WASHINGTON — As the only NCL America U.S.-flagged ship that will be cruising the Hawaiian Islands after May, the Pride of America hasn't always had smooth sailing.

The ship, whose hull is decorated with a bald eagle set off by red stripes, was left unfinished in a bankruptcy, received a $185 million taxpayer subsidy and partially sank four months before completion at a German shipyard.

Despite that, Colin Veitch, president and chief executive of NCL Corp., the parent company of NCL America, takes pride in the ship as the first modern U.S.-flagged passenger ship in 50 years.

"We've got what we always suspected, which is a ship that is distinctly American in its appearance as well as its crewing," Veitch said by phone from NCL's Miami headquarters.

The 2,100-passenger Pride of America comes from a congressional "Project America" program, supported by former Sen. Trent Lott, R-Miss., and Sen. Daniel K. Inouye, D-Hawai'i, and dates back to at least 1999. The program was designed to revitalize the U.S.-flag oceangoing cruise fleet but never completed a cruise vessel.

NCL, which once operated three ships in the islands, announced Feb. 11 that the Pride of Aloha will end its Hawai'i cruises in May, making the Pride of America the only U.S.-flagged ship offering interisland cruises.

Veitch said the company, which has been losing money on the Hawai'i cruises, chose to leave the Pride of America, which has been operating 2 1/2 years, in Hawai'i rather than the other ships because it has been profitable.

"Sentimentally, we've always looked at it as the first ship in the Project America that was intended to bring U.S.-flagged shipping back, so it was a nice coincidence that it was the one that was making the money," Veitch said.

Originally, Project America was to build two cruise ships with an option for a third for American Classic Voyages at Ingalls shipyard in Mississippi. American Classic Voyages was supposed to use the U.S.-flagged ships for Hawaiian cruises.

The U.S. Maritime Administration would guarantee $1.1 billion in loans for the shipbuilding and the federal government would give American Classic Voyages a monopoly on the Hawaiian cruises.

But taxpayer watchdogs, Sen. John McCain, R-Ariz., and others, criticized the program with the loan guarantees as corporate welfare and a waste of the public's money.

"Talk about sinking taxpayer money into some huge wasteful boondoggle, this definitely fits the bill," said Leslie Paige, spokeswoman for Citizens Against Government Waste.

The plan as envisioned failed when the American Classic Voyages went bankrupt as tourism dropped after the Sept. 11 terrorist attacks.

The bankruptcy left an incomplete hull — eventually the Pride of America — and parts for another ship at Ingalls.

The Maritime Administration paid out $187.3 million in loan guarantees for the vessels and received about $2 million from selling the hull and other parts to NCL Corp. in 2002. The company took the pieces to a German shipyard, which completed the Pride of America and a second ship, originally known as the Pride of Hawaii.

But the benefits to Hawai'i from the ships have been substantial, according to state economist Pearl Imada Iboshi, who estimated that the Pride of Aloha's overall economic impact was up to $422.5 million a year and as many as 4,000 jobs. Iboshi also estimated the Pride of Hawaii's overall impact as up to $542 million a year and as many as 5,000 jobs.

Despite criticisms of the loan guarantee program, some say it was at least partially successful because it gave work to a U.S. shipyard, and the Pride of America and the other ship built still provide U.S. maritime jobs.

"Even though the vessels were not completed in a U.S. yard, the program did fulfill its goals," said U.S. Maritime Administrator Sean T. Connaughton. "You did have the vessels generating economic activity in the U.S. as well as providing the employment for U.S. mariners, and obviously the potential is there for national security uses."

While President Bush, and President Clinton before him, tried to eliminate the loan guarantee program, Congress kept it alive. For example, the Maritime Administration guaranteed the $140 million loan to build two ferries for Hawaii Superferry Inc.

Veitch also said the federal government has been paid back for its Project America loan guarantee through the company's payroll taxes and the economic benefits from the NCL America operation in Hawai'i over the past four years.

"Our own calculation is that we and our employees have paid back the treasury something like $114 million so far," he said.

Veitch said that after buying the hull and equipment in 2002, the company sought permission to finish the vessels in Germany but have them U.S. flagged, a condition of operating Hawaiian interisland cruises.

Inouye liked the idea and pushed legislation through Congress to give NCL the exclusive right to operate up to three ships on Hawai'i cruises. Bush signed the legislation in February 2003.

But other events conspired to delay Pride of America's scheduled July 2004 entry into Hawaiian waters.

During a January 2004 storm in Germany, the partially finished ship sank up to its third deck in 35 feet of water — the depth of the harbor. "It was one of the Maalox moments when you get the phone call," Veitch said. "Had it been in deep water, it would have sunk up to the funnel. That was the saving grace, I guess."

The accident was one of the largest marine accidents in Germany, leading to a $200 million insurance claim, Veitch said.

"The ship was heavily booked and looked like it was going to be commercially successful from the word go, had it not sunk," he said. Veitch said the ship's entry into the Hawai'i market was delayed for a year but now is providing "a really excellent product."

The Pride of America's future in Hawai'i also looks bright, said Veitch, who remains optimistic about increasing the number of ships his company operates in Hawai'i.

"The ship is profitable today and on that basis, we are confident about its future," he said. "It's generating tremendous economic benefit in Hawai'i."

Reach Dennis Camire at dcamire@gns.gannett.com.