American Classic Voyages Company - Company Profile, Information, Business Description, History, Background Information on American Classic Voyages Company

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Chicago, Illinois 60606

History of American Classic Voyages Company

American Classic Voyages Company is parent company to two pleasure cruise companies, the Delta Queen Steamboat Company, which offers paddlewheel steamboat cruises on the inland waterways of the South and Midwest, and American Hawaii Cruises, which offers ocean liner cruises in the Hawaiian Islands. With origins reaching as far back as the 1890 establishment of Greene Line Steamers, later known as the Delta Queen Steamboat Company, American Classic Voyages is the oldest cruise line to operate under U.S. flag and adopted its current name in 1994.

History of Steamboating

Greene Line Steamers originated as a family-owned and operated business established by Captain Gordon C. Greene and his wife, Captain Mary Greene. After working his way from deck hand to captain, Gordon Greene purchased his first steamboat with his own savings in 1890. The last years of the 19th century and first years of the 20th were prosperous for steamship lines, and the Greenes purchased several "packet" steamers which carried both passengers and freight. Their riverboats traveled on the Ohio River from the port at Cincinnati to Charleston, Pittsburgh, and other ports along the way, transporting agricultural products to the west and general goods to the east.

In the 1920's the railroads came to dominate freight transport, and many packet steamer companies folded. Greene Line Steamers, however, survived by building modern steamships which could carry more freight, by capitalizing on shorter trade routes, as well as by initiating passenger pleasure cruises. Though the business of pleasure cruising stalled during the Great Depression, the Greene Line's freight business endured. Greene Line Steamers directed a fleet of 26 steamboats when Captain Tom Greene, son and successor of Gordon Greene, purchased the Delta Queen in 1946.

Since its inaugural voyage on June 1, 1927, the Delta Queen has become "legendary" as the last original overnight paddlewheel steamboat in full operation. Captain A.E. Anderson, head of the California Transportation Company (CTC), had reportedly defied conventional wisdom when he built the Delta Queen and its twin, the Delta King. They were the largest, most extravagant sternwheel riverboats of their time, built at a cost of $1 million each. A crystal chandelier, stained-glass windows, and a grand staircase with accents of Honduran mahogany and bronze filigree were just some of the adornments to grace the Delta Queen. Though river transportation was in decline, CTC successfully operated both boats on the Sacramento River, offering "Luxury and Comfort Afloat" on overnight passages between San Francisco and Sacramento.

After some years out of service during the Great Depression, the Delta Queen and Delta King were leased to the U.S. Navy in the late 1930's for barracks, for naval training and, later, to be used to transport men wounded at Pearl Harbor from oceangoing vessels to military hospitals in San Francisco. After extensive electrical and mechanical maintenance and a coat of navy gray paint, the steamboats provided general ferry transportation between naval bases in the San Francisco Bay area. When World War II ended, the Delta Queen and Delta King were sent to the mothball fleet. Tom Greene purchased the Delta Queen from the Maritime Commission with a bid of $46,250. (Another company bid higher for the Delta King, which eventually became a floating conference center in Sacramento.)

Tom Greene's vision to place the Delta Queen into operation on the Mississippi River faced many challenges. To transport the flat-bottomed boat without damage over rough ocean waters--from northern California, along the coast of Mexico, through the Panama Canal to New Orleans--the Delta Queen would have to be towed. Most of the mechanical parts were dismantled and wood planks were mounted on the external framework of the first two decks to protect the ship's interior. The Delta Queen arrived safely in New Orleans on May 19, 1947, after a month-long voyage. With the steamboat's paddlewheel reinstalled and its steam engine realigned, the Delta Queen powered itself to the Dravo Shipyard in Pittsburgh for a complete refurbishment and overhaul. On June 30, 1948, the Delta Queen made its inaugural voyage under the banner of Greene Line Steamers from its port at Cincinnati.

The 1950s-60s: Delta Queen on the Mississippi

A variety of problems beset Greene Line Steamers in the following years. The company had incurred a large debt from the $750,000 renovation of the Delta Queen, while competition from the trucking industry reduced freight rates, exacerbating the company's financial difficulties. Frequent engine problems on the Delta Queen were also a hindrance. The company eventually purchased internal mechanical components from the owner of the Delta King for use as replacement parts, including the paddlewheel shaft which was replaced in 1980.

The premature death of Tom Greene in 1950 placed his wife Letha in charge of the company. To stay in business, Greene Line Steamers eventually sold all of the boats in its fleet except for the Delta Queen, including family namesakes, the Chris Greene, the Tom Greene, and the Gordon C. Greene. In 1958, without funds to market the company for the next steamboating season, Letha Greene decided to fold the company and put the Delta Queen up for auction.

