NCLA is on it's own - Star have carried out their ultimatum threat to pull out

20/08/2007 - Honolulu Advertiser article...

NCL Corp.'s money-losing Hawai'i interisland cruises will come up for a review next year, when the company will decide whether to continue them.

"The options are two," NCL president Colin Veitch said in an interview. "One is continue the (Hawai'i) business and the other is not to continue the business."

The company says it will decide on its NCL America subsidiary, which operates three interisland ships, by the end of 2008.

NCL has struggled with its Hawai'i interisland operation, losing money the past two years. NCL doesn't break out results for its divisions, but last year the company lost $130.9 million. While its international cruises were profitable, the Hawai'i operations nullified the gains. The company has been reworking its Hawai'i strategy after aggressively adding capacity here.

The company has announced plans to relocate the largest of its three local ships, the 2,466-passenger Pride of Hawai'i, to Europe in February.

The company yesterday disclosed the review of its Hawai'i operations as it announced a pending $1 billion cash infusion from one of the nation's largest private equity companies, Apollo Management LP. New York-based Apollo will become a 50 percent owner of NCL, which will use the money to pay down debt and help expand its operations.

As part of the deal, NCL's owner agreed to review the Hawai'i business and to fund the local operation's losses.

Veitch said he is optimistic the Hawai'i operations will be able to continue.

"Shareholders are very optimistic and enthusiastic about the (Hawai'i) business," Veitch said in a telephone interview from his Miami office. "If that were not the case, it (closing the Hawai'i operation down) would have been dealt with now."

In addition to reducing its Hawai'i fleet by one ship, the company hopes to save money with the help of a change in labor rules. Last year a federal law was changed that allows up to 25 percent of staff to be green-card holders or other visa holders.

Veitch said that change will help the company deal with turnover by bringing in veteran foreign crews. He said last year the company spent $30 million on recruiting, training, documenting and transporting workers. He said the company is starting to see some relief and that cruise prices that had been depressed by too much capacity, looked to be increasing after February.

"We're already seeing in the forward bookings, those beyond February, a much more encouraging revenue picture than we've seen in the last year and a half."

The agreement announced yesterday between NCL owner Star Cruises and Apollo will keep the Hawai'i operations under the NCL brand while Star funds losses.

Veitch said an agreement was needed to cover the Hawai'i operations because it was difficult to value a money-losing operation and because NCL needed time to see if its new local strategy was producing expected gains.

"We believe an unlikely alternative is that the business closes down," Veitch said. A two-ship Hawai'i operation "is going to be a good business."

Yesterday's Seatrade.....

Star Cruises is exiting NCL America

It’s official: Star Cruises is leaving the NCL America business in Hawaii in which it has shared ownership via a subsidiary formed with NCL Corp. co-owner Apollo Investment.

 

Last Friday, the parties quietly agreed to the termination of Star’s interest in NCL America. It was exactly four weeks to the day that Star shares shot up in Hong Kong on rumors of the disposal of an unnamed subsidiary.

 

NCL Corp. has made an unspecified payment to Star in respect of its interest in Pride of America’s assets. In January, assets related to Pride of Aloha are expected to be settled......(continues in article)

Star made it perfectly clear that it would not continue to lose money in Hawaii and they gave the NCLA dept 16 months to shape up or ship out....as expected, they have shipped out and who can blame them, eh?

Could see that coming. It's only a matter of time before NCL America is out of business or they replace the existing itinerary with 14 day cruises to Hawaii from LA.

I also suspect that the failed attempt to get the Jones Act changed has had some influence on the decision by Star to pull out their investment in NCLA.

In the last 16 months since the gauntlet was thrown down by Star, NCL/NCLA have tried every trick in the book to save the subsidiary...some bordering on dodgy.

As you say...it was bound to happen eventually and it will be a matter of time before Pride of America is reflagged as international and used either on west coast Hawaii itineraries or elsewhere in the world...or put on the market.

