Economics of the America

When the Navy last week conscripted the luxury liner America, it left the venerable U.S. Lines without a single passenger ship. But at the company's offices in lower Manhattan there was no mourning. The atmosphere was more like a carnival. Everyone got a 10% bonus (based on last year's pay). Passenger-department clerks were told they would be kept on. After work there was a rush to nearby bars.

The loss of its vessels has been a godsend to U.S. Lines. Over 80% of its $3,801,180 net income in 1940 came from sale of its ships. The America, its No. 1 money-loser, was the climax. She was built to replace the old Leviathan, whose owners patted her poop whenever she lost less than $75,000 a trip. The America did a little better than that. But since her commissioning last summer she has lost something like $1,250,000.

Biggest boat ever built this side of the Atlantic, the America cost $17,586,478. Of this, U.S. Lines put up $2,396,629 cash, the Leviathan (valued at around $2,000,000), and a mortgage for $7,328,140, the Maritime Commission the rest. But even after throwing out the Government's ante, the America cost U.S. Lines $850,000 annually in depreciation ($600,000) and interest ($250,000). And that was without even moving her from the dock.

Barred from the Atlantic run for which she was designed, the America spent her brief commercial life in the cruise business, mostly in the Caribbean. She could carry 1,202 passengers, needed a crew of 643. But she never was entirely full, averaged only 450 passengers per trip. At an average $170 per passenger, each twelve-day cruise yielded about $76,500. Against this were operating costs of $90,000 (wages, food, fuel, general overhead at $7,500 daily), plus depreciation and interest of $28,200 ($2,350 daily). Result: net loss of $41,700 a trip. The loss to U.S. Lines was less than that. Under the Bailey-Bland (ship relief) Act of 1940, most of its losses will be paid by the Government.

This week not even U.S. Lines knew what the Navy would pay for their pet ship. But one thing they did know: in ships, bigness does not beget profits.

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