Troubled waters for the cruise industry

The ships and profits are getting bigger in an industry that lacks oversight and is increasingly accident-prone

Troubled waters

Photo by Marco Secchi/Getty Images

Troubled waters
Photo by Marco Secchi/Getty Images

The cruise ship Carnival Triumph set sail out of Galveston, Texas, amid an unusually high level of fanfare a little over a month ago. Comedian George Lopez performed two matinee shows, DJ Irie spun records by the pool and visitors to the newly added EA Sports Bar were greeted by Houston Texans cheerleaders. The “all-out bash” was an attempt to wash away lingering memories of the Triumph’s infamous “poop cruise” back in February. That’s when a fire knocked out the Triumph’s engines, leaving the ship and its 3,143 passengers adrift in the Gulf of Mexico—without air conditioning or working toilets—for four long days.

It was the second black eye in just over a year for Carnival Corp., the world’s largest cruise ship company. On Jan. 13, 2012, the Carnival-owned Costa Concordia struck a rock off the coast of Italy, tearing a 50-m-long gash in its hull. Thirty-two people died when the ship sank off the island of Giglio, marking one of the worst cruise ship disasters in recent memory. Capt. Francesco Schettino was dubbed “Captain Coward” by the tabloids because he abandoned ship before all the 4,229 passengers and crew had been evacuated. He is being tried for manslaughter this month in an Italian court. On July 20, five crew members on the ship were convicted of manslaughter in a separate trial.

Yet, for every headline-making cruise ship accident or mishap, dozens more go relatively unnoticed. Six weeks after the Costa Concordia sank, its sister ship, the Costa Allegra, suffered an engine room fire that left it and its passengers adrift in the Indian Ocean. A similar engine room fire three years ago disabled the Carnival Splendor, stranding its 4,500 passengers and crew off the coast of Mexico. In March of this year, the Carnival Dream suffered an emergency generator failure while docked in port in St. Martin. In May, Royal Caribbean’s Grandeur of the Seas caught fire in mid-cruise with all 2,224 passengers aboard. And, recently, Spanish cruise line Pullmantur said the Zenith, carrying 1,672 passengers, lost power after a fire broke out in the engine room, forcing it to drop anchor off the coast of Venice.

If a similar list of failures struck, say, the commercial airline industry, a regulatory crackdown would be well under way. Yet, despite carrying some 21 million passengers annually, there’s no single authority to enforce rules and regulations for cruise ships. Instead, the industry operates amid a patchwork of jurisdictions that critics say effectively makes it a Wild West on the water, insulating it not only from strict oversight when it comes to safety, but also scrutiny of how it handles everything from sexual assaults to viral outbreaks, which critics say are far more common than most people realize.

With its headquarters in Miami and shares trading in New York City, Carnival appears to many passengers as an all-American company. But its parent is actually incorporated in Panama and many of its ships, including the Triumph, are registered in the Bahamas, putting the tiny string of islands in control of much of what happens beyond U.S. or Canadian territorial waters. “The cruise industry is almost wholly self-regulating,” argues Ross Klein, a professor at Memorial University in St. John’s. “They’re only accountable to the country where the ships are registered in. And very often where the ship is registered is thousands of miles away.” The flip side of the complex arrangement is it makes for a highly profitable business. Carnival, which operates 102 ships spread across 10 brands, including Princess Cruises, Holland America Line, Costa and Cunard, earned $1.9 billion on nearly $16 billion in sales in 2011, paying almost no U.S. federal taxes. Nor is it forced to abide by U.S. rules about employee wages or working conditions. And when things go wrong at sea, any resulting investigation is likely to be headed by a foreign body like the Bahamas Maritime Authority, which isn’t obligated to share its findings.

Still, the cruise ship industry denies it has a safety problem. Carnival chairman and Miami Heat basketball team owner Micky Arison emphasized during a June conference call with analysts that “your risk [of getting killed] driving to the port is probably a lot higher than getting on a cruise.” Though not exactly comforting language, it is true that deaths at sea are rare (although the industry is careful not to count deaths as a result of crimes or passengers falling overboard, which happens at least once a month on average, according to some estimates). Yet critics argue that being trapped on a disabled ship hundreds of kilometres from shore, as is far more likely, remains a potential recipe for disaster, and that it only takes one cruise ship catastrophe—an out-of-control fire or a powerless ship in the path of a major storm—to result in a substantial loss of life. That’s particularly the case with new “mega-ships” that can carry upward of 7,500 passengers and crew. “The cruise passenger gets a really cheap vacation because they’re on a ship that’s registered offshore, and they’re able to pay the labour next to nothing,” Klein says. “But people never bother to think about why it’s so cheap.”