Damn shame as NCLA had great potential to bury the ghosts of past companies working out of Hawaii...it was thrown away by lousy management and questionable decisions regarding manpower used. As much as it annoys the US to say this, the crew ultimately let the company down...not all of them but it is a fact that with everything in life, it only takes a minority of troublemakers to bring down a company.

Pride of America had a bad start...being the unwanted & unfinished product of a business that went bust...then sinking in her drydock during a storm in Hamburg. Maybe that should have told them that maybe it wasn't a good idea afterall.

So much potential lost...damn shame.

So, as I interpret the Seatrade article, NCL has paid Star for the PoA, the Sky, and the Jade....for a total payout of $500M (the 3 hawaiian ships)

It should be a lot easier to be nimble now, with only NCL & Apollo to please, and not Star as well...

How old is this article?....It specifies the operation of NCLA's "3" ships, they have been down to 1 for at least 6 months now.

Not that i am arguing with the fact they are losing money, cause i firmly believe they are.

Can't wait to see what the cheerleaders have to say about this though. There was a thread just a few weeks ago about how NCLA could not possibly be losing money :p

What can i say, got 3 weeks off of work am bored and in the mood for a little bit of evil :p

Actually I see this very differently. The agreement provided that by end of 2008 Apollo/NCL would have to pay Star for these ships or turn the ships over to Star. So all of this is the end of the original purchase agreement. Star STILL owns 50% of NCL. All that is happened is the last of the cash has been transferred and the agreement concerning NCL America finally has been completed. NCL a long time ago made the decision to reflagged the Jade and leave the one NCLA ship in Hawaii. Other than the fact that the money has been paid(inclduding the agreement on how much to pay) its really not that much 'news".

Star has been paid a billion dollars, it has all the debt off its books and it still owns 50% of NCL......not bad for an investment that was less than $500 million dollars...

How old is this article?....It specifies the operation of NCLA's "3" ships, they have been down to 1 for at least 6 months now.

 

Not that i am arguing with the fact they are losing money, cause i firmly believe they are.

 

Can't wait to see what the cheerleaders have to say about this though. There was a thread just a few weeks ago about how NCLA could not possibly be losing money :p

 

What can i say, got 3 weeks off of work am bored and in the mood for a little bit of evil :p

If you read it properly, the Honolulu article is from when the initial ultimatum was issued...August 2007. The ultimatum gave NCLA 16 months to prove itself viable or not.

Now fast forward to 16 months later, NCLA have been dropped by Star, as most anticipated that it would...regardless of how many tricks were used to save it.

NCLA with one ship to it's name has no choice but to succeed. If it fails then that will be proof enough to justify Star's stance and ultimatum.

In order to save face, it would be better in the long run to either reflag or sell Pride of America.

The failed attempt to hijack the Jones Act, the basically lousy record that NCLA have had from day one in regards to service etc has done them absolutely no favours whatsoever...if anything it is the bad reviews that sent cruisers to Princess, HAL etc for their Hawaii cruise experience, not the foibles of the Jones Act.

Humans march with their feet, if they ain't happy, they take themselves and their money elsewhere. Pride of America has a massive amount of superior competition out there and with the bad reviews still happening, they stand a snowball's chance in a furnace to finally break even or make a decent profit.

NCLA was a good idea in theory but the practice was way off the mark and economics have to govern whether or not something is viable and as things stand currently, NCLA is not viable...the sums no longer add up (that's if they ever did in the first place, the critics thought it was sheer folly to put 3 ships on a route that barely managed to keep one reasonably well booked with American-Hawaii that went belly up in 2001).

Yes it is a nice romantic notion to have US flagged ships with US nationals working on them out of one of the world's most incredible places on earth.....but when push came to shove and the backers invested, they found out pretty quickly that this dead horse ain't going to be revived at any cost.

Wrong ship(s), wrong time, wrong place....NCLA was doomed to fail and in all probability the F3 order has been trimmed back to a single ship cos they got their fingers burnt with NCLA and they cannot afford to get burnt again. Pride of Aloha/Norwegian Sky is still on the market for way over book value when you consider the global economy at present.

