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Wednesday
Jan182012

Italian Cruise Ship Wreck Costs Could Surpass $130 Million

STRINGER/AFP/Getty Images(GIGLIO, Italy) -- The near-sinking of the Costa Concordia cruise ship will send a tidal wave of bills at the owners that could reach $130 million -- if the ship can be salvaged.

If it is determined that the $650 million luxury liner is too badly damaged, the owners -- Costa Cruises and its parent company Carnival Cruises -- will have to absorb the loss of the ship.

"They just lose," said Jaime Katz, an equity analyst for Morningstar Inc., an independent investment research firm.  "The ship is gone.  They will have to start over or have one less ship in that market."

That determination has yet to be made, but even a bill that big would not sink the company, experts said.

Carnival Cruises is the largest company in the cruise industry with more than 100 ships in service and 11 global brands. Nevertheless, the company is bracing for an iceberg of bills heading its way.

Already, the disaster has affected Carnival's stock. On Tuesday shares of Carnival were down nearly 14 percent to $29.53.  Bloomberg said it was the biggest drop for the company since April 2009.

Morningstar has estimated that the company will face $85 million to $95 million loss in revenue while the ship is out of service.

Carnival, which is based in Miami, has a $30 million insurance deductible for damage to the ship.

Lawsuits will also sink the company's bottom line. The company reportedly has a $10 million deductible on third-party personal injury liabilities, and Italian laws regarding civil suits may protect Carnival and Costa from mega suits that are common in the U.S.

And, according to Bloomberg, Carnival said it, "further anticipates other costs to the business that are not possible to determine at this time."

But despite the public relations nightmare, Katz said that passengers would continue to sail the high seas after a bit of assurance from the industry, especially Carnival and Costa.

"People are not going to be booking as quickly," she said. "[Carnival] is going to have to assure people this is a safe way to travel."

Copyright 2012 ABC News Radio







ABC News Radio