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Outlook a little worse

"The steady drumbeat of negative news emanating out of Europe is certainly having an impact.  As a result, we are seeing pluses and minuses in the different geographical markets – North America is holding up reasonably well; Asia is a big plus; but Europe is a pretty consistent minus.  Overall we have seen about a 100 basis point drop in our yield projections, but we expect to offset over half of this decline with lower spending."

-Richard Fain


  • Frustrated with results
  • Caribbean continues to be solid.  Alaska holding reasonably well but has slightly underperformed. Asia revenue yields were great (had easy comps).
  • European pressures and underperformance stand alone;  cost-cutting will continue to offset the weakness.
  • Q2 like for like yields (ex deployment changes) were up 1.7%
  • Ticket yields were slightly ahead of forecasts, driven by Asia 
    • Caribbean yields were up 7%
    • Europe yields were lower but not as low as Q1
  • Onboard revs
    • Increased modestly but less than RCL forecasted
  • Booking window for NA and other non-European countries was the same YoY
  • Closer in booking windows in key European markets, particularly Southern Europe
  • Load factors improved as Q2 progressed but ended a little lower YoY
  • Q3: booked APD is lower YoY as Europe discounting has picked up
    • Alaska prices have been reduced recently, but considering a record year in 2011, the performance is still pretty good
  • Q4: hope to be yield positive; APD has been stable
  • Excluding European, FY 2012 ticket yields are expected to increase 5-6% YoY (over last 3 months, forecast has been stable)
  • Increased revolver capacity by $225MM
  • % of repeat cruisers has been slightly elevated compared to prior years
  • Capacity % impact from deployment of Mariner of the Seas to China:  large increase in Asia, small increase in Caribbean, decrease in Europe
  • A number of on board areas contributed to the positive momentum, offset by year-over-year decrease in gaming spend. In addition to Americans spending more on a year-over-year basis, they continue to improve ability to generate higher on board spend from guests in many of our priority markets.
  • Saw decreased year-over-year spend from guests from the major Southern European markets. 



  • New ship order upcoming? 
    • Are looking but in today's market, you couldn't get a ship before 2016
  • Europe has required more discounting than expected
  • Alaska has been more discounting than expected
  • Q4 guidance:  Low-single digit constant-currency yield
  • Q3 % booked are lower than what's expected based on historical data
  • Q4 % booked are better than what's expected based on historical data
  • Order book solid in 2013
  • More contraction in booking window in Southern Europe relative to Northern Europe
  • Voyager of the Seas has gotten good reception in Asia
  • 10% YoY decrease in Europe capacity in 2013
  • Not afraid having more capacity in a market (Asia) that is getting very robust rates, but those rates may be stable instead of going up.
  • 2013 European capacity growth: 1% in 1Q; 32% in 2Q; 49% in 3Q; 24% in 4Q; overall: 27%
  • FY 2012 capacity: 42-43% Caribbean, 30% Europe, 8% Asia, 4% Alaska, 15-16% other itineraries 
  • Too early to speculate when Europe will recover
  • Pullmantour:  very challenging Spanish market
    • Currently 40% Spanish customer base, down from 87% historically; some shift to South America customer base
  • Europe airfare has been an impediment for sourcing US passengers
    • But on European cruises, % of NA customers have increased by a few % points from their original forecast
    • Have been able to drive late business in Europe at a discounted rate but with good volume across all European markets
  • Less aggressive hedging on new build costs since they are bearish on Euro
  • Have been investing in information technology area
  • Caribbean yields are higher than peak 2008 levels
  • Capacity hole in Europe: Volumes need to be higher (August/Sept/Oct). They need to find that volume but believe they are finding it.
  • Marketing efforts increased in Southern Europe, doesn't really have much an impact on market share
  • FY 2013 cost impact on the 2012 deployment changes: neutral impact
  • FY 2013 not a big shift in deployment between Northern and Southern Europe itineraries.



  • "Since the April guidance, the strengthening of the U.S. Dollar has reduced the company's full year outlook by approximately $0.13 per share.  This outlook reduction has been largely offset by the reduction in bunker pricing that occurred during this same time period.  The net effect of these currency and fuel price changes is essentially neutral for the company's full year earnings outlook."
  • "Overall, booking trends have continued to normalize and are now running at levels comparable to prior year's activity."
  • "Larger than expected discounting has been required for the European season which has lowered the midpoint of the company's Constant-Currency Net Yield expectations for the year by approximately 1% point from the April guidance."
  • Forecasted consumption is now 58% hedged via swaps for the remainder of 2012 and 54%, 38%,  22% and 7% hedged for 2013, 2014, 2015 and 2016, respectively.  For the same five-year period, the average cost per metric ton of the hedge portfolio is approximately $526, $568, $619, $595 and $582, respectively. 
  • Currently has options expiring in 2013 at a strike price of $90 bbl that cover an estimated 9% of 2013 consumption. 
  • Q2 Cash+ undrawn RC: $1 billion (currently at $1.6bn)
  • The company has utilized a portion of the accordion feature on its revolving credit facility due July 2016 which increased the size of the facility from $875 million to $1.1 billion.  The company has also closed on a €365 million, delayed draw (June 2013) five-year unsecured bank loan facility.  The combination of these actions provide liquidity of approximately $600 million and has been done primarily as part of the company's refinancing strategy to prepare for bond maturities in 2013 and 2014.
  • Additionally, the company has committed unsecured financing on its newbuilds.  The company noted that debt maturities for 2012, 2013, and 2014 are $600 million, $1.6 billion, and $1.9 billion, respectively.  
  • Capex guidance:  2012, 2013, 2014 and 2015 are $1.3 billion, $600 million, $1.1 billion and $1.0 billion, respectively. 
  • Capacity guidance: 2012, 2013, 2014 and 2015 are 1.5%, 1.1%, 1.0% and 6.6%, respectively.