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'Italian Titanic' cruise ship disaster could impact Carnival, entire industry

costacon011612_optStill want to go on that cruise?

That’s a major concern for the cruise line industry in the wake of the ship disaster off Italy’s Tucson coast on Jan. 13.

Besides the human toll, with six dead and more than a dozen missing — including a Minnesota couple — according to Fox News, the accident could cost Carnival Corporation more than $1 billion, Bloomberg News estimates.

The lagging worldwide economy already had potential customers hesitant about plunking down money for a cruise. But the grounding of the luxury Costa Concordia, operated by Costa Crociere and owned by Carnival, could seal the deal for skittish vacationers.

"Carnival still books a large portion of their bookings at this time of year,” Jaime Katz, equity analyst from investment research company Morningstar in Chicago, told Reuters. “What company, in the middle of the busiest season for their business, wants to be weighed down with that sort of PR?"

Other cruise lines are certain to feel the ramifications, as well.

“There will be negative short-term implications for bookings across the cruise sector as pictures of the stricken ship are flashed around the world,” Wyn Ellis, an analyst at Numis Securities in London, told Bloomberg News.

"I think the important factors are that this adds insult to injury, with struggling economic markets in Europe and all the unrest you've seen in the Middle East," Katz told Reuters.

Add that lost income to the looming liability claims, the refunds that must be made now that the Costa Concordia will be out of service, the repair costs and the potential environmental costs and you have a disaster of epic proportions for Carnival.

The company’s stock had its biggest drop in 11 years in London, plummeting 16 percent to 1,878 pence, Bloomberg reported.

Some investors may switch holdings into Royal Caribbean after the Concordia incident, according to Tim Ramskill, an analyst at Credit Suisse in London, told Bloomberg News.

“If the industry already didn’t face enough challenges — fuel price volatility, capacity absorption, and weakness in the European economy — this unfortunate event will reverberate on the group,” he said.

Carnival said in a statement that the 114,500-ton ship would be sidelined at least through the end of this financial year, which ends on Nov. 30.

Bloomberg also reported that, with the lawsuits from passengers that are certain to follow, the insurance loss could range from $500 million to $1 billion.

There has also been concern about whether or not the ship’s fuel could pollute the island’s crystal-clear waters, but Reuters reported that there was no sign of spillage yet. The ship was carrying nearly a full load of oil as the cruise had just begun.

Costa Crociere Chairman Pier Luigi Foschi said that the ship had been diverted from its programmed route by the captain, a maneuver that caused it to slam into the rocks, Bloomberg News reported.

The Mediterranean cruise was to take its passengers from Civitavecchia near Rome to calls at ports in Marseille, Barcelona and Palma de Mallorca.

Until the hiccup caused by the current, economic uncertainty, the cruise industry has had extraordinary growth over the last four decades. The Italian Cruise Watch study of tourism think tank Risposte reported that 19 million people took cruises in 2010, up from some 5 million in 1990 and a half-million in the early 1970s.

But at least one expert feels the customers won’t stay away long, barring financial concerns.

“Consumer sentiment soon recovers following such tragic events, and we do not expect there to be long-term negative consequences for demand,” Numis’ Ellis told Bloomberg. “Tragic accidents happen with greater frequency and, sadly, often greater loss of life, in the aviation and rail industry and this does not prevent people using these modes of transport.”

—JOE GREENE, NEWJERSEYNEWSROOM.COM

 

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