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Copenhagen sees rebound in 2003

Copenhagen sees rebound in 2003

The drop is related to post-September 11 redeployments by ships carrying mostly American passengers. However, officials stressed the figure is not as low as originally feared, and they predict a rebound to pre-September 11 levels in2003.

Meanwhile, the Danish capital is promoting itself as a safe and secure destination by releasing two recent surveys. The William M. Mercer international research organisation's latest Quality of Living Report, published in December, ranked Copenhagen among the world's safest cities with an 8 out of 10 score. And when Danish research institute GfK Danmark asked 2,700 attendees at various congresses to rate the city in terms of safety, Copenhagen scored 4.4 out of 5. Both reports also ranked Copenhagen high in the areas of infrastructure, airport, restaurants, theatres, sports facilities, friendliness and residents' multilingual abilities.

Copenhagen's first cruise call of 2002 was February 14, but the season officially gets underway on April 16 and runs until September 15. One highlight will be the two-day visit of The World of ResidenSea on July 25-26.

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Ratcliffe reflects

Ratcliffe reflects

Ratcliffe reflected on what he referred to as the most 'interesting six weeks of my life' leading up to February 14th's 'most extraordinary of extraordinary general meetings.' He also said having worked through that period of strict time restraints and deadlines he had more appreciation for journalists and the pressures they encounter and confirmed he would not be giving up his day job, rather preferring the life of a cruise executive. As for the merger of equals deal Ratcliffe remained tight-lipped on latest developments and spent two hours masterfully deflecting questions and probes on the subject from the roomful of media.

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HAL fits AIS across whole fleet

HAL fits AIS across whole fleet

Under IMO SOLAS V carriage requirements all new ships built after July 2002 will need to be equipped with an approved AIS. Existing passenger ships have until July 2003 to fit the system.

The HAL order was placed with Leica's authorised dealer, Radio Holland USA, which will also provide installation, integration and commissioning for the equipment. The MX 420/8 AIS was introduced by Leica last year as a fully integrated solution to shipboard DGPS and AIS requirements and satisfies all IMO, ITU and IEC standards. Gunnar Mangs, Leica Marine GPS business director said, 'HAL will be one of the first to outfit its entire fleet of cruise ships with AIS in advance of the carriage requirements deadline.'

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Genoa cruise traffic up 30%

Genoa cruise traffic up 30%

Last year's total of almost 500,000 passengers will be easily surpassed as already some 620,000 passengers are scheduled to call this year, a 30% increase.

'Genoa will this year again become No 1 in the Med,' said Fabio Capocaccia, adding that the coming season would be particularly exciting because the local Cruise Genoa grouping had agreed to join forces with nearby Portofino, a favourite with luxury cruise passengers. Henceforth all passengers arriving Genoa will have the opportunity to visit Portofino by boat or bus, and vice versa.

In addition the fourth Seatrade Mediterranean Cruise and Ferry Convention will open in the city on September 11, he added, the date providing an ideal opportunity for the Convention to review what has been a highly eventful year for the cruise industry.

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RINAapos;s new evacuation procedure notation

RINAapos;s new evacuation procedure notation

'It's a voluntary rule in which we specify a standard for assessing the operational procedure in case of evacuation through the use of commercially available software,' explains Mario Dogliano, head of Innovation & Product at RINA's Ship Division. 'In the event a ship is to be evacuated, the role of the crew in the mustering of passengers is crucial and at least as important as a good escape route layout. Now there is a benchmarking system that allows you to evaluate and improve that evacuation procedure.'

Dogliano also chairs an IMO Working Group on evacuation analysis that has just completed three years' work in assessing the fitness for purpose of ship-layouts for emergency evacuations, pronouncing on such issues as corridor widths and escape routes. 'The RINA product is complementary,' he says, looking at the 'software' or role of the crew, as well as the 'hardware' of good design.

One company offering the software is Safety at Sea Ltd (SaS) of Glasgow, which works in partnership with the University of Strathclyde through the Ship Stability Research Centre (SSEC), an established authority on ship safety.

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apos;Moving in the right directionapos;

apos;Moving in the right directionapos;

In a summary, Farley said that pricing and capacity 'are moving in the right direction.' She notes that price elasticity and a closer-in booking curve are helping cruise lines fill Q1 capacity at improving rates. 'Even so, we remain cautious on full-year 2002 bookings given that a shorter booking window means reduced visibility, and that redeployments in the third quarter may also exacerbate net yield declines,' Farley said. 'Despite our cautious outlook on pricing, we think the tide will turn for pricing comparisons by the fourth quarter.'

Farley also said capacity increases this year won't be as great aspreviously thought: 'Expectations for an 11% increase in industry capacityin 2002 have lowered to a 5-6% increase.'Farley said improvement in the pricing environment might impact the cruise lines differently because of the difference in financial leverage. 'Weestimate for every 1% change in net yield, the impact on 2003 EPS would be 14-17 cents for Royal Caribbean, 11-12 cents for Princess and 5-7 cents for Carnival Corp.' Farley wrote. 'For a rapid recovery in the priceenvironment, we believe Royal Caribbean may be the best play. Because ofCarnival's stronger balance sheet, we view it as more of a core holding ingood times and bad, while Princess falls nicely between the two in terms of the potential EPS benefit from its leverage.'

