Union Comes in Midst of Travel Industry Upheaval

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NEW YORK (AdAge.com) -- Two of the top leading cruise lines announced they were merging today even as their industry struggles to overcome an economic downturn and the ill effects on travel in the wake of Sept. 11.

Royal Caribbean Cruises and P&O Princess Cruises, the Nos. 2 and 3 lines in the world, respectively, based on available berths, announced a $6 billion-plus merger today that will create the world's largest cruise operator and pose a more formidable challenge to current industry leader Carnival Corp. The merger will allow significant cost savings, the companies said, through a combination of functions, including marketing.

Separate brands
While it is unclear what the new corporate name of the combined company will be -- the working name is RCP Cruise Lines -- the merger will not affect the individual brand names operated by the companies such as Princess, Royal Caribbean and Celebrity.

"The brands

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are the biggest strength in this merger. They will very much remain separate," a Royal Caribbean spokeswoman said.

Also uncertain is how the advertising agency rosters of the companies would be impacted. Havas Advertising's Arnold Worldwide, Boston, handles Royal Caribbean, while Interpublic Group of Cos.' Suissa Miller, Los Angeles, is the agency for Princess.

Completion of the merger pending regulatory and shareholder hurdles is expected mid-2002.

Richard Fain, chairman-CEO of Royal Caribbean Cruises, is expected to serve in those posts for the new company. The deal, he said in a statement, "brings near-term cost savings and increased efficiencies that will help us respond to any short term challenges while building a stronger group."

Things to come?
The merger could offer a harbinger of things to come in the sibling airline industry where consolidation -- a move previously scorned by Congress, notably by its axing of a proposed United and US Airways merger -- could take off as that industry struggles. Congress wants to ensure competitive pricing in the skies, but if airlines go through a round of bankruptcies, options may be limited.

While the cruise industry also has been buffeted since Sept. 11, it has not drawn the same government sympathy and bailout money that the airline industry has because it is not viewed as vital to the economy.

Bookings declined in the wake of the terrorist events, and with people scared to fly, the industry has faced difficulty trying to bring travelers to ports of departure such as Miami and Los Angeles.

As a result, there has been massive price cutting, hurting profits.

"The events of Sept. 11 certainly lent momentum to the deal," the Royal Caribbean spokeswoman said.

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