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Thursday, May 13, 2021
What happens after Pride of America says ‘aloha’ to Hawaii?
By Grassroot Institute @ 12:14 AM :: 2680 Views :: Jones Act, Tourism, COVID-19

Photo by Charley Myers

What happens after Pride of America says ‘aloha’ to Hawaii?

If the 2,186-passenger cruise liner were redeployed or retired today, there would be no comparable ship to replace it under federal law

By Jonathan Helton, Grassroot InstituteMay 11, 2021

The stately MS Pride of America cruise liner has long been a fixture in Hawaii. But that could easily change — and spell trouble for Hawaii’s already vulnerable cruise tourism industry.

Because of the COVID-19 lockdowns, the world cruising industry is in turmoil, with much talk about redeploying ships and many ships simply being sold for scrap.1

If the 2,186-passenger Pride of America were to be redeployed or retired from service completely, Hawaii would be left with no large cruise liner legally qualified to transport passengers between Hawaii ports without making a long detour to a foreign port.

That detour requirement under the U.S. Passenger Vessel Services Act has been beneficial to Norwegian Cruise Line, owner of the Pride, but not so much for Hawaii’s economy nor the operators of foreign-flagged and built cruise liners, who have to make the costly and time-consuming detours to foreign ports, typically to Fanning Island about 1,000 miles to the south. 

Until the COVID-19 lockdowns came along in March 2020, the Pride of America had been cruising in Hawaii waters since 2005, helping fuel prosperity in the Hawaii ports where it stopped providing reliable employment to more than 900 crew members.2

Since March 8, 2020, however, the cruise liner has been sitting idly in Honolulu Harbor as NCL loses money by the bucket loads3 and tries to convince the U.S. Centers for Disease Control and Prevention to lift its restrictions on the U.S. cruise industry.4

Other states hurting, too

Hawaii is not the only state to feel the pain of the CDC’s restrictions. Florida, for example, is suing the agency in an effort to reopen the ocean cruising industry and keep companies such as Carnival Cruise Line from moving the homeports of their ships to foreign jurisdictions with more liberal public health mandates.5

Alaska’s cruise industry has been hit especially hard. The Last Frontier derives more than half of its annual tourism arrivals from cruise ships, but the industry has been crushed by Canada’s refusal to let vessels carrying more than 100 passengers stop at its ports, until at least February 2022. This is a problem because all of the larger passenger vessels that serve Alaska are foreign-flagged and built, and like in Hawaii, must make a foreign stop, in this case at one of Canada’s western ports.

So Alaska’s problems — not counting the issues with the CDC — are two-fold: Canada’s ban on large cruise ships until early 2022, and the PVSA, which has made Alaska’s tourism trade overly reliant on foreign-flagged and built cruise liners. That, in turn, is a problem because there is only one large cruise liner that is qualified under the PVSA to carry passengers between U.S. ports: the Pride of America, which by law is restricted in the U.S. market to serving only Hawaii.

In October 2020, the Grassroot Institute of Hawaii released “Cruising in Hawaii,” a policy report detailing how the Passenger Vessel Services Act hampers cruise lines operating in the United States.6 Overall, the PVSA has been a complete failure at achieving its intent, which was to protect U.S. shipyards and reserve U.S. commerce for U.S. ships.7 Instead, there has not been a single large cruise ship built in the United States since the 1950s.8 The last time anyone tried, the result was the Pride of America, the only large ocean-going cruise ship flying a U.S. flag.

Pride of America’s complicated history

Construction of the Pride of America, originally named Project America 1, was started in 2000 as part of a federal government plan to revive American shipbuilding. Two ships were planned, but despite $185 million in subsidies, equal to $286 million today,9 only 40% of the work on the Pride was completed before the original owner, American Classic Voyages, went bankrupt.10 Norwegian Cruise Line bought the hull for a mere $24 million ($276 million today),11 then spent $340 million more ($509 million today)12 to have the ship finished in Germany in 2005.13

Now considered foreign-built, the ironically renamed Pride of America ship was granted an exemption from the PVSA’s U.S.-build requirement after heavy lobbying by U.S. Sen. Daniel Inouye of Hawaii and others,14 with the proviso that it be limited to serving only the Hawaii market, unless transferred to an international home port.