Farley also noted a continued economic slowdown could impact the industry and added that 'the industry can be hurt by consumer sentiment toward travel due to event risk.'

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Regulators at work

Regulators at work

as part of its inquiry into theirproposed merger. The action is designed to highlight certain aspects of theproposed merger and to solicit public input on the matter. Among the manyissues the Commission intends to consider: 'Is it likely to lead toultimately to a significant rise in prices, or to a reduction in quality orlevels of service, for customers, travel agents or any other parties?' TheCompetition Commission expects to submit a report on the merger to theSecretary of State on May 20.

Meanwhile, the UK also asked the European Commission to refer part ofCarnival Corp.'s bid to acquire POC to the UK competition authorities. TheUK's Director of Fair Trading 'has advised that this merger appears to raisecompetition concerns in the UK in relation to supply of cruise holidayswhich warrant further investigation.' The Department of Trade and Industryagreed and made the request of the EC, which has until April 16 to reach adecision on the referral.

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Port security grant applications exceed funds available

Port security grant applications exceed funds available

8m, according to a survey by the American Association of Port Authorities released at Seatrade Miami last week. The amount far exceeds the $93.3m appropriated by Congress for the programme. The grantapplications proposed by individual ports will range from $100,000 to $50m; 27 ports indicated they will request $1 m or more.

The Transportation Security Agency isimplementing the Port Security Grants Programme in coordination with MARAD and the US Coast Guard. TSA plans to award competitive grants starting in June to critical national seaports to finance the cost of enhancing security of facilities and operations.

US public seaports have poured at least $49m into enhancing security since September 11, said the AAPA, based on data gleaned from the survey conducted in February. Spending ranged from $3,000 to $1 Om, with ports pouring themost money into personnel costs, including hiring new officers and paying overtime.Fencing, identification systems, lighting and gate/entry controls accounted for most ofthe remaining expenses. Looking forward, the public port industry plans to invest atleast $278.5m for security enhancements, with 41% targeted for personnel, gate/entry controls and surveillance systems. Other top categories of investment were lighting, x-ray equipment, fencing and radiation screening devices.

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Moves could put new ports permanently on the map

Moves could put new ports permanently on the map

'9/11 wasn't the cause (of many redeployments to US drive-to homeports),' saidPrincess Cruises' Steve Nielsen. '9/11 exacerbated the problems of flying: the cost, the hassle.' He suggested 'the drive-in market might just be the future of cruising.' If new cruise ports like Baltimore and Mobile perform well, they might gain permanent business. Having said that, Nielsen noted that 'Europe is good for us this summer. It will be good for us in 2003.' He pointed out that 'Europe airlift is OK and relatively lesscostly (than some Caribbean cities). San Juan airfares are astronomical.'

Carnival Corp's Giora Israel agreed that air costs remain an important factor in itinerary decisions. 'Prior to 9/11, we were able to carry passengers cheaper to Barcelona thanSan Juan,' he revealed. That is why all the Big Three lines have pulled vessels fromPuerto Rico, well before September 11 and despite the fact that island officials present a more ship-friendly attitude than in years past.

Many US cruisers disappeared from the Med immediately after the attacks due to the suspension of air traffic, but Europeans continued to sail because most Med ports are accessible by ground transportation, MedCruise chief Fabio Capocaccia noted. Some lines removed capacity by scheduling ship renovations, while a few pulled vessels out of service. But now traffic is starting tocome back for the summer season, with upcoming Easter sailings across the region largely 100% booked, according to Capocaccia.

Turning to regionalsecurity, no mandatory rules exist for ports across Europe, but that could change. Capocaccia said the European Commission has set a May deadline for receiving data from ports that it will use in formulating new security strategies in cooperation with the IMO.

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Cruise stocks surge on Royalapos;s optimism

Cruise stocks surge on Royalapos;s optimism

Carnival closed up $1.80 at $32.69, Royal Caribbean was up $2 at $23, and P&O Princess climbed $1.53 to $26.40.

Ryan, Beck analyst Peter McMullin notes Royal Caribbean must have achieved somesignificant cost savings to generate a profitability shift estimated at 25-30 cents per share versus Wall Street's break-even consensus. McMullin expects consensus EPS for the year to rise above the current $1.11 and is reviewing his model, which currently indicates $1.32 for full-year 2002.

'RCL will be hit to a greater extent than its two major competitors with this year's double negative of lower prices generally postSeptember 11 and the mix shift from traditionally high yield to low yield markets,'McMullin observes. Next year, he expects this will become 'a double positive ...With afurther reduced cost structure, EPS will probably exceed $2, still well below the company's full earnings potential. Our price target of high $20s to $30 should be edging up when we revise our numbers.' Ryan, Beck rates RCL a Strong Buy.

From Lazard Freres analyst Jim Winchester's perspective, Royal appears to have held its price curve higher than peers during early 2002, resulting in higher initial yields.Based on the company's higher guidance, Winchester is raising RCL's first quarter EPS estimate to 27 cents from 5 cents, its 2002 estimate to $1.25 from 98 cents and its '03 estimate to $1.40 from $1.23. Lazard is also raising its price target on RCL to $24 (17x 2003E EPS) from $19 but maintaining its Hold rating on the stock due to lower visibility going forward.

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