NCL Corporation

Norwegian Cruise Line
7665 Corporate Center Drive
Miami, Florida 33126
U.S.A.
Telephone: (305) 436-086
Fax: (305) 436-4000
Web site: http://www.ncl.com

Wholly Owned Subsidiary of Star Cruise Lines
Incorporated: 1968 as Norwegian Caribbean Lines
Sales: $1.6 billion (2005)
NAIC: 483112 Deep Sea Passenger Transportation

NCL Corporation is one of the pioneers of the modern cruise ship industry, and remains among the top cruise ship operators. Headquartered in Miami, Florida, and formerly known as Norwegian Cruise Lines, the company was acquired by Star Cruise Lines, a member of Malaysia's Genting Group, in 2000. In 2004, Star Cruise restructured NCL as its North American wing, including Norwegian Cruise Lines and NCL America. NCL operates 12 ships with more than 21,500 berths in 2006 (the company expects to take delivery on three new-build vessels by the end of 2007, adding more than 7,000 berths). Norwegian Cruise Lines is the largest part of NCL, operating its fleet in the Caribbean cruise market. NCL America is the only cruise line operator to sail ships under the U.S. flag, and is the only cruise line to serve the inter-island market in Hawaii. NCL also operates cruises to Alaska, and has developed a new cruise concept, "Homeland Cruising," offering year-round departures from New York. In the mid-2000s, NCL also has introduced another new cruise concept, "freestyle cruising," providing more flexible dining hours in a less formal atmosphere than traditional cruising. Once listed on the New York Stock Exchange, NCL remains wholly owned by Star Cruise Lines. The Malaysian parent has indicated its interest in a possible re-listing of NCL in the mid-2000s. David Colin Veitch is NCL's president and CEO.

MODERN CRUISE PIONEER IN 1966

NCL originated in Norway at the turn of the 20th century when Lauritz Kloster purchased a used steamship and founded a company shipping ice from Norway to the United Kingdom. Kloster filled his ship with coal for the return trip, and from this beginning built his company into a major shipping company, Klosters Rederi A/S. Based in Oslo, Klosters later added ferry services as well.

By the early 1960s, the company had come under the leadership of Kloster's son, Knut Kloster, who saw an opportunity to expand the group's ferry operations. In 1966, Klosters acquired a new vessel, the Sunward, which, at 8,600 grt (gross-register-tons) was capable of carrying up to 600 passengers and 500 cars. Kloster's idea was to provide ferry service to British vacationers from Southampton to points in Spain, Portugal, and Gibraltar.

Klosters launched the service in June 1966. The company was soon caught up in the long-running dispute between Spain and the United Kingdom over the island of Gibraltar, however. When Spain closed its border to cruise ships arriving from Gibraltar, the Klosters ferry service suddenly found itself on the brink of collapse.

Help came in the form of Ted Arison, an Israeli entrepreneur who had started out as a partner in an airfreight company before selling his stake in that operation to turn to a newly growing market, that of Caribbean cruises, in the mid-1960s. Until the late 1950s, the cruise ship market was more or less limited to larger vessels sailing intercontinental routes, and served foremost as a means of overseas transportation. The early cruise industry also was marked by a class system, from the luxury of first-class accommodations, to the relative squalor of third-class travel. The development of jet engines and the beginning of a true passenger airline service had begun to transform the cruise ship industry, however.

At the same time, the buoyant economy and the rapid growth of leisure time had begun to stimulate the travel and tourism industry. By the early 1960s, a number of shipping companies and other entrepreneurs had begun to offer shorter cruises. The short cruises provided transportation for vacationers traveling to their destinations, before rapidly evolving into becoming vacations themselves. Ferries, such as the Sunward, became sought-after vessels for the cruise industry.

Arison founded the Arison Shipping Company in 1966 and teamed up with another Israeli group that had begun operating ferry cruises between Miami and the island of Nassau in 1964. That group marketed its ferry service as "the world's first luxury one-class floating motel," distinguishing itself from the earlier cruise lines. By 1965, the group had added a second ferry service. Initially, these ships operated on short three- and four-day cruises. Joined by Arison, however, the company prepared to launch a new service, that of seven-day cruises, originating from Miami and traveling to Montego Bay and to Jamaica. In September 1966, Arison Shipping began marketing the new cruise, and began taking bookings from vacationers.

Arison's own company now found itself in jeopardy, when the ship owners went bankrupt and the two ferries were impounded. Yet Arison had heard of Klosters' problems with the Sunward and encouraged the Norwegians to bring their ferry to Florida. Klosters agreed, and the Sunward arrived in Miami in December 1966. Billed as "the Newest, Most Beautiful Cruise Liner," the Sunward was credited with establishing the modern cruise industry, and with placing Miami as the center of the global cruise market.

