Once they were the most formidable of rivals, but now P&O Princess Cruises, a major customer of the port of Southampton, and the American-based Royal Caribbean Cruises Limited are to merge in a massive six billion dollar deal.

The move, described as a merger of equals, will create the largest cruise holiday group in the world which could bring good news for Southampton.

P&O already have their UK fleet of four luxury cruise ships based in Southampton and the city is a favourite European port for Royal Caribbean.

The new group have already established a joint venture to target customers in Europe which might result in more ships coming to the port of Southampton either for turnaround between cruises or as a stop-off during a voyage.

Southampton is already the major centre for all P&O's cruise operations with the company set to be totally consolidated in the city by the end of this year.

P&O has signed a ten-year contract with Associated British Ports, the owners and operators of Southampton Docks confirming the company's commitment to the city as its main UK dockside base.

Work is also soon to begin on a radical revamp of the Mayflower Cruise Terminal at 106 berth in the Western Docks, traditionally the home of P&O ships in Southampton.

Despite the present challenging times the two companies believe that demographic changes and consumer appetite for leisure activities, coupled with high levels of customer satisfaction support a positive outlook for the cruise industry.

Through the combination both P&O Princess and Royal caribbean believe they will be able to able to benefit from this long-term growth trend.

As a result of the merger the new group will be able to boast of the most modern fleet among major the major cruise companies.

The new combined fleet will have 41 ships with a huge total of 75,000 berths to fill with a further 14 ships on order for delivery over the next three years, offering more than 30,000 additional berths.

The combined group carried some three million customers last year and generated a total revenue during 2000 of over five billion dollars.

It is known initial talks between the two companies were first held, according to a P&O spokesman, "a number of months ago.''

P&O Princess Cruises' chief executive, Peter Radcliffe said the industry had "long term growth characteristsics'' despite the impact of recent events.

P&O Princess will own 50.7 per cent of the new group with Royal Caribbean taking 43.9 per cent of the equity value.

The merger is expected to deliver annual savings of an estimated 100 million dollars in a year's time.

Today's move comes 13 months after P&O Princess Cruises was demerged from ports operator P&O.