Italy's Costa brand weakened by shipwreck, fire

By Colleen Barry

Associated Press

Published: Wednesday, Feb. 29 2012 11:56 a.m. MST

"Certainly it is an ugly thing, and it is better if it hadn't happened, but all of the people of the company are working to reduce the discomfort to the passengers," Corbella said. "In my view, it is a brand that can continue. It has a long history, and this history is also positive and has always been solid and serious."

The financial damage to Costa is still unknown. The company said it can't determine how long the Allegra will be out of service until it surveys the damage. The ship was just a week into a monthlong cruise from Mauritius to Savona in Italy when the engine fire hit. Its next cruise, beginning March 17 in the eastern Mediterranean, has been canceled.

The $450 million Concordia has been partially submerged since Jan. 13 but no decisions have been made yet on whether it can be salvaged. The company faces dozens of lawsuits, besides paying compensation to the 4,200 people who were on board the ship.

Shares of Carnival were up 0.9 percent, or 26 cents, at $30.27 on Wednesday in the U.S. after falling earlier this week on news of the Allegra fire. The shares were trading above $35 prior to the Costa Concordia incident in mid-January, when they dropped to a near five-month low of $29.22.

Costa's real image issue is that the two accidents were so close together.

"I think the problem now for Costa is that it is too close to the Costa Concordia disaster, which is totally different from what happened to the Allegra. Engine room fires can happen. But usually they are more of an annoyance," said Teijo Niemela, the Helsinki-based editor of Cruise Business Review.

The Allegra was retrofitted in 1992 from a cargo ship built in 1969, and underwent a €12 million ($16 million) restyling in 2006. Newer ships, he said, have two separate engine rooms and a thick firewall to prevent fires from disabling the ship and halting the cruise.

Ironically, if Costa's response to the Allegra fire is sure-footed enough, experts said that could help dispel impressions the company has issues in training its crew. Passenger accounts from the Concordia indicated deep confusion over the seriousness of the accident and a chaotic, deadly evacuation.

"It should restore confidence that the last event was a one-off event and show that the staff is pretty well-versed in how to handle an emergency when it occurs," said Jaime Katz, an analyst at Morning Star.

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