Hawaii cruise
ships delayed

American Classic resolves
its shipyard dispute and delivery
is pushed back one year

---

By Russ Lynch
rlynch@starbulletin.com

American Classic Voyages Co. has resolved its differences with the Mississippi shipyard building its massive new Hawaii cruise ships and the project is going full steam ahead.

However, delivery will be a year later than planned and the ships will cost more, according to a joint announcement today by shipbuilder Northrop Grumman Corp. and American Classic.

The first of the 1,900-passenger vessels is now set for delivery on Feb. 1, 2004, and the second ship is scheduled for delivery on Feb. 1, 2005.

Although the announcement was mostly a positive one, American Classic's shares plunged 37 cents, or 28.9 percent, to 91 cents today on the Nasdaq Stock Market.

Already more than 1,600 workers are busy full-time on the project at Northrop Grumman's Ingalls Operations shipyard in Pascagoula, Miss., the companies said.

Meanwhile, American Classic said it has suffered a short-term setback in its Hawaii operations, with its two existing cruise ships in the island market running about 60 percent full on their current voyages.

They had been fully booked and lost 40 percent of the passengers because of the crisis that followed last week's terrorist attacks, said Fran Sevcik, a spokeswoman at American Classic's Miami headquarters.

The voyage was delayed a few hours to let as many people as possible get over the airline difficulties that followed last week's terrorist attacks and catch the ship, Sevcik said.

The 1,212-passenger ms Patriot, which had been set to start its week-long voyage from Honolulu on Saturday night, was held back 24 hours and sailed late Sunday. It has made all its port stops but did skip the usually slow trip along Kauai's Na Pali Coast, Sevcik said.

The 860-passenger S.S. Independence, which begins its week-long voyages at Kahului, Maui, held its departure for a few hours to let some passengers catch up with it.

It is on schedule and making all its calls, she said.

The next voyages look a lot better. Both ships are solidly booked after only a handful of cancellations, Sevcik said.

As for the two new ships in the $1 billion-plus Project America plan, there had been reports that the shipyard was experiencing delays and cost overruns, putting the project at risk.

Today's announcement said the builder and buyer have settled all their difficulties and are moving ahead with these changes:

>> The ship delivery dates have been put back one year.

>> The price per ship has gone up $19 million from the original contract figure of $440 million to cover increased costs from changes in the interior finishing.

>> American Classic and Northrop Grumman have each committed more than $40 million to buy preferred stock over the next four years in Project America, a new American Classic subsidiary.

The money will help offset the additional costs and provide added funding for the ships, now called just Project America Ship I and Project America Ship II.

The delay and the terms do not affect the $1.1 billion loan guarantee from the federal Maritime Administration.

The companies said the design of the ships is virtually complete and construction of the first ship is one-third complete.

To sail under the American Classic-owned United States Lines brand, they will be the biggest cruise ships ever built in the United States and the first American-built cruise liners in 40 years.

"Despite the current challenging economic environment, American Classic believes that Hawaii is a fantastic growth opportunity for the company as the Hawaiian cruise market is in its infancy," said Phil Calian, the company's chief executive officer.