Carnival Corporation and TUI have signed a letter of intent to form a new joint venture, operating Carnival's existing AIDA Cruises brand and a new TUI Cruises brand - both designed for the German-speaking market.

AIDA currently operates four ships and has four more under construction aimed at younger, more active passengers. The new TUI brand will target a different segment of the German market, offering more traditional cruises. The first TUI branded ship, with an estimated passenger capacity of 3,000, is expected to enter service in 2010.

TUI. which is the world's largest tour operator and a major force in the German travel market, has long been rumored to considering its own cruise brand in the German market. By joining forces, Carnival has in effect removed a potential major competitor from the German market and instead turned that competitor into a partner.

TUI also owns and operates Thomson Holidays and Thomson Cruises in the U.K. market, and Hapag-Lloyd Cruises in the upscale German market.

Working in 17 different countries, TUI's tour operations includes 3,200 travel agencies and seven airlines. Its hotel portfolio is made up of 279 hotels with some 164,000 beds in 30 countries.

With Hapag-Lloyd, TUI is also owns of the major container shipping companies, with more than 140 container ships.

TUI Cruises

Under the proposed transaction, AIDA's has been valued at 1.9 billion euros for inclusion in the joint venture which will be formed with 600 million euro.

TUI will initially purchase 5 percent in 2007 and is expected to purchase another 20 percent in 2010. The purchase price will be paid to Carnival in cash based at the closing of each transaction based on a net equity value of 1.3 billion euros.

When the initial 5 percent is purchased in 2007, Carnival expects to record a pre-tax gain of approximately 60 million euros. Another gain will be recorded in 2010.

The new joint venture company will be managed under the direction of Pier Luigi Foschi, chairman of Carnival’s Costa Crociere unit, who also currently oversees Camival's German operations, including AIDA. Michael Thamm, president of AIDA, will become president of the new company.