P&O and Arkona Touristik have announced that they are forming a new company, Aida Cruises, to further develop the German cruise market.

The new company will operate the 1996-built, 38,500-ton, 1,200-passenger Aida and plans call for ordering two more 1,270-passenger ships to be built by Aker MTW Werft for deliveries in 2002 and 2003.

P&O will initially invest DM 150 million ($80.8 million) in the new company and will hold 51 percent of the shares with an option to acquire the remaining shares after delivery of the new ships.

P&O will also acquire Seetours International, which is part of Arkona Touristik, and operates the 520-passenger Arkona in addition to river cruises.

According to P&O, the German cruise market is largely undeveloped. The total number of cruise passengers in 1998 was approximately 300,000 compared to 700,000 in the UK, P&O stated, adding that the compound annual growth rate over the last five years has been 11 percent, but could be far greater with increased investment.

The joint venture will give Aida Cruises 25 percent of the German market, according to Lord Sterling, chairman of P&O, who said that the German market was poised for rapid expansion, comparable to the U.S. market 15 years ago.

The cruise concept offered by the Aida is unique not only in Germany, but to the cruise industry overall. The ship offers a casual, all-inclusive, club-style atmosphere geared to young German passengers. Key product features are buffet-style dining, health and fitness facilities, entertainment and a wide range of sports and other activities ashore. The average passenger age is 43.

The Aida was built by Kvaerner Masa-Yards for Deutsche Seereederei (DSR), but the start-up proved too much of a financial burden as the initial cruises were heavily discounted. DSR also faced financial pressures from other operations. Thus, the Aida was sold to Norwegian Cruise Line and leased back until DSR bought the ship back last month, undoubtedly backed by the P&O deal.

The 18,500-ton Arkona was built in 1981 and offers a more traditional cruise experience.

For P&O, the move makes the company increasingly a European cruise operator, broadening its scope from its traditionally "very British" identity.