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.
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.