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Royal Caribbean - Part 3

From SN Guides

Contents

Introduction


Royal Caribbean – Part 1 traces the history of the company from its creation in 1968 by the Norwegian Skaugen and Wilhelmsen ship-owning families and the London based Gotaas-Larsen shipping group and how by 1988, two decades of bickering, pampered, self-indulgent and extravagant management had reduced the company to an also-ran. Royal Caribbean – Part 2 covers the successful battle by Richard Fain and Arne Wilhelmsen, backed by billionaire Jay Pritzker and the Israeli shipowner, Eyal Ofer, to prevent the company from being acquired by Micky Arison’s Carnival Corporation. It relates the corporate changes that resulted in the formation of Royal Caribbean Cruise Ltd (RCCL for the remainder of the history) and its operational subsidiary, Royal Caribbean International (RCI). It also records RCCL’s failed negotiations with Costa that left RCCL with the urgent requirement to acquire Celebrity Cruises from Chandris.

Chandris


John D. Chandris from the island of Chios, in Greece, bought his first sailing ship in 1915. He went on to buy cargo steamers and then passenger ships for trading around the Greek islands. In 1936, he expanded his passenger services to Venice and the Levant from Piraeus, always using second hand vessels. During the Second World War the operation of the business transferred to London as Chandris (England) Ltd and the Newcastle tramp shipping company, Charlton Steam Shipping Co Ltd was taken over in 1942. John Chandris died at the end of the war and the business passed to his sons, Antonios and Dimitrios.

In the immediate post-war years, much of the Chandris shipping business continued to be managed from London. At the end of the 1950s Chandris decided to enter the European emigrant trade, particularly to Australia. It purchased a shipyard near Piraeus, to use low cost Greek labour to convert bargain priced, redundant passenger liners that were returned to service, largely manned with cheap Greek seamen. The concept was highly successful and by the mid 1970s Chandris was operating 14 ships in both the emigrant and low-cost American cruise trades. In 1973 Chandris also opened the first Chandris Hotel in Greece. By the 1980s however, the Chandris fleet was rapidly declining as emigrant traffic transferred to air travel and cruise passengers increasingly rejected the inferior accommodation offered by the Chandris fleet. Also as a result of Greece joining the EEC in 1981, the Greek standard of living and labour cost rapidly increased. The Chandris passenger business model was becoming unviable and one of the first changes was the disposal of the increasingly uncompetitive Greek shipyard.

Image:Queen_Frederica_1967.jpg

Photo 1: A typical Chandris passenger ship, Queen Frederica photographed in 1967. She was delivered 40 years earlier in 1927 as Malolo; became a US troopship in 1942; was bought by Home Lines in 1948; became Queen Frederica in 1954; laid-up 1973; scrapped 1977.

Celebrity


Towards the end of the 1980s, as a result of a link with a US tour operator, the remaining old ships were trading as Chandris Fantasy Cruises, but were losing market share to its rival’s modern ships. Chandris decided against attempting to upgrade the status of its brand, because of the difficulty of operating two standards of vessel under the same corporate name. In April 1989, John D Chandris, the British-educated patrician son of Antonios, announced the formation of Celebrity Cruises that would provide quality, luxury, innovation and an absolute impeccable level of service at the upper end of the mass-market sector. Holland America and Cunard occupied the upper end of the American market, delivering an elegant cruise experience for mostly older people. John Chandris aimed his new company towards younger, stylish, wealthy passengers who he felt had not yet taken to cruising in large numbers – who would in fact, not be caught dead in a cruise ship.

Celebrity placed an order with the German shipyard, Meyer Werft, for two 47,000 ships at a price of $195 million each. Their striking appearance and dramatic interiors were the work of a team of designers led by Jon Bannenberg, the leading British super-yacht architect. Catering was supervised by the highly rated chef, Michel Roux. To accelerate the launch of the new brand, the latest Chandris Fantasy Cruises ship Galileo was transferred and sent to Lloyd Werft in Bremerhaven for a major upgrade, before being renamed Meridian to act as a partner to the new ships and entering service in April 1990. Horizon, the first of the new-built ships arrived at the end of the same month. Celebrity took over the Chandris Fantasy Cruises operation from New York to Bermuda and gradually expanded into the Caribbean, especially after the delivery of its second new-build, Zenith, in 1992.

