Norwegian Cruise Line seeks federal exemption
By Kelly Yamanouchi
Advertiser Staff Writer
Norwegian Cruise Line is in talks with U.S. Senator Daniel K. Inouye about becoming the dedicated cruise line in Hawai'i, a move that also could exempt it from federal legislation governing foreign-flagged ships.
Jennifer Goto Sabas, Inouye's chief of staff, said the senator's office had been in negotiations with Norwegian to work out an agreement that would allow the company to operate interisland cruises without the federally required trip to the foreign port of Fanning Island.
Goto Sabas said talks were continuing and it was unclear whether any agreement would be limited to exempting Norwegian or also set a model for other foreign cruise lines to operate between U.S. ports without stopping at a foreign port.
Norwegian spokesman Steve Hirano said Friday that the company had been in talks with Inouye's office, but declined to comment on the subject.
"We plan our itinerary and our agenda with Fanning Island, so we can live with the Passenger Services (Act)," Hirano said. "The meetings were not necessarily about the Passenger Services Act."
If successful, the talks could lead to allowing more foreign cruise lines to operate interisland cruises, or allowing Norwegian to spend more time cruising in Island waters, boosting visitors for Hawai'i's struggling tourism industry. Late last year, Hawai'i lost its longtime dedicated cruise line, American Hawaii Cruises, when its parent company filed for bankruptcy and stopped operating.
Goto Sabas said Norwegian officials "approached the senator very strongly about being the dedicated carrier in Hawai'i.... There have been discussions to explore what it would take to secure a level of support that would in some ways be comparable to the American Hawai'i cruise line. They're using that as the basis to kind of go forward."
Inouye has said he would consider supporting an exemption to the Passenger Services Act to allow foreign-registered ships to operate domestically, but only under strict conditions.
The Miami-based Norwegian began operating seven-day Hawai'i interisland cruises late last year. The company is a subsidiary of NCL Holdings, which was acquired by Hong Kongibased Star Cruises in 2000. Under the Passenger Services Act, only U.S.-built, -owned and -crewed cruise ships may take on and discharge passengers between consecutive U.S. ports.
To comply with the law, Norwegian's seven-day Hawai'i cruises must include a round trip to the island of Fanning, about 600 miles south of Honolulu, which takes several days.
Goto Sabas said current discussions center around the act's requirements that a ship be owned and crewed by U.S. citizens and fly a U.S. flag, showing that it was U.S.-built.
"The one requirement that I can tell you that is not negotiable for the senator is that it be a 100 percent American crew," Goto Sabas said. "If that issue is solved, hopefully other things will fall into place."
Federal legislation introduced by Inouye's office in 1997 allowed American Classic Voyages' American Hawaii Cruises to reflag a foreign-built vessel and use it for interisland cruises in exchange for building two cruise ships in Pascagoula, Miss., paid for with nearly $1 billion in private capital and federal maritime loan guarantees.
When American Classic filed for bankruptcy protection last October and ended its Hawai'i cruises, more than 1,000 workers lost their jobs in the state, and completion of the ships was left uncertain.
Norwegian is not the only company interested in some form of support for operating cruises in Hawai'i. Earlier this year, Voyager Holdings, a subsidiary of Washington-based investment firm D'Arcinoff Group, said it would seek an authority to operate cruises between Hawai'i's islands in exchange for building and operating a 2,000-passenger ship for Hawai'i cruises.
Al Wallack, president of Voyager Holdings, said in June he planned to initiate talks with Inouye. Wallack did not return calls for comment. Goto Sabas said Inouye's office was not talking with any cruise lines except Norwegian.
John Hansen, president of the North West CruiseShip Association — which represents nine cruise lines that serve Alaska, including Norwegian — said he had heard there had been discussions about possible legislation to change the Passenger Services Act, but had no details.
"If there is any legislation introduced, we'd certainly want to look at it and see if there are any implications for our member companies," Hansen said.
Local economists said any changes that would allow a foreign cruise line to spend more time in Hawai'i waters by avoiding a foreign port stop could help bring increased visitor spending on everything from retail to hotels.
"It's clearly going to be a net benefit if those people can stay here and spend that time in port," said Byron Gangnes, associate professor of economics at the University of Hawai'i.
Preliminary data from the Hawai'i Department of Business, Economic Development and Tourism for the first quarter of 2002 shows cruise-ship arrivals up 27.8 percent over the same time last year, for a total of 52,360 visitors. Overall, the number of Hawai'i cruise passengers has jumped from 160,000 last year to a projected 250,000 this year.
Norwegian's two ships operating in Hawai'i — the Star and the Wind — were projected earlier this year to account for 90,000 hotel nights and a $140 million infusion into the local economy.
About 31 percent of cruise visitors stay at a condominium or hotel before or after their cruises, and their spending on shopping is comparable to hotel visitors', said state economist Pearl Imada Iboshi.
Iboshi said officials at Mainland ports had told her office they would be interested in sending cruises to Hawai'i if the Passenger Services Act were changed or an exemption passed.
"Right now we do have cruises that come from Ensenada (Mexico) and Vancouver," Iboshi said. "You would think that if that law was not in place, that they would probably come directly from L.A. or San Diego or Seattle."
Reach Kelly Yamanouchi at 535-2470, or at kyamanouchi@honoluluadvertiser.com.
