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.

Have a thought? Please leave a comment below or join the discussion on our Facebook page.

Photo credits:  Biscayne Bay Pilots Facebook page. 

HAL's Veendam Rescues Pilot in Pacific Ocean

A Holland America Line cruise ship came to the rescue, reports KCRA, after a pilot in a small, single-engine airplane on a 2,400 mile trip to Maui, Hawaii ran out of gas fuel over the Pacific Ocean and was forced to ditch his plane. 

The news station says that the plane ran out of fuel about 250 miles northeast of Maui yesterday afternoon.

The U.S. Coast Guard launched an Hercules 130 aircraft and a MH-65 Dolphin helicopter from Oahu, and alerted the HAL Veendam to the scene.

The Veendam is expected to reach Lahaina, Maui today. 

The Star Advertiser reported that the rescue took place amidst 9- to 12-foot seas and 25 to 28 mph winds.

I can't wait to see the rescue on the passengers' YouTube videos.

Video Credit: Defense Video and Imagery Distribution System. 

 

Independence of the Seas Arrested in Norway

A newspaper in Norway reports today that a pilot association seized the Independence of the Seas for non-payment of the association's fees. The association petitioned a court in Norway to detain the cruise ship. A local bailiff served the arrest papers today.

The Independence of the Seas was in Alesund, Norway at the time of the legal action.

In the U.S., vessels can be seized for non-payment of provisions and services such as pilotage fees, crew member wages, food and fuel. The vendors and service providers have a maritime lien for the goods and services. Norway has a similar legal provision permitting the courts to "arrest" a vessel when Independence of the Seasit refuses to meet its financial obligations to creditors and satisfy the maritime lien. If the lien is not satisfied, the vessel can be sold at auction.  

"Vessel arrest" is a  common legal remedy to collect money from fly-by-night maritime owners and operators which try to avoid paying their debts to third parties. You can read about one such case here. I have heard of only one modern cruise ship operated by a top cruise line being arrested, and that was the Carnival Triumph several years ago

In Norway, as well as many other countries, local pilots are required to be at the helm of a ship that enters the local waters of the country. The shipping companies are required to pay the pilots who are more familiar with the local waters. 

The pilot association, Norwegian Coastal Administration (NCA) (Kystverket in Norwegian), issued a press release, stating that the pilot and security fees incurred by Royal Caribbean during several cruises last year have been owed since at least last October.  

The newspaper says that the lien was for  around NOK 600,000 which is approximately $100,000 U.S.

NCA says that it is owed substantial other fees from other cruise line and will be stepping up its collection efforts as the cruise ships return to Norway.

NCA says in its press release that non-payment or delayed payment from some cruise lines have been a major problem and the the association has been unable to convince the cruise lines to pay punctually. The association has been unable to convince certain companies with the worst payment history to meet their obligations voluntarily.

A representative of the association was quoted saying that sometimes it's been many months, up to a year before the outstanding amounts have been paid. How can we operate?

The newspaper further states that once the arrest papers were served on the cruise ship, the captain contacted Royal Caribbean which paid the lien (as well as court costs and interest) within one hour. The cruise ship was then released by the local marshal and was free to sail. 

The Independence of the Seas was last in the news in April when its thrusters swamped a boat in St.Kitts involved in mooring operations, killing two local men handling the lines. 

May 23 2014 Update: The BBC is now covering the story.