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 The Cruise market in 2004 
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 If we were able to hand out 'Oscars' in the cruise 
 market, we would indisputably have two big winners this 
 year: the Carnival Cruise Line group, on one hand, and 
 Fincantieri shipyards, on the other, both having 
 developed a fruitful co-operation.
  The Carnival group closed its annual results with a 
 profit of nearly $ 2 billion for a turnover of roughly 
 $ 10 billion, namely a net margin of 20 %. This 
 result confirms both the success of the merger between 
 the P&O / Princess group and the Carnival group, as 
 well as the growth of the cruise market in the US and 
 Europe in 2004.  
 Fincantieri ended the year with an orderbook of ten 
 cruise ships, all for the Carnival group, representing 
 60 % of the world orderbook and slightly over $ 5 
 billion in value, guaranteeing full employment for 
 their three cruiseship construction sites until 2008.
  
 The enthusiasm which these magnificent results 
 inspire should however be tempered in a global outlook 
 of the market. The cruise industry has just experienced 
 three difficult years since the attack of September 
 11th, 2001 and began the year 2004 with a new 
 challenge, that of absorbing ten ships representing 
 about 23,500 lower-berths, or 10 % of the current 
 capacity. Once again, demand was able to match this new 
 supply thanks to the increase in the number of cruise 
 passengers which should surpass the 13 million mark in 
 2004. 
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 At the beginning of 2004, there were only three ships to be 
 delivered in 2005 and four in 2006. However, despite the 
 continuing decline of the dollar lifting the cost of 
 construction in Europe, owners could not resist the 
 temptation to consolidate their commercial position by 
 ordering new ships, in this booming market.
  Once again, the signal was given by Carnival who as early 
 as January ordered a ship, the 'Costa Concordia', 112,000 
 gt, 1,900 cabins, for delivery in the summer of 2006, at ' 
 450 million, for its subsidiary Costa. In October, two ships 
 of 68,000 gt, 1,000 cabins, were ordered by another Carnival 
 affiliate, Aida, with Meyer Werft, for delivery in April 
 2007 and April 2008, for a unit cost of ' 315 million. But 
 above all, the biggest order ever placed was made with 
 Fincantieri for a total figure of $ 2.6 billion for four 
 ships to be delivered in 2007-2008 and the extension of the 
 future 'Queen Victoria' by 11 meters for Cunard, for a 
 complementary cost of $ 95 million. The four ships are 
 broken down as follows:  
 
 - one for Carnival, 110,000 gt, at a price of $ 500 
 million,
 
 - one for Princess Cruises, 107,000 gt, at a price of $ 
 525 million,
 
 - two similar ships for Europe, priced respectively at ' 
 475 and ' 490 million, with the Carnival group keeping the 
 option to dedicate these two ships to either of its brands 
 during the year 2005. 
 
  
 This order is exceptional in both its size and the fact 
 that Fincantieri agreed to deal both in dollar and in euro, 
 with client and supplier sharing the currency risk.  
 At the end of the year, Carnival thus has 12 ships on 
 order and in January 2005, this owner will add a sistership 
 of the 'Concordia' for its subsidiary Costa, for delivery in 
 2007 at a price of ' 475 million.  
 RCCL declared in September its option with 
 Kvaerner Masa Yard, which has become Aker Finnyards, for a 
 second 'Ultra Voyager' of 163,000 gt, 3,600 passengers, at a 
 price of ' 580 million. RCCL continues to invest in these 
 mega-ships with success, but it is likely that Carnival will 
 start to compete in this market of very large carriers, 
 since its 'Pinnacle' project of 180,000 gt is already on the 
 drawing boards.  
 RCCL has also opted this year for the extension of the 
 ship 'Enchantment of the Seas' which should see its capacity 
 increased by 150 cabins for a cost in the region of $ 55 
 million. The new section will be built at Aker 
 yards and installed in the Netherlands during the second 
 quarter of 2005.  
 Norwegian Cruise Line (NCL) began the year with some 
 concerns due to the financial losses of its mother company 
 in Asia and the accident of the 'Pride of America' under 
 construction at Lloyd Werft. Finally, the group has 
 successfully put in place a financial restructuring, which 
 allows it to raise $ 1 billion and to order two ships in 
 December: 
 
 - one of 92,000 gt, 1,200 cabins, for delivery in February 
 2007 with Meyer Werft, at a price of ' 370 million,
 
 - the other of 89,000 gt, 1,000 cabins, with Aker 
 Finnyards, for delivery in the spring of 2007, with an 
 option for another unit to be lifted in August 2005 for 
 delivery in the spring of 2008, at a price of ' 385 million 
 per unit. 
 
