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In preparation for RCL's Q2 earnings release tomorrow, we’ve put together the pertinent forward looking commentary from RCL’s Q1 earnings call and 10Q.

Outlook from 10Q

2Q 2011

  • Net yields: +5% (current currency): +1-2% (constant currency)
  • Net Cruise Costs per APCD: +5% (current currency); +3% (constant currency)
  • Net Cruise Costs per APCD ex fuel:  +4-5% (current currency); +2 (constant currency)
  • "6.6% increase in capacity, primarily driven by a full quarter of Celebrity Eclipse and by the addition of Allure of the Seas which entered service during the fourth quarter of 2010."
  • D&A: $170-175MM
  • Net interest expense: $75-80MM
  • "If fuel prices for 2Q remain at the level of current "at-the-pump" prices, fuel expenses would be ~$189MM.  Our fuel expense is approximately 58% hedged and a 10% change in fuel prices would result in a change in our fuel
    expenses of approximately $9.0MM, after taking into account existing hedges."
  • "Assuming that fuel prices remain at $596 per metric ton and 2Q 2011 foreign currency exchange rates are $1.47 to the euro and $1.66 to the British pound, we expect 2Q 2011 EPS to be in the range of $0.40 to $0.45."


  • Net yields: +5-7% (current currency); +3-5% (constant currency)
  • Net Cruise Costs per APCD: +5-6% (current currency); +4% (constant currency)
  • Net Cruise Costs per APCD ex fuel: +4-5% (current currency); +2-3% (constant currency)
  • "7.5% increase in capacity, primarily driven by a full year of service of Celebrity Eclipse, a full year of service of Allure of the Seas and the addition of Celebrity Silhouette which will enter service during the third quarter of 2011." (Celebrity Silhouette launched on July 23)
  • D&A: $705-715MM
  • Net Interest expense: $310-320MM
  • "If fuel prices for 2011 remain at the level of current "at-the-pump" prices, fuel expenses would be ~$770.0MM For the remainder of 2011, our fuel expense is approximately 56% hedged and a 10% change in fuel prices would result in a change in our fuel expenses of approximately $31.0MM for the full year 2011, after taking into account existing hedges."
  • "Assuming that fuel prices remain at $581 per MT and full year foreign currency exchange rates are $1.47 to the euro and $1.66 to the British pound, we expect full year 2011 EPS to be in the range of $3.10 to $3.30."

