Isle cruise
parent’s earnings
drop anchor

American Classic Voyages' loss
widens amid a slowdown on
the S.S. Independence

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By Russ Lynch
Star-Bulletin

A plunge in business on its S.S. Independence cruise liner in Hawaii, and price cuts to try to stem the decline, led to a $12.7 million first-quarter loss at American Classic Voyages Co, almost twice the loss from a year ago.

The loss is equal to 60 cents a share and nearly double the loss of $6.4 million, or 33 cents a share, in the year-earlier quarter.

American Classic's stock plunged 25.1 percent, or $2.33, to $6.95 today.

The Chicago-headquartered company said today that yield at American Hawaii Cruises, the subsidiary that runs the 860-passenger Independence, dropped 39 percent to $130 per passenger per night in the latest quarter, compared with $213 in the first quarter of 2000.

The company's introduction of the 1,212-passenger ms Patriot to Hawaii waters in December, in its new United States Lines subsidiary, also apparently took business away from the Independence. Because of the added ship, American Classic had 140 percent greater capacity in Hawaii just when a souring mainland economy was cutting into tourism.

"Our first quarter performance was adversely affected by the downturn in the general economy and competitive pricing in the leisure industry," said Phil Calian, American Classic chief executive officer.

"These factors occurred at the same time that we increased our Hawaii capacity by 140 percent, with American Hawaii's Independence showing the greatest decline in yields," he said.

The company is now doing some aggressive pricing to attract business, he said, which will result in a yield of $105 per passenger per night at American Hawaii Cruises.

"On a positive note, we seem to have reached bottom with pricing and have experienced positive booking in Hawaii during the past month," as well as a significant increase in group bookings for 2002, Calian said.

Also cutting into the first-quarter results was the need to take the Independence out of service for a week in late March to spend $500,000 on repairs to a thruster. The Patriot had to interrupt a voyage in February, necessitating $1.6 million in refunds to passengers and another $500,000 to book others on future voyages.

American Classic also had startup and marketing costs for new vessels in its mainland operations, which include Delta Queen Steamboat Co. and Delta Queen Coastal Voyages.

Overall first-quarter revenues of $64.2 million were up 58 percent from $40.7 million in the year-earlier quarter.