The fate of the Delta Queen and Greene Line Steamers changed unexpectedly with the involvement of Richard Simonton. Letha Greene had returned this man's check for a reservation in early 1958 with a letter explaining that the company was going out of business. Simonton had relished a steamboat trip with his family the previous season and was disappointed to learn of the company's imminent demise. Simonton rescued the company with a $25,000 loan, a $25,000 stock purchase, and the assumption of $70,000 of the company's debt. His friend E. Jay Quinby was named chairman of the board, with the primary responsibility for publicizing the company. Quinby purchased an antique calliope, a steam-pipe organ, and installed it on the Delta Queen, making it the centerpiece of his efforts to promote steamboating. Quinby played the calliope for passengers as well as to attract the attention of the people in the shore towns who could hear the music as the paddlewheel boat traveled along the Mississippi River. Dressed in vintage clothing, Quinby traveled in advance of the Delta Queen to distribute old-style handbills and to promote the riverboat to the local media. Quinby's formula successfully increased passenger bookings so that by 1962 the company's mortgage and other debts were paid in full.

However, new legislation in 1966, the Safety of Life at Sea Law (SOLAS), threatened the Delta Queen's existence as an overnight passenger ship. The law was enacted to prevent the risk of fire danger on overnight vessels carrying 50 or more passengers; the wooden superstructure of the Delta Queen was considered unsafe under the law. Two consecutive two-year exemptions were granted, but the company did not have funds to build an all-steel replacement. Overseas National Airways (ONA) purchased Greene Line Steamers in 1969 with the intention of building a new steamboat.

At the same time, company president Bill Muster and publicist Betty Blake continued the fight to maintain the Delta Queen's presence on the Mississippi River by securing it a place on the Register of Historic Places in 1970. They fought for permanent exemption from SOLAS based on the Delta Queen's perfect safety record, its on-board fire safety devices and the fact that it was not on ocean-going vessel but was always in sight of land. Public officials in support of a permanent exemption from the law included members of Congress, governors and other government officials in the cities and states along the Mississippi River. Public outcry to preserve the Delta Queen and river steamboating heritage included thousands of signatures on petitions to "Save the Queen."

All was to no avail, however, and a final voyage was planned for October 1970. Publicity by Muster and Blake attracted large crowds to watch the Delta Queen's final passage on the Mississippi River. This public support won the Delta Queen an exemption to 1973 after a rider was placed on unrelated legislation and by-passed the House Merchant Marine and Fisheries Committee. (Exemption status continued to be renewed; in 1998 it was extended to 2008.)

1970s: Delta Queen Steamboat Company is Formed

The 1970's brought many changes to Greene Line Steamers. No longer a family-owned and -operated business, in 1973 the company changed its name to the Delta Queen Steamboat Company (DQSC) in honor of the Delta Queen. Under financial duress due to another renovation of the Delta Queen, new boat construction, and problems at ONA, the DQSC was sold to the Coca-Cola Bottling Company of New York in 1973, and Betty Blake became president. Blake had joined the company in 1962 and immediately made her mark when she revitalized the tradition of steamboat racing. As president she would oversee the premier voyage of the Mississippi Queen on July 27, 1976. The Mississippi Queen was the first boat of its kind to be built in the United States since the Delta Queen and Delta King in 1926. It was also the largest at 385 feet long, with seven decks, and the capacity for 416 passengers. At a cost of $27 million, modern amenities were fused with turn-of-the-century decor on the new, all-steel paddlewheel steamboat.

National attention continued to shine on the DQSC and the popularity of steamboating grew in the 1980's. In 1979 the national media followed President Jimmy Carter and the first family on a week-long Mississippi River cruise on the Delta Queen. The Mississippi Queen and its ports-of-call were filmed during an actual cruise and featured on the television show "Real People" in November 1983. DQSC promoted the show through travel agencies nationwide, resulting in a 50 percent increase in the volume of calls. Other television shows which put a national spotlight on the DQSC's Ohio and Mississippi River steamboating cruises included segments on shows featuring known celebrities such as Phil Donahue, Glenn Campbell, and Conway Twitty. Also, during the 1984 World's Fair in New Orleans, a procession of historic vessels like that of the 1776 Bicentennial in New York Harbor was lead by the Delta Queen. In 1989 the steamboat became a National Historic Landmark.

Possibility and Adversity in the 1990s

Around the time of its 100-year anniversary in 1990, DQSC was prospering and expanding. The company endured the national recession by attracting an affluent, retired customer market. Between 1989 and 1992 reservations increased from 80.7 percent of passenger capacity to 95 percent of passenger capacity. Fares rose 28.3 percent, thus boosting operating income from $800,000 in fiscal year ending March 1990 to $9.8 million two years later. In 1992 DQSC went from a privately-held company with a $26.3 million debt and $9.2 million equity to a publicly traded company with $33.2 million equity and no debt. (DQSC had returned to private ownership under billionaire Sam Zell and his partner Bob Lurie when they acquired control of the company in 1981.)