The success of the Sunward, and the rapid development of the cruise industry in the late 1960s, encouraged Klosters to invest in a new fleet. In 1968, the Kloster family founded a new company, Norwegian Caribbean Lines (NCL), and raised some $100 million to build four new ships. The new vessels were initially conceived along the lines of the Sunward, but on a larger scale. The company's second ship, the Starward, was launched in December 1958, with a gross-registertonnage of 15,000, and capacity for 750 passengers. Yet the Starward still retained ferry capacity for 250 cars, in case of a potential collapse of the cruise industry.

By 1970, however, NCL had become convinced that the cruise industry was there to stay. In January of that year, the company launched its third ship, the Skyward, and the first in the company's fleet to feature all-passenger service, with no car-carrying facilities. As such, NCL became one of the leading pioneers of the modern cruise industry, developing a new range of services and facilities to cater to its vacationing passengers. The company began offering inexpensive year-round, seven-day cruises to the Caribbean. By 1971, the company had launched its fourth ship, the Southward, which became the first in the fleet to offer 14-day cruises. The company then completed its transition to full-fledged vacation cruise operations with the commissioning of the Sunward II, replacing the group's original vessel.

COMPANY PERSPECTIVES

NCL Corporation Ltd. ("NCL") is one of the leading cruise ship operators in the world and is increasing the size and modernity of its fleet. NCL currently operates 12 ships with over 21,600 berths, which represents approximately 9.0% of the overall cruise capacity in North America in terms of berths. NCL is in the midst of a fleet renewal program which, by the end of 2007, will add three new ships to its fleet. The addition of these new ships will result in a fleet size of 15 ships with approximately 28,900 berths.

Into the 1970s, however, a dispute erupted between Arison and Kloster. With Kloster accusing Arison of misusing funds, the two companies separated in 1972. Arison once again found himself with bookings and no ships, and turned around and launched Carnival Cruise Lines. That company went on not only to rival NCL, but to become one of the world's top three cruise operators.

APERIOD OF DIFFICULTIES: 1979–95

NCL remained the market leader through the 1970s, notably through a string of innovations. The company began offering the industry's first air flight and cruise packages, providing low-cost flights to Miami. The company also played a role in developing new port destinations in the region, such as to the western Caribbean, Grand Cayman, and Mexico's Cozumel. These included the purchase of the company's own island, Great Stirrup Cay Island, in the Bahamas. The company then launched the first "out island" cruise—only NCL passengers were allowed onto the company's island—which later became an industry standard.

By the end of the decade, NCL had become a clear leader in the cruise market. In 1979, the company attracted international headlines when it purchased the S.S. France, the former pride of the French fleet, originally commissioned in 1962. NCL spent some $100 million to convert the ship, which joined the NCL fleet under the name S.S. Norway. Larger than every other cruise ship at the time, the Norway allowed NCL to greatly expand its range of onboard facilities and entertainment—the company later became the first to add full-scale Broadway shows to its cruises—establishing a new standard for the cruise industry.

Yet the purchase of the S.S. France/Norway was the start of a series of decisions made by Klosters that brought the family's shipping empire into difficulty. Although the S.S. Norway proved highly popular with NCL passengers, the newly renovated, large-scale vessel encouraged the company's rivals to build even larger vessels. While its competitors launched newly designed and built ships, NCL found itself saddled with the cost of maintaining the aging Norway.

The Kloster family company, which became Kloster Cruise A/S, went public in 1986, listing on the Oslo Stock Exchange. The public offering was meant to fuel the group's expansion in the mid-1980s. Observers later criticized Kloster's management, however, for developing an external expansion strategy during this period. By the late 1980s, Kloster had acquired two more cruise operations, Royal Viking Cruise Line and Royal Star Cruise Line. The addition of the new fleets established Kloster and NCL as the world's top cruise operators. The addition of the new fleets, some of the vessels of which were transferred to NCL, allowed NCL to begin operating in routes beyond the Caribbean for the first time. In the late 1980s, for example, the company began offering cruises to San Juan. In recognition of this expansion, NCL changed its name in 1987, to Norwegian Cruise Lines. The following year, Royal Viking Cruise Line was placed under NCL's management, while continuing to operate as a separate brand.

Nonetheless, NCL's expansion effort actually helped slow down the company's growth. Saddled with a fleet of older ships (the company had not commissioned a new-build vessel since the early 1970s), NCL watched its competitors steam ahead in the market with a new generation of modern "superliners." NCL attempted to play catch-up; in 1988, the company commissioned its first new-build in 17 years, the Seaward.

KEY DATES

1906:

Lauritz Kloster founds Klosters Rederi in Norway.

1966:

Klosters begins offering ferry services between the United Kingdom and Spain, Portugal and Gibraltar, but is forced to move to the Caribbean cruise market instead, forming a partnership with Ted Arison (later founder of Carnival Cruise Lines).

1968:

Norwegian Caribbean Lines (NCL) is formed and an expansion program begins, with four ships added into the 1970s.

1979:

NCL buys the S.S. France and converts it to cruise operations.

1984:

The Royal Star Cruise Line is acquired.

