Costa Allegra: Will Cruise Line Have to Change Name to Survive?

The sight of the stranded Costa Allegra drifting in the open Indian Ocean this week may become an unwelcome metaphor for Italy's Costa Crociere cruise line.

With a second major incident involving its fleet in just two months, the company, which is a subsidiary of cruise giant Carnival Corp. (NYSE: CCL), is in danger of permanently blemishing the brand it has cultivated for 60 years.

With images of the Costa Concordia belly-up in the waters off Tuscany keeping alive the memory of the mid-January disaster that killed more than 20 people, Costa is waiting to see if it can weather the storm.

'Bad Luck'

The question is whether first-time cruisers will book a trip, said Mark Murphy, chief executive of travel-industry group Travalliance. The first-time cruisers will be persuaded by what they see on TV.

On Monday a fire broke out in the ship's electric generator room, causing the Allegra to permanently lose power, including electricity to run the engines. The ship had completed about two-thirds of its route from Madagascar to the Seychelles at the time of the fire, leaving it some 250 miles from the nearest viable port.

The ship drifted in the pirate-riddled Indian Ocean for hours, but a distress signal was sent out immediately after the ship lost power, and rescue boats and Seychelles navy helicopters were dispatched.

By early Tuesday, the Allegra had been reached by a French-flagged fishing ship, the Trévignon, which was towing the cruiser to Mahé, the Seychelles' main island. Helicopters are providing the 1,000 people on the ship with fresh food, flashlights and emergency supplies.

Compared to the sinking of the Concordia, the Allegra fire is a minor incident. While extremely serious, fires on ships aren't unusual. The Allegra's crew was able to quickly contain the blaze and stop it from spreading to other parts of the ship.

Accidents like the Concordia, however, are rare, tragic and unforgettable.

Costa has had a bad string of luck. The last time it was 100 percent human error. It could have been avoided, which is terrible, said Murphy. This time, it was just something that happened. It's unusual, but we'll have to wait to see what the cause was.

'Media Massacre'

Even before the Allegra incident, Costa was suffering from a serious image problem. Bookings, which essentially mean sales in the cruising world, were down by 35 percent post-Concordia sinking and Costa chairman and CEO Pier Luigi Foschi was worried that the brand might not survive.

Our brand has been massacred by the media, Foschi told Italian newspaper La Stampa. The company is solid, with a net worth of several billion euros, but could fail as a [brand].

Would ditching the Costa name be the solution to Carnival's problems? The company would theoretically keep Costa's fleet but lose their tarnished reputation.

There have to be real changes in the organization to justify a name change, or else it would be viewed as a cosmetic effort, said Clive Chajet, a branding expert and author of the book Image by Design.

It wouldn't work.

But a complete rebranding isn't unprecedented. After the crash of Flight 592 in 1996, ValuJet merged with a much smaller company and took over the name of one of its subsidiaries. The crash opened up ValueJet to a slew of FAA investigations, which eventually, irreparably tarnished the company's image, and the modern AirTran company was literally borne form the ashes of Flight 592.

Fallout from the accident -- specifically the negative publicity -- placed too much of a financial burden on the company for it to continue operating under the ValuJet name.

It seems unlikely at this point that the Allegra fire was a result of a failing on Costa's part. And unlike Flight 592, in which all 110 people on board were killed, no one was injured on the boat. But, if the accident was found to be the consequence of poor inspection, or if anyone should be harmed on the boat's three-day journey to shore, the whole fleet may come under significant scrutiny.

For Costa to fit into the ValuJet-AirTran model, it will have to be sold off by its parent, Carnival, which Murphy does not think is possible.

Those ships will end up getting booked and sold under the Costa brand, if it survives, or under another (Carnival) brand. Those ships aren't going anywhere, Murphy said.

The Final Test?

Costa seems to have learned from the Concordia nightmare. The company didn't handle the media well in January, Murphy said, and it tried to shift attention from the crash and the passengers to its ill-fated captain, Francesco Schettino.

This time, Costa is sending regular updates to the media on the status of the Allegra and its passengers, and is taking both the necessary safety and public relations precautions.

The company needs to be as open and truthful as possible, Chajet said of Costa's next move. The acid test of any company is to handle an enormous unexpected tragedy in a positive way.