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Smooth Sailing; Alaskan Ferry Service a Success

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HAINES, Alaska - With nary a rough wave along the inlet, the
frequently-traveled route in southern Alaska proved once again to be smooth
sailing.

Guiding the boat on this quiet trip was Gene Strong, a veteran of the seas
along the state's panhandle. Strong, 61, is in his first year as a
full-time captain of the ferry, appropriately named the Fairweather
Express, which operates from May through September.

The weather rarely turns sour during these months in the Lynn Canal, the
continent's longest fiord linking the 14 miles between Haines with Skagway.
After a hard winter, this time offers a respite for residents and visitors
and is the reason why Strong is employed on this catamaran that provides a
shuttle service between the two towns.

"For all of the jobs I've had, this is the closest to retirement without
being retired," he said on a return to Haines. With the coastal mountains
bounding both sides of the canal Strong's remark was "This is awesome."

The Fairweather Express and its cousin, Fairweather Express II, are the two
busiest of the three-ferry fleet operated by Chilkat Cruises & Tours, a
subsidiary of Klukwan, Inc. that's owned by the Tlingit tribe. Offering up
to 28 sailings daily, each trip taking 35 minutes, Chilkat has carved out a
navigational niche in transporting people to Haines, population 2,400.

More than 61,000 passengers stepped aboard the ferries last year with
return tickets costing $45. From an employment perspective, two-thirds of
the workers during this seasonal business are shareholders within the band
while half of the management team is American Indian.

Yet Klukwan hasn't always been able to navigate through troubled waters.
Initiated following the Alaska Native Claims Settlement Act (ANCSA) of
1971, the most successful division within the company's assets was its
23,000 acres of timberland in the southeast of the state. By 1996, Klukwan
started a ferry shuttle that became the predecessor to the present-day
Fairweather expresses.

Still, even with numerous and diverse projects, Klukwan was losing money
and the lucrative timber market that was floating the company was drying
up. Enter Thomas Crandall in 1999, who significantly trimmed operations.

"We are a healthier company now, with only $22 million in revenues, than we
were with $90 million but we were losing money," said Crandall who is now
Klukwan's president.

His philosophy to the employees was simple about their employer's financial
position when cutbacks were occurring.

"Your mission statement is make money or die," Crandall stated in so many
words about the then-troubled company. "A successful Native business is,
first, a successful business."

Constantly within the state's top companies for highest revenues, Crandall
pointed out those numbers were deceiving. Ranked as high as 14th in the
Alaska Journal of Commerce's annual survey, the achievement didn't properly
assess the financial health of the company because, as Crandall added,
expenses and therefore profits, were not factored into the equation.

The original Fairweather of '96 crossed the canal in 80 minutes.
Fairweather Express, purchased in 1999, halved that time with its
double-hull design. Two years later, the second fast ferry and the Chilkat
Express, a 63-seat boat capable of speeds up to 48 knots (52 mph) used for
other excursions, were bought for about $1.3 million each.

Until a decade ago though, Chilkat's services weren't as vital. An average
of five cruise ships docked in Haines per week, each carrying about 2,000
passengers. However, for political and economic reasons, those boats
reduced their appearances during the late '90s, grinding to a near halt in
2001. It's only now the village is getting one of these ships to visit each
week. By comparison, in Skagway it's not uncommon to witness four ships in
port per day at the height of the tourist season.

Wildlife is the attraction in Haines with several tour operators, including
Chilkat, offering affordable and accessible trips that almost assure seeing
animals. Most of these half-day packages have been pre-sold on the cruise
liners and are designed to get the tourists back on the catamaran for their
Skagway departure.

According to the president of Haines' Chamber of Commerce, Chilkat has been
the lifeline to economic sustainability in the area. The owner of River
Adventures, Karen Hess said most of the tour guides, and the town in
general is dependent on the tourism dollars that flow from the day
travelers the fast ferry delivers.

"Without them, there wouldn't be a lot of people working in this
community," Hess succinctly said, adding there aren't enough independent
visitors to Haines for a sustainable tourism industry.

Recently another company has started to provide a shuttle between the two
towns for a price slightly less than what Chilkat is charging. Crandall
didn't show too much concern because he listed the track record and
service-oriented details his company has including two boats that have
proven their reliability to run on time.

The ferries recently underwent a retrofit to include small snack bars for
its passengers. Chilkat also owns a dock in Haines with the restaurant,
Just For The Halibut, and the gift shop, Fairweather Gallery.

These additional amenities, Crandall said, plus a favorable moorage in
Skagway give Chilkat the market advantage over any competition.

"Image is important and if everything else is equal with service, cost and
personnel, but if one company has new equipment, what's your impression
going to be?" Crandall rhetorically asked.