Significantly reduced FY 2012 guidance management optimistic about pricing recovering, resilient onboard spending, and no Costa impact on 2013 bookings. More transparency helps investor confidence this morning.
- 'Confident' Costa Concordia (CC) incident will not have a long-term impact
- Overall bookings remain down in the mid-to low teens
- Close-in bookings declined more than farther-out bookings
- Q2/Q3 2012 - level of uncertainty is high
- Didn't want to make projections
- Had anticipated higher yields in Europe due to easy comps pre-CC
- China opportunity will take some time to pay off
- 2012 yield: 1-2% yield comes from ship revitalization, international expansion, technology development
- Had great pricing momentum going into 2012
- First time, RCL has more non-US customers than US customers
- 4Q Ticket yield: double digits in Caribbean; Europe yields were down
- 2011: fuel cost EPS 20 cents; Japan Earthquake/Arab Spring cost 65 cents
- 2011 pricing: improved slightly more in US than Europe but this is driven more by itinerary mix than economy
- 2011: Operating cash flow $1.6BN; reduced debt by 650MM
- Current booking environment:
- Demand trends still fluctuating
- All new itineraries were down by 20% following CC
- Post CC: North American demand recovering steadily to high single digits decline; Europe weaker
- Extra caution for forward guidance
- 2013 bookings unaffected
- Last 5 years, fuel efficiencies have decreased expenses by 18% but due to deployment of ships, fuel expenses will be higher YoY.
- 2012 Fuel expense impact: 57 cents higher than 2011; FX rate 20 cents higher
- Have resumed full marketing programs
- Non-Caribbean (20%) itineraries are doing well and performing ahead of last year
- Started to see improvement in bookings this week; some pricing have returned to pre-CC levels
- No increase in 'cruise rejection rate' through their research
- Completed Summit revitalization last week
- Reflection will deliver in Oct 2012
Q & A
- Has Celebrity resumed advertising?
- Yes, restarting originally planned 2nd week of Wave Season advertising
- People seeing CC as an isolated incident
- Wave Season could be extended
- Higher Insurance premiums?
- Nothing dramatic
- Distribution changes: more weighted towards 1Q 2012; least in Q3; some in Q2 and Q4
- Deployment initiatives: Voyager of the Seas is going to China; increased capacity in Australia - driving higher fuel consumption and expense
- Somewhat increased Northern Europe capacity; decreased Eastern Europe capacity; Europe overall capacity is lower
- Baltic off to good start despite hard comps
- Would like to get 50% of Arab Spring impact (15/16% less capacity in Eastern Med)
- Azamara ding well
- Loyalty program: January sign ups was a record
- 2012 On board rev: have not seen any notable decline or any decline in ship revenue last few weeks
- Most of the 1Q volatility will be in March sailings and on-board rev spending
- Onboard promotion: 50% deposit sale; UK promotion
- May have a 1Q 2013 bump due to lost January bookings this year
- Will lower pricing to fill ships but not right now
- 1st time cruisers: did increase YoY
HIGHLIGHTS FROM RELEASE
FY 2012 EXPENSES
- Distribution changes and deployment initiatives will increase NCCs by approximately 300 basis points. Absent these changes, Constant-Currency NCC excluding fuel are expected to increase approximately 1% to 2% on a comparable basis (flat to 1% As-Reported.)
- $1.1BN: cash and undrawn RC
- Forecasted consumption is now 55% hedged via swaps for all of 2012 and 47%, 30% and 20% for 2013, 2014 and 2015, respectively. For the same four-year period, the average cost per metric ton of the hedge portfolio is approximately $521, $518, $575 and $580, respectively.
- Based on current ship orders, projected capital expenditures for 2012, 2013 and 2014 are $1.2 billion, $500 million and $1.1 billion, respectively. The company has one option for a second Sunshine-Class vessel which would be delivered during the second quarter of 2015 that expires in late February 2012.
- Capacity increases for 2012, 2013 and 2014 are 2.1%, 2.5% and 0.6%, respectively.