Cunard Line Ltd.

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Cunard Line Ltd.

6100 Blue Lagoon Drive, Suite 400
Miami, Florida 33126
U.S.A.
(305) 463-3000
Fax: (305) 463-3010
Web site: http://www.cunardline.com

Wholly Owned Subsidiary of Kvaerner A/S
Incorporated: 1878 as The Cunard Steam Ship Co. Ltd.
Employees: 427
Sales: $440 million (1995)
SICs: 4481 Deep Sea Transportation of Passengers, Except by Ferry

Cunard Line Ltd. has been in the forefront of passenger shipping since Samuel Cunard began the first regularly scheduled transatlantic steamship service in 1840. The company’s recent history has been one of growth through refurbishment and the implementation of strategic marketing agreements.

In June 1994, Cunard purchased the world’s most highly rated cruise ship, Royal Viking Sun, for $170 million. As a result, Cunard operates the largest fleet of luxury ships in the world. From November to December 1994, QE2 underwent a $45 million refurbishment, which included a major modification to the layout and style of most public areas that resulted in the natural flow and cohesion of the passenger experience and the creation of a distinctive lifestyle reflecting the vessel’s heritage and tradition. And during November-December 1996, an additional $18 million was invested in further enhancements to Cunard’s flagship.

Cunard’s place as the world’s superlative cruise line seems assured due to the consistently high ratings of its five luxury liners, a concept defined by legendary Cunarders such as the Queen Mary, the Queen Elizabeth, and the Queen Elizabeth 2. Besides providing a high standard of leisure accommodations, the company has often been called upon to lend its ships for wartime use. According to Winston Churchill, the troopcarrying work of the first two Queens shortened World War II in Europe by at least a year.

19th-Century Beginnings

Samuel Cunard, the son of a prosperous carpenter, was born in Halifax, Nova Scotia, in 1787. His parents, both Loyalists, had fled the United States after the Revolutionary War. His father, Abraham, had worked his way up, establishing a thriving business at the dockyard. After a stint in the civil service, Samuel Cunard traveled to Boston where he apprenticed in shipbroking. He began shipping to the United States during the War of 1812 and in 1815 won a crown contract to establish mail service linking Nova Scotia, Newfoundland, Boston, and Bermuda.

After the dockyard operations at Halifax were moved to Bermuda in 1819, Cunard and his brothers developed a lumbering and fishing business which eventually collapsed in 1848. Before then, Cunard’s prominence grew as he became involved in a variety of enterprises.

Excited by the possibilities of the new steamships, Cunard sailed for England in 1839 to bid on a contract transatlantic mail service. Before approaching the Admiralty, Cunard ordered three wooden paddle steamships from Glasgow shipbuilder Robert Napier. In May 1839, Cunard had signed a seven-year contract to deliver mail from Liverpool to Halifax to Boston and, part of the year, to Quebec. Originally worth £55,000 per year, the value was increased to £80,000 after further requirements, such as the use of four ships instead of three, were added. (The ships also carried at least one cat on board to keep rats from eating through the mail bags.)

Contracts in hand, Cunard turned again to Napier for help in raising sufficient capital to launch the venture. James Donaldson and managing partners George Burns and David Maclver joined the two men in their investment, and in 1840 the British and North American Royal Mail Steam Packet Company was born. Nearly 20 other Glasgow merchants had also bought shares. While Burns remained in Glasgow, overseeing the building of the new ships, Maclver and Cunard, respectively, oversaw the Liverpool and Halifax and Boston terminals.

The first of the company’s steamships, the Britannia, sailed from Liverpool to Boston on July 4, 1840. The mail operation followed closely to schedule. However, the Columbia, one of the original mail vessels, wrecked in 1843. No mail was lost and most of the ship’s value was insured. The company continued to slowly expand its network.

The size and power of steamships grew rapidly. Although both company management and the Admiralty were rather conservative in applying new technology, an iron-hulled, screw-driven steamship was delivered in 1851. However, this vessel and several others were soon pressed into service in the Crimean War. In 1856, Napier built the company the largest ship in the world. Called the Persia, it was still rather old-fashioned in being powered by paddles rather than a screw (propeller).

The company lost some business to the faster vessels of the short-lived Collins line (the United States Mail Steamship Co.), although the Cunard service proved more reliable. The two companies entered into a price-fixing and revenue-pooling agreement to ease the sting of competition; several others also joined in regulating rates before falling demand induced a series of rate wars at the end of the century.

In the 1850s, the Cunard, Burns, and Maclver families had begun a separate line, the British and Foreign Steam Navigation Company, to operate between Britain and the Mediterranean. However, the Burns family came to hard times and George Burns retired from both these partnerships by 1859, passing most of his interests to family members.

The 1860s Bring New Challenges

In 1866, the British government canceled the subsidy arrangement it had with the Cunard line and opened the mail contract to competition. The new carrier would be compensated based on the weight of mail carried. Cunard, however, was able to retain smaller regular payments in exchange for a scaled down service.

