In the modern facilities, the most technologically sophisticated cruise ships are being built.
Before the end of 2017, it looks like there will be a worldwide duopoly in the business of building cruise ships. Can this be good for cruise lines, their customers or travel agents?
It would come about if Italy’s Fincantieri buys the French shipyard in Saint-Nazaire where Royal Caribbean International’s Harmony of the Seas, and a string of other ships, have been built. (Fincantieri won’t buy all of the Saint-Nazaire yard. The French government will hold onto a one-third stake.)
The yard is currently operating under the name STX France, but the STX parent company, based in Korea, has been trying to sell it to consolidate its way out of financial trouble.
A South Korean court recently approved Fincantieri as the approved bidder.
STX already sold its yard in Turku, Finland, to Germany’s Meyer Werft, the other big name in cruise ship building. Together, Fincantieri and Meyer Werft would dominate cruise shipbuilding the way Boeing and Airbus control the world’s output of commercial jetliners. (Fincantieri has built almost all of the recent Carnival Corp. brand vessels while Meyer Werft has delivered most of Norwegian Cruise Line’s latest ships, among others).
The business of building jets and cruise ships is similar. Both are capital intensive businesses, with a need for specialized labor and a network of subcontractors. Both are subject to wicked swings in the business cycle that can leave them with either more work than they can handle or none at all.
Big cruise lines spend billions of dollars annually on new ships. Yet it is telling that there were no bidders other than Fincantieri for the French yard. It is a very specialized and risky business.
Does it matter to the cruise lines that there are only two suppliers left to do business with? It doesn’t seem to matter much to the airlines, who haven’t been cornered by the Airbus-Boeing duopoly. One difference may be that there are dozens of customers for the plane makers, but less than a dozen for cruise yards.
Fincantieri’s yard in Trieste. Credit: Fincantieri
One well-informed source in the industry rated Fincantieri’s takeover of STX France as “neutral to slightly negative” for cruise operators. The reduction in negotiating partners is a negative, while the stability of having the yard in the hands of a familiar, known entity somewhat offsets that.
There are some other players in the shipbuilding game. Genting Hong Kong bought several German yards, which will build the future ocean and river ships for Crystal Cruises, the line Genting acquired in 2015, and the Chinese government, which has partnered with Fincantieri to begin building ships in China.
Neither poses much of a current threat to the duopoly. So for the foreseeable future, if you want to build a big cruise ship, the choices are Meyer Werft or Fincantieri.
Let’s hope it doesn’t mean anything negative for the cruise lines or their travel partners.