Image:Horizon_entering_St_George's.jpg

Photo 2: Horizon entering St George's, Bermuda

Image:ZENITH_02.jpg

Photo 3: Zenith

John Chandris devoted most of his time to Celebrity, while his wife, Christina, was the curator of the outstanding collection of contemporary art that was displayed in the ships. At any other time, Celebrity would have been able to grow organically, but in the early 1990s, with the first Gulf War and a world-wide economic recession, the new company struggled to reach a size where economies of scale would enable profits to be earned. To push the company forward, Chandris raised additional capital from the New York-Jewish tanker company Overseas Shipholding Group (OSG). The transaction resulted in Chandris owning 51% and OSG 49% of the increased share capital. The funds raised enabled Celebrity to meet the equity portion of the cost of three 70,000 ton vessels; Century – 1995 – $317.5 million; Galaxy – 1996 - $317.5 million and Mercury – 1997 - $339 million. The old Meridian was sold in 1997, leaving Celebrity with a very modern, high quality, five vessel fleet.

Image:Galaxy_01.jpg

Photo 4: Galaxy

Both Richard Fain and Micky Arison had from time to time discussed with John Chandris the approximate price they would pay for a company that was the size of Celebrity. Their thoughts were of no interest to Chandris. There was little personal chemistry between Chandris and Fain, while Arison’s concept of payment being based on a multiple of earnings was meaningless to loss-making Celebrity. To open discussions, Fain telephoned Chandris and explained that he would be in London on business and asked if Chandris would meet with him and Jay Pritzker to discuss the possibility of some mutual business. There was no other business in London, but the fiction worked. Chandris was wary, but like most business leaders, he was in awe of Pritzker and delighted to meet him. It was the charm and charisma of Pritzker that brought the two companies together. He tactfully talked of the mutual benefits of a merger between the two companies. Pritzker understood the huge emotional investment that Chandris had made to Celebrity. He and Fain re-assured Chandris that his vision for the future of Celebrity would be continued. The lunch produced an agreement to continue discussions on a possible merger.

Progress was slow at first. Fain needed numbers but Chandris worried about opening his books to an outsider, especially to RCCL after its treatment of Costa. The RCCL team worried that they were merely being used as a foil to obtain a better deal from Carnival. They did not realise that Chandris had taken an intense dislike of Carnival because of the way Carnival’s sales chief, Bob Dickinson, had verbally mauled and publicly humiliated Celebrity’s head of marketing at a cruise industry forum in 1995.

The deal was finally agreed in the summer of 1997, greatly encouraged by OSG, which was suffering from another decline in tanker freight rates while its shareholders were questioning the wisdom of its investment in loss making Celebrity. Carnival attempted to outbid RCCL, but John Chandris made it clear to Micky Arison that the RCCL arrangements were final. RCCL paid $515 million for Celebrity, made up of $245 million cash and RCCL shares to the value of $270 million. RCCL also took over $750 million Celebrity loan debt. John Chandris and Morton Hyman (OSG) joined the RCCL board. There were now two operating companies below RCCL – RCI under Jack Williams and Celebrity under its existing president, Rick Sasso.

The Celebrity merger provided: -

  • Meridian (1963) 30,440 grt; 1,106 passengers – Sold September 1997
  • Horizon (1990) 46,811 grt; 1,354 passengers
  • Zenith (1992) 47,255 grt; 1,374 passengers
  • Century (1995) 70,606 grt; 1,778 passengers
  • Galaxy (1996) 77,713 grt; 1,896 passengers
  • Mercury (1997) 77,713 grt; 1,896 passengers



Image:Mercury_01.jpg

Photo 5: Mercury

The deal turns sour


With Celebrity Richard Fain had scored another victory over Micky Arison, but he was unable to organise the smooth combination of the two businesses and the merger was soon in deep trouble. Arison expanded Carnival by creating a very successful devolved federal structure. Fain seemed to ignore the destructive infighting that broke out as soon as the deal was closed, and he failed to create a structure to enable Celebrity to flourish. In part this was a consequence of the megabrand strategy, but most of the mayhem arose from the corrosive effect of unrestrained corporate politics. Jack Williams had only been president of RCI since the start of 1997 and he clearly resented Rick Sasso coming into the organisation with the same status as him. The RCCL team had struggled to create a cohesive management structure after shaking off the previous Norwegian comic-opera arrangements and they did not relish further change. They were all too eager to suppress, rather than co-operate with the Celebrity team.

Almost immediately after the merger, Celebrity’s headquarters were closed and the staff moved to RCCL/RCI’s offices. With the overriding pressure to reduce costs, the incoming Celebrity staff inevitably bore the brunt of the cuts. All central services came under Williams whose aim was to run the enlarged operation with the same total central staff. If managers wanted to retain any Celebrity staff they had to reduce their existing staff by the same numbers. Celebrity lost its identity and after four difficult years Rick Sasso resigned. Jack Williams became president of both companies and soon there was only one Celebrity vice-president left from the twenty who had been with the company at the time of the merger. No individual results are published for Celebrity, but industry insiders believe that the company is only marginally profitable, if indeed it makes any money at all.

