P&O Plans to Tackle German Cruise Market

British shipping group P&O plans to enter the German cruise market, one that the company sees as underdeveloped and with huge growth potential. The Peninsular and Oriental Steam Navigation Company is investing an initial $80.6 million and taking a 51 percent stake in a joint venture cruise company it is forming with privately owned German group Arkona Touristik. P&O said the new company, Aida Cruises, would order two new ships to complement the 1,200 berth Aida. P&O has an option to take full control of the venture once the ships are delivered. P&O Chairman Lord Sterling hailed the deal as a major strategic breakthrough. "It will give us a leading position in a market with huge potential and is a significant further step toward P&O becoming a major force in all of the world's cruise markets," he said. P&O, which is floating its Bovis Construction arm next month to focus on its core shipping businesses, has seen its shares almost double from last October. Lord Sterling said Germany was the next big market to be developed for ocean cruises, and would allow P&O to build on its strengths in the three existing key markets - the U.S., Britain and Australia. "The engine room of Europe is still Germany," he said, noting that German spending per head on tourism was the highest in the world. P&O said the German cruise market was underdeveloped, some 300,000 people taking ocean cruises last year compared with 700,000 in Britain and six million in the U.S. P&O is also acquiring the Seetours International business from Arkona for an undisclosed sum; the Aida and Seetours business combined representing 25 percent of the German cruise market. Arkona is owned by the Rahe family through the former East German shipping group DSR, privatized in 1993. The Aida ship is aimed at younger to middle-aged Germans and offers health and fitness facilities on board. The two new ships, to be built by the Aker MTV Werft in Wismar in the old East Germany, will be marketed on similar lines and delivered in 2002 and 2003.