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New Cunard ship long on luxury

In January it will carry up to 2,620 passengers, in considerable luxury, across the Atlantic Ocean. But for now the immense steel carcass resembles little more than a huge anthill.

Some 3,000 workers scramble over the hull of the Queen Mary 2, spackling, drilling and laying air-conditioning ducts between its 17 decks. In the coming weeks, cabins and swimming pools will be installed and restaurants capable of serving thousands at a sitting outfitted. Then, in September, the ship, the largest and costliest ocean liner ever built, is to set sail on trial runs off the coast of Scotland.

There will be a spa, a Veuve Clicquot Champagne bar and a planetarium. There will also be a casino on board. But the biggest gamble is the 1,132-foot Queen Mary itself. It is larger and heavier than a Nimitz-class nuclear aircraft carrier and being built for $800-million by the French shipbuilder Alstom Marine for the venerable Cunard Line, now a unit of the Carnival Corp.

Carnival is betting that the global appetite for ocean cruises, most notably the trans-Atlantic runs between Southampton, England, and New York that will be the Queen Mary's specialty, will boom again when economies recover and the fear of possible terrorist attacks diminishes.

((On Wednesday, Carnival reported that slowed bookings and price cuts because of the war in Iraq had caused second-quarter profit to fall 34 percent, to $127.8-million, or 19 cents a share, from $194.2-million, or 33 cents, a year earlier. But revenue rose 35 percent, to $1.3-billion. It also said second-half earnings would be lower than analysts' forecasts.))

For Alstom, the Queen Mary is to be a signal that the yard can fend off low-cost competitors from Japan and South Korea in the race for complex and expensive vessels.

After trips to Florida, the Caribbean and South America next winter, the Queen Mary 2 will make its inaugural voyage to New York in April. There, it will be received with considerable fanfare, and will meet up with the Queen Elizabeth 2, the liner it is intended to replace. It will be the first time since March 1940 that two liners bearing those names will berth together in New York. (The first Queen Mary is now a floating hotel in Long Beach, Calif.; the first Elizabeth was retired and auctioned off, and was set to become a floating university until it caught fire and was scrapped in the early 1970s.)

The QE2 will cede the regular Atlantic runs to the QM2 and turn to regional cruises.

Cunard toyed with ideas for the QM2 for more than 18 months before soliciting bids in 1999 and ultimately awarding the contract to Alstom. It was the first time construction of a Cunard flagship had gone to a non-British yard.

"They wanted a mix of the old Queen Mary, some elements of the Normandie and the Queen Elizabeth," said Jean-Jacques Gatepaille, the senior naval architect at Alstom who worked on the original design.

And it is quite an undertaking.

Stood on end, the ship will be taller than the Statue of Liberty. As tall as a 21-story building, it will steam at 30 knots, roughly 34 miles an hour, crossing the Atlantic in six days, with cabins of up to 2,250 square feet.

Carnival acquired Cunard in 1998 from Kvaerner, a Norwegian shipbuilder, and plans for the Queen Mary were soon announced. But the luxury segment of the cruise industry, in which Cunard is an icon, weakened sharply afterward as the souring of the global economy, the war in Iraq and fears of terrorist attacks and diseases like SARS took their toll on the travel industry.

In April, Carnival's shareholders approved a $5.5-billion takeover of P&O Princess Cruises, a British rival, thwarting an earlier agreement to merge P&O with Royal Caribbean International.

The industry has been struggling to fill a glut of new ships by offering bargain fares. In April, Carnival said it would add a new ship to its Princess Cruise line, take one out of service at its Holland America subsidiary and delay the delivery of three others. The move reflected greater industry caution that some analysts say could help in the long term.

Last year, the cruise industry, which is based mainly in North America, ordered only four new vessels, after only two in 2001, compared with 13 at the height of the boom in 1999. So in 2004 and 2005, cruise liner capacity is expected to grow by less then 4 percent, half the rate of growth in the last two decades.

Robin M. Farley, a UBS Warburg analyst, said in a report this month that the "North American capacity outlook is better than it appears."

That is little consolation to the shipyard workers at Alstom Marine.

Alstom was awash in orders in the late 1990s as the North American cruise market exploded, and cruise lines ordered dozens of new vessels at European shipyards, which were seeking to overcome competition from low-cost yards in South Korea and Japan by specializing in high-value vessels like liquid natural gas tankers, research vessels and cruise liners.

But Europe's shipyards are foundering. Meyer Werft of Germany and Kvaerner Masa-Yards of Finland both recently announced plans to idle employees. Thousands of suppliers are also hurting.

The yards are also hurting from the weakness of the dollar, which make ships purchased for dollars in European yards more expensive. When Royal Caribbean announced this month that it had provisionally ordered two new giant cruise ships, larger than the Queen Mary and capable of transporting up to 3,600 passengers each, from Masa-Yards, it also announced a financial innovation: It linked the final contract to the dollar's exchange rate. Some analysts calculate that the dollar would have to strengthen to $1.08 to the euro, from $1.15 now, for the final contracts to be signed.

The end of the Iraq war, Alstom Marine's chief executive, Patrick Bossier, said in an interview in the yard newsletter, should spur a renewed flow of orders, though not immediately.

"The cruise lines can wait, for if there are fewer vessels in service, then cruises can be sold more dearly," he said. "Yet one can nevertheless imagine that the first order coming from a major line will likely send a signal to the market and motivate others who will not want to risk losing market share."

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