Building on its success, DQSC began construction of a third paddlewheel steamboat, the American Queen, in 1993. The 436-passenger ship featured Victorian-era interior design with several authentic antiques, and a grand staircase and a formal dining room modeled on the famous J.M. White steamboat much admired by Mark Twain. Complementing a salvaged 1930s Nordberg steam engine with modern diesel technology, the American Queen cost $67 million to build. Service was initiated in June 1995.

In the midst of expansion, DQSC and, later, American Classic Voyages experienced some financial reversals. The Mississippi River flood in the summer of 1993 adversely affected revenues when a number of reservations were canceled due to changes in cruise itineraries. Acquisition of American Hawaii Cruises (AHC) in August 1993 also presented a mixture of legal and financial difficulties. Though DQSC earned $4.2 million in 1993, by 1994 American Classic Voyages, which became the parent company that year, experienced a loss of $983,000. In 1995 the company lost $9.7 million. The losses in both years were attributed to an accounting adjustment at AHC of $.20 per share, totaling $5.8 million, and cost overruns for renovation of its ocean liner, the Independence.

AHC was in bankruptcy when the company was acquired by DQSC in 1993. AHC was created by American Global Lines, Inc. in November 1979 to offer overnight pleasure cruises in the Hawaiian islands on the Independence. Service was expanded with the acquisition of the Constitution, which began operating in Hawaii in June 1982. Despite a monopoly on inter-island travel and some initial success in providing Hawaiian cruise vacations, the company continually lost money. Financial problems eventually led the senior management along with outside investors to acquire AHC from American Global Lines, Inc. in 1985. After being forced into bankruptcy by its lenders, AHC was acquired by the DQSC with approval by the U.S. District Court in Honolulu.

The transformation of AHC was precarious at first. American Classic Voyages paid over $100,000 in fines for garbage illegally dumped in the ocean prior to the purchase of AHC, and the poor condition of the two ocean liners proved costly. Moreover, cost overruns from the refurbishment of the Independence led to a legal dispute with the Newport News Shipbuilding and Dry Dock Company. The ship was put into dry dock in July 1994 with an expected return to service in October. After Newport News Shipbuilding seized the ship in November for the outstanding debt, American Classic Voyages sued the company for fraud, breach of contract and wrongful seizure. A court-ordered bond allowed the Independence to return to service but some voyages had been canceled by this time. The original cost estimate of $13 million was paid in July 1995 and the disputed difference of $16.8 million was settled out-of-court in February 1996. AHC also suffered a financial loss in 1996 when a $60 million estimate for renovation of the Constitution was determined to be too expensive for its return on investment. A write-down of $38.4 million was absorbed by American Classic Voyages.

The bright side of fleet reduction was that AHC was able to focus its attention on the cruise vacation market for the Independence. A successful renewal of AHC occurred under Executive Vice-President Jim Nobles, who joined the company in July 1995. Nobles created an more genuine Hawaiian vacation experience on the Independence by redesigning the interior decoration and providing activities which highlight native Hawaiian arts and culture. AHC won several travel industry awards for its cultural themes, including its "Aloha Festival/Hawaiian Heritage" theme cruise, which was recognized by the Hawaii Visitors and Convention Bureau in 1997. Service improvements, additional passenger capacity, upgrades to its classic ocean liner cabins, a new appeal to families and a variety of theme cruises worked positively for the company. New sales and repeat business increased, while a revision of the fare structure further increased revenues.

Fleet Expansion for the 21st Century

In October 1997 American Classic Voyages announced plans to expand its Hawaii fleet with two new, 71,000 ton, 840-foot long oceangoing vessels. A year later Ingalls Shipbuilding of New Orleans (a division of Litton Industries) was awarded the contract to build the passenger ships at an estimated $400 million each. Fleet expansion was motivated by the U.S. Flag Cruise Ship Pilot Project Statute, enacted by Congress to improve the reserve of oceangoing vessels operating under U.S flag which could be used in case of war, and to support an industrial base for the U.S. Navy. In addition to guaranteeing a 30-year monopoly on inter-island ocean travel to American Classic Voyages, the U.S. Defense Department allocated $250,000 for the design of the two ships. Jon Rusten was appointed president of the Ocean Development Company, a new subsidiary created for the construction of the ships. In February 1999 Roderick K. McLeod, a well-known cruise industry veteran, was hired to oversee construction and marketing as CEO and president of "Project America." The first ship was scheduled to begin service by late 2002 and the second ship nine to eighteen months later.

