FAQ: Was Bismarck/Majestic ‘Given’ to the White Star Line as Compensation for Britannic?
No.
Contrary to popular belief that the German-built HAPAG liners Imperator/Berengaria and Bismarck/Majestic were simply ‘given’ to Cunard and White Star by the British government following Germany’s defeat in the First World War, in fact they had to be purchased. These German ships were allocated to the United Kingdom as one of the winning Allied countries, but the British Lines then had to arrange to purchase them from the British government:
On 27 January 1921, Cunard and White Star signed an agreement with the British government. It provided for a joint purchase with a total purchase price of £1.5 million (£500,000 for Imperator/Berengaria and £1 million for Bismarck). Each ship would be bought in ten equal instalments, with interest (at a minimum of 4 per cent) charged on the cost outstanding. Each company would own their ship in its entirety, but pay the other 50 per cent of their ship’s profit. On 12 March 1921, Harland & Wolff noted that ‘White Star Line have made an offer for her to Lord Inchcape (acting on behalf of the government), which offer has been tentatively accepted.’ In April 1921, Cunard’s annual report noted that they had purchased Imperator and renamed her Berengaria. By 16 November 1921, Cunard and White Star had signed an agreement about how they would operate both ships on a joint account.
The White Star Line had already received full cash compensation from the British government for the loss of Britannic. She was less than a year old when she was lost in November 1916 and so her value was reckoned at approximately £1,947,000. During the war, there was significant inflation. Harland & Wolff produced estimates for the Holland America Line which compared June 1919 shipbuilding prices with April 1916 prices. By their estimates, the cost of building a replacement for the Holland America Line’s Statendam/Justicia (lost in 1918) had risen about 109 percent. Using the same rate of increase in a hypothetical scenario where White Star had ordered Harland & Wolff to build a new Britannic, the cost would have been over £4 million.
In this respect, the company got a very good deal by purchasing Bismarck/Majestic at approximately £1 million, because it was much cheaper than building similar new tonnage. To make matters even better, they did not have to pay it all straight away but rather in instalments over 10 years. And, the profit-sharing agreement diversified earnings over two ships instead of one. What this meant was that if one ship was out of service (such as Majestic in the first quarter of 1925), the White Star Line still received some earnings from Cunard from the operation of Berengaria. (The agreement on a profit sharing arrangement between Cunard and White Star ran until Cunard terminated it just over ten years later, on the grounds that their ship had earned more profit. That meant that they were paying White Star more than they were receiving in return.)
Further details, including a detailed analysis of both ships’ financial results, are included in Appendix Four of the revised and expanded edition of RMS Majestic: The ‘Magic Stick‘ (The History Press; 2024).
