Hopes founder as cruise

line alters course

The decision by Amer ican Hawaii Cruises to pull out of its Tahiti operation has left a massive hole in the territory’s tourism revenue.

Last year, the cruises on the SS Liberie were the single largest contributor to the is lands’ second tourist volume record in successive years.

The Tahiti Sun Press re ported that the news of the company’s withdrawal stunned the local tourism industry. Edi tor A 1 Prince said the yearly financial loss was estimated at US$l.B5 million.

Hoteliers who had invested in extra services on the strength of the cruises are now wonder ing how to fill the gap.

The 715-passenger Liberti had been operating in the is lands for 13 months providing a regular source of revenue in the form of an annual 32,000 arri vals.

But when the cruise liner went into dry dock in San Francisco in January, the oper ators stunned the territory by announcing that it wasn’t com ing back.

Meanwhile, many small and large companies are left with

equipment and capacity ac quired to service the expected cruise passengers, flown in from the states to cruise the islands.

The 200-room Hotel Tahar a’a was the most heavily com mitted to American Hawaii Cruises (AHC) business.

It reported finishing 1986 with a healthy occupancy rate of 89.5 per cent compared with an average of 49 per cent for the previous year.

The 230-room Hotel Sofitel Maeva Beach, less dependent on AHC’s post-cruise and pre cruise passengers, reported finishing 1986 with 75 per cent occupancy compared with 67 per cent the previous year.

Now the argument rages over who is to blame for the AHC pull-out.

Prince reports that neither the territorial government nor the company has fully ex plained the background to the withdrawal.

He revealed that last September AHC chief execu tive Conrad H.C. Everhard appealed to the Tahiti govern ment for additional tax relief to help the company out of its difficulties connected with the local cruise operation.

He quoted sources as saying that Mr Everhard made the appeal directly to tourism minis ter Mr Alexandre Leontieff, seeking a six month period to get the Tahiti business out of the red.

Then, in January, Mr Everhard announced “with considerable regret” the AHC decision. He explained; “That the logistical problems associ ated with operating a 720-berth vessel on 7-day cruises in French Polynesia have resulted in an unacceptable return on the assets employed.”

However, Mr Leontieff, in an interview with La Depeche said the charter contract between American Global Line Inc., owners of the Liberti and AHC was broken following bank foreclosure on the vessel.

However, The Sun Press re ported other senior sources as saying that the vessel was own ed by a company called Ban stead which was responsible for the US$25 million refitting of the ship before it arrived in Tahiti in December, 1985.

Two US banks held mort gages on the ship, which was charterd by Banstead to AHC, the paper said.

After the Liberti left Tahiti on January 3 for drydock work in San Francisco, the two banks told AHC it had until January 31 to pay money which it was claimed AHC owed to Ban stead, according to the Sun Press source.

Meanwhile, AHC in San Francisco was negotiating with another investment group led by Peter C.R. Huang, former president of the US$6 billion conglomerate, City Investing Company. This was revealed in an AHC press statement of January 21.

Mr Leontieff told La De peche that AHC had made a profit of $250,000 per month between June and December last year and was projecting monthly profit of $450,000 for 1987.

According to the Sun Press source, the Huang group was aware of this but was neverthe less unwilling to take a risk on Tahiti and allowed the banks to foreclose.

According to Mr Leontieff, however, the banks were un happy with AHC’s profit poten tial which was the reason for the foreclosure.

Despite the profit potential,

the cruise company had seen some rough financial weather.

The first public hint of a board room struggle for control of the company came last April when H. William Jesse resigned as AHC’s president after apparently failing to successful ly organise a take-over of AHC’s parent and largest shareholder, American Global Line, by an investment group.

Mr Everhard, chairman of American Global Line, was named as Mr Jesse’s successor and announced that Mr Jesse’s resignation “was prompted by the shareholders’ decision not to sell AHC to the investor group that would have included Jesse and other senior manage ment as well as outside inves tors. ”

Mr Everhard interpreted this decision as “a strong vote of confidence in American Hawaii Cruises and its future.

“We believe that this is the beginning of an exciting new chapter in AHC’s history and we are very optimistic about the company’s prospects for con tinued success.”

At that stage, the cruise oper ator was losing money in Tahiti.

However, according to Mr Leontieff, the company, during its first negotiations with the territorial government, said it envisaged a ten-year presence in Tahiti with losses in the first two years followed by a break even year three and profits from there on.

The minister also said the Liberti would have had a Feb ruary occupancy of only 67 per cent, claiming this was due to an AHC economy measure to cease advertising in the US.

A weakened US dollar, he added, also made AHC’s only other cruise destination, Hawaii, a more attractive prop osition than Tahiti.

The tourism minister said he was “deeply shocked” at the off handed manner in which AHC treated the government and tourism officials over its deci sion to stop the cruises.

“This attitude only confirms my analysis of the cause of this brutal departure,” he said.

AHC already had a number of tax and other breaks. These

included duty exemptions, fore ign personnel concessions, promotion cost sharing, the right to operate charter flights and to sell excess capacity and a ten-year agreement.

The minister confirmed that AHC tried to reduce its early losses by seeking a lower tax imposition for imported goods not covered in the original concessions.

The company also sought a revision of pilotage charges it considered exorbitant and a reduction in payments to dock side workers which added $5,700 to weekly operating costs.

The minister noted that Tahiti still has the 88-passenger Majes tic Tahiti Explorer based in the islands on a year round basis while the 150-passenger sail cruiser Wind Song was due to commence operations in June.

He said that for the outer island or Moorea, where a maximum of 400 AHC passen gers disembarked each week, the March opening of the 150room Hotel Sofitel Tiare should compensate for the loss.