New Shipyards Entering Cruise Business Face Uphill Challenge

Two new shipyards have entered the cruise ship building business recently, while an additional yard with a surprise cruise order has some passenger vessel history, but all will be facing a set of staggering challenges when it comes to building customized ships for picky clients and pulling off a flawless hotel build.

The major players in the cruise-ship building business have been going at it for decades, and most specialize in passenger vessels.

Meanwhile, major cargo-ship building yards in South Korea have tried again and again to land orders without success.

In Japan, Mitsubishi has built for local companies along with Princess Cruises and AIDA Cruises, but late deliveries and cost overruns on the recent AIDA ships have not helped the cause.

Kleven

New Hurtigruten Ship Rendering

The last time a cruise ship was built in Norway, the shipyard went bankrupt. That was just over a decade ago with the ship being The World and the shipyard Fosen Mekaniske Verksted against a backdrop of an extremely expensive labor environment.

Earlier this year, Kleven entered into a contract with Hurtigruten to build a set of expedition cruise ships earlier this year, with an option for two more. The ship’s are being built on a Rolls-Royce technical platform.

Shipyard executives declined to speak on the record, but the yard’s website said Kleven was a family-owned operation dating back many decades.

The yard’s recent deliveries show no shortage of supply and platform vessels for the offshore industry, in addition to Coast Guard ships.

A log of ship deliveries back to 1961 shows everything from fish vessels to tug boats, with the last passenger vessel being the Finnmarken, which was built in 2002 for coastal service. The yard has only built three (coastal) passenger ships.

Uljanik Group

Scenic Elipse

In Croatia, Uljanik Group will build its first cruise ship for a new entry to the cruise ship market in Scenic.

The agreement calls for a five-star level expedition ship to be delivered in August of 2018, with an option for a second vessel. The ship is 16,500 tons with capacity for 228 guests.

In 2015 the yard delivered a 3,311-ton ro/ro ferry, the second in a two-ship order. However, the yard mainly builds barges and other supply vessels, but did deliver a series of car carriers as recently as 2008.

The Croatian builder can trade its history back to 1856, when it started out building ships for the Austro-Hungarian Navy.

In 2013, the yard added another facility and building site, 3.Maj, to its portfolio, which has upped its capacity.

The group also owns an engine factory, ULJANIK Diesel Engines Factory Ltd, and has recently delivered a number of large tanker vessels.

Brodosplit

New Star Clippers vessel

Another Croatian yard, Brodosplit, landed an order from Star Clippers for a sailing ship, and is believed to be working toward a separate order for smaller niche vessels.

Of note, the yard has built new motor vessel ships for Grand Circle Cruise Line over the years.

The shipyard is located in Split, Croatia, and was formed when several smaller ship repair facilities combined forces in 1922. The yard builds various types of ships including commercial, container and passenger vessels.

The new Royal Flyer for Star Clippers will be 162 meters long and 18.5 meters wide, and feature five masts and sails.

While it is a sailing ship, the vessel will have two fully independent electric propulsion engines and be compliant with Safe Return to Port rules with two engine rooms.

Norwegian has no plans to reduce China service, Del Rio says

Norwegian Joy
It’s full speed ahead in China for Norwegian Cruise Line.

Despite recent announcements by other lines that ships once scheduled for year-round service in China would move to Australia for part of the year, Norwegian Cruise Line Holdings chairman Frank Del Rio said his company has no plans to follow suit.

“I’m glad to see that the others are leaving,” Del Rio said. “That leaves us perhaps the last man standing, and that’d be great. I’ll take all the demand.”

Del Rio’s comments came during a conference call with analysts to discuss first-quarter financial results.

Cruise selling in China has been disrupted since March by the Chinese government’s move to halt travel to South Korea, a protest of a decision by the South Korean government to install a U.S.-made missile defense system.

“The disruption caused travel agents to be distracted from focusing on contracting charters further out into the year, then trying to book, in some cases rebook, [and] find new customers [for those] who no longer wanted to go on sailings that didn’t include Korea,” Del Rio said. “But it’s also had a bit of a chilling effect on overall demand.”

He added that sales for new cruises had started to pick up in the past two weeks. “The South Korea situation, we believe, is a temporary bump in the road, and time will tell,” he said.

Norwegian Cruise Line is scheduled to start sailing the 3,883-passenger Norwegian Joy, its first ship custom-designed for the Chinese market, from Shanghai in late June.

Princess Cruises recently said that its Majestic Princess, also custom-built for the Chinese market, will be deployed to Australia for six months in 2018-19. The move follows the redeployment of the Sapphire Princess from China to Europe in the latter half of 2018.

Because Norwegian is new to the Chinese source market, Del Rio said he’s being cautious about predicting the impact of the Norwegian Joy on the company’s performance in the second half.

“So in many ways, all the good things that I have to say about how our business is operating on the other 24 ships is being somewhat tempered by the potential that could arise in China,” Del Rio said.

A strong Wave

Del Rio said on the call that this year’s Wave was “the best Wave season that we and likely the industry has experienced in quite some time.” As a result, NCLH brands have fewer cabins to sell for the rest of 2017, and it expects higher prices on those bookings than last year.

NCLH, which also includes Oceania Cruises and Regent Seven Seas Cruises, posted Q1 net income of $61.9 million, compared with $73.2 million a year earlier. Revenue rose 6.8%, to a record $1.15 billion.

Del Rio attributed the net-income decline to higher-than-expected maintenance and repair costs, particularly for the Norwegian Star, which broke down in Australia for five days in February.

Outside of that, CFO Wendy Beck said the results were driven by “strong close-in demand in the Caribbean, coupled with strength in onboard revenue.” Cuba itineraries are now available on all three brands, and “the performance of that itinerary is just astonishing,” Del Rio said. NCLH is also doing better than it planned in Europe this year, which Del Rio attributed to a combination of less inventory to sell than at the same time last year and positive market conditions. “That is resulting in very, very strong sales in Europe at significantly higher prices than the same time last year,” he said.

Carnival settles pollution lawsuit with state of Alaska

Image result for carnival cruise ships pollution

Carnival Cruise ship Belching out Fumes

Carnival Corp. has settled with the Alaska Department of Environmental Conservation over allegations that Carnival Cruise Line violated Alaska’s standards that regulate visible air pollution from marine vessels.

Carnival said the settlement was reached Aug. 6, 2016, and resulted in a payment “not material to our consolidated financial statements.”

The disclosure was made in Carnival’s 2016 annual report filed with securities regulators.

Carnival said Alaska in 2015 issued notices of violation to all major cruise lines operating in Alaska, including its Princess Cruises and Holland America Line brands, the two biggest lines in the market.

Carnival said it is cooperating with Alaska and “conducting its own internal investigation into these matters.”