European tour operator TUI AG agreed to
form a joint venture cruise line with Royal Caribbean Cruises Ltd.,
just three months after a similar deal with Carnival Corp.
imploded.
Scheduled to launch
in early 2009, the joint venture, to be called TUI Cruises, will be
based in Hamburg and will serve the German-speaking
market.
"The alliance
greatly advances our global strategy," Richard Fain, RCCL's
chairman and CEO, said in a statement. "It also aligns us with TUI,
the most powerful brand in European tourism."
RCCL's entry into
the German market is the line's third foray into the European
cruise industry in just over a year and the latest move in its
battle with Carnival for European market share.
RCCL bought Spanish
cruise line Pullmantur just over a year ago, and in September
announced it was launching CDF Croisieres de France in the French
cruise market.
RCCL and TUI will
each have a 50% stake in the joint venture, which will launch with
one ship then add two new-builds slated to enter service in 2011
and 2012.
The parties did not
say what ship would enter service for the new cruise company, but
revealed that it would undergo renovations before launching. It is
likely to be an older ship from the fleet of either Royal Caribbean
International or Celebrity Cruises. RCCL is sending a 17-year-old
Royal Caribbean ship, the Empress of the Seas, to its Pullmantur
brand in March.
Robin Farley, a UBS
equity analyst, said the move gave RCCL its first exposure to the
German market, which she said was Europe's second largest with
about 700,000 passengers per year.
While the terms of
the deal were not revealed, Farley said that with equal ownership,
both companies would have to make equity investments. RCCL's ante,
she said, would be "in the form of cash, a ship or both."
TUI said the
product would be tailored to German tastes in terms of food,
entertainment and amenities. Richard Vogel, a manager at TUI who
has worked extensively on the project, is expected to be named CEO
of TUI Cruises after the transaction, which is still subject to
regulatory and board approvals.
Carnival cited a regulatory roadblock as the reason
it scrapped its deal with TUI in September. That deal was to have
included the formation of a new cruise line and the expansion of
Carnival's existing German cruise line, Aida Cruises.
Pier Luigi Foschi,
the CEO of Costa Cruises, who had been expected to head the
ill-fated Carnival/TUI venture, said he was not surprised that TUI
had partnered with RCCL.
"TUI was very
anxious to make a deal," Foschi said. He added that because RCCL is
smaller than Carnival Corp. and doesn't already have a German
brand, and because RCCL and TUI would have equal ownership, the
deal might not face the same regulatory issues that the
Carnival/TUI deal had faced. With Carnival, TUI would have entered
the deal with a 5% share that would have increased to 20% in
2010.
"It's a very
different structure," Foschi said.
That share is
expected to grow in the very near future. When Carnival pulled the
plug on the TUI venture, it promised to continue to grow in Germany
through an aggressive new-build plan for Aida. Just last week,
Carnival placed orders for two ships for Aida; it has ordered four
other ships for the brand in the last
three years.
To
contact reporter Johanna Jainchill, send e-mail to [email protected].