Travel Weekly's Cruise E-Letter: October 29, 2002

BETROTHAL AGREEMENT: The P&O Princess board accepted Carnival Corp.'s proposal to form a dual-listed company and withdrew its recommendation for a merger with Royal Caribbean Cruises. In a deal worth $5 billion, give or take, Carnival Corp. -- already the world's largest cruise conglomerate, with 55 ships and 90,000 berths -- grows to 82 ships and 135,000 berths.

MICKY ARISON, Carnival Corp. chairman and CEO, said the dual-listed company "not only provides P&O Princess shareholders with the superior economic terms of our increased offer, but also enables them to retain their U.K. listed shares." Arison said representatives of P&O Princess would be "invited to join the Carnival board." Under the deal made public Friday, Arison said, "P&O Princess and Carnival shareholders can both participate in the future of a combined business, which will be one of the most exciting and dynamic in the leisure industry." Although they will be operated as "a single economic enterprise under a unified executive team," P&O Princess and Carnival will retain separate corporate identities, officials said. The agreement is expected to close in the first quarter of 2003.

ROYAL CARIBBEAN chairman and CEO Richard Fain, meanwhile, said his company regrets that the Princess board took the action. "We remain today as convinced as ever that the pairing of our two companies would be a great partnership and a great business. Ultimately, it is the shareholders of P&O Princess who must decide what is best for their company." RCCL said P&O Princess has paid the agreed break-up fee of $62.5 million, and both firms signed releases to terminate the joint venture they agreed on last November.

SEABOURN CRUISES is taking the Seabourn Spirit to Australia and New Zealand in early 2004, after some years' absence. The series will begin with an 11-day cruise from Singapore to Cairns, Australia, followed by four itineraries, two that wend their way through New Zealand to Fiji and two that double back on the original voyages. Exiting the region, the ship will spend 18 days sailing through the Coral Sea and making stops in Papua New Guinea and the Philippines en route to Hong Kong. Meanwhile, Seabourn said, its three ships -- the Legend, Pride and Spirit -- are about to go into dry-dock where all will undergo upgrades, to be completed in mid-January.

CARNIVAL Cruise Lines canceled Sunday's departure of its Elation due to a problem with the ship's propulsion system. The malfunction was discovered during last week's sailing, prompting the ship to miss a call in Cabo San Lucas, Mexico, and head for Los Angeles, where passengers disembarked. The Elation will be dry-docked for repairs in San Francisco, the line said. The dysfunction affected only the speed of the ship, and not any of its hotel systems or air conditioning. The vessel is expected to return to service this weekend for another Mexican Riviera cruise. Refunds and discounts were offered to affected passengers.

IN OTHER NEWS, CCL took delivery of the Carnival Conquest, its largest ship and the first in its Conquest-class series. The 2,974-passenger, 110,000-ton ship will sail from the Fincantieri shipyard in Italy to New Orleans, where it will begin sailing a year-round western Caribbean itinerary on Nov. 15.

REGAL CHINA CRUISES terminated its relationship with Nantong Lihui Int'l Co., the Chinese owners of the three vessels Regal China uses in its Yangtze River cruises. The vessels will be operated by Lihui in the future, but the brand name Regal China Cruises remains the property of David Yiu, owner of Regal China Cruises.

BY THE NUMBERS
• P&O Princess Cruises recorded a $174.9 million profit during the third quarter, a 7% increase compared with the period in 2001. Occupancy on its North American sailings was up four percentage points, to 103.8%. Yields for the group were down by 5%. CEO Peter Ratcliffe added that Princess has returned to a "normal" booking curve, although Carnival Corp. and Royal Caribbean Cruises both have said they continue to experience significant booking activity closer to departure dates.
• Royal Caribbean Cruises said third-quarter profits were $193.5 million on record revenues of $1 billion, compared with earnings of $159.2 million on revenues of $940.7 million in the third quarter of 2001. The company attributed its upbeat earnings report to a 15.9% increase in capacity. Net yields for the quarter were down 1.7% from the third quarter of 2001. The company said yields for the full year are expected to be down between 1% and 2% compared with 2001. Also, the company moved up delivery on two ships: The Serenade of the Seas will be delivered in the third quarter of 2003; the Mariner of the Seas, in the fourth quarter.

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