Despite Lagging Economy, Carnival Continues To Expand

Carnival Corp. plans to post more vessels to Europe, a smaller but more promising market than the North American sector dominated by the world's biggest cruise group, executives said on Tuesday.

After last year completing at a cost of $510 million the buyout of Costa Cruise of Italy, Miami-based Carnival has announced the transfer of two other ships to Costa from other company lines and will dispatch a Carnival Cruise Line vessel on some European itineraries for the first time. "We want to allocate more capital to building in Europe," Carnival officials said.

Carnival, whose fleet of 44 ships sail in six lines such as Holland America and Cunard, has been hit by sluggish booking volumes in its Caribbean, Alaskan and other core routes and weak pricing since last year.

Other cruise groups have also seen a downturn after robust growth in the 1990s. A boom in new ships and the downturn on Wall Street and the U.S. economy have been blamed for the slowed pace of business. Carnival itself is spending nearly $7 billion on 16 new ships through 2005.

Carnival cautioned late Monday in a government filing that slower booking volumes that had begun in March were continuing and that sustained sluggishness might weigh on earnings for fiscal 2001 and net yield, a key measure of revenues per passenger. The company made no change in its profit targets.

Shares of Carnival closed off $.82 at $26.50 on Tuesday. Other big cruise group stocks were also down. Royal Caribbean ended at $20.10, a loss of $. 90, and P&O Princess, the number three cruise group after Royal Caribbean, ended off $.75, or 4.3 percent, at $16.60.

Officials expressed that the importance of Costa and the European market to Carnival were underscored by the three new ships scheduled to be added to Costa's fleet before 2005 at a cost of more than $1 billion.

"It's going to be a pan-European brand, not just an Italian brand," they said. "The fleet will be doubled in size by 2005."

Costa, whose itineraries include the Mediterranean, the Caribbean and Latin America, would soon be offering new routes meant to appeal to the German contingency, who already constitute a significant share of the seven-ship line's passengers, the officials said.

"There's a huge opportunity to grow our business in Europe," the company said. It was reported that a seasonal assignment of a Carnival Cruise "Fun Ship" to Europe might be announced for 2002 but more likely for 2003.