I’ve seen this too many times in the last few years. It all starts with a passenger vessel company that is doing fine and then either sells to new owners or expands into new areas.
Things usually go very well for a year or two. Then something happens, whether it’s a machinery breakdown or bad weather that causes passenger counts to slide or something else. The owner presses forward but also decides to overlook a few maintenance items because of lack of funds. The vessel still gets its U.S. Coast Guard Certificate of Inspection and keeps operating even though some of these little things aren’t being taken care of. Then passengers start to notice (most of these vessels get about a 40% return rate) that things don’t seem to be as good as they were before. Inevitably, passenger counts and revenue slide.
The owner also can’t afford a few other small things. All of these add up to one big thing and the Coast Guard inspector decides to pull the COI. The owner now needs to get the vessel up and running with a new COI or revenue and income will quickly fall to zero.
Now, however, the owner can’t afford items like insurance premiums and bank payments. Red flags go up. As a representative of the insurer we scale the policy back as far as we can (with the insurance company underwriter fully aware of the circumstances).
The vessel owner tries to give the vessel up to the bank. The bank doesn’t own it so the bank needs to place a lien. She goes to auction and the bank is the highest bidder and then legally owns the vessel. The vessel quickly falls into major disrepair, and without a COI and upkeep, sells for nearly scrap prices.
It’s heart-wrenching and happens slowly, right before the eyes of the owners, their colleagues in the passenger vessel business, the Coast Guard, lenders and, yes, the insurers. And nearly forgotten in this scenario are the passengers who see another business and a once beautiful vessel go away.
There are many losers here and I don’t have an answer. It’s truly a sad thing.
