Cruise Line’s Cash Crisis No Surprise to the Savvy

Earlier this year, Premier Cruise Lines was promising to do big things out West and give us greater choice among Mexican cruises from Los Angeles. Instead, Premier’s best use today is as a cautionary tale.

Premier, known for its child-friendly Big Red Boats and budget Caribbean and Atlantic itineraries, suspended operations on Sept. 14. But just 10 months ago it had announced a grand realignment, saying it would station one of its ships, the Rembrandt, in Los Angeles, this fall.

Premier aimed to send the Rembrandt here for three- and four-day itineraries between Los Angeles and Ensenada, Mexico, the same route that Carnival and Royal Caribbean cruise lines already ply. It planned to focus on families by outfitting the Rembrandt as a Big Red Boat. Apart from tossing some passenger business to the Port of Los Angeles, this move was a good bet to heighten competition and perhaps hold down prices in an already highly competitive market. (Even without Premier, the price for cruises to Ensenada frequently dips beneath $100 per person per day.)

But Premier’s plans went farther south than any itinerary in its brochures.

Amid a series of embarrassments and setbacks in the last six months, the company quietly scrubbed its L.A. plans, intending to keep the Rembrandt sailing along the East Coast. Premier’s misadventures climaxed last week when the five vessels it operates abruptly headed for port. A day later, the ships began discharging passengers in mid-cruise, leaving an estimated 2,800 travelers shipless with less than a day’s warning. Future Premier cruises have been canceled.

The reason: The lender that financed most of the ships, investment bankers Donaldson, Lufkin & Jenrette, moved to repossess them after nonpayment of debts. The lender and Premier arranged return travel for the passengers, including several charter flights.

The Big Red Boat I packed off its passengers in the Bahamas, where they flew back to Orlando, Fla., or to their Port Canaveral starting point. Passengers on the Big Red Boat III were debarked in Cozumel, Mexico, and Nassau, Bahamas, with return flights to Houston. Passengers on the Rembrandt and SeaBreeze were offloaded in Halifax, Canada, then flown to Boston and New York. Big Red Boat II, operated by Premier but owned by Oceanic Marine Ltd., was expected to sail back to New York with passengers aboard.

In a conference call last week, Premier general counsel Alan Twaits said the company was laying off most of its staff and contemplating its financial options.

Premier officials said information for passengers seeking refunds would be available on the company’s toll-free phone number: (800) 327-9766.

Premier’s collapse was no surprise to travel agents who deal with the cruise industry. The litany of Premier’s troubles is an excellent example of what to look out for when choosing a cruise company.

Among the Premier’s recent setbacks:

* On May 27, the maiden cruise of the Big Red Boat III was beset with mechanical problems, including air conditioning that malfunctioned. About 1,000 customers got certificates for a free cruise. The mechanical problems lingered. A week later, after the next cruise, passengers also received certificates for a free cruise.

* The line also canceled cruises on Big Red Boat III that were to begin June 10 and 17 because one of the ship’s two propellers was damaged in a collision with a tugboat.

* On June 11, Premier’s Big Red Boat II was off Newport, R.I., and was expected to leave that evening. But when the ship pulled up its anchor, it snagged an underwater power line, causing a widespread power outage in Jamestown, R.I. The ship was delayed for several hours.

* Also in June, Premier laid off 38 employees, 10% of its work force. In May, the company sold its ship OceanBreeze to Imperial Majesty Cruise Line of Fort Lauderdale, Fla.

* In late June, a Miami federal appeals court ruled that Premier and other cruise lines with ships registered abroad are required to accommodate disabled passengers under the Americans With Disabilities Act. The decision grew from a lawsuit filed by Tammy Stevens of Jacksonville, Fla. Stevens, who uses a wheelchair, said that on a Premier Cruise she was advised to use a bucket to replace the cabin toilet that wasn’t accessible to her. The U.S. Justice Department argued in support of Stevens in the case. Premier, which has not yet answered Stevens’ account in court, has filed a petition for reconsideration.

* Around dinner time on Aug. 20, as the Big Red Boat II sailed from Newport, R.I., to Boston, the ship’s power failed. Premier flew in technicians to work on the problem, and the ship reached Boston many hours late on Aug. 21. The ship remained in Boston until late Aug. 22 and missed a port call at St. John, Canada. Again, about 1,000 passengers received certificates for a future cruise.

Many of those problems, taken alone, could have been dismissed as isolated misfortune. But when bad luck comes with such frequency, it’s logical to wonder if this is luck or a consequence of deeper troubles.

The staff reduction hinted at cash-flow problems, as did the sale of the ship and the scrubbing of the company’s repositioning plans. Technical problems don’t necessarily point to a larger problem, but when such problems recur, it’s sensible to be wary. And many travel agents were.

In fact, some agents, made nervous by the above troubles and suspicious about delays in commission payments from the company, told the travel industry newsletter Cruise Week that they stopped selling Premier months ago.

For consumers, this is a classic example of what they can lose by chasing bargains. The travelers who did homework on Premier or who relied on cautious, well-informed travel agents had a far better chance of avoiding trouble.

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Christopher Reynolds welcomes comments and suggestions, but cannot respond individually to letters and calls. Write Travel Insider, L.A. Times, 202 W. 1st St., Los Angeles, CA 90012, or send e-mail to chris.reynolds@latimes.com.