Carnival Corporation and Fincantieri have signed an agreement for the construction of four new ships and the redesign and lengthening of the Queen Victoria. The agreement, which is structured in euros and in dollars, has a total value of approximately $2.6 billion.

The agreement calls for the construction of a 110,000-ton, 3,000-passenger Conquest-class ship for Carnival Cruise Lines and a 116,000-ton 3, 100-passenger Caribbean Princess-class ship for Princess Cruises. The building costs are reported to be $500 million and $525 million, respectively.

Carnival Chairman and CEO Micky Arison commented that the cost compares favorably to the $165,000 to $175,000 per berth that Carnival has historically paid for new ships for these brands.

Arison also said that the cost should allow the company to achieve its financial targets.

Both ships are expected to be delivered in the spring of 2007.

In addition, two more ships of the same configurations will be built for delivery in spring 2008. Carnival has one year to decide which of the company's brands will take delivery of the vessels. Arison said it was probable that both ships will go to Carnival's European brands. The ships are priced in the 150,000 to 170,000 euros per berth range, which Arison said is what the company has previously paid for newbuildings for its European brands.

Based on these orders, Carnival's capacity growth will be 5.9 percent in 2007 and 5.1 percent in 2008, compared to an average annual growth rate of 15 percent in the three-year period from 2002 to 2005.

The agreement also comprises the re-designing of the Queen Victoria, which will be lengthened by about 35 feet added to the original design and with its tonnage increased to 90,000.

Also, Fincantieri and Carnival are jointly developing new classes of ships, including the so-called Pinnacle Project, which will be a 180,000-ton prototype for Carnival Cruise Lines. Delivery of the first ship of that class is expected in late 2008 or early 2009.

Arisen said that the orders allow the company to execute its two-pronged growth strategy: "For our U.S. brands it is important for us to build vessels at reasonable U.S. dollar costs especially under the unfavorable dollar-euro environment that exists today. At the same time, we must continue to reinvest in our European brands to develop the cruise business there and maintain the leadership position of those brands in their respective markets."