Monday November 6 12:50 PM ET Carnival to Buy World's Largest Cruise Ship By Jim Loney MIAMI (Reuters) - Carnival Corp., the world's biggest cruise operator, said on Monday it has sealed a contract with a French shipyard to build the spectacular luxury liner Queen Mary 2, the largest passenger ship ever constructed and costing $780 million. Carrying the famous name of the speedy Atlantic passenger liner than made its debut in 1936, Queen Mary 2 will weigh 150,000 tons and will be as tall as a 23-story building when it enters service for Carnival's Cunard Line in late 2003, the company said. ``Queen Mary 2 will be the heir to all that has gone before and she will be a showcase of the art of shipbuilding in its most refined and masterful form,'' Cunard chief executive Larry Pimentel said in a statement. ``Queen Mary 2 will carry the grace and elegance of a bygone era into the future.'' Miami-based Carnival said the 1,132-foot (345-meter) long vessel, to be built by the Alstom Chantiers de L'Atlantique shipyard in Saint Nazaire, France -- will have a passenger capacity of 2,620 and a power plant capable of creating 157,000 horsepower, enabling it to attain a speed of 30 knots. The ship currently touted as the world's largest passenger vessel, the Explorer of the Seas -- owned by Carnival's chief rival, Royal Caribbean -- arrived in her home port of Miami two weeks ago to begin cruises between Florida and Haiti, Puerto Rico, the U.S. Virgin Islands and the Bahamas. Explorer weighed in at 137,300 tons, is 1,020 feet (311 meters) long and 237 feet (72 meters) from keel to top of funnel. It can carry 3,840 passengers and cost more than $500 million to build. Queen Mary 2's famous forebear set Atlantic speed records in her day and served as a troop carrier in World War II, but now is docked in Long Beach, California as a museum. The new ship will target aging baby boomers who can afford its luxury and have the time for leisurely transatlantic cruising, Credit Suisse First Boston analyst Scott Barry said. ``The demographics point to an opportunity there. I think the Queen Mary name still has sizeable brand equity. It harkens back to the day of white-glove, luxury, old-style cruising,'' Barry said. ``I think it plays well,'' he said. ``There's a significant nostalgia appeal in the baby boomers. These retirees will have the time and the money.'' Carnival said the main dining room on Queen Mary 2 will soar three decks high and span the full width of the ship, recalling the classic dining salons of the past with a central grand staircase for passengers wanting to make an entrance. In addition to standard cabins of 194 square feet (18.02 sq meters), it will have suites, penthouses and five two-story apartments measuring 1,650 square feet (153.3 sq meters) with sternward sea views through glass walls. Each apartment will have its own gymnasium, balcony and butler service. The ship will have five pools -- four outdoors and one indoors -- a planetarium and a 360-degree promenade deck lined with traditional steamer chairs. Carnival's decision to build the ship comes at a time when many analysts consider the cruise industry overbuilt. But Queen Mary 2 will target a market with little current traffic. ``You have to make the capital allocation decision well in advance. There really isn't any transatlantic market per se right now,'' Barry said. ``It's a bit of a leap of faith. But Carnival's the best-managed company in the cruise industry.'' Analysts said the market for transatlantic luxury cruising may not be significant right now but is probably big enough to carry one more ship bearing a famous name. Sister ship Queen Elizabeth 2 will continue operations. ``It will make Carnival Corp. more of an international player,'' said Ryan, Beck & Co. analyst Peter McMullin. ``It might be difficult to make a fleet of them work but one that is state of the art should be able to do quite well.'' Including Queen Mary 2, Carnival said it has 16 new vessels with an estimated value of $7 billion scheduled for delivery over the next five years. Carnival shares traded up 5/16 at $24-7/16 near midday on the New York Stock Exchange (news - web sites). The stock has a 52-week high of $51-7/8 and a 52-week low of $18-5/16.