The global cruise ship industry suffered a total of 97 mishaps in 2012. That includes 14 collisions, 20 fires, five ships that ran aground and four that sunk (although only one of those, the Costa Concordia, belonged to a major cruise line). During the first five months of this year, the industry racked up another 31 incidents—mostly fires and problems with propulsion systems. Those numbers don’t come from any government agency, however. They come from Klein’s personal website, Cruise Junkie. “The data that I have on accidents—there is no other data,” Klein says. “The industry doesn’t keep track of it.” Or if they do, they’re not required to make it public or share it with government agencies.

What the industry does share, however, is “operational fatalities,” which refers to deaths that result from marine accidents, including collisions and sinkings. David Peikin, a spokesperson for the Cruise Lines International Association (CLIA), the industry’s trade association, points to a study by G.P. Wild, a maritime consulting group. It found the cruise industry carried 223 million people between 2002 and 2011, but suffered only 28 deaths—six passengers and 22 crew members.

But does the industry truly have a stellar safety record, or has it merely been lucky? The industry’s number of fatalities doubled overnight with the sinking of the Costa Concordia, which was far from a worst-case scenario: it happened close to shore, in calm weather and in shallow water. And the way the accident unfolded hardly demonstrated a laser-like focus on safe operations. An investigation by Italian authorities found that Capt. Schettino steered the boat too close to shore (media reports suggested he was attempting to give the island of Giglio a “salute”), striking a rock at around 9:45 p.m. But it wasn’t until 10:43 p.m. that the abandon-ship order was given. By that point, an evacuation led by shore-based search and rescue teams, alerted by passengers’ 911 calls, had already begun.

Passengers who made it off the ship told tales of mass confusion. Martha Manuel, an American, told CBC that passengers were initially instructed to go to their rooms, but that she disobeyed and headed to a lifeboat station instead—a decision she credits with saving her life. “Our only goal was to get off the ship,” Manuel said. Among those who died was a five-year-old girl named Dayana Arlotti. She and her father were turned away from a lifeboat and “fell into an abyss which was created as the starboard side of the ship overturned,” reported the Daily Telegraph.

The cruise industry moved quickly to bolster its reputation in the wake of the disaster. CLIA launched a safety review that resulted in 10 recommendations that have since been adopted by member cruise lines, as well as the International Maritime Organization (IMO), the UN agency charged with overseeing maritime safety. They include changes to how emergency drills and lifeboat training is conducted, and requirements to store additional life jackets “far in excess” of the number of passengers and crew.

Similarly, CLIA launched a “preparedness risk assessment” in the wake of the Triumph’s “poop cruise” that focused on backup power systems. Carnival, meanwhile, said it would spend a total of $300 million to “enhance emergency power capabilities, introduce new fire safety technology, and improve operating redundancies across its entire fleet.” When asked why those redundancies weren’t already in place, company spokesperson Jennifer De La Cruz told Maclean’s that every ship already has emergency backup systems that “meet or exceed” regulatory requirements. “The changes we are making are designed to go above and beyond to do everything possible to prevent an occurrence in the future,” De La Cruz said.

What concerns safety advocates is that it’s all being done on a voluntary basis. “The International Maritime Organization is supposedly the governing body, but it doesn’t actually have the authority to pass laws or regulations,” says Jim Walker, a Miami attorney that specializes in lawsuits against the cruise ship industry. “If people don’t comply with it, there’s no consequence.” Instead, the IMO relies on the countries where ships are registered—usually so-called “flag of convenience states” like Panama, Liberia and the Marshall Islands—to adopt the rules and enforce them as law. Coast guards can also play a role by conducting inspections of cruise ships when they call on North American ports. But Walker says it’s impossible for the agency to stay on top of the industry, given the messy jurisdictional situation and the sheer number of new ships being added to the fleet, about 165 over the past 13 years. “They can’t inspect them all systematically,” he says.

