(Before It Was Born)

By Guy Span

Millionaire real estate speculator Sam Zell took over control of a couple of enterprises in late 1993, including the Delta Queen Steam Boat Company (operator of former Sacramento River Lines paddle wheel steamer, the Delta Queen) and parent company American Classic Voyages (former NASDAQ listed AMCV). AMCV operated two American flagged ships, the SS Constitution and the SS Independence, both ex- American Export Lines Atlantic steamers.

These two ships operated around Hawaii and despite their nearly 50 years of age, did not require expensive upgrades to comply with current SOLACE rules (due to being in protected waters). However, these ships had the disadvantage that they could not operate in the open ocean, such as service between San Francisco and Hawaii or along the California coast from San Francisco to Los Angeles.

In the mid 1990s, AMCV was in good shape. Its two Mississippi River steamers usually ran at capacity and had no debt, while the two Hawaiian liners were fairly full but carried fairly small MARAD (U.S. Maritime Administration) repair loans. Both operations were profitable. Other cruise lines considered AMCV a niche player, stemming from its policy to use and repair older ships that had an historical as well as a tourist draw. In turn, this led to low debt service offset by higher operating expenses from using older vessels. It was a business plan that worked. AMCV stock was at $20 per share and rising and the future looked good. And under the Jones Act, no foreign flagged ship could pick up and drop off passengers at an American port without first stopping at a foreign port. Clearly, AMCV had the Hawaiian market sewn up.

The SS Independence was a draw all by herself. When she was in San Francisco for dry-docking in 1994, the Coast Guard got so many calls on the day she was scheduled out that an exasperated Vessel Traffic announced they would take no further inquiries about the SS Independence’s imminent departure, but would make a general radio announcement when she called for clearance. Out on the Bay, along with your intrepid reporter, were tugs, fishing boats, work boats, and pleasure craft, all there to watch the last American-built and American-flagged liner head out for Hawaii.

Then in 1996 the SS Constitution needed extensive repairs. The decision was made to scrap her, but she sank while being towed in fair weather. Like most vessels that sink under tow in balmy conditions, she went down in 10,000 feet of water and could never be recovered. Insurance would cover the loss. This left only the SS Independence, now running at near 100% capacity and turning away others who wished to cruise in Hawaii. Zell was casting about for another running mate for the elderly Indy, when some idiots suggested borrowing a secured loan from MARAD and building a brand-new American ship in an American yard. So in 1997, special legislation was passed in Congress to allow government security and give AMCV a 30-year monopoly in Hawaii. As a result, Zell went for two and these would be the first new ocean liners to be built in America for nearly 50 years. However, it came to one hell of a lot of borrowed cash.

After the loss of the SS Constitution, AMCV had not been performing, racking up small but persistent operating losses. The River Boats were doing well, but it wasn’t enough and besides, with a public company, it was grow or die. By 1999, Zell had brought in “blue water” experts from Carnival Cruise lines and embarked upon a huge shipbuilding program, in addition to the liners.

With historical contract signing at Litton Ingalls (the shipyard that built the last American liners in 1958–the SS Brazil and SS Argentina), Project America was underway. Since American ships were being built, AMCV could buy a foreign ship and flag it American, while construction continued. Thus, AMCV bought the Nieuw Amsterdam (for $114 million), flagged her American, added a $20 million refitting, and renamed her the Patriot. She became the temporary running mate of the SS Independence, but her launch was handled poorly when a bunch of travel agents were left at the dock in San Francisco when the Patriot’s arrival was delayed.

By 2002, AMCV had added a Columbia River paddle diesel, another Mississippi River steamer, and one coastal cruiser with another on the way. The Hawaiian market had slumped and it became difficult to fill the Patriot, no matter how low prices were cut. Then, to make life interesting, NCL, Norwegian Cruise Lines (which has nothing to do with Norway, as its offices are in Hong Kong and Miami), figured out how to compete in Hawaii with a foreign-flagged vessel. Hawaii is pretty far from anywhere, but NCL found a foreign port at the remote Fanning Island (something called the Republic of Kiribati), requiring a full three days at sea. As of December 16th, 2002, there would be three ships working a market where two weren’t running full.

Meanwhile, all was not going well on the rivers, as the additional riverboat diluted the market. Since AMCV had no real competitors on the Mississippi, by adding another vessel, they competed with themselves. The new coastal cruiser was also under performing, as existing competition fractured the market and the second (and perhaps unnecessary one) was nearing completion. Debt service on the many new vessels, the Patriot and vessels under construction added to the pressure. So even before the events of 9/11 affected tourism, AMCV was in serious trouble. The weight of the two super liners under construction dragged the company into insolvency and not long after 9/11 all operations shut down.

The SS Independence made what could be its last deadhead trip (no revenue passengers) from Hawaii to San Francisco, where it was then de-commissioned and returned to MARAD as security for the repair loan. But the Indy resisted retirement when her forward mast struck the Carquinez Bridge. Eventually she made it to storage, where she remains today –available for sale.
Meanwhile, at the Northrop Grumman- owned shipyard in Mississippi, the partially completed hulls were now tying up two expensive graving docks and AMCV (with its stock in the pink sheets) had no income to pay, as all operations were shut down. Since these ships were guaranteed by MARAD, some $180 million in taxpayer dollars went for their partial construction and the talk was that these would both be scrapped, before ever being launched.
Once again, NCL entered the picture. Essentially, they copied AMCV’s business plan to enter the market with U.S.-flagged ships (under an American subsidiary) and using U.S. crews, as required by the Jones Act. The partially completed hull apparently had enough content to be flagged American and finished overseas at a German shipyard. Since no one else was interested, NCL reportedly bought the two hulls for $24 million and promptly towed them to Germany.

NCL then applied to flag a foreign-built ship, the Norwegian Sky as the Pride of Aloha, to operate her with American crews under the Jones Act as a running mate for the Project America ship, now called the Pride of America. Things went well at the Lloyd Werft shipyard, and the Pride was to be completed in April and make inaugural cruises to the East Coast in May.

On January 14, disaster struck again, when hundred mile an hour winds caused the Pride to list, taking on water. The bottom three decks (including the engine room) filled and she settled on the bottom with a 15-degree list. Clearly, the Pride would miss her inaugural runs and insurance wrangling would actually drive the shipyard into bankruptcy. As of this date, she remains on the bottom while events get sorted out.

Thus, the first U.S.-built liner in nearly 50 years has started out as one of the unluckiest ships ever. She bankrupted her first owner before she was ever completed, looked to be headed for scrap, made an Atlantic crossing, and then sank before her second scheduled completion, bankrupting the shipyard. No dates are set for her third completion, but if maritime lore is any judge, this will now be a lucky ship, having used up all the bad luck at the beginning– not the end.