First Cruise Ships Built in U.S. In 40 Years

AMERICAN CLASSIC VOYAGES CO. (AMCV) SIGNS MAJOR CONTRACT WITH INGALLS FOR LUXURY CRUISE SHIP CONSTRUCTION

Washington, D.C., March 9, 1999 – Litton Ingalls Shipbuilding (NYSE: LIT), Pascagoula, Mississippi, and American Classic Voyages Co. (NASDAQ: AMCV), Chicago, Illinois, today signed a contract for the construction of the first major cruise ships to be built in the United States in more than 40 years.

Under the terms of the ACVC.jpg (53739 bytes)"Project America" contract, which has a potential value of $1.4 billion for three ships, Ingalls will initially build two 1,900 passenger cruise ships for AMCV, with an option for a third vessel.

These will be the largest cruise ships ever built in the U.S., with the first scheduled to enter service in early 2003. Ingalls delivered the last American-built large cruise ships, SS BRASIL and SS ARGENTINA, and those two passenger ships are still in service.

"The signing of the Project America contract is an historic step for both the U.S.-flag cruise industry and our nation’s shipbuilding industrial base," said Phil Calian, President and Chief Executive Officer of AMCV. "Today, we are showing that American shipyards can compete in the construction of U.S.-flag oceangoing cruise ships, and that the U.S.-flag cruise industry has an exciting future."

"This contract is a vital element of Ingalls’ integrated strategic business plan," said Jerry St. Pe’, President of Ingalls and Senior Vice President of Litton Industries. "Of all the commercial ship projects available, cruise ships require a level of complexity, and a mix of skills, most closely matched to those inherent in the building of complex naval vessels, and already available at Ingalls."

Ingalls will perform the contract in a teaming agreement with Kvaerner Masa Shipyards of Turku, Finland, one of the world’s most experienced and successful designers and builders of large, modern cruise ships. The European company will, under a fixed-price contract to Ingalls, provide design and planning expertise, and will advise Ingalls on commercial manufacturing techniques.

"Through our industrial relationships," St. Pe’ said, "we are working together to implement exciting new approaches to commercial shipbuilding, including major improvements in our facility that will enhance our processes and bring increased efficiencies to every ship we build – including ships for the U.S. Navy."

In a separate announcement today, Ingalls and Litton announced plans to invest $130 million over the next two years in a major facilities program at the Company’s shipbuilding and marine production operations.

"This contract, while important as a stand-alone element of our business base, will significantly enhance Ingalls’ competitive posture for future Navy and commercial programs," St. Pe’ continued. "This is a unique opportunity available to our shipyard and U.S. shipbuilding to implement practices and processes required for this and other commercial programs, that will also be a direct benefit to Navy programs for which Ingalls will be competing in the future."

Ingalls expects to begin construction of the first ship in 2000. This contract, along with other commercial work and U.S. Navy programs underway in the shipyard or planned for the coming years, will significantly stabilize Ingalls’ workforce into the 21st century. As many as 2,300 Ingalls employees will be involved in cruise ship work during peak construction periods. The Company currently employs 11,300 people.

AMCV Chairman Sam Zell, along with Mississippi’s U.S. Senators, Thad Cochran and Trent Lott, U.S. Senator Daniel Inouye of Hawaii, Mississippi's  Fifth District Congressman Gene Taylor, Hawaii's First District Congressman Neil Abercrombie, as well as Secretary of the Navy Richard Danzig and Clyde J. Hart Jr., Administrator of the U.S. Maritime Administration (MARAD), were among the business, Congressional, Administration, and labor leaders attending the contract signing ceremony in Washington.

Project America is the result of the U.S.-Flag Cruise Ship Pilot Project Statute passed by Congress in 1997, designed to revitalize the U.S.-flag oceangoing cruise ship fleet. It is expected to create more than 5,000 American jobs, help sustain and modernize the U.S. shipbuilding industrial base, increase U.S. tax revenues, boost Hawaii tourism, and expand consumers’ leisure travel opportunities. The Department of Defense and the U.S. Maritime Administration (MARAD) have strongly supported the U.S.-Flag Ship Pilot Project.

The ships plan to cruise within the Hawaiian Islands. The design of the state-of-the-art luxury cruise ships, each approximately 72,000 gross tons and 840 feet long, embraces all the amenities of modern cruise ship luxury. Each vessel will feature a four-deck-high atrium, a 1,060-seat dining room, an 840-seat theater, a 590-seat cabaret lounge, and a uniquely Hawaiian outdoor performance stage.

Accommodations for 1,900 passengers include 950 cabins, 77 percent of which will be "outside cabins," and 64 percent of which will have private balconies. The ships will have 85,850 square feet of open deck space, extensive health spa and gymnasium facilities, and 2,100 square feet of conference space. In addition, the upper three decks of the ships are designed to maximize the sense of spaciousness on board, and provide passengers with panoramic views of the Hawaiian Islands and the surrounding Pacific Ocean.