Revenue rises, but IPO expenses put Norwegian Cruise Line in the red

Posted on 7 May, 2013 by Spacejunkie2

By Tom Stieghorst

Norwegian Cruise Line posted a $96.4 million first-quarter loss, but said accounting rules that require it to recognize some one-time expenses masked a solid improvement in its business.

Revenue rose to $527.6 million from $515.4 million.

Norwegian said that without $110 million in expenses related to its public offering in January, income would have been $12.9 million. Norwegian’s net profit was $3.3 million in last year’s first quarter.

“We had a fantastic quarter — above consensus,” said CEO Kevin Sheehan in an interview.

The expenses include costs tied to prepaying bonds and stock compensation for former executives.

Sheehan said by using the proceeds of the public offering, Norwegian was able to replace secured debt that carried 11.5% interest rates with unsecured debt that costs about 5%.

Norwegian raised $447 million in the quarter by selling 23.5 million shares for $19 each.

Excluding fuel, net cruise costs fell 1.5% in the quarter. Sheehan said the expense of introducing Norwegian Breakaway will likely raise cruise costs by 5% to 6% in the current quarter.

The New York-themed Breakaway is set to arrive before daybreak on May 7 at the Manhattan Cruise Terminal. The ship will be named the next day by the Rocketttes before starting a series of seven-day cruises to Bermuda.

Norwegian says sales uplift vindicates 10% commission move

Posted on 30 April, 2013 by Spacejunkie2

Norwegian says sales uplift vindicates 10% commission move

By Phil Davies

Norwegian Cruise Line attributed its switch to 10% commission a year ago to a big lift in UK business – and stressed there are no plans to alter its course on remuneration.

Executive vice president sales Andy Stuart revealed that business from the UK was 25% ahead of this time last year.

This vindicated the move to cut commission as it helped eradicate retail cruise discounting and provide price clarity to consumers.

And Stuart stressed that his door was always open to negotiate with Advantage Travel Centres after the consortium took the rare decision to take the line off its preferred supplier list due to the reduction in commission.

“We were clearly disappointed because we felt we were doing something positive to discourage rebating in the industry,” he said.

Speaking as Norwegian showcased new 4,000-passenger ship Norwegian Breakaway in Southampton to 2,000 UK agents, he claimed Advantage had “misunderstood” the company’s intentions and there continued to be ongoing positive dialogue.

“We believe 10% is a fair commission which will result in a higher retention and better margins for agents while ensuring that consumers are less confused about pricing,” Stuart added.

More than 100 Advantage agents were on board for the overnight showcase of the ship and the opportunity to earn additional commission by ensuring they saw different parts of the vessel.

Stuart conceded that the line would continue to run tactical promotions such as the current short-term bonus commission offer to coincide with the introduction of Norwegian Breakaway.

But he insisted that there would be no shift in the ongoing 10% level as part of Norwegian’s Partners First philosophy.

He declined to be drawn on a rise in the company’s share price but industry observers believe investors see positive returns from ongoing improvements in profitability and the introduction of both Breakaway and sister ship Norwegian Getaway from Miami from January 2014.

Stuart revealed that there would be tweaks to the second new ship to reflect its Florida home port.

Norwegian expects UK passengers to be attracted to the Miami-based ship due to the popularity of Florida as a holiday destination and good levels of airline capacity.

The line is aiming for “more than double digit” percentage growth from the UK in 2014.

For close-in bookings, Carnival losing pricing battle

Posted on 9 April, 2013 by Spacejunkie2

For close-in bookings, Carnival losing pricing battle

By Tom Stieghorst

In a new report, Jeffries International analyst Ian Rennardson says cruise pricing slipped in March, with the most dramatic decline at Carnival Corp.

For cruises in the next three months, prices are 2.1% lower than at this time last year, with increases at Royal Caribbean Cruises Ltd. (up 7.7%) and Norwegian Cruise Line (up 7.1%) more than offset by a drop at Carnival Corp. (down 8.9%).

The outlook is more positive for cruises booked four to 12 months out, with prices trailing last year by 1.4% in March, compared with 2.1% in February. For cruises booked four to 12 months out, Carnival pricing in March was down 0.7%, RCCL down 3.3% and Norwegian up 4.7%.

The report is based on a Cruise Market Watch database that tracks 190 ships and 9,000 annual cruises.

Rennardson said the March results are disappointing for Carnival.

“We are becoming more concerned that pricing for CCL over the next 12 months remains well below our 0% forecast as we estimate that 30%-50% of the all-important Q3 capacity has been sold at this point,” the report said.

“We are now lapping the easy pricing comparisons, and there is less and less time to make up the shortfall — pricing needs to turn sharply positive, and soon, if estimates are to be met.”