Why Scrap Them?

[London-Calling]

So why has ACL scrapped American Countess and Duchess, when they paid over $3 million dollars for the pair?  It also sounds like they are going to dispose of the wonderful American Queen too?

 

Can anybody tell me why? All three ships must have had some life left in them, especially Countess and Queen.

[BaumD]

If someone else had purchased them, that would be competition for American cruise lines. Now that American queen is gone, ACL basically has no competition except for Viking on the Mississippi.

[London-Calling]

Hmm...the way Viking keep expending, ACL need to be scared!

 

Just found thsi:

 

American Cruise scraps Countess, Duchess, evaluating Queen, Empress (seatrade-cruise.com)

[chengkp75]

8 hours ago, London-Calling said:

Hmm...the way Viking keep expending, ACL need to be scared!

Given Viking's struggles with the US flag market, I think it will be many years before Viking poses a major threat to ACL, with their years of experience in building (at their owned shipyard) and operating US flag vessels.

[London-Calling]

Struggle? Please tell me more.

Edited May 17 by London-Calling

[chengkp75]

8 minutes ago, London-Calling said:

Struggle? Please tell me more.

From the very beginning, Viking didn't understand the realities of operating in the PVSA trade.  They thought they could build a riverboat somewhere other than the US and operate it on the Mississippi, and they thought they could own the boats.  When they found that there were no exemptions to the US built and US owned requirements, that set them back a couple of years in rollout.  Then, they had to face the increased cost of US building, and paying the US owner, Chouest, to charter the boat.  Then there is the US crew issues.  First, US cruise crews are nowhere alike with crew that Viking is used to, in terms of guest service culture or in terms of loyalty to the company, resulting in massive turnover.  Then there is the pay rates (minimum wage levels, etc) and Social Security taxes, insurance, and the liability for wages for injured or sick crew, that foreign crew don't get.  ACL has had years of experience with these issues, and has developed a pool of active and potential crew, and the ways and means to locate, attract, and hire them, and even then they struggle with crewing issues all the time.  Then there are the customs issues.  Foreign flag ships operating in countries where they are not registered have everything that they import be duty free, from spare parts, labor from overseas technical engineers, to food and liquor.  US flag ships operating in the US don't get that duty free treatment, so if they need to import something for the ship's operation, it needs to pay duty on it.  Even repairs done to a US flag ship, if done outside the US (like a dry docking in Bahamas to lower cost) becomes dutiable at 50% duty.  And, finally taxes.  Foreign flag cruise ships, even those home ported and operating out of US ports, are exempt from all corporate taxes on revenues earned by the foreign flag vessel.  Not so for a US flag vessel.

 

US flag operations is an entirely different universe than foreign flag passenger ship operations, as NCL found out back in 2004 when they started their US flag operations, and with which they continue to have struggles.

[London-Calling]

Thank you! I was not aware of all this.

 

However, I was aware of the issues NCL had with "NCL America".  I note that a cruise onboard "Pride of America" can cost twice the normal.

 

I cruised on "American Queen" a few years ago. What a wonderful ship! She will be a sad loss, if they scrap her.

 

I've always wanted to cruise the Great Lakes, but the fares that I have seen make my eyes water! I also have to add the long haul fare from the UK.

[chengkp75]

10 minutes ago, London-Calling said:

Thank you! I was not aware of all this.

 

However, I was aware of the issues NCL had with "NCL America".  I note that a cruise onboard "Pride of America" can cost twice the normal.

 

I cruised on "American Queen" a few years ago. What a wonderful ship! She will be a sad loss, if they scrap her.

 

I've always wanted to cruise the Great Lakes, but the fares that I have seen make my eyes water! I also have to add the long haul fare from the UK.

The US Maritime Administration, the federal agency tasked with supporting US flag shipping, conducted a study years ago, the showed it cost 3 times as much to operate a US flag ship as a comparable foreign flag ship.  In that increased cost, crew cost was nearly 5 times higher (and this is for a cargo ship with a crew of 20, imagine a cruise ship with crews of hundreds or thousands).  This is a business model Viking will take some time absorbing and finding ways to operate in.

 

I do expect the Queen to be removed from service, but not scrapped.  She is 30 years old, well past the point where maintenance costs have increased exponentially over a ship less than 15 years old, let alone factoring in the inefficiencies of a steam power plant with today's fuel costs and environmental concerns.  Operation as a museum, or even a tied to the dock hotel are the most likely scenarios.

Edited May 17 by chengkp75

[chengkp75]

The article notes that the "cash flow" for the American Queen was between $16-18 million.  Now, not sure if the source or the reporter are confusing "cash flow" with "profit", but if they really mean the amount of money that comes in as revenue, and then goes out as expenses ("cash flow"), that is only a little above $100 per passenger-day.  Real hard to make a profit on that.

[GJustice]

@chengkp75 Fancy meeting you over here 🙂 Seen lots of GREAT information from you over on the Royal Caribbean board. Looking forward to you take on river cruising and ACL in particular.

[London-Calling]

15 minutes ago, chengkp75 said:

The US Maritime Administration, the federal agency tasked with supporting US flag shipping, conducted a study years ago, the showed it cost 3 times as much to operate a US flag ship as a comparable foreign flag ship.  In that increased cost, crew cost was nearly 5 times higher..

Excellent information. thanks you.

 

European river cruising is hardly cheap, but I guess we have more choice and competition.  We do have a few "budget" river cruise products.

Edited May 17 by London-Calling