• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Here


    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

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





  • 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
  • Fuel
    • 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.  
  • Capex
    • 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.