The U.S.-flag ship business takes baby steps in Hawaii

In an ideal cruising destination such as Hawaii, why is only one large cruise ship sailing inter-island itineraries? The answer is rooted in centuries-old maritime laws.

The Jones Act is commonly cited as the source of the cabotage regulations controlling cruise ship routes in the U.S., but it controls shipment of goods and services, not passengers. Most cruise ships must comply with the U.S. Passenger Vessel Services Act of 1886, which forbids foreign vessels from transporting passengers between U.S. ports without a penalty unless they call at a foreign port during the itinerary. Only U.S.-flagged ships — those built in America, owned by Americans and operated by Americans — can transport passengers between U.S. ports without visiting a foreign port.

But the Passenger Vessel Services Act reaches far beyond Hawaiian waters. It is a determining factor in itineraries from the mainland by major cruise lines such as Royal Caribbean International, Carnival, Princess and Norwegian. It's the reason you can't sail from Los Angeles to Seattle and that you have to stop at a Canadian port when sailing from Seattle to Alaska. It's why cruises from the West Coast to Hawaii leave from Ensenada, Mexico, or Vancouver, British Columbia. And it's why NCL's Norwegian Wind, which is registered in the Bahamas, must call at Fanning Island in the Republic of Kiribati on its Hawaii cruises. It's the reason the Pride of Aloha, owned by NCL America, has a virtual monopoly on Hawaiian itineraries. Its officers and crew are American. It is registered in the U.S.

Until June, the Pride of Aloha flew the Bahamas flag as NCL's Norwegian Sky, built in 1999 at a German shipyard. It was reflagged after Congress granted an exemption requiring U.S. construction. (NCL created the NCL America brand to operate its U.S.-flagged ships in Hawaii.)

Past U.S.-flagged companies have foundered economically in Hawaiian waters. NCL America sails in the wake of American Classic Voyages, which stopped sailing its Patriot in Hawaii after the Sept. 11, 2001, attacks.

So far, NCL America has faced more start-up problems than is usual for a new cruise line. Its Pride of America was to be introduced to the fleet in July but was flooded in a German shipyard. Instead, the Pride of Aloha made its debut in July after reflagging and a rushed refurbishment.

The line has had trouble hiring, training and retaining an American crew, amid reports that many had quit because they didn't like the long hours and hard work or work conditions. The cruise line has said the attrition rate has been normal. But passenger complaints about service and other problems led the line to temporarily drop its mandatory daily service fee of $10 per adult.

Operating in Hawaii under the U.S. flag has unique challenges, said Rod McLeod, the last cruise executive to try it. With a long track record in the industry, McLeod oversaw the launch of American Classic Voyages' Patriot in late 2000.

"The problems NCL is experiencing are not unusual from the experiences I had with the Patriot," he said. "Our challenge was a three-step process: recruiting, training and retaining the crew, and the most difficult is recruiting."

It's harder to get and keep U.S. workers on a ship than it is to recruit workers from Eastern Europe, Asia and other regions where incomes are lower, he said. For a worker in Eastern Europe earning perhaps $200 a month, it makes economic sense to take a cruise ship job with an average income of $3,000 or more a month with tips, McLeod said. (Nearly all those earnings come from tips; workers on foreign-flagged cruise ships are paid low wages by U.S. standards.)

By contrast, U.S. workers can get shore-side jobs making comparable wages to those aboard a U.S.-flagged ship.

"The issue becomes more one of lifestyle. A very good waiter in Las Vegas would make probably what he would on a cruise ship. But in Las Vegas, he goes home every night. If you're a waiter on a cruise ship, you're there for 13 weeks and you get home for seven," McLeod said. "You have to go … find people who are prepared to accept that lifestyle."

McLeod said American Classic Voyages had difficulty hiring Hawaiians, because in the islands' culture, family bonds are strong, and many Hawaiians don't like to be away from their homes and families. Hawaii also has a well-established resort market, which competes with ships for workers, and often wins.

"[NCL America is] a new venture, and no one has done this successfully in 50 years," McLeod said. "It's going up against an international-flag industry.

"The U.S.-flag large-ship business is in its infancy — it's learning to walk while the other cruise lines already know how to run."

---

Mary Lu Abbott welcomes comments but cannot respond individually to letters. She can be reached at cruisecolumn@aol.com. Cruise News appears once a month.