Thursday, November 20, 2003

Oligopolies on cruise control Here's an example of how oligopolies use their weight to control costs. The subject is cruise lines, of which there are only a small number of significant ones, as our table shows below.  In fact, two companies control over 60% of the cruises. The most popular venue for cruisers is the islands of the Caribbean, where visitors from cruise boats are a mixed blessing. They do deliver passengers who shop a bit and recreate themselves, adding jobs to local economies and generating cash flows. On the other hand, they ships themselves involve major expenditures in docking facilities and other public accommodations. For example, harbors have to be dredged to allow passage for ever larger luxury liners. The threat of the luxury liners is real, according to an outraged article in The Nation newspaper of Barbados, "Big Bullies in Paradise" (10/26/03): These floating cities with their own zip codes ferry millions of people each year into our sensitive Caribbean ecosystems. Largely unregulated ships have been discharging waste for decades from toxic chemicals to raw sewage directly into our once pristine waters and contributing to the death of our coral reefs and marine wildlife. And the destruction will continue to increase exponentially with more and more ships. Yet t he cruise companies are flourishing, having recovered well since the drop-off after 9/11 and other international scares. So the Caribbean Tourism Organization (CTO) and a few of the island nations proposed a $20 per passenger tax, to be divided among the islands, to help local governments handle the cruise traffic and their negative impact. Carnival Cruise Lines CEO Mickey Arison immediately called the tax "outrageous." The head of the CTO which proposed the tax, stated that "these multi-billion-dollar cruise ship operations were using strong-arm tactics to drive "the fear of God" into Caribbean governments; that the Florida Caribbean Cruise Association (FCCA) was using tactics "unacceptable by reasonable men"; and of "making considerable profits while bearing a disproportionately small share of the burden of maintaining those resources which they rely on." As of now, the scare tactics are working, and Caribbean governments are backing down. While the cruise lines may compete for passengers, they are of one voice in dealing with uppity Third-World locals. The power of a trade association is used to control costs through intimidation, even to turn back a tax that is the equivalent of a couple of daiquiris. The cruise oligopolies make their own foreign policy, along with their own environmental and labor policies. This goes beyond a seat at the table - it involves taking away the table and the seats. US Cruise Line Market Share 2nd Quarter 2003 Cruise Line Passengers (thousands) % of Total Passengers Carnival Cruise Line 723 36.2 Royal Caribbean International 510 25.5 Norwegian Cruise Line 186 9.3 Princess Cruises 156 7.8 Celebrity Cruises 153 7.6 Holland America Line 141 7.0 Disney Cruise Line 101 5.1 Cunard Cruise Line 13 0.6 Costa Cruise Lines 8 0.4 Crystal Cruises 7 0.1 Source: US Dept. of Transportation 6:50:21 PM

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