Dodge his attacks until he throws a lot of bombs. Pick one up, dodge the flying ghost he summons (if it hits you, SpongeBob drops the bomb), and throw the bomb at The Dutchman. Dodge his portal, then he starts his attacks over again. Repeat the bomb technique.

When the Flying Dutchman becomes whole from his ghost phase, fire a bubble at him to stop him from blowing fire. When the barrels come down from the bubble hit, activate the karate chopping ability Sandy gave you. Karate chop one of them into the Flying Dutchman before they hit the floor. Note: Doing this requires precise timing and good aim.