CLIA says there is plenty of oversight. “The cruise industry as a whole is heavily regulated under national and international law, maritime conventions and flag and port state laws,” Peikin says. “These regulations cover every aspect of the cruise experience—from ship design and construction to operation—and are all aimed at protecting and enhancing the safety of passengers and crew.”

Nevertheless, the debate over who’s watching the industry will only get louder as the industry moves to bigger and more profitable vessels. Royal Caribbean’s Oasis of the Seas carries a staggering 5,400 passengers and 2,160 crew, and features 21 pools, a “Central Park” with 12,175 plants, a Coach store where travellers can buy $500 handbags and a 25-m zip line strung across the ship’s superstructure. With all those people on board (3,000 more than were on the Costa Concordia), questions have naturally been raised as to whether the ship can be abandoned safely in 30 minutes, as required by the International Convention for Safety of Life at Sea. Royal Caribbean has touted its new, state-of-the-art lifeboats, which can each carry 370 people, but experts are more concerned about the length of time it will take passengers to get their life jackets and assemble at the lifeboat stations—a process that can itself take up to 45 minutes when everything’s running smoothly. “The assembly process is rather difficult given the large, complex nature of modern passenger ships,” says Edwin Galea, a professor of mathematical modelling at the University of Greenwich and director of the Fire Safety Engineering Group. And whereas muster drills are generally pre-announced, a true emergency can occur at any time and is unlikely to be an orderly affair. “The IMO requirements for the design analysis assume ideal conditions, with no fire or smoke or adverse vessel orientation brought on by a list,” Galea says, pointing to a recent study called the Safeguard project, that suggested the current industry standards on evacuation times may be insufficient.

The regulatory patchwork that so frustrates cruise-ship safety advocates also gives rise to a host of other less-discussed problems. A surprising number of cruise ship passengers jump, fall or otherwise end up overboard. Earlier this year a young Australian couple died after going over the railing on the Carnival Spirit in quick succession. Their bodies were never found and an investigation has yielded little more than a few moments of security footage that captured their final minutes. More recently, a man fell from his balcony aboard the Carnival Magic and died after hitting an open deck area three floors below. In total, about 201 people have died by going overboard since 2000, according to data on Cruise Junkie.

Sexual assaults are another growing problem. They appear to be about 50 per cent more prevalent on cruise ships than they are on land, according to a study Klein co-authored with a New Zealand researcher. And investigating and prosecuting cruise ship crimes is difficult, since a country’s legal jurisdiction essentially ends 20 km from shore. In 2010, the U.S. passed the Cruise Vessel Security and Safety Act, which requires the reporting of sexual assaults and other crimes involving U.S. citizens to U.S. authorities—a requirement that didn’t previously exist. The law also mandated that ships calling on U.S. ports be equipped with peepholes in staterooms and video surveillance equipment in public areas.

Kendall Carver has first-hand knowledge of how challenging it can be to pry information from cruise lines. His daughter, Merrian, went missing from a week-long Alaskan cruise back in 2004. A police investigation went nowhere, so Carver, a former head of an insurance company, hired a private investigator. But the investigator also ran up against roadblocks when trying to speak to the cruise ship’s staff, according to Carver, who founded the International Cruise Victims Association. Despite spending more than $75,000 in legal fees, Carver says he still doesn’t know what happened to his daughter.

A more common occurrence is the outbreak of illnesses, particularly noroviruses. So far this year, six cruise ships calling on the U.S. reported being stricken with norovirus outbreaks, a highly infectious stomach bug that causes vomiting and diarrhea, while another was hit with a bout of E. coli. Two of the ships, both owned by Royal Caribbean Cruises Ltd., said more than 100 people got sick. While most quickly recover, those who experience complications or suffer some other type of serious health ailment may find themselves in the care of the ship’s doctor, who, again, may or may not be trained to acceptable North American standards. Two years ago, 66-year-old Bernie Hamilton of St. Catharines, Ont., suffered a heart attack while aboard a Holland America Line cruise ship and died a few weeks later. According to the CBC’s The Fifth Estate, the on-board doctor, a Canadian licensed in the U.S., initially misdiagnosed Hamilton’s condition while ship staff fumbled with a defibrillator. The investigative program also discovered the doctor had “two malpractice settlements in cases involving allegations of misdiagnosis and mistreatment, both resulting in death.” Holland America Line told the program Hamilton’s care was “appropriate.”

