Princess spends $1.3 billion to expand.

CENTURY CITY - Princess Cruises is in the midst of a $1.3 billion capital expansion that will increase its ship inventory by the end of the decade by 50 percent.

Next Monday, May 6, Princess Cruises' newest acquisition, the Sun Princess, will make its first stop in Los Angeles on a cruise to Alaska. Two weeks ago, the company announced it had ordered a sister ship to the Sun Princess, which will be delivered in 1999.

The new ship, which will be called the Sea Princess and will cost $295 million to build, was the fourth ordered by the Century City-based cruise line company in the last three years. Together, the four new ships will cost $1.3 billion and will increase the company's fleet to 12 by the end of the decade.

Princess now operates nine ships on cruises around the world but one is leased and will be returned to its owner later this year.

To keep up with the asset growth, Princess is also expanding its headquarters staff. There are currently about 1,000 people working at Princess' corporate office at 10100 Santa Monica Blvd. in Century City an increase of about 200 in the last two years. Another 250 people are expected to be hired by the end of the decade.

To handle the administrative expansion, Princess is considering various options in terms of office space, said President Peter Ratcliffe. However, he said, headquarters will not be moved out of the greater Los Angeles area.

Cruise ships get bigger

The Sun Princess that will dock at the Port of Los Angeles next Monday is, at 77,000 tons, the largest cruise ship currently operating in the world. Princess took delivery of the ship last December, and is moving it to the Pacific Northwest for the summer cruise season in that region.

Later this year, Florida-based Carnival Cruise Lines will take delivery of the 100,000-ton Destiny, which will make that the biggest cruise ship in operation.

However, the mantle of the biggest ship will pass back to Princess in 1998 when the company takes delivery of the 105,000-ton Grand Princess. The Grand Princess will have a passenger capacity of 2,600 compared to 1,950 for the Sun Princess.

"If you look at the cruise industry today, there are three major cruise lines and they are all doing well - and then there is everybody else. In the industry, they are called the Big Three and, to keep up, you have to bring in new ships," said Ratcliffe.

The so-called Big Three are Carnival, Florida-based Royal Caribbean Cruise Line, and Princess, in that order. Princess officials said the company has about 10 percent of the worldwide cruise market, and last year carried 450,000 passengers.

This year, the company predicts it will carry 452,000 passengers.

Princess is owned by Peninsular & Oriental Steam Navigation Co., which is based in England and is one of the oldest and largest shipping companies in the world. Last year, P&O had revenues of more than $10 billion and an operating profit of $760 million.

P&O does not break out revenues for Princess, which got the money for the capital expansion from its parent company, said company officials.

Focus on today's market

Ratcliffe said to keep up with the competition, Princess has had to build big, modern ships designed for today's cruise market. "These ships are not old converted transatlantic carriers, the kind which used to dominate the industry," he said.

Company officials said the new, big ships will be marketed to a cross-section of consumers because they will be equipped with all types of facilities. "These new ships will have everything. They will have a wide variety of facilities that will appeal to many people," said one company official who did not want to be identified.

Princess offers cruises in all parts of the world and is considered just below a deluxe carrier. Princess' cruises are generally for a minimum of seven days and start at $649 per person.