Project Eagle


While RCCL was looking at possible corporate acquisitions, approval was given for the RCI’s first Post-Panamax ships, using a radical new design under Project Eagle. Both Carnival and P&O had already decided that as many of their cruise ships never used the Panama Canal, there was little point in restricting all of their ships to comply with the Canal size limitations. RCI elected to go far beyond the size of ships selected by their rivals.

RCI also decided to return to their roots and build the Eagle ships in Finland. A contract was agreed with Kvaerner-MASA Yards in January 1997 that resulted in the October 1999 delivery of the 137,000 grt, $500 million Voyager of the Seas. The Eagle class structural and interior designers used the freedom given by abandonment of Canal restrictions, to introduce a considerable degree of innovation and ingenuity into the design. Perhaps the most dramatic feature in Eagle is the Royal Promenade, a four deck high, 120 metre long, horizontal atrium, which acts as the ship’s High Street. This a grand version of a feature that was first introduced in 1990 by the same shipyard in the super-ferry, Silja Serenade. This arrangement permits 138 cabins to be fitted with bay windows overlooking the shops, boutiques, street entertainers, bars and eating places in the street below, with lighting effects mimicking the progress of day into night. This feature enables RCI to charge more than it could obtain from a normal interior cabin.

Image:Navigator_of_the_Seas_Royal_Promenade_01.jpg

Photo 6: The Royal Promenade in Navigator of the Seas

The main dining room is three decks high, containing two mezzanine floors, plus a large number of speciality restaurants and eating facilities situated throughout the ship. There is a 1,350 seat theatre, styled on the La Scala Opera House in Milan, plus the 900 seat Studio B that is equipped for a variety of shows, including the first ice-rink fitted in a ship. The trade mark Viking Crown Lounge is situated in a forward arc around the base of the funnel, fourteen decks above the water line. The funnel appears small in proportion to the size of the ship; nevertheless the air draught is a formidable 63.5 metres.

As an additional safety measure, the Eagle class have a very high level of plant redundancy, with at least 50% capacity available after any equipment failure. The diesel-electric power station and the electrical distribution switchboards are divided between two compartments. A total of 6 Wärtsilä 12V46C diesels are installed, each driving a 17,600 kW ABB Marine alternator. The Eagle class are the first ships to fit three ABB Azipod propulsion units, each having a 14,000 kW output; one is a fixed unit mounted at the aft end of a central skeg and the other two are 360 degree azimuthing units. The ships are designed to cope with 40 knot side winds, with the Azipods being helped by four 3,000 kW bow thrusters.

Image:Freedom_of_the_Seas_Azipod.jpg

Photo 7: The Project Eagle Azipod propulsion arrangements

The basic specification of Voyager of the Sea was – 137,300 grt; 311.1 metres Loa; 38.6 metres beam; 3,138 passengers on the basis of 2 passengers per cabin; 3,840 passengers max; 1,181 crew; service speed 22 knots.

Image:Voyager_Of_The_Seas_at_St_Thomas_01.jpg

Photo 8: Voyager of the Seas at St Thomas

The follow-on sister ships had slightly modified upper deck arrangements, which changed the enclosed area and therefore altered their gross tonnage figures. There are no changes in the other specification figures.

  • Explorer of the Seas – 2000 – 137,308 grt
  • Adventure of the Seas – 2001 – 137,276 grt
  • Navigator of the Seas – 2002 – 138,279 grt
  • Mariner of the Seas – 2003 – 138,279 grt



Image:Navigator_of_the_Seas_at_Southampton_01.jpg

Photo 9: Navigator of the Seas at Southampton

Millennium Class


After the merger, the remaining members of the Celebrity new-building team were absorbed into RCI. The Celebrity operations department was delighted to receive four new Panamax ships, but it was disappointed that the contract was not placed with Meyer Werft, the German yard that had built all of its existing ships. In March 1998, the order went instead to Chantiers de l’Atlantique, one of RCI traditional builders. Both yards quoted a price of $350 million per ship, but the French yard offered faster delivery. To add to Celebrity’s annoyance RCI placed its own Panamax order with Meyer Werft.

