Outlook: P&O cruises

WHILE Eurotunnel is busy doubling its freight capacity between Dover and Calais, Lord Sterling has decided to double the size of P&O's cruise business. The two companies are direct competitors on the cross- Channel routes. But whereas Eurotunnel sees its future growth in getting more truckers on board Le Shuttle, P&O reckons it will be more profitable to target the wrinkly market in the US.

P&O calculates that by 2010 the number of Americans aged between 50 and 59 will have doubled to 40 million. With their pension plans in place and their disposable income rising on the back of an extraordinary bull market, each and every one is a potential customer for one of the floating hotels that P&O is having built.

The significance of P&O's latest pounds 1.25bn order for five new luxury cruise ships cannot be underestimated. By the time the fleet expansion is complete, P&O will have enough berths to cope with a moderately-sized refugee crisis, provided they are the sort of refugees who can afford $2,000 for a ten- day cruise in the Caribbean.

The shape of P&O will also have changed out of all recognition. Property, the construction arm Bovis and Earls Court will all be gone along with P&O's container interests. In its place will be a leisure company with 75 per cent of its profits generated from transporting ageing Americans around the Bahamas.

A sharp correction on Wall Street could burst Lord Sterling's bubble as could a decision to make the elderly pay for more of their health care. But right now the shares are riding the crest of a wave.