Yet, despite the seemingly long list of reasons to avoid taking a cruise, it remains a surprisingly popular pastime for millions of North Americans. Cathy Fairhurst, 43, and her husband took their first cruise in 2007. “It was completely stress-free,” the Dallas resident says. “Within six months we took our second cruise. Now, six years later we’ve been on 12 cruises. We’re big fans.” Nor is she overly concerned about the industry’s track record. “There are hundreds of cruise ships that go out every week with thousands of passengers,” she reasons. “So even if there were five incidents that happened in the past few years, that wouldn’t be enough for me not to go.

“People have this fanciful notion of what a cruise ship is—the floating restaurant and amusement park,” explains Walker. “So when something goes wrong, there’s a tendency for people to say, ‘Well, accidents happen everywhere.’ ” Walker chalks up the forgiving attitude to two things: rock-bottom prices and over-the-top amenities. Carnival didn’t just steam clean the Triumph and repair its engine room when it went out of service earlier this year. It slashed prices, offering five-day Caribbean cruises for as little as $249, and added a bunch of new restaurants and bars, including a Guy Fieri-inspired burger joint and a pair of duelling cantinas—all part of its “Fun Ship 2.0” concept. Meanwhile, rival Royal Caribbean is hoping to woo back existing guests and first-timers with a host of new features on upcoming new ships. When Quantum of the Seas makes its debut in late 2014, it will offer guests the chance to participate in a skydiving simulator, drive around in bumper cars and dangle 90 m above the waves in a viewing capsule that’s attached to giant, movable arm.

The cruise industry’s strategy appears to be working. Carnival recently posted a $41-million second-quarter profit, up from $14 million last year in the wake of the Costa Concordia disaster. While industry surveys suggest Carnival’s brand continues to suffer in the wake of the Triumph’s “poop cruise”—a recent Harris poll said “quality” scores for Carnival were down about 28 per cent from where they were prior to the incident—company executives say several studies of corporate crises suggest the cruise line’s business should be fully recovered within two to three years.

Rival Royal Caribbean is staging an even better recovery. The company, also headquartered in Miami, but incorporated in Liberia, operates 41 ships across six brands, including Celebrity Cruises, Pullmantur, Azamara Club Cruises and CDF Croisières de France. Its biggest setback this year was the fatality-free fire that torched the stern of the Grandeur of the Seas, taking the ship offline for six weeks during the busy summer season. “We are gratified that no one was hurt and that the safety and comfort systems performed exactly as designed,” CEO Adam Goldstein said in a statement in late May. Royal Caribbean reported a quarterly profit of $76 million in its most recent quarter, up from $47 million a year earlier.

But while consumers in search of cheap vacations may be willing to look the other way, the cruise ship industry could have a more difficult time winning over government officials. In Italy, the trial of the Costa Concordia’s captain promises to keep the accident in the headlines for months, as is the ongoing efforts to salvage the partially capsized ship. Meanwhile, in the U.S., Democrat Sen. Jay Rockefeller has been pounding away at the industry, with some success. In a letter earlier this year to Carnival chairman Arison, Rockefeller complained about the industry’s tiny U.S. corporate tax bill and comparatively generous use of U.S. federal government services. The U.S. Coast Guard has said it spent about $780,000 dealing with the Triumph earlier this year, while the 2010 engine fire on the Carnival Splendor cost the Coast Guard and Navy, which delivered food from one of its aircraft carriers, about $3.4 million. Rockefeller asked if Carnival intended to repay American taxpayers, calling the cruise line “bloodsuckers” during one TV interview. Arison, who was recently replaced as CEO in a management shuffle, initially responded by citing the maritime tradition of helping fellow mariners in distress. Later on, however, Carnival appeared to backtrack. It said in a statement: “Although no agencies have requested remuneration, the company has made the decision to voluntarily provide reimbursement to the federal government.” A small concession, perhaps, but one that nevertheless suggests the cruise industry’s days of sailing away from its problems may be numbered.