  
 An agreement was finally signed with Lloyd Werft to take 
 delivery of the 'Pride of America' in June 2005, whilst the 
 'Norway' has definitively been stopped, awaiting a sale.  
 NCL, under the NCL America banner, continues to develop 
 its cruise business in Hawaii under the American flag, 
 despite some teething problems linked to restrictions with 
 the American flag. Four ships are still programmed for this 
 market over the next three years.  
 In Europe, the year began sadly with the demise of 
 Festival who should have celebrated ten years of existence 
 in 2004, but which allowed MSC to expand 
 its development policy by taking over the 'European Vision' 
 and 'European Stars' at a price of some ' 215 million per 
 unit.  
 Mediterranean Shipping Cruises (MSC) has become a main 
 competitor to Costa in Europe and also plans to consolidate 
 its position as European cruise operator in the American 
 market. Comforted by being the second largest owner of 
 containerships in the world, MSC does not hide their plans 
 to become a prime player in the European cruise scene. In 
 September MSC completed six months of negotiations 
 with Chantiers de l'Atlantique for the order of two 3,000 
 passenger ships, for delivery in the summer of 2006 and in 
 the spring of 2007, at a price of ' 400 million each, with 
 an option for an additional ship.  
 The European market should increase from 3.1 million 
 lower-berths in 2004 to 3.7 million in 2007, profiting from a 
 potential steady growth and should continue to absorb a 
 quarter of the world fleet. It is true that if we apply the 
 American model to Europe, there could be ten million cruise 
 passengers in ten years time. 
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 Finally 12 ships were ordered in 2004, representing 33,000 
 lower-berths, plus an additional three on option.
  The orderbook at the end of the year thus comprises 21 
 ships firmly booked, for a total of 56,000 lower-berths, or 
 an average capacity per ship of 2,650 passengers, of which 
 nine ships are of post-panamax size.
 
  
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  Carnival Miracle 
 85 700 tb, livr' en 2004 par Aker Yards, exploit' par
 Carnival Cruise Line  | 
  
 
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  Ten new ships representing 23,500 lower-berths were 
 delivered during the year, of which seven went to the 
 Carnival group. These deliveries were broken down as 
 follows:  
 For Carnival Cruise Line: 
 
 - 'Carnival Miracle', 85,700 gt, 2,124 lower-berths, 1,057 
 cabins, delivery February 2004, built by Aker Finnyards
 
 - 'Carnival Valor', 109,500 gt, 2,974 lower-berths, 1,438 
 cabins, delivery November 2004, built by Fincantieri 
 
  
 For Princess Cruises: 
 
 - 'Caribbean Princess', 112,894 gt, 2,998 lower-berths, 
 1,557 cabins, delivery March 2004 built by Fincantieri
 
 - 'Diamond Princess', 115,875 gt, 2,674 lower-berths, 
 1,337 cabins, delivery March 2004
 
 - 'Sapphire Princess', 115,875 gt, 2,674 lower-berths, 
 1,337 cabins, delivery May 2004 built by Mitsubishi 
 
  
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  Diamond Princess 
 115 875 tb, livr' en 2004 par Mitsubishi, exploit' par Princess
 Cruises  | 
  
 
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  For Costa: 
 
 - 'Costa Magica', 102,200 gt, 2,702 lower-berths, 1,358 
 cabins, delivery November 2004 built by Fincantieri 
 
  
 For Holland America Line: 
 
 - 'Westerdam', 81,769 gt, 1,848 lower-berths, 924 cabins, 
 delivery April 2004 built by Fincantieri 
 
  
 For Royal Caribbean Cruise Line: 
 
 - 'Jewel of the Seas', 90,090 gt, 2,100 lower-berths, 
 1,055 cabins, delivery April 2004 built by Meyer Werft 
 
  
 For Mediterranean Shipping Cruises: 
 
 - 'MSC Opera', 59,058 gt, 1,526 lower-berths, 795 cabins, 
 delivery in June 2004 built by Chantiers de l'Atlantique 
 
 
  
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 MSC Opera 
 59 058 tb, livr' en 2004 par les Chantiers de l'Atlantique,
 exploit' par MSC Cruises | 
  
 
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  For Birka Line: 
 - 'Birka Paradise', 33,000 gt, 1,800 lower-berths, 728 
 cabins, delivery November 2004 built by Aker Finnyards
 
  
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 The revival of the cruise market during the year gave life to the 
 second-hand market which was enlivened by the auction sales of 
 vessels owned by companies in financial difficulties (notably ROC 
 and Festival), as well as the sale of ships from the group My 
 Travel (Sun Cruises) who decided to shutdown their activity as 
 shipowners.
  These sales allowed one to gauge the relatively firm prices 
 which were established, partly due to the rise in the cost of 
 construction and to some extent due to the weakness of the 
 dollar.  
 Amongst the more notable sales were:  
 
 - 'Carousel', 23,000 gt, 1,000 lower-berths, built 1971, 
 'Seawing', 16,700 gt, 754 lower-berths, built 1971 and 'Sunbird' 
 37,773 gt, 1 414 lower-berths, 633 cabins, built in 1982 
 (chartered by Thomson) to the owner Louis Cruises, at 
 respectively $ 14, $ 9 and $ 71 million, whereas the 'Sun Dream' 
 23,000 gt, 1,000 lower-berths, built 1970 was sold to Caspi 
 Shipping. 
 
