Fast Ferry Catalina Was Repossessed

Passenger Ferry Proposed for New Service From New Bedford Was
Centerpiece Of Financial Trouble in California

By JULIA WELLS

The high-speed passenger ferry that the Steamship Authority is
negotiating to lease and possibly buy was returned to the Washington
state shipyard where it was built because it had mechanical problems
- and because it was a financial disaster for the California
company that bought it, the Gazette has learned.

In fact, the Catalina Jet was such a financial disaster that it
nearly sank the 42-year-old ferry company that had launched the service.

"The real problem is the ridership," said Catalina
Cruises chief executive officer Bruce Voss in a story in the Knight
Ridder/Tribune Business News that reported on the failure of the
high-speed ferry. "Essentially, the boat was too big for the
number of people we were carrying," said Catalina Cruises chief
financial officer Sam Luxenberg in the same story.

The story was published in September of 2000. It was one of a series
of stories that chronicled the rise and fall of the Catalina Jet.

In May of 1999 it was billed as one of the most modern high-speed
passenger ferries to hit the American market. "It's bigger,
it's faster, it's smoother," declared a story in the
Seattle Times announcing the launch of the ferry that spring. Built by
the Nichols Brothers Boat Builders on Whidbey Island in the state of
Washington, the 144-foot, 499-passenger ferry was put into service on
the run to Catalina Island off the coast of southern California. The
ferry ran at 36 knots, cutting travel time to Catalina from two and a
half hours to 45 minutes.

One year later, newspaper accounts about the Catalina Jet suddenly
lost their glow.

"Catalina Cruises said ongoing mechanical problems forced it
to mothball the $8 million, 450-passenger craft and cease service. . . .
The foundering company also announced that it was laying off
employees," reported the Los Angeles Times in September of 2000.

"It's a very difficult situation for all of us. Our goal
is to resume service by . . . next summer," said Mr. Voss, the
Catalina Cruises CEO, in the story.

The Catalina Island Visitors Bureau scrambled to put out the word
that Catalina Island was still open for business. The island is serviced
by three other ferry companies.

About a million people a year visit Catalina.

Catalina Cruises announced that it would refund ticket money to
people who had unused tickets for the high-speed ferry. The company
stopped high-speed ferry service to Avalon but continued regular service
to other points on Catalina.

"We're sorry it came to this," said Mr. Luxenberg,
the Catalina Cruises CFO, in the Knight-Ridder story published in
September of 2000.

The Catalina Jet has been back at the Nichols Brothers shipyard
since then. The boat is now on the market for $8.275 million.

Last month, the SSA board of governors voted to reject a lease-buy
proposal for the Catalina Jet after two of the three board members
concluded that the financial projections for using the ferry in a pilot
program were too risky.

The pilot program has been proposed to replace the passenger ferry
Schamonchi on the run between New Bedford and Martha's Vineyard.
City officials in New Bedford are pushing a plan to open a full
Steamship Authority ferry port in the Whaling City.

A pilot program for freight was converted this year to an SSA-run
program for the coming year.

Two years ago, New Bedford city officials said they were only
interested in freight service, but now all that has changed.

Immediately after the vote by the boat line board to reject the
high-speed pilot project last month, New Bedford city solicitor George
Leontire took matters into his own hands, launching a fresh set of
negotiations with the Nichols shipyard. Mr. Leontire presented the boat
line with a new lease-buy offer for the ferry. He also launched a
personal attack on Falmouth boat line governor Galen Robbins, who had
voted to reject the pilot project.

Since then SSA acting general manager Wayne Lamson has been involved
in active talks with the ship builder and also with New Bedford city
officials.

James Swindler, the director of operations for the SSA, said this
week that he knew little about the Catalina Jet.

"For whatever reason the vessel was repossessed. That's
all I really know," he said. Mr. Swindler has been actively
involved in the lease-buy negotiations for the ferry.

Mr. Lamson said yesterday that the two-week negotiation with the
shipyard had concluded and he was preparing a management summary on the
new proposal. The summary was expected to be sent to SSA board members
today. The November boat line meeting will be held next Thursday morning
in Woods Hole; the reshaped proposal is expected to come up again for
consideration.

The city of New Bedford is also suing the Steamship Authority in an
aggressive - and expensive - lawsuit in federal court.

The lawsuit is now in the discovery phase and throughout the week
SSA staff were busy collecting documents for city attorneys. Last
Friday, city attorneys deposed Mr. Robbins for some eight hours in what
many observers say is pure legal harassment.

So far boat line general counsel Steven Sayers has raised little or
no objection to the aggressive legal action.

Mr. Lamson acknowledged yesterday that the situation is awkward.

"We are looking into the appropriateness of all of
this," he said.