“Our Pride of America agreement requires us to sail the Hawaiian Islands year-round,” a Norwegian Cruise Line representative told Cruise Industry News last June.15

At its christening in New York, then-U.S. Secretary of Labor Elaine Chao said she hoped the ship would mark “a revival for the Merchant Marines,”16 though things haven’t quite worked out that way.

Over its 16-year life, the ship has been refurbished once, in 2016. It spent almost a month at the BAE Systems San Francisco Ship Repair facility, receiving improvements to its library, dining room, pool and other amenities. It also added the Soho Art Gallery.17

Currently in limbo, eager to resume cruising

Currently, the Pride of America remains in limbo. NCL had planned to put it back into operation last year, but its start date has repeatedly been pushed forward because of CDC regulations; one tentative goal was October 2020, then May 2021.18 As of mid-April, the CDC was not planning on allowing cruise ships to sail in U.S. waters before November 2021.19 Norwegian Cruise Line has been lobbying for a resumption of cruising in July, with safety protocols that would include requiring anyone sailing on its ships to be vaccinated against COVID-19.20

However long it takes, the Pride of America very likely will sail again, with its passengers enjoying the luxury of open waters, beautiful night skies, onboard entertainment, all-you-can-eat dining areas and wonderful visits at its various ports of call. However, those might not always be in Hawaii, if NCL decides to homeport the ship somewhere outside of the U.S.

Norwegian Cruise Line did not respond to repeated requests for comment on its plans for the Pride, but even if leaves the Pride of America in Hawaii, what will happen when the vessel is past its prime? The average cruise liner is usually 30- to 45-years-old before being retired from commercial use. Often, cruise lines operating in the North American market sell their vessels after 15 to 20 years to lines in other regions that care less about age.21 In other words, if the Pride were a ship operating in the international market, or even a competitive North American market, it would be nearing retirement. 

Meanwhile, more than a dozen large cruise ships have been sold off or scrapped since the beginning of the pandemic. Many of those were built in the early and mid-1990s, making them only slightly older than the Pride.22

Because the PVSA provides a barrier to competition, it is likely the Pride will remain in Hawaii for a few more years at least, profiting from its captive market.23 Eventually, though, Norwegian Cruise Line will need to consider replacing the ship or cutting the Hawaii itinerary altogether.  

How to ease the transition: Reform or repeal the PVSA

Replacing the Pride would be challenging. Even if large cruise liners were still being built in the U.S., they almost certainly would carry an eye-popping price tag, just as U.S.-built ocean cargo vessels intended to qualify under the Jones Act typically cost at least four to five times more than comparable ships on the international market.24 Also, NCL would need to go through the arduous process of obtaining another PVSA exemption, if it sought to qualify under the act with another foreign-built vessel. 

There is, however, a simple reform that would solve the problem: Amend the PVSA to allow U.S. cruise companies to buy foreign-built ships, just as U.S. airlines can buy foreign-built aircraft.25

Similar waivers are issued each year for small passenger vessels. Any for-hire vessel with capacity for 12 or fewer passengers can apply for an administrative waiver from the U.S. Maritime Administration.26 According to a Freedom of Information Act request, more than 1,000 such waivers were issued between 2005 and 2017 so Americans could buy these smaller vessels and sail them in U.S waters.27 Apparently these foreign-built vessels pose no danger to national security, so why should the large ships be treated so differently? 

All things considered, the only significant difference would be the crews. Hypothetically, the crew of a large PVSA-qualified ship would be better qualified for manning a military vessel in the event of a national emergency requiring significant sealift capacity. But this hypothetical has never been tested. 

Further, this scenario is doubtful since U.S. civilian mariners are a volunteer force. There is no guarantee the crew from the Pride of America, or any of the smaller PVSA cruise liners, would serve in a military emergency.28 And once the Pride of America leaves the fleet, that question will be moot, as there will no longer be any large passenger vessel mariners to even volunteer. 

If federal officials want to ensure that the Pride of America is not America’s last large U.S.-flagged cruise liner, they need to reform or repeal the PVSA.

Considering Alaska’s immediate quandary — and Hawaii’s longer-range future — they probably should not wait for the retirement of the Pride of America, but get the ball rolling now.

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