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Reuters
As war looms, few Americans book Europe cruises
Sunday March 9, 11:41 am ET
By Michael Connor

MIAMI, March 9 (Reuters) - Retired California educator Mindy Sharp and her husband spent long hours poring over travel brochures before signing up for a summer cruise on the Baltic Sea. Northern European itineraries, they figured, were less likely to be affected in the event of a war on Iraq.

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"We know geography," she said. "And, yes, we have serious concerns. But, on the other hand, we won't let terrorists stop us."

The cruise in July will be the second for the Sharps, who live in southern California. They were considering a pricier trip recommended by friends, when they were offered a bargain fare for the 12-day north European voyage.

"In November, we got an e-mail from Holland America offering a run-of-ship veranda cabin. It was a flash sale and a good deal. So we decided to go," she said. "My husband has never done Scandinavia."

For cruise companies, there are not nearly enough people like the Sharps in North America, by far the biggest source of passengers. These days, too few are willing to put aside anxieties about war and book a cruise overseas.

"Americans don't travel very far when there is a war situation," said Anne Campbell, editor of Cruisemates.com (http://www.cruisemates.com/), a Web site that caters to cruise passengers.

Long seen as a promising market for cruise companies needing fresh itineraries as they bring on more and larger ships, Europe again looks like it may disappoint the industry.

Bookings and prices in Europe, which are generally more profitable for operators than the industry's mainstay Caribbean and Alaskan routes, were severely curtailed in 2002 by fallout from the Sept. 11, 2001, attacks in the United States.

P&O PRINCESS PULLS SHIP FROM EUROPEAN TRIPS

European bookings this year are so weak that P&O Princess (London:POC.L - News; NYSE:POC - News), the No. 3 cruise group based in Britain, shifted one of its biggest ships from European itineraries to the Caribbean for summer sailings with bargain fares.

"In the past few weeks, we have seen a sharp drop in overseas bookings," said Colin Veitch, chief executive of Norwegian Cruise Line, the Miami-based No. 4 cruise group owned by Star Cruises (SES:SARC.SI - News). "We've seen a sharp increase in domestic bookings."

Mediterranean sailings were softer than others in Europe, according to executives. "The Baltic has been reasonably strong," Andy Stuart, NCL's top sales executive, said in an interview.

Like other providers in the $460 billion tourism sector, cruise operators have been wrestling with the post 9/11 drop in travel bookings.

Two small lines collapsed in late 2001, profits sagged, and many of the big lines yanked ships from the Mediterranean and other European routes to U.S. ports that millions of Americans suddenly wary of flying could easily reach by car.

In addition, the industry keeps building new ships and this year will have the capacity to carry 1 million more passengers than the 8.66 million in 2002. The expansion of the world's cruise fleet is not likely to slow much until 2006, at the earliest.

CRUISE LINES ADD EURO SWEETENERS

But filling their ships comes at a cost for the cruise lines in the form of reduced fares, relaxed cancellation policies, shouldering into North American ports and highly competitive itineraries, and adding sweeteners such as cabin upgrades.

Crystal Cruises, an operator of luxury ships owned by the Japanese shipping giant Nippon Yusen (Tokyo:9101.T - News), offered subsidized business-class airfares with some European voyages this summer.

"Bookings are nowhere near where anyone wants them to be," Crystal Senior Vice President Adam Leavitt said in an interview.

Cruise executives who met in Miami at an industry conference last week reported soft current bookings, with generally disappointing sales so far in the key early-year selling season. Executives blamed the uncertainty created by the increasing threat of war in Iraq.

"I think we are going through a difficult period," said Howard Frank, the vice chairman of Carnival Corp (NYSE:CCL - News), the world's largest cruise group with 45 ships and such lines as Cunard and Holland America.

"People are waiting for the second shoe to drop."


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