THE QE2 GOES ON THE BLOCK

By Bill Saporito

WHAT A STRANGE COINCIDENCE THAT Cunard's flagship, Queen Elizabeth 2, was launched by the monarch herself in 1967. Both the House of Windsor and the money-losing cruise-ship company, a division of Britain's Trafalgar House PLC, have endured a series of public calamities--although at least the toilets haven't been exploding in Buckingham Palace, as they were aboard the QE2 during its infamous Cruise to Hell in late 1994.

And now both outfits are splitting up. Princess Diana may get a couple of cars out of her breakup. No word yet on who will buy the QE2, which along with seven sibling ships is for sale in the wake of a proposed takeover of Trafalgar by Kvaerner, a Norwegian engineering company. Kvaerner is buying Trafalgar for a steerage-priced $1.35 billion. Trafalgar, primarily an engineering and building company, lost nearly $500 million last year on sales of $5.7 billion.

Cunard, with sales of about $440 million, managed to run up $24.6 million in operating losses last year even as the cruise market was flourishing. Still, the company has 37% of the luxury-cruise market and five of the 10 top-rated ships.

Kvaerner, which also builds ships, is fishing for $400 million for Cunard, but it may wind up keeping the company if it doesn't get its price. Two would-be buyers, Carnival and Royal Caribbean, say they are not currently interested. Roderick McLeod, a Royal executive, told Lloyd's List, "The company has a marvelous name, dating back some 150 years. But in terms of current condition and assets, there's nothing we would gain from them."

--By Bill Saporito. Reported by Michael Brunton/London

With reporting by Michael Brunton/London