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One passenger said he and his terrified wife had contemplated jumping into the sea as the Costa Allegra stalled in an area of the Indian Ocean where Somali pirates prey on merchant shipping.
"We thought the worst had happened. I couldn't believe it, after what happened to the other cruise ship. I could just picture having to jump for it into the water -- my wife was terrified," Chris told reporters as angry and exhausted passengers disembarked in the Seychelles.
"Guests were prepared to disembark, they put on life vests and were taken to lifeboats," the captain, Niccolo Alba, told a press conference after docking in Victoria.
"Obviously all the passengers were assembled at the muster stations to prepare to board the lifeboats," after the fire broke out in the engine room on Monday, he said.
"The emergency situation lasted for three hours to make sure the fire was completely out."
The ship drifted for several hours before being taken into tow by a French deep sea fishing boat, and limped into Victoria port on Thursday after a three-day ordeal.
Frightened passengers spent most of the time crowded on the Costa Allegra's decks fighting sweltering temperatures since the fire had knocked out the ship's power, leaving it without lighting, electric toilets and air-conditioning.
"The fear was that we would have to abandon ship with all these children and elderly people in the middle of the Indian Ocean," said the ship's Italian chaplain, Father Camillo Testa.
"The worst moment was when I heard the coded alarm.... The emergency procedure was implemented immediately," he told Italy's Sky TG24 news channel.
"Not being able to go back into the cabins sparked a bit of panic on board."
Once the panic subsided, however, others were determined to enjoy their holiday as best as they could.
"We kept the bar open the whole time, there may not have been much water but there was plenty of alcohol," said Gino, a barman from the Philippines.
An executive of the ship's owners Costa Crociere, which also operated the doomed Costa Concordia that ran aground in January off Italy with the loss of 32 lives, was on the dock to welcome the passengers as they came down the gangway.
"This has a risk of damaging our brand. These incidents don't often happen but there's a law of probability," said Norbert Stiekama, executive vice president.
The captain, who insisted he had followed "all the international rules on emergencies," said a diesel-powered generator designed to take over power generation in an emergency had worked for only a few hours before breaking down.
"It's been a rough ride, we had to sleep on deck because there was no air conditioning and the cabins stank, because we couldn't flush the toilets," said Alena Daem, a 62-year-old passenger from Belgium.
"There was food, but nothing that had to be cooked - we ate a lot of bread. I'm exhausted and pretty glad the whole thing is over," Daem added.
Helicopters had been delivering fresh food to the ship over the last few days.
"It was absolutely atrocious," said Henri, an 82-year old Frenchman, his voice breaking with emotion, as he arrived on the chaotic dock, crowded with passengers, piles of luggage, officials and journalists.
"No lights, no toilets, I could hardly sleep up there on deck with so many people all crushed together... The first day was fine but it got steadily worse, it was awful."
Medical teams and ambulances were on standby as tired passengers stepped onto the dock. However, the only reported injuries from the crisis were two elderly women, who had hurt their wrist and shoulder when they fell.
Italian investigators were also dockside waiting to question the crew of the ship, a converted container vessel.
Nine people are under investigation for the January 13 Costa Concordia disaster, including three Costa Crociere executives, the ship's captain and five other crew members.
Passengers appeared tired and disorientated as they arrived on land, although some in apparently better spirits had waved and cheered from the ship's decks as they arrived. Long lines of buses waited to swish them off to hotels.
Seychelles Foreign Minister Jean-Paul Adam was also one of the welcoming officials.
"They've had a tough experience on board that ship, but hopefully they'll feel a lot better once... we look after them," Adam said.
Costa Crociere said in a statement that around 70 per cent of the 627 passengers had taken up its offer to continue their holiday in the Seychelles for one or two weeks.
All the passengers will get their ticket, travel costs and on board expenses refunded and will receive "an indemnity equivalent to the amount of the fare paid for the cruise and associated travel expenses", Costa Crociere said.
The 30 per cent who are not staying on will also receive a voucher for the same value as their unfinished cruise for a free trip on any Costa cruise.
The Costa Allegra had left Madagascar last weekend and was on its way to the Seychelles when the fire broke out. After the Seychelles, the liner had been due to travel through the Red Sea to the Mediterranean.