Struggling Europe operations sent Royal Caribbean Cruises Ltd. to a $3.6 million net loss in the second quarter, as the company’s difficulties in the region “outweighed all the good news in the rest of the world,” RCCL Chairman Richard Fain said during the company’s earnings call on Thursday.
The result was markedly down from a $93.5 million net profit in last year’s second quarter.
Fain called Europe a “bummer,” as weak demand resulting from the Costa Concordia accident and a deepening economic downturn (especially in southern Europe) forced RCCL to heavily discount cruises.
“The steady drumbeat of negative news emanating out of Europe is certainly having an impact," said Fain. "We are seeing pluses and minuses in the different geographical markets: North America is holding up reasonably well, Asia is a big plus but Europe is a pretty consistent minus.”
As predicted earlier this year by RCCL, the impact of the Concordia crash “seems to be particularly meaningful in the second and third quarters,” the company said.
“The timing of the incident left a big gap during our peak booking period, and filling that gap is disrupting our normal booking patterns," CFO Brian Rice said.
Despite troubles in Europe, RCCL’s net revenue increased 2.8%, to $1.82 billion, due to robust business in the Caribbean, Alaska and Asia. Cruise operating expenses, however, increased 9.2%, to $1.3 billion. Fuel cost was up 26.5%, to $238 million.
Looking to the third quarter, Fain said the company “isn’t relying on too much economic improvement to improve our earnings.”
Rice said yields in Europe will be down for the year, with a greater impact felt in the third quarter because European cruises will account for 53% of the company’s capacity during that period. The company’s outlook is slightly rosier for the fourth quarter, when Caribbean capacity increases and Europe’s decreases.
RCCL didn’t have much to say about 2013 except that capacity will be cut 4% worldwide and 10% in Europe.
Adam Goldstein, Royal Caribbean International’s CEO, said the company will “focus on efficiency gains that do not affect the quality of the product” and “do everything in our power to minimize fuel costs.”