Cunard sets a steady course for the marketplace

Cunard charted some rough seas last year but it remains the pride of Britain's merchant fleet - which is why several potential buyers are currently running their slide rules over the operation, writes Russell Hotten.

The public relations nightmare that followed the QE2's re-fit continues to haunt Cunard financially, but Kvaerner is already thought to be in discussions about offloading the business.

Among the potential purchasers are Lord Sterling's P&O shipping line, US cruise operations Carnival and Royal Caribbean, and the Walt Disney group, which has already moved into the liner market.

Cunard made a loss of pounds 134m last year, although its book value in the last Trafalgar accounts was put at pounds 294m after a pounds 79m write-down in assets.

Trafalgar had embarked on a large reorganisation of Cunard, investing some pounds 200m over the past two years. But Trafalgar said yesterday it did not expect Cunard to return to profit for a least two years. Demand on the fleet of eight passenger ships, which also includes the prestigious Royal Viking Sun, has slowed as the slump that hit the cruise industry in 1995 looks like continuing into 1996.

Cunard was particularly badly hit because of underinvestment in its ageing fleet, which is less efficient and less well organised on board than the modern vessels. The QE2 is said to be 30 per cent more expensive to run that P&O's Oriana.

But analysts feel that cruise operators with deeper pockets than Trafalgar (or Kvaerner) will be able turn Cunard around as long as the crucial North American market continues to grow steadily.

Excluding the disposals already announced by Trafalgar, Kvaerner is expected to raise pounds 750m from selling off businesses, of which Cunard will be the biggest. But the Norwegian company, the biggest builder of cruise ships in the world, knows something about the passenger liner market and will not feel the need to embark on a fire sale. One Kvaerner source said: "Cunard is not part of our core strategy. But neither do we fell under pressure to sell."