As we head into the weekend, I think this would be a good time to analyze the Cruise Line’s recent financial statements.
Who better to start things off than the Industry leader and cash machine Carnival Corp. The Miami based firm reported a net income of $252 million ($0.32 per share) with total revenues coming in at a whopping $3.2 billion. This time last year revenues were $2.9 billion.
Carnival Corporation Chairman and CEO, and in this writers opinion, the smartest man in the industry, Micky Arison stated, "We were encouraged to see revenue yields turn positive for the first time since late 2008. Improving revenue yields combined with an 8 percent capacity increase and ongoing cost control efforts offset significantly higher fuel prices." Regarding future bookings: "Considering recent global economic concerns and other world events our advance bookings are holding up reasonably well and remain in line with our expectations. We believe this will lead to earnings growth in both the third and fourth quarters. The summer season, which is our strongest and most important quarter of the year, is shaping up particularly well."
Intresting stat that caught my eye: fuel costs increased 64 percent to $498 /mt. Up from last year of $304 /mt.
Carnivals forecast for the next quarter is a positive one. They expect an increase of 5-6 percent from the Q3 2009. Not surprisingly, they anticipate fuel costs to increase $74 million compared to the prior year. But when you anticipate these things, you can build around them and not be caught off guard.
Royal Caribbean International
Rivals from the other side of town, Royal Caribbean, released their reports indicating that they too were in the positives for the quarter. RCI produced a net income of $61 million which is a significant improvement over the $35 million loss this time last year. Total revenue was $1.6 billion a 19% increase from last year. RCI tributes this to an increase in ticket prices and an increase in the number of people traveling. Perhaps due to the non-plummeting economy.
RCI sees a strong Q3 as guests are booking their summer cruises further in advance than last year.They anticipate that they will remain profitable.
Chairman and CEO of Royal Caribbean Richard Fain, the man that brought ground breaking innovations to the industry, stated: "I recognize that considerable angst exists regarding the state of the economic recovery. Like everyone else, I would prefer a more robust economy. However, we’ve always assumed a lackluster economic environment for 2010, and we’ve never counted on big improvements driving our results this year. Rather, we’ve assumed that our new and more-efficient ships, along with good cost control, would drive substantial improvements in profitability, and that is clearly proving to be the case."
Norwegian Cruise Line
Well NCL didn’t have that well of a quarter. They posted a loss of $14.9 million. Total revenue for the quarter was $477 million pretty much the same as last year. As with the other lines, fuel costs played a significant role. NCL’s quarterly fuel cost rose to $508 /mt up from $356 /mt.
It is not all doom and gloom for NCL. They stated that their pricing, net yields and vessel occupancy were all up. For example the net revenue per passenger cruise day increased by 6.6 %. Add in the Norwegian Epic, and that should go up. Epic will hopefully be NCL’s Oasis of the Seas. Before you all get bent out of shape by that comment, let me explain. Oasis has been a financial success. It came as quite a surprise but not when you think about it. Oasis has a lot of catchy, attractive venues designed to get the passenger to spend more (i.e. increasing onboard revenue.) Epic seems to have more of these venues, especially all the restaurants that carry a cover charge. This is where the Epic could play a very crucial role in getting the struggling line back in financial shape.
NCL’s CEO, Kevin Sheehan stated: "Our improved results over last year were achieved while absorbing a 43 percent increase in the price of fuel."
In this writers opinion, I have been very impressive at what Mr. Sheehan has done. If you frequent the site, you should know I am not a very big fan of some (ok-pretty much all) of his predecessor, Colin Vietch’s decisions (NCL American anyone!). One of the first things that Mr. Sheehan stated he will do is a top-bottom review of the company’s finances and operational expenses. It seems that it is working.
Thompson Cruises parent company TUI reported a loss for Q2. The pretty much entirely European firm came in with a loss of 409 million pounds. Their revenue was 8.3 billion pounds, but they measure it in nine-month periods. Last year they also posted a loss of 304 million pounds with revenues of 8.2 billion pounds. As stated, TUI operates the British line Thompson Cruises along with a massive destination based holiday company (i.e. fly to destinations along with a charter airline.)
In conclusion, it appears that while the economy is still struggling, the lines aren’t necessarily struggling as bad. I contribute it to the strong backgrounds of the industry leaders, and the vulnerability of a line that is constantly walking the red line. These results don’t really surprise me. While it is great to see the big lines make a profit, a true test to see how the industry is doing, will be to see how the smaller lines, NCL do. Keep a close eye on the smaller lines, the time from when one books a cruise to when they sail, and cruise fares. Follow these and you’ll get a good picture of the industry.