New challenges for cruising

POLLUTION INCIDENTS COST ROYAL CARIBBEAN
Royal Caribbean Cruises Ltd. last month announced a 16% increase in net income to $383.9 million in 1999, up from $330.8 million in 1998. Reported net income for the fourth quarter of 1999 was $38.3 million, which included a $3.3 million non-recurring item. Reported net income for the fourth quarter of 1998 was $23.4 million, which includes a $9 million non-recurring item. Revenues for the fourth quarter of 1999 were $584.0 million, up from $575.1 million in 1998.

What do you suppose those "non-recurring items" were? Here's a hint. Back in June 1998, the U.S. Department of Justice announced that Royal Caribbean had agreed to pay a $9 million fine and plead guilty to a fleet wide conspiracy of dumping oil into the ocean and lying to the Coast Guard to cover up the crimes.

Then, just last month, the State of Alaska announced that Royal Caribbean Cruise Lines had agreed to a $3.5 million settlement with the State after admitting to dumping oily bilge water and other hazardous chemicals into state waters in 1994 and 1995. The settlement was in addition to federal penalties.

The incidents that led to these penalties took place between 1990 and 1995 and, since then, Royal Caribbean has taken major steps to clean up its act. The point we're making here, though, is not to stress the past wrongdoings of any particular cruise line. It's to emphasize that, like other sectors of shipping, cruising has to operate within the complex international, national and regional maritime regulatory environment.

SOLAS CHANGES AHEAD?
The recent loss of propulsive power by one of the world's largest cruise ships, Carnival Destiny,.will only add to already gathering pressure for further regulatory attention to the issue of the safety of the very largest cruise ships. In the event, the Destiny incident passed off without undue public attention. Mercifully for the cruise industry, nobody in the media asked the nasty question:"What if it had happened in the hurricane season?"

Aboard a cruise ship, real estate commands a premium. Over the years, two trends have been unmistakable. One is for the size and passenger capacity of ships to climb relentlessly upward. This is underscored by the entry of the postpanamax generation of ships-first the Carnival Destiny, then the Grand Princess and the Voyager of the Seas Currently promising to be the next contender for the title of the "largest passenger ship ever built" is Cunard's Project Queen Mary ship.

Not only is the size of ships going up, but so, in many cases, is the percentage of the ship devoted to earning revenues. That's a large part of the logic that first saw bulky things like mechanical shafting being replaced by cabling as diesel electric became the industry's preferred power mode and which is now seeing those space-consuming electric motors hung outside of the hull in podded drives.

We now have a generation of ships accommodating around 5,000 people (passengers and crew) and with vast public spaces that were not foreseen when the current SOLAS regulations were drafted.

That raises the question of what happens in an emergency. How do you get 5,000 people off a ship in a hurry? Equally importantly, how do you rescue them after you've got them all safely into lifecraft? It's known that the U.S. Cast Guard has some very serious concerns about questions like these, and so do other regulators.

It can be taken as a near certainty that these issues will be raised at this May's meeting of IMO's Maritime Safety Committee. The next step will be for a working group to be established, setting the stage for possible substantial revisions to SOLAS. The result could well be that cruise lines will have to devote some of that valuable on board real estate to things like helipads rather than, perhaps, crazy golf or imitation ski slopes.

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