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Trouble for NCL Hawaii: "Aloha" Means Both Hello and Goodbye

Just one year ago, it seemed like Norwegian Cruise Line had Hawaii by the coconuts, with three U.S.-flagged ships operating in the islands full-time Now comes the question: Is it all falling apart?

Just one year ago, it seemed like Norwegian Cruise Line ( had Hawaii by the coconuts, with three U.S.-flagged ships operating in the islands full-time and another sailing itineraries that combined Hawaii with stops at the South Pacific's Republic of Kiribati. No other line had anywhere near this kind of capacity in the islands, nor had any other gone to the lengths NCL had to secure its place. As of 2007, it had taken the line more than five difficult years to get to this point, years spent lobbying the U.S. Congress for special dispensations, years spent marketing its new product, years spent training the first all-American big-ship crews assembled in decades.

Now comes the question: Is it all falling apart?

In April 2007, NCL announced that it was withdrawing the 2,466-passenger Pride of Hawaii from the Hawaii market and sending her instead to Europe for 2008. This month, the vessel went into a wet-dock refit in Los Angeles, where she was stripped of her Hawaii-specific decor, retrofitted with a casino (which had been forbidden by Hawaiian law), reflagged to Bahamas registry, staffed with an international crew, and sent to sail in Europe. Norwegian Sun was also pulled off her Hawaii/Kiribati routes and reassigned to the Caribbean.

Now comes word, just this week, that Pride of Aloha one of the two remaining NCL Hawaii ships, will leave the fleet in May, transferred to NCL parent company Star Cruises for service in Asia. That leaves NCL's Hawaii operation with just one ship, the 2006-built Pride of America.

So what happened?

The Background: 19th-Century Laws, 21st-Century Commerce

The principal impediment to inter-island Hawaii service -- that is, cruises departing from Hawaiian ports and spending all their time in state waters -- is the Passenger Vessel Services Act, a U.S. law dating from 1886 that 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. Informally known as the cabotage laws, the act was originally 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 the coastal U.S. have had to visit a foreign port as part of their itineraries, even if that port isn't terribly interesting and even if they only stay for a few hours.

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. Intense lobbying in Congress led to a deal in which NCL was able to have these vessels completed at a German shipyard yet still sail under the U.S. flag. As part of the fine print, NCL was also able to reflag the foreign-built Norwegian Sky, renaming it Pride of Aloha and operating it under the company's U.S.-flag brand, NCL America. That ship debuted in July 2004 and went through several tough months as NCL worked out the kinks involved in hiring and training more than 1,000 new crewmembers, almost none of whom had ever worked aboard a ship before.

One year later, the company introduced Pride of America, the first of the Project America vessels to see the light of day. One year after that it debuted Pride of Hawaii, completing the trifecta that was supposed to dominate Hawaiian cruising for years to come.

Trouble was, other cruise lines put up a fight.

Commenting on the Pride of Aloha withdrawal, NCL President and CEO Colin Veitch noted that, "Our Hawaii business has been extraordinarily difficult, and although we have progressively established a stable operation, delivering a good product in a great destination, the overall price level in the market has been driven down, to a significant degree, by an unprecedented expansion of capacity from low-cost foreign flag ships based on the west coast operating domestic Hawaii itineraries . . ."

Translation: You can currently get an 11-, 12-, or even 15-night cruise sailing from west coast cities like San Diego or Ensenada (Mexico) for prices that are competitive with what NCL charges for its 7-night inter-island cruises. You might not spend quite as much time in the islands (it takes 4 or 5 days to reach Hawaii from the west coast) but you will get a lot more vacation days for your money, as well as saving air costs by only having to fly one-way from the islands rather than round-trip.

For comparison purposes, September/October NCL rates currently start around $1,249 for seven nights, while Celebrity and Carnival are offering 11- and 12-night Ensenada-Honolulu or Honolulu-Ensenada cruises for $999, and Celebrity and Holland America are offering 15-night round-trip cruises from San Diego for $1,359 and $1,535, respectively. All of these cruises get around U.S. cabotage laws by either sailing from or visiting a foreign port in the course of their itineraries.

NCL's Veitch had those ships in his sights when he noted that NCL has "invested heavily in U.S. flag cruising in reliance on our nation's cabotage laws providing a level playing field in Hawaii. Our remaining ship, Pride of America, is generating an encouraging profit now, and we project a continued improvement in this one-ship operation as the unique nature of Hawaii, from a cabotage standpoint, is clarified and restored. In due course, we would then expect, and hope, to be able to grow our U.S. flag business back to two profitable ships by reintroducing Pride of Hawaii."

Another translation? U.S. Customs is considering amending the cabotage laws to require that foreign-flagged vessels sailing round-trip from U.S. ports spend at least 48 hours in foreign ports as part of their itinerary. This change, if enacted, would not only affect many foreign-flagged vessels operating Hawaii cruises from California ports, but would also throw the Alaska cruise market into chaos, affecting the dozen or so ships due to sail north from Seattle this season.

How Things Stand Now

Pride of Hawaii, a Frommer's five-star vessel, will leave Los Angeles February 16 under her new name, Norwegian Jade, sailing a 13-night cruise along the Mexican Riviera and through the Panama Canal en route to Miami. From there, she'll sail a 13-night transatlantic cruise en route to Barcelona and the start of her Europe season. She'll offer 12-, 13-, and 14-night Eastern and Western Mediterranean cruises departing from Barcelona, Istanbul, and Athens/Piraeus through May; reposition to the UK for a series of North Cape, Western Europe, and British Isles cruises from Southampton June through August; then return to her Mediterranean routes from September through October.

Pride of Aloha is currently scheduled to leave NCL and the Hawaii market on May 11, 2008. She'll be reflagged out of U.S. registry and deployed in Asia in the summer, sailing for NCL parent company Star Cruises.

Pride of America will remain as NCL's sole entrant in the Hawaii market, offering weekly inter-island sailings at least through 2010.

"Withdrawing Pride of Aloha was an extremely difficult but necessary commercial decision," said Andy Stuart, NCL's executive vice president of marketing, sales, and passenger services. "However, we see a strong future for the long-term flagship in Hawaii, Pride of America. In the longer term, as demand continues to grow for this premium experience, we hope to bring back our other modern purpose-built U.S.-flag ship, Pride of Hawaii."

In the meantime, guests holding bookings on Pride of Aloha beyond her May 11 transfer can choose to sail on Pride of America's concurrent sailings, departing one day earlier. The following considerations are also available:

  • A $100 per-person onboard credit (up to $200 per stateroom).
  • For guests who made their air and/or hotel arrangements through NCL, NCL will protect the rates they currently have paid and cover any air or hotel change fees.
  • For guests who purchased their own air, NCL will protect up to the first $100 per person of any increase in air costs and cover up to $75 per person in air change fees.
  • For guests who made independent hotel arrangements, NCL will cover any hotel change fees up to $25 per person.

Guests may also choose to book any other NCL cruise or receive a full refund, as long as they make these arrangements by March 7, 2008.

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