To cash in on the success of James Cameron's Titanic, probably. As to why this was made the way it was...three guesses come to mind: A) The writers and directors were poorly educated on history and didn't realize this was a real tragic event where hundreds of people died, or B) they were aware of this but thought that the truth would be too scary and sad for young children to handle, or C) they cared less about making a historical movie for children and more about shoving their save-the-whales agenda down their throats.
This, plus the other Animated Titanic movie, demonstrate fairly clearly that there apparently is a large percentage of people who do not understand Titanic actually happened. Probably dismissing everything they saw in a movie as, well, fiction—not just historical fiction but pure fiction, as in fantasy—they assumed, wrongly, that the Titanic film by James Cameron was nothing but a fairy tale of some kind. Like the way Disney makes movies about Indian princesses who have magical ecomancy powers, or how Anastasia was apparently a Magical Girl chased by a demonic Rasputin. They just saw the Titanic movie and assumed it shared the same or less historical validity as Anastasia and Pocahontas so they decided to make their own—it never occurred to them to see if Titanic was a real ship that actually sank, or how serious it really was, because they likely assumed it was either complete fantasy or some quasi-mythical footnote. Hell in Tentacolino they directly say that Titanic was just a myth, and compare it to the story of Atlantis. So yeah, they're that ignorant. But then again, as they say, when you assume you make an ass...etc, etc.
Why sink the Titanic to cover your tracks? This is the Titanic, the Ship of Dreams! People would rather finish the maiden voyage of the most luxurious ocean liner than worry about whaling. Sure Hockley wants to break Jack and Rose apart, but it never crossed his mind to sink the Titanic.
Why did they place so much emphasis on the fact that Elizabeth could talk to dolphins because of her tears, but the villains were already talking to sharks and everyone was talking to mice?
The entire second movie is a headscratcher. Seriously, I cannot make sense of the plot.
If the Titanic and all its passengers arrived well and safely in New York City, where did the "misunderstanding" that it sunk and many people died come from?
The closest thing I can think of to an explanation is that it was an early printing error. When the ship actually sank, several newspapers printed headlines that got facts wrong, such as saying that the ship sank in four hours or that many more people were saved.
Why exactly did Re force Elizabeth, Don Juan and their friends to stay in Atlantis? They did nothing wrong and they were victims of a shark attack. Seriously, if he wanted to avoid people knowing about Atlantis, all he had to do was send them back to the surface.
Speaking of which, why were Elizabeth and Don Juan alright with being immortal and stuck underwater for the rest of eternity? Some people think that they had a case of Stockholm Syndrome, but even that doesn't make any sense. Not to mention that they had no regard for the people they left behind (i.e. parents, spouses, children, friends, ect).