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Royal Caribbean announces Q2 profit

Posted: Monday, July 26, 2010

Royal Caribbean Cruises has announced it turned a profit in the quarter ended June 30, after having lost money in the same quarter last year.

Klas Stolpe / Juneau Empire
Klas Stolpe / Juneau Empire

Royal Caribbean is the world's second largest cruise company behind Carnival, and is the first company to report profits for a significant portion of the 2010 Alaska cruise season.

For the year's second quarter, Royal Caribbean reported net income of $61 million, up from a loss of $35 million in the same quarter of 2009.

Other financial data the company released shows its business improving on a variety of fronts. Total revenue for the quarter increased 19 percent to $1.6 billion, as both average ticket prices and the number of people traveling increased compared to last year.

The news may not be as good for Juneau businesses, however. Royal Caribbean this year has relocated the 2,100-berth Serenade of the Seas from Alaskan waters after a dispute with the state over the commercial passenger vessel tax, commonly known as the "head tax," established by voters in 2006.

Overall, Juneau is expecting 14 percent fewer cruise ship visitors this year.

The Legislature has reduced the head tax, beginning next year, and also rolled back associated environmental regulations in a effort to win ship visits in future years.

In a conference call with industry analysts, company executives said the strength seen already is likely to continue through the remainder of the year.

Royal Caribbean also owns Celebrity Cruises, a higher-end line which does the majority of its Alaska business.

"During the second quarter, we had healthy demand for all our products, with cruises in Europe and Alaska performing particularly well for Celebrity," said Daniel Hanrahan, president and CEO of Celebrity Cruises.

Ticket prices were "significantly higher year-over-year," he said.

The increase in ticket prices isn't the only positive change Royal Caribbean reported. The company's costs of operating cruises had also declined, improving the company's bottom-line profits.

The executives told analysts that customers are booking summer cruises further in advance than last year, giving them confidence the profits will continue.

While the economic recovery is continuing slowly, the executives said they expect to remain profitable without strong improvement.

"I recognize that considerable angst exists regarding the state of the economic recovery. Like everyone else, I would prefer a more robust economy," said Richard Fain, chairman and CEO of Royal Caribbean.

"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," he said.

• Contact reporter Pat Forgey at 523-2250 or patrick.forgey@juneauempire.com.



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