Damn shame but there ya go...NCL/Star/Genting/Apollo will have to chalk this failure up to experience and hope they never go down the same road again.

Duplicate Post

NCLA have been dropped by Star, as most anticipated that it would...regardless of how many tricks were used to save it.

 

 

NCLA with one ship to it's name has no choice but to succeed. If it fails then that will be proof enough to justify Star's stance and ultimatum.

Not exactly. As a 50% owner of NCL Star retains a 50% share of NCLA. All that has happened is the NCLA assets have been folded into the bigger Apollo/Star NCL deal. With the POA now making money and a stable market for the Sky (POAL) this move was now possible.

I see far more positives in this move then the negative spin you wish to provide.

1. three ships in Hawaii didn't work.

2. the whole Hawaii adventure was cursed from the start(the Pride of america sank at the pier).

3. they moved three ships in too soon.

4. Training didn't work(why do the Brits think that Americans don't work ---over fed over sexed over paid and over there In fact we have much less time off than most industrialized nations.) I want our Marshall plan money back.

5. You sure can gloat over the failure of the NCL America. Its over they tired and it didn't work.

I personally would like to know what is going to happen with the SS United States than to rehash this again.

All that has happened is the purchase agreement contigencies have been completed as to NCL A...

I am confused. Putting aside all opinions about NCLA (there are plenty), what exactly has taken place, or might still take place?

Is NCLA still in Hawaii or not?

Here is what I read a few days ago. Sounds like going down to one ship did the trick:D

http://www.travelpulse.com/Resources/Editorial.aspx?n=49357

NCL turned a profit in the third quarter of this year and this included the performance off NCLA. The Pride of America is booking strong and after they pulled two ships out of the market the price point for the POA went way up and the consumers are paying it. I think the Pride of America will continue to book strong and generate profits for the company.

Should I be worried about POAm being around for the May cruise I have booked? Should I have a backup plan?

Should I be worried about POAm being around for the May cruise I have booked? Should I have a backup plan?

I don't think you should be concerned. Had NCL not decided to roll NCLA into the Apollo deal and acquire the ships from Star then you should have been worried. This move is in fact a positive indicator for the future of NCLA. The option was to not buy the assets and fold up NCLA which is exactly what they did not do.

How old is this article?....It specifies the operation of NCLA's "3" ships, they have been down to 1 for at least 6 months now.

 

Not that i am arguing with the fact they are losing money, cause i firmly believe they are.

 

Can't wait to see what the cheerleaders have to say about this though. There was a thread just a few weeks ago about how NCLA could not possibly be losing money :p

 

What can i say, got 3 weeks off of work am bored and in the mood for a little bit of evil :p

Here is what I read a few days ago. Sounds like going down to one ship did the trick:D

 

http://www.travelpulse.com/Resources/Editorial.aspx?n=49357

Where did you read it "a few days ago"? The article is dated today (Dec 26, 2008).

Where did you read it "a few days ago"? The article is dated today (Dec 26, 2008).

:confused:

NCL Extends Hawaii Deployment to January 2012

Published on: December 10, 2008

"The options are two," NCL president Colin Veitch said in an interview. "One is continue the (Hawai'i) business and the other is not to continue the business."

How astute. No wonder he was made president.

How astute. No wonder he was made president.

He no longer is with the company.

Can't wait to see what the cheerleaders have to say about this though. There was a thread just a few weeks ago about how NCLA could not possibly be losing money :p

 

What can i say, got 3 weeks off of work am bored and in the mood for a little bit of evil :p

Sure, go causing trouble and make all of us Lowellians seem like we're up to no good! I think the PofAmerica will stay in Hawaii but it just won't have any further involvement by Star Cruises. I guess Apollo Management inherited it.

Hope you had a great Christmas! Sailing the Crown in 1.5 weeks! :D