MHI to record huge loss on AIDA cruise ships

MARCH 24, 2014 — The two cruise ships that Japan's Mitsubishi Heavy Industries is building for AIDA Cruises may come out of the shipyard emblazoned with AIDA's kissy face grins, but bean counters at the Japanese shipbuilder aren't smiling. The company said today that it will book an extraordinary loss of 60 billion yen (about $585 million) from its cruise ship business in its consolidated financial results for FY 2013 (ending March 31, 2014).

The two 124,500 gt, 3,300 passenger ships incorporate a number of innovative features, including the first cruise ship application of air-lubricated hull technology.

Here's what MHI says are the reasons behind the extraordinary loss:

In November 2011 MHI received an order for two large-sized cruise ships for the AIDA Cruises brand]. Based on its previous experience building cruise ships, the company set up a project to facilitate prompt implementation of measures necessary for the newly ordered ships' construction. Also, the company, because it views the two ships as next-generation energy-efficient cruise vessels that will function as a prototype for the AIDA Cruises brand, accordingly allotted a proportionate amount of time to handling the pre-construction details.

The foregoing initiatives notwithstanding, as work proceeded in the actual construction phase of the project, difficulties involved in the construction of the prototype became evident. Moreover, the volume of design work relating to the cruise ships cabins and other areas has been vast and significant design changes have been made, with the combined result of a delay in the design work. Said delay has translated not only to increased design costs but also to negative factors in terms of additional material procurement, construction schedule, etc.; and these adverse influences have eroded the originally planned cost structure.

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