Cruise Line Executives Defensive, Optimistic After Costa Concordia Tragedy

By Jane Sutton | March 14, 2012

In their first major industry gathering since the deadly Costa Concordia accident, cruise line chief executives defended their overall safety record on Tuesday and said they were confident of better days ahead.

The Concordia capsized off Italy in January, killing at least 25 passengers and crew, and focused global attention on the safety of modern cruise ships that ply the seas with thousands of passengers aboard.

At the annual Cruise Shipping Miami conference, cruise executives made no mention of the accident’s cause, but said they would study and learn from it. They insisted it was an aberration.

“The industry is fundamentally very safe and we just need to do a better job explaining that,” said Stein Kruse, president and chief executive of Holland America, which like Costa is part of Carnival Corp, the world’s largest cruise company. “We are an incredibly regulated and an incredibly professional industry.”

A record 16 million passengers took cruises in 2011 and the executives were confident of topping that in 2012, despite a slowdown in bookings after the Concordia accident. December and January bookings suggested a strong year ahead amid an improving economy and rising consumer confidence in North America, which supplies more than two-thirds of global cruise passengers.

“We were all in a very good position at the beginning of the year, booked ahead of where we were the prior year at good prices, and it did start to look like things were going to be really on the rebound,” said Kevin Sheehan, chief executive of Norwegian Cruise Line.

“Of course this (accident) is another incident that has impacted us … We’re all back to moving on to the future and building this great industry that we all know is here and has been a fantastic growth proposition for many, many years and will continue to be. We’re all thinking of the next generation of ships.”

Norwegian’s parent company, NCL Corp., is jointly owned by U.S. private equity firms Apollo Management LP and TPG Capital Management LP and by Genting Hong Kong Ltd.

The Cruise Line International Association, an industry group made up of the major lines, said 25 new ships are due to come on line by 2015, bringing the total among its members to 231 with 360,000 berths. Fourteen of those ships are due in 2012, but after that the pace slows somewhat.

Industry officials were confident of filling them and said potential passengers holding out for deep discounts because of the accident would be disappointed.

“They’ve been waiting and that’s not happening; so I think the good news is we will be able to get more volume back at maybe the pricing that we will need competitively,” said Cruise Line International Association President Christine Duffy.

Cruise officials said they had seen no change in cancellation levels after the Concordia accident and their surveys show no change in the number of people they describe as “cruise resisters.”

“I do think there were some people that maybe aren’t as familiar with the industry that were scared off by a lot of what was carried in the media with the constant attention,” said Daniel Hanrahan, president and chief executive of Celebrity Cruises, a unit of Royal Caribbean Cruises Ltd.

But among repeat cruisers “all the surveys we’ve done said people see it as an isolated incident and they’ll continue to cruise.”

While European bookings have lagged, those among U.S. passengers have picked up again, said Carnival Cruise Lines President and Chief Executive Gerald Cahill.

“If you look at the volume of our bookings we had taken since the beginning of January through the end of February, we actually had more bookings this year than we did last year, and those bookings we took are at slightly higher prices than we did last year,” Cahill said.

“It really has not been draconian at all … I think the industry will weather this in the United States. I don’t think we will get back as much pricing probably as we otherwise would have if this hadn’t occurred and I think as we move into the future here we will continue to get stronger.”

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