 - 'European Vision' renamed 'MSC Harmonica', and 'European 
 Stars' renamed 'MSC Sinfonia', 58,000 gt, 1,506 lower-berths, 783 
 cabins, built in 2001 and 2002, bought by Mediterranean Shipping 
 Cruises at the cost of '215 million each. 
 
 - 'Mistral', 47,276 gt, 1,196 lower-berths, 598 cabins, built in 
 1999, sold to a Spanish tour operator Viajes Iberojet for a price 
 of about ' 130 million. 
 
 - Iberojet also bought the 'Superstar Capricorn', 23,400 gt, 755 
 lower-berths, built in 1972, renamed 'Grand Latino' at a price of 
 $ 20 million. 
 
 - 'Superstar Aries', 37,000 gt, 611 lower-berths, built in 1981, 
 renamed 'Holiday Dream' was sold to Pullmantur for a price of $ 
 44 million. 
 
 - 'Bolero', 15,800 gt, 761 lower-berths, built in 1968, renamed 
 'Orient Queen' was sold to Lebanese buyers at the price of $9.5 
 million, whilst the 'Azur', 9,200 gt, 694 lower-berths, built in 
 1971 was sold to the Israeli owner ManMaritime (renamed 'Royal 
 Iris') at a price around $ 10 million, and the 'Flamenco' bought 
 by Ravenscroft for $ 12.25 million at auction, has been charted 
 by Travelplan in Spain. 
 
 - The German financial organisation KfW, creditor of Royal 
 Olympic Cruise, who had bought the 'Olympia Explorer' and the 
 'Olympia Voyager', built in 2000 and 2002, 24,500 gt, 840 
 lower-berths, 27 knots, for respectively $ 82.7 million and $ 
 97.2 million, resold the 'Olympia Explorer' for $85 million to a 
 maritime university, whilst the 'Olympia Voyager' was chartered 
 out for on a long term period with a purchase option to the 
 Spanish Iberojet. 
 
 - 'Paul Gauguin' was sold by the financial owner Centre Solution 
 to the tour operator Grand Circle/Vantage for a price in the 
 region of $ 40 million, but the ship should remain in service in 
 Tahiti for Radisson for the next two years, 2005 and 2006. 
 
 - The project easyCruise, which caused a lot of curiosity from 
 all the professionals in the sector, should start in the spring 
 of 2005 following the purchase and the transformation of 
 'Renaissance Two' bought for $ 7 million and transformed in 
 Singapore, doubling its capacity to accommodate 180 passengers. 
 This ship, renamed 'easyCruise 1' will serve as a test to the 
 promoter, Stelios Haji-Iouannou, to develop on a much larger 
 scale the ambitious project of easyCruise, which is planning to 
 expand the range of products offered in the cruising industry in 
 trying to capture a much younger clientele. 
 
 - The sister ship, ex 'Renaissance One' was sold to Singaporeans 
 at a price of $6 million to operate casino cruises. 
 
 - Also to be noted was the purchase of the 'Discovery', 20,186 
 gt, 472 lower-berths, built in 1972 by the tour operator All 
 Leisure Group (Voyages of Discovery) which chartered the ship for 
 six months of the year, thus becoming an owner. 
 
  
 These sales show the activity of some tour operators, 
 especially Spanish, Spain having become the fourth market in 
 Europe within several years with 300,000 cruise passengers, after 
 the United Kingdom with over 1 million, Germany with near to 
 600,000 and Italy with more than 350,000 cruise clients.  
 We have not seen any new mergers within the cruise companies 
 this year, the sector being already concentrated in the hands of 
 a few big groups, but there was one promising diversifying 
 operation with the entry of CMA CGM into 70 % of the capital of 
 the Compagnie des Iles du Ponant, who exploit three small cruise 
 ships under French flag, and in the tour operator Tapis Rouge. 
 Let us hope that this major containership owner will wish to 
 develop rapidly in this new activity. 
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 Whilst we might have imagined that the sector would take a 
 pause after the strong growth in the fleet at the beginning 
 of this decade, it appears that cruise companies are looking 
 to achieve a controlled growth of around of 5 % per year, 
 which should result in some ten ships being ordered each 
 year.
  Once again, the question is whether there are too many 
 shipyards in Europe to serve the needs, which overall have 
 become relatively moderate, although owners have no interest 
 in seeing reduced competition amongst shipyards as this has 
 helped boost their growth.  
 The decline in the dollar has of course been a constraint 
 on the ambitions of American companies, but the growth of 
 the market and a wiser decision-making process in the annual 
 ordering of ships should permit, as seen this year, an 
 increase in cruise prices compensating the rise in 
 construction costs expressed in dollars, taking into 
 consideration 
 that amortisation of the vessel can be spread out over a very long period.
  
 The cruise industry, which in twenty years has become a 
 well-known and appreciated leisure activity, has no need to 
 be under-priced to survive and the sector should experience 
 a much more controlled development than in the past, 
 particularly as only ten ships will be coming out of the 
 yards over the next two years, four in 2005 and six in 2006, 
 which should allow a better occupancy rate and price 
 optimisation given a demand which is continuously expanding. 
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Shipping and Shipbuilding Markets in 2004
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