Youtube from Q1 Conference Call

  • “The Mediterranean became softer as a result of Libya. Obviously the events in Asia and Egypt and Tunisia had an impact. I would say all those product lines are down from our expectations when we had our last call. But our expectations related to the Caribbean, Alaska and the other product lines are the same to slightly better. And the net effect of it is, excluding the direct impact of Egypt, Tunisia and Japan, net, net it’s all about the same as it was three months ago.”
  • “At that time, we provided initial guidance for the year of $3.25 to $3.45... the direct impact of the geopolitical events is expected to be about $0.20. At today’s pricing, fuel expense, net of our hedges, cost us another $0.30. But we were covered about a $0.11 of this in the first quarter from the change in the value of our fuel options. In addition, when fuel prices are increasing, the U.S. dollar more often than not is decreasing in value, which has a positive effect on our earnings. Since our last call, we’ve picked up about $0.15 in our forecast from currency. So on a nutshell, the midpoint of our guidance has been lowered by approximately $0.15.”
  • “With regard to cost, we are feeling the pressures... in precisely the areas that we said we were most concerned about: food and transportation in particular. However, our team has managed to offset these cost pressures without sacrificing our customer engagement initiatives.”
  • “Each additional 1% we can improve pricing, moves our earnings per share up by about $0.25... You should expect to see us toeing the line on costs, but pushing harder than ever to enhance our pricing, both by being more attractive to the guests and by strengthening the support we provide to our travel agent partners. This will continue to include sales and marketing commitments, our hardware investments, better deployment or enhanced websites, just to a name a few. These actions do put pressure on costs, but we only intend to pursue them if they generate disproportionate benefit on revenues.”
  • “You’ll note that we have modestly increased our CapEx estimates. Part of this relates to Project Sunshine, which we’ve previously announced and which we’ve recently finalized the contract for. Another part of the increase relates to our revitalization programs, which have been underway for some time now. Our results from the refurbishments we have already completed have been so compelling, both in terms of guest satisfaction and returns that we feel it’s appropriate to accelerate and expand these.”
  • “In addition to our fuel swaps, as we have previously disclosed, we have numerous WTI fuel options which provide additional insurance against rising fuel prices. These options are at strike prices ranging from $90 to a $150 and have various maturities running through 2013.”
  • “Prior to the earthquake in Japan, we were forecasting double-digit yield improvement for the Legend of the Seas. Unfortunately, our spring deployment of this vessel was targeted to the Chinese market with Japan as the featured destination. In total, we have already rerouted 21 sailings as a result of the tragic events at Japan and it is likely we will need to make further modifications going forward."
  • “Prior to the Libyan uprising, Mediterranean bookings were running ahead of the same time last year despite significant increases in capacity... During the months of February and March demand softened considerably, particularly out of the U.S. and UK markets. Over the last few weeks, however, bookings have returned to normal levels albeit at reduced pricing.”
  • “We still expect our European product line in total to finish the year with yield increases in the mid single-digits. Additionally, our other product groups, including the Caribbean and Alaska, continue to show strong year-over-year improvements. We expect this strength to substantially offset the discounting you’ve witnessed in the Mediterranean.”
  • “Pullmantur has recently expanded its air and distribution operations in Spain. Both of these initiatives are expected to strengthen our brand and improve our market position in the future. And while this area may cause some volatility in our metrics, we expect little to no effect on earnings for the balance of the year. We currently expect about a 1% increase in yields and about a 1.5% increase in costs due to these initiatives.”
  • “We’ve been able to offset virtually all of the increases in oil prices through our hedges, options and currency gains. The demand environment remains sound and for the vast majority of our products demand is as good as or better than it was in January. And with the exception of Asia, we are forecasting yield increases for all of our other product groups.”
  • “Although there is of course very limited visibility for the 2012 Europe season at this time, we remain bullish on our brands prospects for next year in Europe and view the Navigator situation as a unique one.”
  • “In May, we will revitalize the already beautiful Radiance of the Seas, again adding a number of features from our more recent ship classes. And in the fall, we will do the same for Splendour of the Seas.”
  • [UK pricing] “In the last month or so, we have seen pretty solid demand, some of it at lower prices than we would have received if we had been in the absence of these events... We expect to sail our ships and we expect it will have a reasonable pricing as the season moves on. It’s very hard to divorce what’s happening in the UK and the EMEA market from the rest of what we’re doing, because they’ve just become so strategic and that’s the primary source market for us that we take them sort of integrally into the mix as we do our business.”
  • “The Mediterranean, we’re still discounting. We have got the volume back where it needs to be. But it is discounted from before the Libyan situation but the volume is back and our yields in aggregate from the other products are substantially offsetting that discounting. We are looking at peak yields in the third quarter, in part because of the impact of the items that we talked about but also as we alluded to on our last call, the third quarter is probably where we have the most ground to make up to prerecession levels.”
  • “At this point, we are not adding discounts other than the normal tactical things that go on in the marketplace. But I think our pricing is more back in equilibrium with the demand environment and relatively stable at this point.”
  • “Generally speaking, we’ve talking about being 50% booked in the trailing 12 months period.”
  • “We are seeing outside of the Med the ability to raise prices. We’ve also been able to raise the prices in Northern Europe. So, we are able to largely offset the shortfall in the Med and then the Med promotions are typical promotions that we do anywhere when we run into a situation where we aren’t getting the demand that we’d like."
  • “I think we do see that the investments that we are making ...relates either to sales and marketing efforts in the U.S. or to our growth internationally. So we have significantly expanded our focus in your offices in places like China and Brazil et cetera. We are also investing in things that will hopefully make us even more attractive to the travel agent community in terms of systems and programs. So all of those are expensive, they’ve been included in our forecast and our expectations and while we’re coming back to a question that was asked earlier, while we are trying to control costs and seem to have done so, we are not doing and sacrifice those things which we think payoff.
  • “The constant currency yield increase for the quarter is low relative to the full year. This is driven by two factors. First, the majority of the impact from events in Northern Africa and Japan are expected to be felt in the second quarter. And secondly, most of the revenue upside from Pullmantur’s increased tour operation will fall in the second half of the year with very limited impact in Q2.”