These ships belong to a new group of passenger vessels classified as “absolute-Panamax” size. The hull is straight-sided, with the greatest beam that can be accommodated in the Panama Canal, while the lifeboats and other deck equipment are installed so that there is no overhang beyond the hull, allowing the canal Mules to work freely alongside the ship as they tow it through the locks. The superstructure is inset from the ship’s side to within the inner line of the lifeboats. The narrowing of the superstructure continues above the lifeboats, which reduces the topside mass sufficiently to permit the inclusion of an additional cabin deck. The final upper decks return to the full beam of the hull. In common with other designs of this class, the boats are set into the hull, not the superstructure. Unusually the Celebrity ship’s hull plating returns to full height aft of the boat space. The paint scheme gives the impression that Millennium has a forecastle and poop. The initial paint scheme was a considerable departure from the clean, bold, modern, dark blue and white Bannenberg scheme applied to all earlier Celebrity ships. The Millennium paint scheme is more complex and fussy, with a considerable amount of gold banding and additional red flashes on the funnel and uptakes. It was not a success and the ships reverted to the Bannenberg scheme at their first major dry-docking.

The Millennium class design features the first shipboard use of external glass lifts. The ships follow the usual Celebrity policy of providing a wide range of restaurants, cafés and bars, including an up-scale restaurant, which in Millennium features rescued panelling from the 1911 White Star liner Olympic.

Image:Celebrity_Millennium_Olympic_Restruant.jpg

Photo 10: Part of the Olympic Restaurant

It is unfortunate that the new Millennium class have experienced more technical problems in service than any of the new generation cruise ships built for other owners. The ships became the subject of a lengthy legal dispute and RCCL has refused to place any further work with Chantiers de l’Atlantique. (This may change in the future, now that the French shipbuilder has been taken over by Aker Yards.) Furthermore, while all previous Celebrity new-built ships were powered by conservative, simple, “father and son” paired diesel engines, the Millennium class feature a pioneering machinery arrangement that has proved to be over-ambitious, very unreliable and a commercial nightmare.

The power plant adopted for the new ships consists of two General Electric LM2500+ gas turbines, each driving a Brush alternator developing 25MW. In addition a waste heat boiler is used to power a Fincantieri steam turbine driving a smaller Brush alternator developing 9MW. The ship’s propulsion uses up to 39MW of the 59MW available, with the remainder being used to provide all other shipboard electrical requirements. The system provides further steam for fresh water production, laundry, galley, air conditioning and other needs. This power plant has very good environmental characteristics, with an 80% reduction in NOx emissions and (by using higher quality fuel) a 98% reduction in SOx emission. Although in 2000 the fuel cost for the ships was higher than a conventional diesel electric propelled ship, this was offset by additional passenger revenue, as the power plant is so compact it freed space for an additional 40 passenger and 20 crew cabins. Unfortunately since 2000 fuel costs have escalated dramatically and as a result the equation is no longer valid and the new Celebrity ships have become very expensive to operate. The plant is also very inflexible. As there are only two gas turbines the minimum electrical power available is 25MW, which is far more than is required when the ship is in port.

Image:USS_Bunker_Hill_LM2500_modules.jpg

Photo 11: A pair of LM2500 modules being installed in USS Bunker Hill. These are the same size as the pair of main engines installed in Millennium.

In 2006 it was decided to retrofit each ship with an additional 11.2 MW generating set powered by a 16-cylinder Wärtsilä 38 diesel engine. The new engines will more economically provide the base load power for the ships when they are in port.

Propulsion of the new ships is through two azimuthing podded propulsors. This concept was first used in the Carnival cruise ship Elation, delivered in 1998 at the time the Celebrity ships were ordered. After initial teething troubles, the Elation propulsors were very successful, greatly reducing underwater drag and turbulence, as well as eliminating transmitted shaft noise and vibration. Although Elation has a completely unchanged Fantasy class hull-form, fuel consumption was reduced by 15% and the propusors’ ability to rotate through 360 degrees provided dramatically improved manoeuvrability. The Millennium class hull-form was specially designed for podded propulsors, so even better performance was anticipated. Sadly the trials of Millennium were a great disappointment, with the ship demonstrating unacceptably high accommodation structural vibration. Millennium was provisionally accepted in June 2000 while the shipyard designers carried out further studies. Several months later the ship was put in dry dock at Newport News where it was fitted with a ducktail and additional buffer section in the stern. Several cruises had to be cancelled to enable the work to be carried out. The modifications satisfactorily addressed the vibration problem, but fuel consumption remained disappointing. Her manoeuvrability has always been excellent.

The second ship, Infinity, was in its in final stages of completion when Millennium's vibration problems surfaced. Infinity's delivery was delayed by over a month to enable the hull modifications to be incorporated into the ship. Several of Infinity's early cruises were cancelled.

