FULL STEAM AHEAD; CRUISE SHIP COMPANY, LITTON LAUNCH HISTORIC FLEET.

Byline: Alan Sayre Associated Press 

The Delta Queen Steamboat Co., best known for its paddle wheelers that cruise the rivers of mid-America, is putting its future on passenger vessels that will take tourists around Hawaii and along the East and West coasts.

Using a federally guaranteed loan program designed to encourage domestic shipbuilding, the company's parent, American Classic Voyages Co., has signed contracts with a division of Woodland Hills-based Litton Industries Inc. that are worth more than $1 billion to build four new ships, including the first large passenger ships to be built by a U.S. shipyard in more than 40 years.

The company is convinced it's on the right track, bolstered by projections that its annual passenger load will quadruple from the current 100,000 in five years. Surveys show the average age of a first-time cruise ship passenger to be 50, and two-thirds of those eventually go on a repeat cruise, said Scott Young, president of Delta Queen.

``The baby boomers are just taking their first cruise,'' Young said. ``We're going to see a swelling of those ranks.''

The company is planning two $470-million ships to cruise the Hawaiian Islands. Each will be able to handle 1,900 passengers.

American Classic Voyages already has one cruise ship that operates weekly cruises around Hawaii through Delta Queen's sister company, American Hawaii. It recently agreed to pay Holland American Line $114.5 million for a second vessel that it will use on Hawaiian cruises until the new ships are delivered.

In addition, the company has signed contracts to build two 300-foot passenger vessels to cruise the East and West coasts. Each will cost $37 million and handle 226 passengers.

In April, American Classic received a commitment from the U.S. Department of Transportation to guarantee private financing of up to $1.1 billion for three vessels for the Hawaiian voyages.

The loan-guarantee program, which has been around for decades but received a boost from the Clinton administration in 1997, is intended to revive the flagging U.S. domestic shipbuilding business, which for decades has been centered largely around military contracts.

Most of the newer passenger vessels, such as the behemoths of Carnival Cruise Lines, have been constructed in yards in Italy, Germany, France, Finland and Spain.

American Classic's two Hawaiian vessels will be the first large passenger vessels delivered from a U.S. yard since 1958, said Ed Welch, legislative director of the Passenger Vessel Association, based in Arlington, Va.

``When you start getting into smaller vessels, it is easier to get financing. But then you get into these larger vessels, the government guarantee helps,'' Welch said.

The Hawaiian cruisers, being built at Litton's Ingalls Shipbuilding Co. yard in Pascagoula, Miss., are scheduled for delivery in January 2003 and January 2004.

In addition, there is an option for three more. The coastal cruisers will be built by Atlantic Marine Inc. in Jacksonville, Fla. with delivery dates in 2001. There also is an option for a third - and thoughts about more.

``We would like to do as many as five to seven of the coastal ships,'' Young said.

American Hawaii has a unique position in the Hawaiian tourist market. Although foreign vessels cruise in Hawaii, U.S. law mandates that they make a stop at a foreign port. Because American Hawaii has U.S.-registered ships, it is exempt from that. Nonetheless, it is still a premium-priced cruise since it has to abide by U.S. inspection and labor laws, including paying its crews 80 percent more than the average crew of a foreign-flagged vessel, Young said.

The coastal cruisers, which will have a steamboat style without the paddle wheel, will be part of the Delta Queen steamboat fleet, which includes the Delta Queen, a national historic landmark; the Mississippi Queen; and the world's largest steamboat, the American Queen.

Plans call for a new riverboat, the Columbia Queen, to be launched on the Columbia, Snake and Willamette rivers in the Pacific Northwest next April.

For the second quarter ending June 30, American Classic Voyages earned $2.3 million, or 13 cents per share, up from $1.6 million, or 11 cents per share, a year ago. Revenue rose to $55.2 million from $53.5 million.

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2 Photos

Photo: (1--Color) American Hawaii, operator of the cruise ship Independence, plans a fleet of ships that will include two $470 million ships built in the U.S.

(2--Color) A hula dancer bids goodbye as the SS Independence leaves Honolulu Harbor. Independence is the first in a planned fleet.

Ronen Zilberman/Associated Press