1986:

Kloster Cruises goes public on the Oslo Stock Exchange.

1987:

NCL becomes Norwegian Cruise Lines.

1988:

The Royal Viking Cruise Line is acquired.

1995:

The fleet is consolidated under NCL, phasing out Royal Star and Royal Viking; Klosters becomes NCL Holdings.

1999:

NCL Holdings goes public on the New York Stock Exchange.

2000:

The company delists after its acquisition by Star Cruises of Malaysia; the Freestyle Cruise concept is launched.

2004:

NCL America and inter-island Hawaii cruises are launched.

2006:

Fleet expansion begins, with three new vessels added by the end of 2007.

By the early 1990s, however, NCL's difficulties were compounded by the collapse of the international tourist market, amid the slumping economy and the repercussions of the Persian Gulf War. Adding to the group's troubles was a long series of management changes, and a succession of presidents, including Knut Kloster's brother Einar, and then his son Knut Kloster, Jr. In the meantime, the company had been slow to replace its aging fleet, launching its next new-build, the Dreamward, only in 1992, followed by the Windward in 1993. These were joined by the Leeward in 1995. By then, however, NCL had suffered through several years of losses.

CRUISING INTO THE NEW CENTURY

In 1995, Kloster was forced to consolidate its cruise ship operations, shutting down the Royal Viking and Royal Star lines. Most of these companies' fleets were then transferred to NCL, a move that allowed NCL to begin offering European cruises for the first time. During this time, the Kloster family lost control of the company, and Kloster Cruises was renamed as NCL Holdings.

Under new management and new ownership, NCL once again looked forward to expansion. The company acquired a new, single-ship cruise company, Orient Line, in 1998. In 1999, NCL went public, listing on the New York Stock Exchange. NCL soon took on a new major shareholder, Star Cruise Lines, part of Malaysia's Genting Group. Yet the company also faced down a hostile takeover attempt, from Carnival Cruise Lines.

By 2000, however, Star Cruise had gained full control of NCL, taking the company private again. Under Star Cruise and a new president and CEO, Simon Veitch, NCL launched a new period of growth. In particular, NCL appeared to have regained its position as cruise industry innovator. At the beginning of the decade, for example, the company launched the industry's first "Freestyle Cruise," a concept that provided more flexible dining, including a wider choice of restaurants, while dropping formal dining attire requirements in favor of more casual dress. In 2004, the company launched a new cruise concept, NCL America, which became the first to sail under the American flag in 50 years, and the first to provide inter-island cruises in Hawaii. In that year, NCL reincorporated as NCL Corporation. Star Cruise also announced its interest in taking NCL public in the near future.

By 2006, NCL had once again gained a place among the industry's top three, with a fleet of 12 ships and more than 21,500 berths. The company also had put into place a strong investment program, with plans to add three new ships, and more than 7,000 additional berths, by the end of 2007. The completion of this build schedule was expected to give the company the industry's youngest fleet. NCL Corp. appeared to have set sail for new successes in the 21st century.

PRINCIPAL COMPETITORS

Carnival Corporation; Mitsui OSK Lines Ltd.; Carlson Companies Inc.; Neptune Orient Lines Ltd.; MyTravel Group PLC; PT Angkutan Sungai Danau Dan Penyeberangan; Royal Caribbean Cruises Ltd.; Wan Hai Lines Company Inc.; Stena Line Scandinavia AB; Seabourn Cruise Line; J Lauritzen A/S; Korea Line Corporation; Holland America Line Westours Inc.; Wallenius Lines AB.

FURTHER READING

Bertram, Cindy, "A Cruise Line of Innovation and 'Firsts,'" Leisure Group Travel, December 2003/January 2004.

"Carnival and Star Sever Tie Up After Buying NCL," Travel Trade Gazette UK & Ireland, March 27, 2000, p. 30.

Golden, Fran, "Kloster's Adam Aron: 'Dark Days Are Behind Us,'" Travel Weekly, March 28, 1994, p. 12.

Green, Marilyn, "NCL Will Target Asia," Leisure Travel News, October 16, 2000, p. 24.

Jordan, Allen E., "Humble Beginnings: Many of Today's Top Cruise Lines Grew from Hardscrabble Roots," Cruise Travel, January-February 2006.

Major, Brian, "Glory Days," Travel Agent, November 18, 1996, p. 44.

Mott, David, "Dynamic NCL Aims for the Youngest Fleet in the Industry," International Cruise & Ferry Review, Spring/Summer 2005, p. 43.

"NCL Gears Up for Five New Vessels by 2007," Travel Trade Gazette UK & Ireland, May 13, 2005, p. 17.

"NCL Parent Tweaks Corporate Setup," Travel Weekly, July 26, 2004, p. 6.

"NCL to Be Relisted on New York Exchange," Travel Trade Gazette UK & Ireland, February 18, 2005, p. 17.

"NCL to Take Agents to See Ship's Launch," Travel Trade Gazette UK & Ireland, March 17, 2006, p. 8.