American Classic Voyages also initiated plans to provide vacation cruises in other U.S. coastal areas, featuring the regional cultures and countryside of Northern California, the Pacific Northwest, and the Eastern Seaboard from Miami to Halifax to the Great Lakes. Five new 300-foot, diesel-powered boats would be small enough to fit through the locks of the St. Lawrence Seaway. Seattle-based Guido Perla & Associates, Inc., Naval Architects, was contracted to design the ships in the style of the old packet steamboats. Delta Queen Coastal Cruises was established to oversee the project with inaugural service expected to take place in 2001.

Fleet expansion at American Classic Voyages became possible under the direction of company chairman Samuel Zell. Zell recruited Philip C. Calian who was named CEO and president of American Classic Voyages in 1995. Some of Calian's strategies for alleviating American Classic Voyages's financial difficulties included debt refinancing, with an expected annual savings of $1.8 million, the sale of the Maison-Dupry Hotel in New Orleans for $22 million, and the sale of the Constitution for $1.8 Million. In July 1996 Zell purchased 170,000 shares of American Classic Voyages stock, raising the its value from $6.50 per share to over $9.00. This was substantially less than the November 1993 price of $16 per share, but by March 1998, with plans for fleet expansion underway, the value of American Classic Voyages stock was $22 per share. Repurchase of up to one million shares of stock was approved by the board of directors in June 1997; as of November 1998 only 51,000 shares had been purchased.

Principal Subsidiaries: The Delta Queen Steamboat Company; DQSB II, Inc.; Cruise America Travel, Incorporated; Great River Cruise Line, L.L.C.; Great Ocean Cruise Line, L.L.C.; Great AQ Steamboat, L.L.C.; DQSC Property Co.; Delta Queen Coastal Cruises; Great Hawaiian Cruise Line, Inc.; Great Independence Ship Co.; Oceanic Ship Co.; Great Hawaiian Properties Corporation; American Hawaii Properties Corporation; CAT II, Inc.; Ocean Development Company.

Additional Details

Further Reference

"ACV to Order US-Built Ships; Rusten to Oversee Project," Journal of Commerce and Commercial, August 27, 1998, p. 2B.Ambler, Charles Henry, A History of Transportation in the Ohio Valley, Glendale, Calif.: Arthur H. Clark Company, 1932."American Hawaii Cruises to Quadruple Passenger Capacity in the Next Eight Years," Business Wire, October 20, 1997, p. 10201419."American Hawaii Cruises Wins Hawaii's Top Tourism Award," PR Newswire, April 16, 1997, p. 0416CLW033."Black Ink From the Mississippi," Business Week, August 25, 1997, p. 156."Court OKs Delta Queen Takeover," Travel Weekly, June 28, 1993, p. 1.Determan, Wendy, "American Classic Merges Management," Tour and Travel News, May 13, 1996, p. 4.----, "American Hawaii to Stick With One Ship," Tour and Travel News, April 15, 1996, p. 2.Fritz, Michael, "Rising Tides Lift Zell Cruise Ships," Crain's Chicago Business, September 16, 1996, p. 3.Garvey, Stan, King and Queen of the River: The Legendary Paddle-Wheel Steamboats Delta King and Delta Queen, Menlo, Calif.: River Heritage Press, 1995.Greene, Letha, Long Live the Delta Queen, Hastings House, 1973.Huber, Lisa, "Owner of Cruise Ship Seized over Debt Countersues," Journal of Commerce and Commercial, November 10, 1994, p. 9B.----, "Shipyard to Settle with American Classic Voyages," Knight-Ridder/Tribune Business News, February 7, 1996, p. 2070175.Kamhis, Jacob, "Refurbished Independence Back to Work," Pacific Business News, June 23, 1997, p. A12.Lynch, Janet, "Senior Executives, Investors Will Buy American Hawaii," Travel Weekly, December 9, 1985, p. 1.Marino, Donna, "American Hawaii Brings Back 'Heritage Cruises'," Tour and Travel News, May 26, 1997, p. 30.----, "New Legislation a Boon to American Hawaii Cruises'," Tour and Travel News, October 20, 1997, p. 8.Mehlman, William, "Delta Queen Making Splash with Affluent Customer Base," The Insider's Chronicle, September 28, 1992, p. 1."New Riverboat to Echo Gilded Past," Travel Weekly, September 5, 1994, p. C14.Perez, August, et al., The Delta Queen: Last of the Paddlewheel Palaces, Gretna, La.: Pelican Publishing Company, 1973.Seiden, Allan, "Rebuilding AHC," Travel Agent, February 3, 1997, p. 105."Swell for Zell," Chicago Tribune, October 9, 1998.

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