Latest ship launches illustrate a shift to Europe

Harmony of the Seas

It seems like U.S. agents are having to wait longer to see brand-new ships, or to send their clients on them, unless they want to fly to Europe.

Nearly all the ships coming out of European shipyards this year will be dedicated in Europe and spend the summer and fall sailing there.

The exception is the Seabourn Encore, which will be even farther away, in Singapore, when it is christened next January.

Once the primary window for ships to be delivered was in the fall, when they could be pressed into service in the Caribbean. That was the case in November when the Norwegian Escape was christened by Pitbull and began a series of cruises from Miami.

But while the Carnival Vista, the Koningsdam and the Harmony of the Seas will all arrive in South Florida in November, and will have occasions for travel agents to tour them or sail on them, they will be six months into their service by the time that happens.

I don’t know when the shift began. Clearly the larger cruise lines have enough ships in their fleets that leaving newbuilds in Europe for the summer doesn’t disrupt their plans for North America.

That may be different from the past, when every ship counted in the strategy to beat the competition.

And it may be good luck that Carnival Cruise Line, Royal Caribbean International and Holland America Line have some of their most attractive ships in Europe at a time when that region needs a boost.

Ironically, the next big ship introduction scheduled for North America comes in November 2017 when a European-based cruise line, MSC Cruises, debuts its MSC Seaside in Miami.

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Australia and Europe tackle cruise ship sulphur emissions

The Quantum of the Seas is one of the first Royal Caribbean ships to be equipped with exhaust gas scrubbers.

Challenges related to air pollution from cruise ship engines are cropping up elsewhere in the world, even as they’ve been overcome for now in waters around North America.

In Australia, a newly elected government ran in part on a pledge to reduce the amount of sulphur coming from cruise ship smoke stacks to the same low level as in the U.S. and Canada.

Meanwhile in Europe, some regulators are asking whether a popular solution to reducing sulphur emissions — exhaust gas scrubbers — might contribute to water pollution in some areas.

The issues are percolating because of a worldwide effort to cut pollution from ship engines, which rely on oil particularly high in sulphur.

Since Jan. 1, all ships, including cruise vessels, have had to meet a much-reduced standard for sulfur in North America and certain other regions such as the Baltic Sea.

The standard, which remains 3.5% of fuel volume in much of the world, was reduced to 0.1% in so-called Emission Control Areas (ECAs). The change will prevent 14,000 early deaths annually by 2020, according to estimates from the U.S. Environmental Protection Agency (EPA).

Now Australia is seeking parity with the U.S. In late March, voters retained the New South Wales state government led by premier Mike Baird, who campaigned on a pledge to reduce the sulphur content of fuel for cruise ships in Sydney to 0.1% by July 2016.

Such quick action could disrupt Australia’s cruise sector, which has been growing by leaps and bounds.

Bud Darr, senior vice president of technical and regulatory affairs at CLIA, said the industry is “directly and actively engaged” with New South Wales authorities and the Australian EPA on air pollution issues.

“We are exploring a range of possibilities with those authorities,” Darr said in a statement. “We encourage those officials to take into account operational considerations and the results of a science-based study they have commissioned before taking any unilateral actions locally or nationally.”

Globally, the framework for air pollution control is set by the International Maritime Organization (IMO). Sulfur standards are scheduled to drop to 0.5% worldwide in 2020.

Countries can act earlier by setting up ECAs, such as the one formed jointly by the U.S. and Canada. The CLIA statement noted that so far Australia has chosen not to create an ECA.

Because of the expense and time involved in the installation of scrubbers — Carnival Corp. is currently installing scrubbers on 70 of its ships in a three-year project that will cost $400 million — the cruise industry has focused on installing scrubbers for ships with ECA itineraries, not those sailing in non-ECA areas such as Australia.

Darr said that the sulphur content of fuel has been on the decline and in most cases is below 3.5%. He said in Australia, which imports all of its marine fuel, indications are that the content is about 2.5%.

In the past, ships were powered with “residual” fuel left over from distillation of refined products such as gasoline, leaving behind oil with particularly high sulphur levels.

In addition to using more refined fuel, ship owners have turned to exhaust gas scrubbers.  Carnival Corp. and Royal Caribbean Cruises Ltd. are among the companies that have won permission from the EPA to meet lower sulphur standards by scrubbing it from engine exhaust.

The scrubbers generally fit in a ship’s smokestack and use either seawater or fresh water augmented with alkaline to create a chemical reaction that transfers the sulphur from air to water.

The water is then treated and discharged. It can also be recirculated with a smaller discharge amount. The treated water is generally more acidic than seawater, although tests have mostly shown it to fall within parameters set by the EPA.

But some worry that the water, if discharged in certain vulnerable areas such as ports, estuaries and coastal waters, could harm marine life and otherwise disrupt the environment.

Regulators in some European countries have questioned whether discharging scrubber wash water can be reconciled with the European Union’s “Water Framework Directive,” which gives local jurisdictions say over water matters in their areas.

A group of ship owners last year petitioned the EU for clarity, saying the uncertainty over enforcement jeopardizes their investment in scrubbers as a solution to lowering sulfur emissions.

In its statement, CLIA said about one-third of ships operated by its members have either installed scrubbers or committed to do so.

In January, many EU states submitted a plan to the IMO to create an alternate standard for verifying the acidity of washwater. CLIA said it endorsed the proposal, which is set to go before the IMO’s Marine Environmental Protection Committee in May.

CLIA added that the IMO global standards should be the ones used by individual governments to fully encourage development of the new technology.

On Europe cruises, getting acquainted with VAT

By Tom Stieghorst
*Insight I got a question last week from a travel agent whose clients were surprised to see an added charge on their cruise bill whenever they went to the bar. It was an 8% fee for a Value Added Tax, a common feature of taxation in Europe that doesn’t exist in the U.S.

The tax comes on top of the 18% gratuity affixed to bar bills on most cruise ships, meaning the two charges together add nearly a quarter of the cost of the drink or bottle of wine to the price.

How was this possible? the agent asked.

It is a good reminder that European cruises can bring exposure to VAT. It is a tax that members of the European Union are expected to charge, but each country has its own way of doing so.

The cruise in question was an Oceania Cruises voyage from Spain, which of all the European countries seems to enforce its version of VAT on cruise ships most vigorously.*TomStieghorst

Different purchases are taxed at different rates. The VAT on bar sales and specialty restaurant cover charges is 8%, while the tax on items bought from retail shops on the ship is 18% and spa treatments can be taxed at either 8% or 18%, depending on the item.

Cruises that do a roundtrip itinerary from a Spanish port must charge the tax. Ships making a port of call in Spain are supposed to charge the tax while they are in port or in Spanish waters.

There is a further wrinkle. If the cruise visits a non-EU destination, such as Gibraltar or Tangier, the tax no longer applies.

Upon leaving the EU, guests from non-EU countries can apply for a refund of the VAT under certain conditions. Be sure to have clients ask for a pamphlet from the cruise line outlining the refund procedure.

Receipts from a single store that add up to more than 90.16 euros, or about $130, are eligible for a refund. Receipts from different vendors (i.e. the spa, the photo concession, shops) can’t be combined.

Alas, spirits and other goods that have already been consumed aren’t eligible for a VAT refund.