Even more seriously the ships use the first production propulsors manufactured by Alsthom, the then owners of Chantiers de l’Atlantique. To add to the development risks involved these were jointly designed with Kamewa and their 19.5MW output was considerably higher than any unit already in service. Uniquely the design provided for the replacement of the shaft seals or even the entire unit while the ship is afloat. In January 2001, the Millennium was once again out of service for two weeks due to an "under-performing" electric motor in one of the Mermaid propulsion units. The weak motor limited the ship's top speed to 20.5 knots instead of 24 knots, making it impossible to stay on schedule. Two cruises were cancelled during the repair. Shortly afterwards one of Infinity's pod drive bearings failed and she had to enter dry dock for repairs, as replacement afloat proved to be impractical. She was out of service for three weeks, leading to the cancellation of two more cruises. The four ships in the class have suffered 14 pod failures up to December 2006; each failure requiring dry-docking and cruise cancellations. Mysteriously, all subsequent Mermaid units, including the even more powerful pods fitted to Queen Mary 2, have been trouble free.

Image:Podmermaid.jpg

Photo 12: A Millennium Class Mermaid propulsion unit

The basic specification of Millennium was – 90,228 grt; 294.0 metres Loa; 32.2 metres beam; 2,038 passengers on the basis of 2 passengers per cabin; 2,450 passengers max; 997 crew; service speed 24 knots.

Image:Millenium.jpg

Photo 13: Millennium

The remainder of the class were delivered: -

  • Infinity – 2001
  • Summit – 2001
  • Constellation – 2002



Image:Constellation.jpg

Photo 14: Constellation

Image:Infinity.jpg

Photo 15: Infinity


Other cruise industry changes


After RCCL acquired Celebrity in the face of a late intervention from Carnival, Micky Arison responded by purchasing Cunard and the ultra-luxury sector operator Seabourn. By early in 2000, Norwegian Cruise Line was in very poor financial shape. Knut Kloster had been removed from the company by the rest of the Kloster family, but the company continued to decline. NCL was quoted on the Oslo stock market and Carnival began to build up a stake in the business. Soon afterwards the Malaysian company, Star Cruises also became a shareholder and the price of the stock began to rise in anticipation of a takeover battle. Micky Arison appeared to have an interest in settling old scores with NCL, but not to the extent of paying more than the company was worth. After bidding up the price, he stepped out, leaving Star with a high acquisition debt burden.

By the end of 2000 the leading cruise operators were: -

  • Carnival Group: 44 ships – 2,150,029 grt – 71,379 passenger capacity
  • RCCL Group: 19 ships – 1,438,385 grt – 45,401 passenger capacity
  • P&O Group: 17 ships – 982,638 grt – 29,559 passenger capacity
  • Star/NCL: 16 ships – 686,051 grt – 28,080 passenger capacity



Continuation


For a continuation of this history see the links at the foot of this article

Bibliography


  • The development and growth of the cruise industry: Roger Cartwright & Carolyn Baird: Butterworth-Heinemann; 1999
  • Cruise Ships: An evolution in design: Philip Dawson: Conway Maritime Press; 2000
  • The cruise ship phenomenon in North America: Brian J Cudahy: Cornell Maritime Press; 2001
  • Devils on the deep blue sea: Kristoffer A Garin: Viking; 2005
  • Various publications of The Royal Institution of Naval Architects, particularly their annual Significant Ships since 1990
  • Various publications of ShipPax Information, Halmstad, Sweden, particularly their three annuals, Designs, Guide and Statistics
  • Various Royal Caribbean Cruise Ltd published annual accounts



Photographs



Some of the photographs used to illustrate this article are from the very large collection contained in the Ships Nostalgia Galleries, which are available for use in the Directory. The individual photographs have been produced as follows: -

  • Photo 1: Ships Nostalgia – WDM
  • Photo 2: Ships Nostalgia – eddieo
  • Photo 3: Ships Nostalgia – shipmate17
  • Photo 4: Ships Nostalgia – KShips
  • Photo 5: Ships Nostalgia – John Rogers
  • Photo 6: Ships Nostalgia – Pompeyfan
  • Photo 7: ABB
  • Photo 8: Ships Nostalgia – dicamus
  • Photo 9: Ships Nostalgia – Hadleigh Shrimper
  • Photo 10: Aker Yards
  • Photo 11: Ships Nostalgia – Alistair94
  • Photo 12: Wikipedia
  • Photo 13: Alsthom
  • Photo 14: Aker Yards
  • Photo 15: Aker Yards



Royal Caribbean History

Royal Caribbean - Part 1 |Royal Caribbean - Part 2 |Royal Caribbean - Part 3 |Royal Caribbean - Part 4



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