A Race to the Bottom? Cruise Lines Seek Reduction of Harbor Pilot's Compensation

Biscayne Bay PlotsThe safe operation of a cruise ship to and from the port of Miami depends in large part on someone who few cruise passengers will ever meet - a pilot from the Biscayne Bay Pilots.

Cruise ships, tankers and cargo ships are all piloted in and out of the narrow channel of Miami's Government Cut by a highly trained and experienced "harbor pilot." Before the ship enters the port, a harbor pilot will board the ship by climbing up a ladder from the pilot boat onto the ship. The officer in charge of the ship's navigation will then turn the command of the ship over to the pilot, who will use his familiarity with the unique characteristics of the port to safely bring the ship into (and later, out of) the port.

There is overwhelming pressure on the ship captains employed by the cruise lines to depart from and arrive at ports on time. The cruise lines pay bonuses to these captains for keeping their schedules. There are recent instances where the captains have been forced to imprudently take their cruise ships into dangerous sea conditions; a good example was reported by the Washington Post last year regarding Royal Caribbean's Anthem of the Seas in an article titled 4,000-Passenger Cruise Ship Inexplicably Sails Into Atlantic Mega-Storm.  

The harbor pilots, whose rates are determined by state law and are not under the thumb of the cruise lines, are at the front line of keeping safety paramount over economic pressure.

The Miami-based cruise lines, through their trade association, the Florida Caribbean Cruise Association ("FCCA"), is nonetheless seeking to reduce the compensation to be paid to the Biscayne Bay Pilots Association for its services. 

The Florida Pilotage Rate Commission is holding a hearing this week on the FCCA's petition to lower the rates paid to the pilot's association. No other maritime ship owners or operators, like the bulk carriers or cargo ship owners, have objected to the pilot's rates.

There appears to be no legitimate reason for the cruise lines to try and reduce the compensation paid to the local pilots.

There has been no rate increase for the pilots since 2002; the rates have remained flat or have trended downward over the last 15 years. In contrast, the billions of dollars in revenues collected by the cruise lines, like Carnival and Royal Caribbean, have increased substantially during this time period. Cruise lines enjoy a virtual tax-free status by incorporating their business in countries like Panama or Bermuda and flying foreign-flags of convenience. The compensation earned by each of the local pilots, in contrast, has decreased by $100,000 in the last 15 years. The pilot rates have not been adjusted to keep up with the consumer price index ("CPI"). Taking into account inflation, each local pilot has lost another $90,000 in real dollars, while the cruise lines have all substantially increased their profitability by billions of dollars.

Royal Caribbean's Senior Vice President of Marine Operations William Baumgartner, testified on behalf of the FCCA. Admiral Baumgartner initially praised the pilots but quickly criticized everything about their services. He characterized the port of Miami as a "simple, safe and easy to access" port, particularly compared to other ports like New Orleans, Tampa, Bayonne or New York City, implying that the pilots' jobs were easy. This argument was effectively rebutted by Stuart Lilly, Biscayne Bay pilot and past president of the Florida Harbor Pilots Association, who explained the difficulty of piloting Biscayne Bay Pilotsthe increasingly wide and deeper post-Panamax ships in and out of the narrow port of Miami channel which has not been widened since 1968. The channel into the busy port of Miami, with heavy traffic by pleasure boats, sail boats, work boats, fishing boats, ferries and oil tankers, is only around 500 feet wide, with tight turning basins, sometime called "malfunction junctions," (watch video here) in contrast to the channel in Bayonne, New Jersey with a width of around 2,000 feet.

The greatest risk is a cruise ship striking the hard rock side of the narrow channel at the port, similar to the Norwegian Dawn which ran aground near Bermuda in 2015 or the Costa Concordia which struck rocks near Giglio in 2012. A long, salvage effort similar to that involved in the Costa Concordia catastrophe would cause financial ruin to the port of Miami and the cruise industry.

The cruise lines also criticized the business model of the pilot association. The FCCA's accounting expert criticized the fact that the pilots pay for "full insurance" for their employees as "unreasonable" and also labeled the retirement plan as "rich" and also called it "unreasonable." This was an ironic argument given that the cruise lines have all terminated the retirement plans of their crew members or have agreed to pay only a small pittance (a token amount of $5,000 to be paid after 10 years of 8-10 month contracts which few crew members will ever reach). Meeting the insurance and retirement needs of employees are honorable steps to take, and are actually grounds to increase the pilotage rates. There is also irony in the fact that the cruise executives of the of the larger lines, like Carnival and Royal Caribbean, make around $10,000,000 a year each.       

A review of the schedule of ships which will be piloted into and out of the port of Miami tomorrow by the Biscayne Bay Pilots provides an insight into the vital services provided to the shipping commerce at the port. The pilots will be in command of three cruise ships into the port of Miami early tomorrow morning, the Norwegian Sky, Carnival Victory and Enchantment of the Seas between 5:00 A.M. and 6:00 A.M. The pilots will then take these cruise ships out of the port late tomorrow afternoon between 4:00 P.M. and 5:00 P.M.

In addition to the cruise ships, the pilots will provide in-bound services to container ships MSC Antonella, Hansa Augsburg, Arsos, and Seaboard Patriot, the general cargo ships Tango III and Sara Regina, and the pallet carrier Betty K VII, as well as pilot the ro-ro ship San Gwann and the container ship Arian to and from the port.     

Due to economies of scale, the average pilotage rates per cruise passenger are minimal. The handling rate for the Norwegian Sky, for example, is only $1.16 per passenger.

The rate reduction which the FCCA is seeking for the cruise lines amounts to only $0.25 per passenger, which is a $1,800,000 discount to be spread amongst all of the cruise lines.       

The effect of this proposed reduction on the pilots will be disastrous. It will reduce the compensation to each pilot by $100,000, even though the pilot compensation has already decreased over the years and has not been adjusted for inflation for a decade and a half.  It will be well below the national compensation paid to pilots of equal experience and training (not the meager salaries of the foreign-flagged cruise ship captains) and will undercut the efforts of the pilots to attract skilled pilots to Miami who are needed to handle the increasingly complex ships calling here at the cruise ship capital of the world.     

My view: The cruise industry likes to demand control of everything, whether it is the taxes imposed by the state of Alaska for environmental protection and infrastructure, or the minimal head taxes of the poor Caribbean ports. It steals the tips intended from its powerless foreign crew members. And it nickels and dimes all of its passengers to collect every penny it can. When the industry acts badly, like Princess Cruises did leading to a $40,000,000 environmental fine last December, it just passes the fines on to its customers via higher fares. But when it comes to reasonably paying a group of highly skilled local pilots who are vital to the safe transit of cruise ships into and out of Miami, it shows its true penny-pinching colors.

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Photo credits:  Biscayne Bay Pilots Facebook page.