Cruising s Salty Seadog Learns New Tricks
would be a grave miscalculation to characterize Cunard's Chief > Executive Antti Pankakoski as anything but a very cool customer. Don't let his charming, easy-going manner hoodwink you; after all, he is a veteran of the Norwegianowned Kvaerner industrial empire and he does mean business. Under his sturdy guidance, Cunard has steamed back to the front and center of the cruise industry in recent months, successfully emerging from a series of at-sea mishaps, unlucky business tides and a change in ownership that temporarily waylaid the company's competitive stance in the luxury sector niche.
A focused business plan, combined with the now-unwavering support of new parent company Kvaerner ASA and rising stock prices have boosted the cruise line's image in the public eye, and concurrently, its positioning in the sector.
Revamping A Sullied Reputation In August 1996, The New York Times profiled then-Cunard CEO Peter Ward as the force which would rescue the cruise line from a pattern of "rudderless management," in order to win the confidence of new owners who had already tried to sell off the business after acquiring previous owner Trafalgar House's assets in April of the same year.
Ward's goal was to reposition the company as a leader in what was a slowly maturing and quickly consolidating marketplace. This was to be no easy task considering the sector-wide intense battle for first-time cruisers, the 1994 QE2 voyage which resulted in a payout in the millions to passengers after the flagship sailed prior to a refit completion, a fire aboard Sagafjord which stranded passengers in the South China Sea and Royal Viking Sun's Red Sea reef encounter, which preempted a world cruise.
Fifteen months after putting a sensible and contemporary business strategy in place, the former Rolls- Royce chief jumped ship and market insiders once again held their breath as Cunard prepared for yet another torrent of bad press and sale negotiation rumors — rumors which proved to be more than just hearsay. In November 1996, Kvaerner sacrificed its dually-appointed Shipbuilding vice president and Kvaerner Masa-Yards executive vice president to Cunard management in what appeared to be a lastditch effort to bring the cruise line into a pattern of predictable profitability. When Finnish-born Pankakoski assumed leadership at this time, Kvaerner was still considering dumping the cruise line, although negotiators balked at the near $600 million investment ($325 million for the five-ship fleet and a $240 to $250 million commitment to build a ship at its Finnish yard) demanded by the owners.
Break-Out Plan Synergizes Strengths Contrastly, seven months later, a bullish outlook on the company's business prospects prevailed at Cunard headquarters in New York City. The cruise line's all-importanthave been shelved and Antti Pankakoski sat down with MR/EN to speculate on events in his company's recent past and to divulge his views on the apparent turnaround. First order of business: details on the Cunard reorganization strategy.
"Definitely our intention is to give good value for the dollar. The product is a luxury product, but it should always give good value for the dollar spent," said Pankakoski, explaining that an important element of the company's strategy was decided a few years ago when Cunard determined it would "concentrate on the luxury end." At this time the company also sold off certain ships, launched aggressive sales and marketing campaigns and improved service onboard, reinforcing the corporate mission of growth through refurbishment and strategic marketing agreements. "The process that he (Ward) and the team started — I do share their views and strategies. He and the team here (New York) started a lot of good initiatives. Basically, we're following the same lines, with a few differences," said Pankakoski.
The main tenets of the plan call for maintenance of a five-ship fleet, superior management shoreside, the best passenger service seaside and a peaked emphasis on all that exudes luxury. The seasoned observer would also add Cunard's engagement of a new public relations firm, the company's increased internet presence and the cruise line's absolute commitment to the highest vessel maintenance standards to the mix.
"The ships are up to the highest modern standards. They have been well maintained. We have a refit every two years so as to make sure we keep up with the state-of-the-art," said the Cunard executive. Pankakoski also spoke about Cunard's information technology (IT) efforts, specifically in the areas of revenue management and shoreside reservations, stressing: "We're really trying to bring this company up to date. We're working on a number of initiatives at the same time. In order to maintain and improve our position, it goes without saying that you have to." "I think we've seen some results based on higher '97 profits," said Pankakoski, adding: "The company is moving and the company is moving now in the right direction.
Management-wise, we've been able to stabilize the company." He also said that keeping Cunard's senior management concentrated in New York as opposed to a split with London seems to have effected a better exchange of information, which is "much, much better from a team point of view." To Sell Or Not To Sell In mid-May 1997, Kvaerner shares surged seven percent based on the company's higher than predicted earnings for Ql. Reported profits of $62 million included funds earned from the divestment of shares in Norwegian shipping group Bergensen and Britain's Amec pic, interests which were deemed sellable as non-core assets. Market watchers wondered if these transactions spoke volumes concerning Cunard's fate. Pankakoski was willing to clear the air somewhat in this regard.
This operation is still being regarded as a so-called non-core asset. At the same time, we have the full support of Kvaerner at all times ... They have approved every measure we have proposed," Pankakoski confided to MR/EN, squelching, if temporarily, gossip about parent company ownership misgivings.
Indeed, Kvaerner has been generous in approving Cunard's proposed measures, which according to the Cunard chief, account for a $40 million tab which will go towards funding work on the line's five ships for just one year (December 1996 to December 1997).
Pankakoski also has his own measures in mind for increasing market shares and ensuring Cunard's dominance at the high-end niche of the cruise sector for years to come. He told MR/EN that his goal for 1997 is to reach full capacity utilization, and this goal doesn't seem far off as the year's bookings are solid. "In '97, the ships will be relatively full throughout the year," said the CEO.
After the goal of sailing full ships is realized, Pankakoski said that he will not overlook the possibilities of building new ships, exploring mergers or acquiring existing fleets. On the subject of newbuilding, this shipbuilder by profession confided: "I think that would be the likely way to go. I would hate to exclude the notion of doing something with another line or acquiring existing ships. Building a new ship is always a very attractive option." customer ratings had steadily