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September 28, 2005

Sunk costs

As Kristoffer Garin makes all too clear in “Devils on the Deep Blue Sea”—by far the most entertaining business book of 2005—nobody gets the better of Carnival Cruise Lines. Especially not the morons at FEMA:

On Sept. 1, as tens of thousands of desperate Louisianans packed the New Orleans Superdome and convention center, the Federal Emergency Management Agency pleaded with the U.S. Military Sealift Command: The government needed 10,000 berths on full-service cruise ships, FEMA said, and it needed the deal done by noon the next day.
The hasty appeal yielded one of the most controversial contracts of the Hurricane Katrina relief operation, a $236 million agreement with Carnival Cruise Lines for three ships that now bob more than half empty in the Mississippi River and Mobile Bay. The six-month contract – staunchly defended by Carnival but castigated by politicians from both parties – has come to exemplify the cost of haste that followed Katrina's strike and FEMA's lack of preparation.
To critics, the price is exorbitant. If the ships were at capacity, with 7,116 evacuees, for six months, the price per evacuee would total $1,275 a week, according to calculations by aides to Sen. Tom Coburn (R-Okla.). A seven-day western Caribbean cruise out of Galveston can be had for $599 a person – and that would include entertainment and the cost of actually making the ship move.

Not for nothing does Garin describe cruise shipping as “the perfect business.”

Posted by Stephen at 1:22 AM in Business | Politics | Permalink | TrackBack (0)

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