|Freedom of the Seas // (c) Royal Caribbean International|
Despite major crises that took place in Northern Africa and Japan this year, Royal Caribbean Cruises Ltd. reported a net income for the first quarter of 2011 of $91.6 million, compared to a net income of $87.4 million in the first quarter of 2010, which included a gain on a legal settlement of $85.6 million. An 11-cents per share marked-to-market gain on the company’s fuel option portfolio was included in the 2011 first quarter results.
Revenues improved to $1.7 billion in the first quarter of 2011 compared to $1.5 billion in the first quarter of 2010 as a result of capacity increases and yield improvements. Net yields for the first quarter of 2011 increased 4 percent (2.8 percent on a constant-currency basis). The company saw improvement in both ticket and onboard revenue yields and across all major product groups. The company said it has been able to largely offset higher fuel prices through its hedging strategies as well as the impact of currency exchange rates.
”The year started off with a roar—strong bookings, low costs and solid profits—and in the first quarter every one of our brands exceeded its forecast,” said Richard D. Fain, chairman and CEO. “Unfortunately, the events in Northern Africa and Japan have turned what was shaping up as a spectacular year into merely a very good one. Nonetheless, other than adjustments for fuel pricing, our earnings guidance for the year is essentially intact despite these dramatic geopolitical events. The demand for the majority of our products has remained quite strong and even the impacted itineraries have begun to improve.”
Costs in the first quarter of 2011 were well controlled with most expense categories performing better than expected, the company said. At-the-pump fuel pricing (including the benefit of the company’s hedging program) was very similar to earlier calculations at $511 per metric ton. As previously disclosed, in addition to its fuel hedging activities, the company has purchased various fuel options as further protection against rising fuel prices.
Compared to its prior guidance, Royal Caribbean said that three significant factors have influenced the company’s outlook on yields: geopolitical events, the weakening of the U.S. dollar and increased tour activities.
The company also noted that it observed a broad slowdown in bookings for Mediterranean sailings following the unrest in Northern Africa. These booking volumes have now returned to normal levels as a result of reduced pricing. The effect of this has been largely offset by the company’s other product groups, including its Caribbean and Alaskan itineraries, which continue to show better than expected year-over-year improvement.