NEW YORK -- Premier Cruises, cruising's fifth-largest line, is not
expected to sail again, and its principal creditor, Donaldson,
Lufkin & Jenrette, is expected to sell the four vessels it
seized on Sept. 14. Premier mortgaged the ships to DLJ in 1998 in
exchange for a $55 million line of credit.
A fifth Premier ship, Big Red Boat II, was reclaimed by its
owner, Oceanic Marine Ltd. Premier's Seawind Crown, under charter
to Spanish tour operator Pallmantur, continues to operate in the
Mediterranean.
Passengers who purchased canceled cruises will be reimbursed
through a $15 million surety bond required by the Federal Maritime
Commission (FMC). Greenwich Insurance Co. and the NAC Reinsurance
Corp., which hold the bond, are developing a claims process;
details are expected in a few days.
The bond is expected to cover travel agent commissions and port
charges but not air travel to the port of departure.
But bond payouts could be slow in arriving. In a communication
to its members, ASTA noted it typically takes several years for
claims processing, and "customers may not receive 100% of their
claim."
Premier is advising passengers who paid for their cruises with a
credit card to contact their credit-card companies.
A number of passengers with canceled Premier bookings are
covered by travel insurance. Travel Guard International, which
sells policies covering financial default of a cruise lines and
travel suppliers, has received "several hundred" phone calls from
policyholders and travel agents, said Tom Zavadsky, executive vice
president of sales. He said Travel Guard may pay out "well in
excess of $1 million" in claims.
Premier's demise comes after years of financial turmoil, which
intensified this year as cruise pricing dropped steeply and fuel
prices shot up sharply.
Premier lost $70 million in 1998 and, despite a restructuring
that year, lost $20 million in 1999. Most recently the line
suffered a string of embarrassing mishaps and mechanical failures
aboard its ships.
Multiple Berths
Although the fifth-largest line in cruising, Premier
Cruise Lines' capacity (including Big Red Boat II, which it
operated under charter) doesn't equal the combined capacity of the
three largest ships at cruising's "Big Three" brands.
Premier's ships
Capacity
BRB I (Oceanic)
1,800
BRB II
1,600
BRB III (IslandBreeze)
1,146
Rembrandt
1,075
SeaBreeze
842
Seawind Crown
728
Total
7,191
The Big Three's Megaships
Capacity
Carnival Victory (Carnival)
2,758
Grand Princess (Princess)
2,600
Voyager of the Seas (Royal Caribbean)
3,100
Total
8,458
Difference
1,267
The seized vessels represent Premier's principal assets, meaning
the cruise line is effectively finished. Premier's demise, however,
could be good news for its larger competitors. Carnival Corp. and
Royal Caribbean Cruises Ltd. saw their share prices rise
significantly Sept. 15, a day after the seizures removed 5,000
berths from cruising's mass market segment.
DLJ said it seized the ships to ensure the orderly
disembarkation of passengers after learning that other creditors
were planning similar seizures. Passengers were told Sept. 13 that
they would have to disembark early because the company was
bankrupt.
"We acted quickly to lay claim to the ships first and to get
passengers back to their home ports," said Catherine Conroy, a DLJ
official, during a Sept. 15 conference call.
Travel agents react to the news
Premier gave no notice of the impending shutdown, although signs
of trouble were apparent to some agents. "I put a 'stop sell' on
Premier three weeks ago because of their late [commission] payments
to us," said Jeff Kivet, president of Cruise Value Center in East
Brunswick, N.J. "They kept saying we'd get our money, but it never
came."
Kivet now has 33 canceled bookings on his hands and estimates
he's owed $10,000 to $30,000 in commissions. "I got stuck for a
lot," he said.
Premier gave no notice of the impending shutdown, although signs
of trouble were apparent to some agents. "I put a 'stop sell' on
Premier three weeks ago because of their late [commission] payments
to us," said Jeff Kivet, president of Cruise Value Center in East
Brunswick, N.J.
"They kept saying we'd get our money, but it never came." Kivet
now has 33 cancelled bookings on his hands and estimates he's owed
$10,000 to $30,000 in commissions. "I got stuck for a lot," he
said.
Even agents who have never sold Premier were touched by the
story of passengers being pulled off the ship in the middle of a
cruise.
"I felt bad for the people on board. It could have been the trip
of a lifetime for them, and it got cut short," said Leslie Wilde,
owner of Hubbard Woods Travel Service in Winnetka, Ill. "When you
think abut that type of product -- it's not a high-end product -- a
lot of those people have saved up for a long time..."
"It's unfortunate the clients were stranded like that," said
Karen Pickrum, office manager of Betty Maclean Travel, Inc. in
Naples, Fla. "You never like to see that happen."
Those who sell Premier were affected through their clients. "I'm
in a state of shock," said Margie Dolgin, president of Coast to
Coast Travel in Las Vegas. "My clients are telling me they gave
them 15 minutes to get off ship. How could the cruise industry let
this happen? I've been in the business 25 years and I can't ever
remember anything as outrageous."
Dolgin said she feared this would make it harder to sell cruises
to the 93% who have never cruised. "Fortunately it's not affecting
my clients who have cruised, but those who have only done land
vacations might say, 'This could never happen on land. They would
never give you 15 minutes to leave your hotel.'"
Many found it distasteful that creditors pulled the ship in the
middle of a cruise. "They have no respect for the money the clients
have paid," said Dolgin. "How dare the creditors not wait for
people to complete a sailing? We really need to have some regard
for people."
The incident re-affirmed for many the importance of agents in
protecting their clients from the dangers for travelers even in the
21st century. "We are challenged with staying on top of the
financial status of all industry suppliers." said Phoebe Weinberg,
president of Greatways Travel of Grosse Pointe Farms, Mich. "I just
wish there was a way to more accurately glean this
information."
About 2,800 vacations disrupted
The ship seizures disrupted the vacations of about 2,800
passengers in Canada, Mexico and the Bahamas. DLJ seized Premier's
Big Red Boat I (also known as Oceanic) in Nassau, Bahamas; Big Red
Boat III in Cozumel, Mexico, and the Rembrandt and SeaBreeze in
Halifax, Nova Scotia.
Six hundred passengers disembarked Oceanic in the Bahamas and
were told they would receive vouchers for return flights to Orlando
on a first-come, first-serve basis. From Orlando, buses took the
passengers to Port Canaveral, where the cruise started.
However, passengers dropped off at the port found the company's
terminal locked and scrambled to find accommodations for the night.
Alan Twaits, a Premier vice president, said during the conference
call that no passengers were stranded.
Most of the 1,700 passengers who disembarked Rembrandt and Sea
Breeze in Halifax were flown back to their points of origin, but
several hundred were allowed to board Premier's Big Red Boat II for
its return voyage to New York, where it was reclaimed by Ocean
Marine.
Big Red Boat III, which departed from Houston, was seized in
Cozumel, where about 100 passengers opted to fly back to Texas.
Another 300 chose to stay aboard as DLJ sent the vessel back to
Nassau for temporary storage. The ship arrived in Nassau on Sept.
16, from where passengers were returned to Texas.
The shutdown cost about 270 shoreside employees their jobs at
the company's Port Canaveral headquarters. Employees were informed
of the shutdown upon arriving at work on Sept. 14.
Travel Weekly reporter David Cogswell contributed to this
report