Facing Med capacity woes, RCCL Q3 income declines

By Tom Stieghorst
Royal Caribbean Cruises Ltd. said last week that higher prices for close-in bookings in Europe enabled it to post third-quarter earnings of $367.8 million, down from $399 million in Q3 2011.

Revenue was $2.2 billion, down from $2.3 billion a year earlier.

Royal Caribbean International President Adam Goldstein said a shortage of Europeans on Mediterranean cruises this summer was offset not only by more North Americans but by passengers from South America and Asia.

"It is a positive development for our global footprint that we were able to attract people from all over the world to go on those cruises," he said.

About a quarter of the customers in Europe were North Americans, he said.

Next year, RCCL's capacity in Europe is down 20% in the Western Mediterranean, down 9% in the Eastern Mediterranean and up 28% in the Baltic area.

"The European market continues to be the most puzzling market we're facing," Vice Chairman Brian Rice said.

For 2013, RCCL said it would keep about 44% of its capacity in the Caribbean, 27% in Europe, 10% in Asia, 4% in Alaska and 15% elsewhere.

Goldstein said that so far the consequences of new low-sulfur fuel regulations have been insignificant, but that will change in two years. "The question is what more will happen as we approach 2015," when tighter standards are set to drive cruise fuel costs much higher.

Goldstein said the industry was working on adjusting the standards through the political or legislative process.

The third quarter is the biggest contributor to annual earnings. Last year RCCL earned $399 million, or $1.82 a share, in that quarter, on the way to a profit of $607 million, or $2.77 a share, for the entire year.

Despite the drop in earnings, the company indicated its results were better than expected, and it raised its guidance for 2012 earnings from $1.75 a share to $1.90.
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