Plans Set For The Largest U.S. Cruise Ships Ever Built; American Classic Voyages Co. and Litton's Ingalls Shipbuilding Announce Signing of Historic Contract.

MIAMI--(BUSINESS WIRE)--March 10, 1999--

Construction of The First U.S.-Flag Oceangoing 

Cruise Ships in More Than 40 Years

Today at Seatrade, the Annual Convention for the International Cruise Shipping Industry, American Classic Voyages Co. (NASDAQ:AMCV) and Litton Industries' Ingalls Shipbuilding (NYSE:LIT) division presented the details of the Project America contract to build the largest U.S. cruise ships ever built and the first large cruise ships in the United States in more than 40 years.

Under the terms of the Project America contract, which has a potential value of $1.4 billion for up to three ships, Ingalls will initially build two 1,900-passenger U.S.-flag cruise vessels for AMCV, with an option for a third vessel. The base price for the first two vessels, not including incentive payments available to Ingalls, is $880 million. These state-of-the-art luxury cruise ships will cruise among the Hawaiian Islands. The first vessel is scheduled to enter service in early 2003.

Project America is the result of the U.S.-Flag Cruise Ship Pilot Project Statute passed by Congress in 1997 (PL 105-56), with the goal of revitalizing the U.S.-flag oceangoing cruise ship fleet. It is expected to create more than 5,000 American jobs, help sustain and modernize the U.S. shipbuilding industrial base, increase U.S. tax revenues, boost Hawaii tourism, and expand consumers' leisure travel opportunities. The Pilot Project Statute was sponsored by Senator Daniel K. Inouye (D-Hawaii) and was supported by the Department of Defense.

Phil Calian, president and CEO of AMCV, said, "The signing of the Project America contract is an historic step for both the U.S.-flag cruise industry and our nation's shipbuilding industrial base. Today, we are showing that American shipyards can compete in the construction of modern cruise ships and that the U.S.-flag cruise industry has an exciting future."

"This contract is a vital element of Ingalls' integrated strategic business plan," said Jerry St. Pe, president of Ingalls and senior vice president of Litton Industries. "Of all the commercial ship projects available, cruise ships require a level of complexity, and a mix of skills, most closely matched to those inherent in the building of complex naval vessels, and already available at Ingalls."

Senators Inouye, Trent Lott (R-Miss.), Thad Cochran (R-Miss) and John Breaux (D-La.) and Representatives Gene Taylor (D-Miss-5) and Neil Abercrombie (D-Hawaii-1) along with Secretary of the Navy Richard Danzig, Maritime administrator Clyde J. Hart, Jr., Deputy Maritime Administrator John E. Graykowski, and AMCV Chairman Sam Zell, as well as many other congressional and administration officials and leaders, joined AMCV and Ingalls to highlight Project America's significance to the nation's shipbuilding industry, the U.S.-flag cruise industry, and national security. They also were joined by maritime industry and labor leaders.

"This contract, while important as a stand-alone element of our business base, will significantly enhance Ingalls' competitive posture for future navy and commercial programs," St. Pe said. "This is a unique opportunity available to our shipyard and U.S. shipbuilding to implement practices and processes required for this and other commercial programs, that also will be a direct benefit to Navy programs for which Ingalls will be competing in the future."

Ingalls delivered the last American-built large cruise ships, SS BRASIL and SS ARGENTINA, to Moore McCormack lines in 1958.

Ingalls will perform the contract in a teaming agreement with Kvaemer Masa Shipyards of Turku, Finland, one of the world's most experienced and successful designers and builders of large, modern cruise ships. The European company, under a fixed-price contract to Ingalls, will provide design and planning expertise, and will advise Ingalls on commercial manufacturing techniques.

The Project America contract signing culminates a 10-month bid process involving two other prominent U.S. shipbuilders, and follows an October 1998 letter of intent signed by AMCV and Ingalls Shipbuilding. The contract contains options which could result in up to six ships being built under Project America.

"Our goal at American Classic is to provide passengers a great Hawaiian vacation experience aboard modern U.S.-owned, U.S.-built, U.S. crewed cruise ships," AMCV's Calian said. "These first two vessels represent the future of the U.S.-flag cruise ship industry."

The two initial ships will be state-of-the-art luxury cruise vessels, each approximately 72,000 gross tons and 840 feet long. The design of the vessels blends the best of Hawaii with the modern luxuries of cruising. Each vessel will feature a four-deck-high atrium, a 1060-seat dining room, an 840-seat theater, a 590-seat cabaret lounge, and a uniquely Hawaiian outdoor performance stage. Accommodations for 1,900 passengers include 950 cabins, 77 percent of which will be "outside cabins", and 64 percent of which will have private balconies.

The ships will have 85,850 square feet of open deck space, extensive health spa and gymnasium facilities, and 2,100 square feet of conference space. In addition, the upper three decks of the ships are designed to maximize the sense of spaciousness on board and provide passengers with panoramic views of the Hawaiian Islands and the surrounding Pacific Ocean.

Ingalls expects to begin construction of the first ship in 2000. This contract, along with other commercial work and U.S. Navy programs underway in the shipyard or planned for the coming years, will significantly stabilize Ingalls' work force into the 21st century. As many as 2,300 Ingalls employees will be involved in cruise ship work during peak construction periods. Ingalls currently employs 11,300 people.

Ingalls is one of the nation's leading systems companies for the design, engineering, construction, and life cycle support of ships for the U.S. Navy and international navies, and for commercial marine structures of all types. Ingalls has built luxury liners, general cargo vessels, container ships, and tankers for the Merchant Marine Fleet. It also has produced amphibious assault ships, submarine tenders, destroyers, ammunition ships, and nuclear submarines built for the U.S. Navy during the past 60 years.

Litton Industries, headquartered in Woodland Hills Calif., is a leader in worldwide technology markets and advanced defense, electronic and information systems.

AMCV is the largest owner and operator of U.S.-flag passenger vessels. It owns and operates two U.S.-flag cruise lines, American Hawaii cruises and the Delta Queen Steamboat Co., both headquartered in New Orleans, La. Currently, AMCV's American Hawaii Cruises creates an authentic Hawaiian experience aboard its steamship, the INDEPENDENCE, on three-, four- and seven-night itineraries visiting up to five ports on four islands. With Project America, AMCV plans to more than quadruple its passenger capacity in Hawaii in the next seven to 10 years.

The Delta Queen Steamboat Co., the oldest U.S.-flag cruise line, offers three- to 14-night vacations through America's heartland aboard its authentic steam paddlewheelers, DELTA QUEEN, MISSISSIPPI QUEEN, AND AMERICAN QUEEN.

The Delta Queen Steamboat Co. has announced plans to build a new line of five small coastal cruise ships at a cost of approximately $35 million each. Delta Queen Coastal Cruises will operate along America's Eastern seaboard, the Pacific Northwest, and Northern California. The first of these 300-foot, 226-passenger vessels is scheduled to launch in the spring of 2001, with the second scheduled to enter service three months later.