RCCL eyes 3rd Oasis-class ship; Norwegian orders newbuild

By Tom Stieghorst
Two major cruise lines are looking to expand their North American fleets.

Royal Caribbean Cruises Ltd. last week all but announced it will order a third Oasis-class vessel capable of carrying 5,400 passengers at standard capacity.

It's unusual for a cruise line to publicly reveal that negotiations for a new ship are under way, and RCCL stressed that talks for a third Oasis-class ship are not final. But a deal might be in place by the end of the year, with the ship potentially ready to sail in late 2016.

The revelation of the RCCL talks comes on the heels of a firm order by Norwegian Cruise Line for a 4,200-passenger ship that would be the line's largest.

The new ship, nicknamed "Breakaway Plus," will be 200 berths bigger than the Norwegian Breakaway, which is taking shape at the Meyer Werft yard in Germany and is set for delivery in May. The Breakaway Plus vessel would be delivered in 2015. Norwegian has an option with Meyer Werft for a second Breakaway Plus, which, if exercised, would be delivered in 2016.

For travel agents, the additional ships mean more sales opportunities, especially on high-yielding vessels with the latest bells and whistles.

The third Oasis-class ship comes as a mild surprise.

"A year or two ago, I said that two ships in this class would be the right number," RCCL Chairman and CEO Richard Fain said Oct. 25 during a call with Wall Street analysts to discuss third-quarter earnings. "But they have shown such solid performance that we overcame our reservations."

Fain said that RCCL typically waits until a contract is signed to announce a newbuild, but the deal is so close to being done that it made an exception.

A newspaper in Finland reported two weeks ago that the ship would be built at the STX Finland shipyard in Turku with financial help from the Finnish government.

Fain did not say where the ship would be built or for how much. The Oasis cost $1.4 billion, or about $220,000 per berth, when it was ordered in 2006. Fain said the new ship would be ordered at a lower cost per berth than the Oasis or sister ship the Allure of the Seas, which cost $1.2 billion.

Norwegian put a price tag of about $918 million on its new vessel. At 163,000 gross tons, it will be about 5% bigger than its two predecessors.

As the name implies, Breakaway Plus will have all the amenities built into the Norwegian Breakaway, along with some extras.

"There's some exciting things we're not talking about yet," Norwegian Executive Vice President of Sales Andy Stuart said.

The Breakaway's features will include a two-deck spa, a water park with five full-size water slides, a minigolf course, a ropes course and the Haven, a private area of  upper-end suites accessed by keycard. Celebrity chef Geoffrey Zakarian will debut his first restaurant at sea on the Norwegian Breakaway.

Both the Royal and Norwegian ships will be designed to meet the stringent requirement for low-sulfur fuel that takes effect in 2015 as well as carry other environmental upgrades.

Fain said the new order would come halfway into a four-year hiatus of ship deliveries that started after the Allure of the Seas was launched in 2010 and will end in 2014 with the deployment of the first of two 4,100-passenger "Project Sunshine" vessels.

Fain said the new ships represent a measured increase in capacity.

"We've been very transparent in our desire to slow capacity growth," he said. "At the same time we have no intention of stagnating."

With 22 ships already in the Royal Caribbean International fleet, the three new ships represent a 22% increase in berths, or about a 5% annual increase over the next five years, Fain said.

At Norwegian, the new Breakaway Plus order brings a bigger change. It is on course to take delivery of a 4,000-plus passenger ship each year for the next three years and raise its berth count by 46%.

The trio of newbuilds would move Norwegian's fleet firmly into fifth place among cruise lines, ahead of MSC Cruises, but trailing Holland America Line, Princess Cruises and Carnival Cruise Lines, all owned by Carnival Corp., and Royal Caribbean International.

Cruise lines splurged on new ships in the decade prior to 2008, but once the recession hit in 2009 the pace of new orders slowed dramatically.

Cruise lines have leverage now to secure new ships at attractive prices because the European shipyards, including STX and Italy's Fincantieri, are starved for cruise business.

Seven of the 11 ships in Norwegian's current fleet were built at Meyer Werft, as will be the two 158,000-ton Project Sunshine ships for Royal Caribbean.

"We are pleased that Norwegian Cruise Line has decided to expand and enlarge its exciting Breakaway class at Meyer Werft," Bernard Meyer, the shipyard's managing partner, said last week.

Carnival Corp. has not put a new ship into the construction pipeline since August 2011. Last year it added the 100th ship to its 10-brand empire, and it has recently put as much energy into upgrading the existing fleet as it has into expanding it.

However, even if the pace of newbuilding has slowed, it hasn't stopped. Carnival will add six ships by 2016, the most of any cruise company, including two Princess Cruises ships set for delivery in 2013 and 2014, and one for Costa Cruises in 2014.
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