Sir Samuel Cunard died in 1865. Two sons, Edward and William, continued to play a role in the company. By this time, Mediterranean trading had proven itself quite profitable, as had the transport of emigrants across the Atlantic from England. The two distinct lines were merged by 1867, with control of the company divided between the Cunard, Maclver, and Burns families. Sir Edward Cunard died in 1869. These interests were incorporated in 1878, under the title The Cunard Steam Ship Co. Ltd. William Cunard, John and James Cleland Burns, and Charles Maclver were the sole partners.

The Servia, built in 1881, carried the line into an age of new materials and power. The 392-ton vessel, the company’s first steel ship, was the first in the world to use electric lights. At the time, the company’s gross annual income had reached £1,000,000.

In the last half of the century, the line paid more attention to the steerage trade, although the company never became as dependent on it as other lines. The treatment of immigrants from Britain and the Mediterranean was no frills to the extreme, while first class passengers were pampered, according to ship dinner menus. At the time, immigrants and cabin class passengers accounted for nearly 75 percent of company income.

Beginning in 1901, the legendary American financier J. P. Morgan assembled a combine of shipping interests that sent shivers through the rest of the industry. The group attempted to buy an interest in the Cunard line and, after that failed, engaged them in a fierce round of price competition.

Between 1912 and 1916, Cunard acquired an interest in several shipping firms that extended its routes to Canada, India, Australia, and New Zealand. In March 1912, Cunard acquired an interest in a longtime rival, the Anchor Line, which itself became associated with the Donaldson Line in 1916. Cunard bought the Commonwealth and Dominion Line, which specialized in shipping between the United Kingdom and Australia and New Zealand; this division became known as the Port Line Ltd. Cunard merged with the venerable firm of T. and J. Brockle-bank Ltd. soon thereafter.

The Great War and Great Depression

The Carmania introduced the company to steam turbine propulsion in 1905. Cunard bought two other historic vessels in the next two years. The Lusitania and its sister ship, the Mauretania, built in 1907, both garnered the “Blue Riband” trophy for fastest Atlantic crossing. The Mauretania held the record from 1909 until usurped by the Queen Mary in 1936.

Most Cunard ships were converted to military use as armed cruisers or troop transports during World War I. One exception was the luxury liner Lusitania, which remained in normal commercial service until torpedoed on May 7, 1915. The war claimed many of Cunard’s fastest ships, which handicapped the company after the war in spite of replacements provided.

In 1921, Congress restricted immigration to the United States, scalping third-class passenger traffic. (The situation was entirely different in Canada. The Canadian government pressured Cunard to keep fares low in order to encourage immigration.) There was excess capacity in the cargo market as well. Cunard responded by diversifying its financial interests, creating subsidiaries in Germany, Hungary, and Romania and buying a London ship-repair firm and the remaining shares of Brocklebank. In addition, the company promoted tourist business, adding some amenities to third-class service and upgrading deluxe accommodations. The fleet was converted to burn oil rather than coal.

Company Perspectives:

Cunard, the world’s leading luxury cruise line, maintains a fleet of five elegant ships: Cunard’s flagship Queen Elizabeth 2, Royal Viking Sun, Vistafjord, and super yachts Sea Goddess I and Sea Goddess II. The ships call at more than 300 ports throughout the world.

Cunard began losing money in the 1930s due to the Great Depression. The company merged with its financially strapped rival, the Oceanic Steam Navigation Co., commonly known as the White Star Line, in 1934. The White Star Line had been founded in the height of the booming emigrant business in 1869. A new company was created, Cunard White Star Ltd., which would coexist with the Cunard Steam Ship Co. until the latter bought its remaining shares in 1947. In 1935, Cunard disposed of the last of its investment in the over-extended Anchor Line.

The Queen Mary, delivered in 1936, helped right the company’s fortunes. Its large scale and lavish outfitting were products of pre-Depression planning. Designed to replace the Mauretania, it too became the fastest liner in the water and, at 81,000 tons, the largest by far. Construction had idled for more than two years due to difficulties in financing the vessel, which ultimately proved very profitable. An even larger ship, the Queen Elizabeth, followed in 1938.

World War II and Postwar Planning

Unfortunately, the outbreak of World War II scuttled the company’s plans for a twice weekly transatlantic service, as well as other offerings designed to increase revenue. Instead, these new ships were used to ferry more than a million troops. One of the war’s worst naval disasters came when the Lancastria was bombed while anchored at a French port, killing 5,000. In October 1942, the Queen Mary collided with an escort vessel, the H.M.S. Curaçao, sinking it.

More than £30 million was needed to replace and restore ships after World War II. The cost of making ships had risen four times during the war. Facilities on new ships were improved to satisfy American tourists, who became the prime market due to Europe’s postwar austerity. Cunard emphasized flexibility in its planning, running scheduled service during spring and summer, offering cruises during the winter. The company generally allocated more resources towards freight operations, however.

It became apparent before the war that air travel would amount to serious competition both for passengers and mail. Although government officials discussed Cunard’s support in a new airline, in the end Cunard was not among the sponsors of the newly created British Airways and was later, as a matter of national policy, not allowed to invest in the amalgamated national carrier BOAC.

