbying in Congress led to a deal in which NCL was able to have these hulls built out at a German shipyard yet still sail under the U.S. flag. By July 2006 the two Project America ships had been reborn as Pride of America and Pride of Hawai'i, a third ship had been reflagged to U.S. registry via a special Congressional dispensation, and NCL had itself the only cruise operation in the business manned by U.S. officers and crew, sailing round-trip from Honolulu, and concentrating exclusively on the Hawaiian islands.

Idyllic business story, no? Well, no. NCL may have crafted a great product, but starting a U.S.-manned cruise line wasn't as easy as putting an ad in the paper and hiring fry cooks. From the start, the line had problems attracting, training, and especially retaining U.S. crew, who were unused to the long hours typically worked by cruise staff. The result was a crew turnover rate that sometimes reached 200% -- a disaster when you consider the cost of training.

So what's a cruise line to do? How about change the law again. Earlier this year, Hawaiian Senator Daniel K. Inouye and Representative Neil Abercrombie succeeded in attaching a rule change to the Defense Authorization Bill, which will allow NCL to hire a quarter of all staff aboard each U.S.-flagged ship from within the pool of international crew currently employed by the rest of the NCL fleet. To qualify, staff must have served for at least a year aboard one of the other NCL ships. In turn, they'll receive the same rate of pay as the ships' U.S. crew.

What's all this mean for you, John or Jane Q. Cruiser? Only good things, from a service perspective: More experience means better attention to detail. As for the political question of untying a law to slip around knotty labor issues, well, I won't go there . . .

NCL News, Pt. 3: Norwegian Gem Takes First Baby Steps, Leaves German Dry-Dock

Finally, some fun news in NCL's big week! And it takes place in northern Germany, the veritable home of good times . . .

At the edge of beautiful Papenburg, just southwest of Bremerhaven, the Meyer Werft shipyard has two indoor building sheds, each measuring over 1,200 feet long, 335 feet wide, and 196 feet high. In each of those sheds is a dry-dock facility where ships can be built, then floated out into a wide basin after flooding the docks with water. That's what happened on August 12, when Norwegian Gem, the newest megaship from NCL hit the water for the first time.

Prior to her float-out, the 93,500-ton ship underwent a series of tests and engine trials, all of which went smoothly. From here, she'll be berthed at an outfitting pier in Papenburg for finishing. She's currently scheduled to make the narrow, difficult passage up the River Ems to the North Sea on September 16, then travel to Eemshaven, Netherlands, for her sea trials.

Scheduled to make her U.S. debut in New York in mid-December, Norwegian Gem is the seventh NCL ship built on the same basic design, following sister ships Norwegian Spirit, Star, Dawn Jewel, Jade, and Pearl, the latter of which is Gem's near-identical twin, both featuring ten restaurants, a nightclub that incorporates a four-lane bowling alley, extravagant Garden Villas (the largest suites in the cruise biz), and the slightly less grand Courtyard Villas.

Gem will offer 7-, 10-, and 11-night Bahamas/Caribbean sailings from New York from December through April, then return to Europe for a summer of 7-night round-trip sailings from Barcelona.

NCL News, Pt. 4: NCL Becomes the Official Cruise Line of the PGA Tour

NCL has had a fine golf program for the past several years, particularly in Hawaii and Bermuda, where passengers can book escorted golf excursions to some of the islands' best courses. So, it's not particularly surprising that last week the line announced it had wrangled a designation as the "Official Cruise Line of the PGA TOUR and Champions Tour."

So once again, the big question: What does that mean to you? So far, the details are sketchy, but word is that the PGA Tour will work with NCL to expand the line's golf experience, with the possibility of including tournaments and appearances by tour members among the line's offerings.

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