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Maintaining a new Course

Spurred by the need to fill their fleets with state-of-theart ships with the latest amenities, cruise shipping companies large and small, old and new, have embarked on an unprecedented buying binge and seeming oneupsmanship which has filled shipyard orderbooks and created considerable business opportunities for suppliers which offer advanced products and systems.

The past six months have been active, punctuated by an order for the world's largest (136,000-ton) cruise ship, and a contract for a ship that will serve for a home at sea, at least for those willing and able to fork over between $1.5 to $6 million per living space.

More recently, Cunard Lines — sold by Kvaerner to Carnival — announced its plans to re-establish itself as a defining force in the cruise market with, what it dubs, the Grandest Liner ever.

The litmus test of success is evident in the considerable coverage given to the market in U.S. consumer publications such as The Wall Street Journal, Time and Business Week. As is the practice of publications not schooled in the intricacies of a particular market (and in the effort to create a juicy story), many of the reports have harped what it perceives as "overbuilding," or on the few problems which have cropped up of late in some of the yards. Most recently a report in WSJ detailing the difficulties encountered at Fincantieri in getting the Disney ships out the door to the specification of the notoriously selective buyer.

While it is true that the shipyards' cruise orderbooks are brimming, with more than 38 ships totaling more than 2.21 million GT on order according to Lloyd's Register statistics of a few months ago (see chart below), it is also true that the cruise potential in the U.S. — the world's largest market has barely been scratched.

Statistics show that just eight percent of North American residents (the world's largest cruise market) have actually taken a cruise.

"Our commitment to continued expansion of our core brands through newbuildings demonstrates our confidence in the future of the cruise industry," said Carnival chairman Micky Arison in a statement. "Although cruising is becoming an increasingly popular vacation option, still only eight percent of the vacationing North American public has ever taken a cruise, and the market for cruising in Europe is just beginning to develop. We are very bullish on the future; the growth potential is tremendous." Also, statistics touted by the major lines and generated by the Cruise Line International Association (CLLA) an impressive 8.6 percent increase in passengers in the North American market in 1997, as more than 5.05 million passengers took to the seas last year. Similar good news, particularly for industry skeptics who have taken to the soap box to deride the continued addition of new tonnage, capacity was also at an all-time record or 90.8 percent In the next five years, the market will absorb an astounding 51 percent increase in capacity Combined with strong market prospects, legislative matters are also playing a hand in keeping cruise ship orderbooks full. Everrestrictive safety codes and standards have made it more attractive for shipowners to opt for new ships with endless amenities, rather than upgrading older tonnage for tens of millions of dollars. While cruise ship newbuildings generally fall in the $300 to $500 range, this end of the maritime market is by far the most image conscious, and long-term success demands substantial capital investment.

While it is no doubt that the size and content of these new floating palaces are pushing shipbuilders as well as equipment and service providers to the edge, it has also been a continuing exercise in the development of superior solutions in terms of maritime safety and performance. While a debate could long rage as to which areas onboard cruise ships have experienced the most significant technological advances, a strong case could be made for machinery.

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