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Ships seem pretty weak, but AIRSHIPS are amazing.
I recently found an advanced undead airship (Flying Line Gallus) and that thing is just brutal. Flying movement grants superb mobility - and I can imagine if I had a few of those, I would just need 1 ground unit to capture all the cities and that's it. :>
 
Yes, they are costly, but so far money was not really an issue for me during the early game.
The flying ability is really worth it. :)