Cruising 2001: year-end review: major lines retrench in the wake of a weak economy and the aftermath of 9-11

Cruise Travel, Jan-Feb, 2002 by Theodore W. Scull

The worldwide recession hit the cruise industry hard for all of 2001, and to keep berth occupancy rates up in order to maintain numbers for generating onboard spending, fares came tumbling down--and so did the profit margins for nearly every line. While the industry appeared to be absorbing all the new tonnage from orders made before the economic downturn swept into the picture, both Royal Caribbean and Princess have had second thoughts about taking up options on further ships in current series.

The mass-market and premium-level operators began offering seven-day cruises at prices beginning as low as $399 and $499 per person, in some cases, with only slightly more elevated minimum rates for the traditionally higher priced Alaskan and European markets. The high-end lines responded in two distinctively different ways--either by discounting cruise rates or, in order not to completely undermine luxury price levels for the long-term, offering free air, complimentary shore excursions, and/or a lump sum of onboard credit.

Hoof & mouth and mad-cow diseases deterred many North Americans from traveling to and cruising from Britain and Northern Europe, and as the ongoing Arab-Israeli conflict only deepened, nearly every cruise line canceled all calls at Ashdod and Haifa for the foreseeable future. With Israel off the cruising map, Eastern Mediterranean cruises became hard hit and bookings dropped.

Then in the wake of the September 11th terrorist attacks against New York and Washington, the cruise industry went into a sea change, and the impact has been substantial and widespread. The immediate effect was the complete and unprecedented shutdown of air service to, from, and within the United States, resulting in cruise passengers being unable to leave or reach their ships. Cruises in progress returned to port, but in some cases there were arrival delays as heightened security procedures took place, and those bound for New York were diverted to other northeastern ports.

Cruise lines kept passengers aboard until some flight schedules resumed, many on a limited basis, and impacted travelers had priority boarding. Subsequent cruises often did not operate as joining passengers were either unable or unwilling to leave home. Ships catering to North American passengers and leaving from European ports were hit especially hard, and some sailings were canceled altogether. Other sailings had many missing passengers.

Then on September 25th, Florida-based Renaissance Cruises, the fifth largest cruise line with 10 ships, announced a cessation of all cruise operations effective immediately. While the line had been experiencing financial difficulties for some time due to the recession and absorbing eight new ships in the space of three years, the terrorist attacks on the United States caused both widespread cancellations and a severe drop in new bookings, with most Renaissance passengers originating in North America.

Passengers and most of the crew were repatriated, and the eight 684-passenger ships and the two 114-passenger vessels were laid up--six of the eight larger and the two smaller ones, Renaissance VII and Renaissance VIII, at Gibraltar; and R Three and R Four in Tahiti. The eight 30,300-gross-register-ton ships, all completed since 1998, will likely find buyers, though there may be some time lapse for the legal procedures to permit charters and sales.

The complex ownership makes it difficult to determine the direct financial impact on the French shipyard Chantiers de l'Atlantique, builders of the eight R vessels. Its order book includes additional new ships for Celebrity, Crystal, Festival, Mediterranean Shipping Cruises, Princess, and the most important order of all, Cunard's approximately 150,000-grt Queen Mary 2. Ordered ships in several yards have already been delayed, some where construction has begun, and others may be in the offing. Carnival Corp., owner of Cunard, says that its huge liner will be built, though steel has not yet been cut.

Then on October 19th, American Classic Voyages filed for Chapter 11 reorganization. The company ceased operating its two Hawaiian ships, the Independence and Patriot, plus the Delta Queen Steamboat's American Queen, Mississippi Queen, Columbia Queen, and Cape May Light as soon as they reached their final ports. The National Historic Landmark flagship, the 1926-built Delta Queen, is the only ship continuing to operate her scheduled voyages. Hail to the DQ! AMCV also said that it intended to work with Northrop Grumman Corporation and the U.S. Maritime Administration to continue with Project America, the construction of two U.S.-flag ships for inter-Hawaiian service. Within three days of the reorganization announcement, the Patriot (the former Nieuw Amsterdam) reverted to Holland America Line ownership.

In the wake of the terrorist attacks on the twin towers of the World Trade Center, all non-essential harbor traffic ceased in the Port of New York, and the Passenger Ship Terminal, located on the West Side of Manhattan, became the command center for the Federal Emergency Management Agency, the Red Cross, and the National Guard. Coast Guard and police vessels patrolled the waters and escorted all ships passing along the Hudson River. While the tanker, bulk, vehicle, and container trade resumed, cruise ships that were scheduled to call at New York had to divert to Baltimore, Philadelphia, and Boston to embark and debark passengers. Cunard's westbound New World terminus again became Boston (after some 150 years) where the Queen Elizabeth 2 interchanged passengers with the Caronia, but not after both experienced considerable delays in being allowed to berth. The logistics proved difficult for those ports not used to handling multiple daily arrivals and departures. Additional bomb threats and a few instances of suspicious passengers being arrested only added to the confusion and tension.