Japan’s MHI Scuttles Cruise Shipbuilding Plans After Losses on Carnival Ships

The AIDAPrima was delayed several times at MHI before its delivery in March 2016, more than a year behind schedule. 

TOKYO, Oct 18 (Reuters) – Japan’s Mitsubishi Heavy Industries Ltd has abandoned its ambition to build European cruise liners and will stick to making smaller ferries and other medium-sized passenger ships after racking up losses on a venture to build two large vessels.

Mitsubishi Heavy Industries (MHI), Japan’s No.4 shipbuilder, booked 238 billion yen ($2.3 billion) in extraordinary losses in the three business years ended March 31 due to cost overruns and delays in the construction of two 100,000-ton class cruise liners for Europe’s Carnival Corp.

“We thought we could somehow manage it, but it showed us that we need a stringent decision making process and risk management, MHI Chief Executive Officer Shinichi Miyanaga said at a press briefing in Tokyo on Tuesday.

The construction of the vessels for Carnival was plagued by faulty engines, late design changes and onboard fires. That delayed delivery by more than a year and increased construction costs for the first of the two liners by almost four times to nearly $2 billion, MHI said in a report.

In the future, MHI’s passenger ship unit will build smaller vessels, such as 40,000-ton cruise ferries, that it can manage with its current workforce and domestic supply chain.

Currently, more than 90 percent of the world’s cruise liners are built in European shipyards.

MHI is more skilled at building merchant vessels, mainly liquefied natural gas carriers.

Earlier this month, a media report said MHI was downsizing its shipbuilding operations due to a slump in orders. Shipyards worldwide, including in Japan, South Korea and China, have been hurt by a slump in demand as a result of oversupply.

Global orders last year fell to 2,197 ships from 2,888 in 2014, according to the Shipbuilders Association of Japan. (Reporting by Tim Kelly; Editing by Chris Gallagher and Himani Sarkar)

Crystal's Sale and New Ship Spark Speculation

Crystal Cruises makes bold moves with its sale to Genting Hong Kong and plans for a new ship in 2018

Crystal Cruises is getting a new owner — Genting Hong Kong (GHK) — along with a long-awaited new ship. As a result, travel agents are generating a boatload of questions. Despite assurances that Crystal’s management team will continue intact, travel planners worry about highly respected, key executives. In light of so many recent cruise industry moves into China, they also voice concerns about whether Crystal will become a Chinese product.

The current parent company, Japan’s Nippon Yusen Kabushiki Kaisha, launched Crystal in 1988, and the luxury line has competed very successfully against more recent ships with its two vessels, the 922‐passenger Crystal Symphony (1995) and the 1,070‐passenger Crystal Serenity (2003). When the order for the line’s largest vessel, Crystal Serenity, was announced in November 2001, luxury lines were struggling, even before the events of 9/11. I remember standing beside one of the Japanese owners who said to me, “Could the timing be any worse?”

They subsequently reduced the fleet size in 2005, sending the oldest ship,to the parent company to be renovated and moved into the Japanese cruise market. Since then, Crystal’s two-ship fleet has consistently received top industry awards. The company has continuously added additional features, changed the decor and proven that the highest luxury standards could be maintained on ships as large as 1,000 passengers — a bold pioneering move in luxury. 

The new owner, GHK, is part of the Genting Group, a public global hospitality and leisure company with business in more than 20 countries, including the U.S. (New York, Florida and Nevada).

“Genting will provide financial resources and proven expertise in innovative ship design to build a new ship that will set the highest standard in luxury cruise ships,” said Tan Sri Lim Kok Thay, chairman, CEO and acting president of GHK. “This new ship, together with Crystal’s legendary six-star service, will reinforce Crystal Cruises’ reputation as the world’s leading luxury cruise line for decades to come.”

Under the terms of the agreement, GHK will acquire Crystal for $550 million during the second quarter of this year. Genting already owns Star Cruises, Asia’s major cruise line, and is a 28 percent owner of Norwegian Cruise Line Holdings, the umbrella company of Regent Seven Seas Cruises, Norwegian Cruise Line and Oceania Cruises. 

Crystal president and CEO Edie Rodriguez pointed out that Regent and Crystal will continue to compete head to head, citing the relationship between Princess Cruises and Holland America Line as an example of competition between two brands within the same parent company.

“After 25 successful years with NYK, we are excited to have Genting Hong Kong as the new owner of Crystal Cruises,” Rodriguez said. “The proposed expansion of our fleet will present our loyal Crystal Society members and new luxury cruise guests with more itinerary options, accommodation choices and exceptional vacation experiences, as we continue to position Crystal as the innovative leader in global luxury cruising. Additionally, Crystal’s veteran leadership, management and crew will continue to focus on our award-winning guest service and our strong partnership with the travel agent community — which now has a greater opportunity to grow their businesses with a larger menu of Crystal product offerings.”

Travel consultants certainly agree that an additional ship is what Crystal needs to compete in the growing luxury sector of cruising.

“They would really be losing out if they didn’t,” said Susan Reder, managing partner of Frosch Classic Cruise & Travel in Woodland Hills, Calif. “I think there are lots of changes ahead, but Crystal really must form an advisory board. Agents know the features needed for the new ship to compete with the new Regent ship, which I hear is unbelievable.”

Tom Baker, co-owner of Houston-based Cruise Center, thinks it’s too early to predict what will happen.

“We won’t know enough until after the deal becomes finalized later this year,” Baker said.

Several agents expressed concern that Crystal will become a cruise line geared toward the Chinese market, and some expressed the hope that executive vice president Jack Anderson will remain in a leadership position, along with Thomas Mazloum, senior vice president of operations. The timing for Crystal’s newbuild represents a sort of coming of age, as the company turns 30 in 2018, when the ship will launch.

Boeing and battery maker clash over 787 fix

By Phil Davies

Boeing and the Japanese company that makes lithium-ion batteries for 787 Dreamliner disagree about what should be included in a package of measures aimed at returning the aircraft to service.

Battery maker GS Yuasa Corporation believes the fix for the battery should include a voltage regulator that could stop electricity from entering the battery, the Wall Street Journal reported, citing government and industry officials.

Boeing proposed its fix to the US Federal Aviation Authority on Friday.

But on Thursday, Yuasa told the agency that its laboratory tests indicated a power surge outside the battery, or other external problem, started the failures on two batteries, according to the newspaper.

The FAA confirmed the meeting with Yuasa, but did not give any details. A Yuasa spokesman declined to comment.

A Boeing spokesman said that the investigation has not showed that overcharging was a factor and that the 787 had quadruple-redundant protection against overcharging in any case.

"Our proposal includes multiple layers of protection covering the known potential probable causes of the events," he said.

He added that Boeing was co-ordinating with key suppliers.