RCCL First Quarter Profits Rise despite Challenges

RCCL First Quarter Profits Rise despite Challenges

Royal Caribbean Cruises Ltd. on April 28 announced net income for the first quarter 2011 of $91.6 million, or 42 cents per share. This compares to net income of $87.4 million, or 40 cents per share, in the first quarter of 2010, which included a gain on a legal settlement of $85.6 million, or 39 cents per share. An 11-cent-per-share marked-to-market gain on the company’s fuel option portfolio is included in first quarter 2011 results.

Revenues improved to $1.7 billion in the first quarter compared to $1.5 billion in the same period last year as a result of capacity increases and yield improvements. Net yields for the first quarter increased 4.0 percent. The company saw improvement in both ticket and onboard revenue yields and across all major product groups.

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. Unlike its fuel swaps which largely receive hedge accounting treatment, fuel options are marked-to-market to the income statement at the end of each reporting period. During the first quarter of 2011 the value of the company’s fuel option portfolio increased by $24.2 million, or 11 cents per share.

Bookings at the beginning of the year in the Mediterranean and in Asia were quite strong. However, events in Northern Africa led to itinerary modifications of 63 sailings and the tragic series of calamities in Japan led to itinerary modifications of 21 sailings. The combination of these events is expected to have a direct negative impact on the company’s yields of approximately 1 percent for the full year.

The company also noted 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 booking disruption has been largely offset by the company’s other product groups, including Caribbean and Alaska itineraries, which continue to show better than expected year-over-year improvement.