The Trouble with Ships

The filing was under Chapter 11 of the federal bankruptcy law allows the company to reorganize and continue operating the hotel and attractions on the classic liner.

The company has operated the classic liner and surrounding 55 acres since 1993 under a 66_year lease from the city. They pay the city only $25,000 a month plus up to 5% of their annual gross revenue.

The percentage is variable depending upon certain conditions, and that is what seems to be at the heart of matter which caused the bankruptcy. The two parties have been disputing the percentage due since 2000, and the operator apparently can't afford as much as the city is demanding is due.

The incident points up the problem facing groups that want to buy classic liners, permanently moor them and operate them as hotels or attractions.

The trouble with ships is that they get old, and then there's nothing to do with them that can generate as much money as necessary to pay the high cost of maintaining them. Lots of people want to preserve them, but no one has yet to come up with an idea that will generate lots of cash.

The City of Long Beach has owned the former Cunard liner for 37 years, and reportedly it is yet to ever have turned an annual profit, even under the operation of such experienced giants as Hyatt and Disney.

While Queen Mary is only in financial trouble, and not imminent danger of being disposed of, Norway is continuing to sit without a buyer and is drawing nearer to the self-imposed deadline NCL has set where the company will reluctantly have to make the prudent business decision to scrap the ship.

Norway is an excellent example of the dilemma about older ships. It’s still in beautiful condition, and would be a wonderful example of naval architecture to preserve. With the issues surrounding its boiler explosion, it has reached the end of its sailing days. There has been no shortage of interested buyers for Norway, most even with access to the cash for the $20 million asking price, equal only to the scrap value. Each, so far, each has backed away once they study the steep costs of maintaining the ship as it is, the surprisingly high costs just to park the ship in an accessible location (necessary if you will have the public visiting it), the relatively high cost (compared to a shoreside building) of renovating the vessel to serve as a permanently-moored facility, versus the limited actual income potential.

In addition to Norway, there are probably another half dozen high-profile classic liners slowly deteriorating in shipyards waiting for buyers, and their owners will probably face the same dilemma as NCL within a short time.

They are like family heirlooms in storage. They have lots of sentimental value, yet no one in the family has a use for them or the space to display them. Not even museums are interested, so one day someone in the family realizes that it doesn’t make good sense to keep paying for storage and has to make a difficult, but sensible, decision.

The City of Long Beach is not yet at that point, but the bankruptcy of the Queen’s Seaport Development Company is another indication that they may be on the road to having to make that same decision.

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