Weak prices hurt cruise line profits

[Jason]

Weak prices hurt cruise line profits

By Robbie Dingeman, Advertiser Staff Writer

Hurt by weak cruise prices in the Hawai'i market, NCL Corp. yesterday said it lost $60.8 million in the first quarter compared with a loss of $28.8 million during the same period a year earlier.

The Miami-based cruise ship company said revenues rose to $490.8 million for the quarter ending March 31, a 15 percent increase over the first quarter of 2006.

With profits being dragged down by the Hawai'i operations, the company recently announced it will pull one of its three Hawai'i-based ships — the Pride of Hawai'i — from the local market early in 2008.

The ship will leave Hawai'i in February, be reflagged, renamed Norwegian Jade and shipped to Europe for the summer of 2008.

With increasing competition from other cruise lines, NCL has been forced to cut ticket prices. A check online yesterday found a number of companies selling seven-day NCL cruises starting at $599 based on double occupancy.

"Our first-quarter results reflect the challenges we have faced in Hawai'i and that we will continue to face for the majority of the year," said Colin Veitch, president and chief executive officer of NCL Corp. Ltd.

He acknowledged the challenging operating environment and the impact of increased competition from other cruise lines in Hawai'i. However, Veitch said, "we remain committed to the Hawaiian market and believe that the various measures announced since the fourth quarter of last year will collectively result in a significant improvement by the same time next year."

The company said price competition has remained stiff especially in Hawai'i and the Caribbean. It said demand for Alaska has begun to show some signs of slowing while demand for European cruises has remained strong.

The company reported a 23.4 percent increase in capacity days — that is double occupancy per cabin multiplied by the number of cruise days for the period. But officials said that was partially offset by a 5.3 percent decrease in net yields, which represent total revenue minus commissions, transportation and other expenses for each of the capacity days.

Robert Kritzman, NCL America's executive vice president and managing director of Hawai'i operations, declined to comment beyond the official statement on whether any other changes might be contemplated in the wake of the latest financial report.

The company said it had achieved progress in controlling costs for the entire fleet, with net cruise costs per capacity day decreasing by 1.9 percent.

Some of the lower costs came from the absence of the start-up costs from 2006 when Pride of Hawai'i was introduced.

The company said a decrease in U.S. crew turnover helped as well, by keeping down recruiting and training expenses.

The cruise line said the European market has shown strong growth resulting from a combination of an increase in Europeans taking cruises and strong demand from Americans who found cruising to be an economically attractive way to travel.

NCL Corp. has a fleet of 14 ships in service and under construction. The corporation oversees the operations of Norwegian Cruise Line, NCL America, and Orient Lines. The company recently took delivery of its newest ship, Norwegian Pearl, and is building Norwegian Gem for delivery in October. The company also plans to build three new ships for delivery between 2009 and 2011.

[hazelson]

Awww! I feel so sorry for them .... NOT!

[elfed]

Well their lack of profit was certainly not due to the high salaries of the employees!!!!. Why oh why did they put 3 ships around Hawaii? I'm surprised even one is still cruising around those lovely islands.The ships don't do a lot of actual cruising but act more like a water taxi going from island to island. Of course it depends on one's definition of a cruise doesn't it?

Regards,

James.