Poor results for Ambassadors International’s cruise business dragged down fourth-quarter earnings, as the company reported a net loss of $24.5 million, compared with a net loss of $1.9 million in the fourth quarter of 2006.

Costs and operating expenses were $89.3 million in the fourth quarter of 2007, an increase of $34.9 million from the fourth quarter of 2006. Ambassadors said the increase was primarily due to cruise operating expenses and other selling, general and administrative and depreciation expenses associated with its cruise business. Ambassadors also operates a marine division and a travel and events division.

“The cruise division continued to post significant losses, overshadowing the progress made in our other businesses,” said Joe Ueberroth, Ambassadors president, chairman and CEO. 

Approximately $20.4 million of the increase in losses was due to the addition of expenses associated with the Windstar Cruises brand, which was acquired in April 2007.

The losses were due to several factors, according to Ueberroth, including the company’s decision to seek all disputed expenses it has with Holland America Line, which operated Windstar until it was sold to Ambassadors.

“We expensed approximately $2 million of expenses that we believe are expenses of Holland America Line … we are aggressively pursuing reimbursement,” said Ueberroth. “We had an overrun in the drydock of the Wind Star. A significant portion of the overrun is related to issues of class, which is also the responsibility of the previous owner, Holland America Line. And once again, we are pursuing reimbursement.”

Ueberroth also attributed losses in the Windstar business to the unplanned drydock of the Wind Spirit and an increase in fuel costs.

Both of Ambassadors' cruise brands, Windstar and Majestic America Line, lost money in the fourth quarter. Majestic, Ambassadors’ U.S. river and coastal cruising business, had a pre-tax loss of $9.4 million in the fourth quarter, compared with a $5 million pre-tax loss in the fourth quarter of 2006.

“The business was negatively impacted in the fourth quarter by low per diems, the early layup of the Empress of the North, high operating costs and costs associated with the transition to V. Ships [a company that manages Majestic's ship operations],” Ueberroth said. 

Ueberroth said that management is focused on three components of the cruise business to drive financial improvement: sales and revenue, operating efficiency and the reduction of selling, general and administrative costs.

“To drive revenue,” said Ueberroth, “we have moved to a multi-channel market strategy that embraces the travel agent community, opens up international markets, and caters to charter and incentive business.”

Ambassadors entered the cruise business in 2006, when it separately acquired American West Cruises and the Delta Queen Steamboat Co. to form Majestic America Line.

Ambassadors reported revenue of $78.4 million for the three months ended Dec. 31, a 61% increase. Cruise revenue increased $18.8 million primarily due to $17.1 million of additional revenue generated from the acquired Windstar Cruises.

For the year, Ambassadors reported revenue of $287 million and a net loss of $26.9 million. In 2006, Ambassadors reported a net profit of $5.6 million on revenue of $144.3 million.

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