Dog Days After 1955

Besides rising costs and high taxes, labor strife and the threat of war in the Middle East also plagued shipping companies from the mid-1950s through the 1960s. In 1957, revolution in Hungary contributed to Cunard’s losses of £1 million. After the first transatlantic jet crossing in 1959, air traffic would take away more and more business from cruise ships. In 1958, after years of increase, the amount of passenger traffic traveling by sea began to decline. By 1965, six times as many passengers crossed the Atlantic by plane as by ship.

In 1959, Cunard bought Eagle Airways Ltd., which connected Europe with much of the Western hemisphere. However, gaining access to U.S. markets was difficult, and complicated by BOAC’s intervention. In 1962, Cunard took a 30 percent interest in a new joint venture with the British national carrier called BOAC-Cunard Ltd. So much capital would be needed to update the fleet with jumbo jets that Cunard sold its share of the investment in 1966.

The 1960s: Launch of a New Industry

With shipping on the ropes as a form of transport, Cunard took on a whole new strategy for survival. It aligned itself with the leisure industry, seeing its ships as floating resorts—a destination in themselves. A grand new ship/hotel, known then as the Q.4, would be the centerpiece of this vision.

In 1962, a management company, Cunard Line Ltd., was formed. To become more self-sufficient, in the next two years Cunard formed its own insurance company and created a handling company, Cunard Stevedoring Ltd. In 1964, Cunard bought the H.E. Moss and Company Tankers Ltd., entering it in the tanker trade. The company also began trimming its fleet and workforce while selling several of its historic office buildings.

Cargo operations responded well, buoying the company towards profitability. The company began shipping containerized packages in 1966, which required a significant investment in facilities and new ships. It subsequently became a partner in the multinational consortiums Atlantic Container Lines Ltd. and, through the Port Line, Associated Container Transportation.

The share of revenues derived from passenger traffic declined from 50 percent in 1965 to 20 percent by 1968, and the company managed to control losses in this category. Since they were no longer profitable, the Queen Mary and the Queen Elizabeth were sold in the late 1960s. The Queen Elizabeth, on its way to becoming a floating university in Hong Kong, was destroyed by fire in 1972.

The ship identified in early plans as the Q.4 —the Queen Elizabeth 2 —was launched in 1969. Although immense, its dimensions were compact enough to allow it into exotic new ports and through the Panama Canal. It also boasted unprecedented efficiency and flexibility. As Cunard only operated two other passenger ships at the time (besides 60 freighters), it proved enormously important to the company. Its financing, including a £25 million loan from the Crown, achieved a similar scale of complexity.

A New House in the 1970s and 1980s

Trafalgar House Investments Ltd., whose diversified portfolio included 260 companies, bought Cunard in August 1971. Trafalgar’s luxury hotel interests were combined with the company, hoping to derive benefits from Cunard’s superior sales network. This paved the way for integrated holiday packages. The company bought the renowned Ritz Hotel in London in 1976. Trafalgar House poured money into the Cunard Line, financing two new cruise ships, the Cunard Adventurer and the Cunard Countess. In the late 1970s Cunard also engaged in several aviation ventures, including Heavy Lift Cargo Airlines, which used giant RAF-surplus Belfast jets to carry uniquely large loads.

Four Cunarders were used in the 1982 Falklands Island campaign. The Atlantic Conveyor was sunk by missile while ferrying aircraft from Britain to the South Atlantic. The QE2 underwent an extensive conversion in order to deliver 3,500 troops.

In 1983, Cunard’s cruise fleet increased to five with the addition of two more luxury vessels from Norwegian American Cruises. Cunard joined British Airways to offer an unusual round-trip package in 1984: one way across the Atlantic on the QE2, the other via Concorde.

The QE2 ’s amenities grew to include television and delivery of a daily newspaper (the International Herald Tribune). It was retrofitted with diesel electric engines and variable pitch propellers. Cunard Line added two new cruise ships in 1986, the Sea Goddess I and the Sea Goddess II.

Navigating the 1990s

Like so many of its predecessors, the Cunard Princess carried troops for Operation Desert Storm. After divesting its cargo interests, Cunard refurbished several of its cruisers in the mid-1990s, including the QE2, which received $45 million of improvements. Cunard bought additional ships, including the award-winning Royal Viking Sun in 1994.

Kvaerner A/S, Europe’s largest shipbuilding concern, acquired Trafalgar House in April 1996 for £904 million. Cunard was losing money at the time, £16.4 million in 1995. In the autumn of 1996, Cunard launched a massive advertising campaign. The QE2 completed yet another multimillion-dollar refurbishment in December 1996. In 1997, the company headquarters was relocated from New York to Miami and Captain Paris G. Katsoufis was named president and chief operating officer. Antti Pankakoski was the company’s chairman and chief executive. His predecessor, Peter Ward, had resigned after a year.

Berlitz guides rated all of Cunard’s cruise ships at five stars and Business Traveler International readers voted Cunard “Best Cruise Line in the World.” Although the company only operated five ships, they still comprised the largest fleet of luxury ships in the world. Approximately 200 Cunarders have carried passengers over more than a century and a half, and this prestigious tradition formed a valuable part of Kvaerner A/S’s NOK 60 billion empire.