P&O buoyed by cruise market recovery

P&O Princess Cruises, the UK luxury ship group in the middle of a three-way merger battle, yesterday revealed that bookings and pricing had recovered faster than expected since the attacks of 11 September sank the cruise market.

Peter Ratcliffe, the chief executive, used the strength of the recovery to justify the group's rationale for recommending an agreed £6.4bn merger with Royal Caribbean.

"If anything, the deal we struck post 11 September looks even more favourable than it did at the time," adding that because Royal Caribbean is highly leveraged its profits would recover very quickly.

P&O Princess said pricing had almost returned to last year's levels. Pre-tax profits for the three months to 31 March increased by 43 per cent to $27m (£19m) while sales fell to $512m compared with $542m a year earlier.

"If you look at the wider vacation market, cruising has come through better than other areas," Mr Ratcliffe said. "Clearly, it's early to be too precise but we are increasingly confident that we will see a return to normality by the end of the year."

The group said like-for-like net revenue yields, which measures how much money cruise lines maker per passenger, fell 8 per cent. It expects net yields to fall in the second and third quarter but to recover in the fourth quarter, limiting the full-year decline to 5 to 6 per cent. This will be offset by a full-year reduction in underlying costs of 7 per cent, the company said.

"It is incredibly bullish ... In the UK it reflects that people have been less impacted by 11 September and travelling patterns than people expected. In the US it reflects an improving US economy and consumer spending and the growth of the overall cruise market," said Simon Champion, an analyst at Deutsche Bank.

P&O Princess must wait until the summer to learn whether regulators will approve both the Royal Caribbean deal and a hostile £4.8bn bid from Carnival Corporation, the market leader.

It intends to launch the brochure for Ocean Village, its new cruise brand aimed at 35-to-45 year olds in June.