Royal Caribbean Cruises Ltd. (RCCL) reported a strong advance in second-quarter earnings and said it was so confident of continuing progress that it pledged to double its annual profits by 2017.

RCCL also said it would raise the return on its investments in new ships to double-digit levels, in what it calls the "Double-Double" program.

"Obviously these are aggressive goals, especially since our starting point will be record earnings this year," RCCL Chairman Richard Fain said in a conference call with analysts.

The prediction underscores the profitability of the new generation of ships Royal Caribbean and others are building. It rests on higher profits against the approximately $5.3 billion it will spend on ships through 2017.

Ships on order include the Quantum and Anthem of the Seas plus a third Quantum-class and Oasis-class ship due in 2016.

Investors drove RCCL stock up 8.5% in trading immediately following the announcement.

RCCL CFO Jason Liberty said the Oasis and Allure continue to command fare premiums in the Caribbean, where they operate most of the time.

He said the pricing and load factors on the Quantum's six-month run in New York and its repositioning cruise to China next spring "are doing exceptionally well. As we've said in the past, it's in line with how Oasis and Allure booked when they came out."

Fain said profits on the new ships are being driven by innovations such as the 03B satellite communications system, which he said will be ready for use on the Allure of the Seas in two months. The system is said to provide the same sort of connection speed for Internet tasks as on land.

"This will be a revolutionary breakthrough," RCCL President Adam Goldstein said.

Fain said that will give the Allure a clear competitive advantage, especially with millennial cruisers, a key demographic target. The system is also scheduled to be used on the Oasis and Quantum.

"You are talking about something we think will help us bring in more customers, raise our prices," Fain said. "And this is the sort of thing we've been doing … that underlies the Double-Double program."

On the conference call, analysts applauded the program. "Thank you for the accountability it implies," said Wells Fargo Securities analyst Tim Conder.

RCCL is on track to earn $755 million to $777 million this year, after reporting $530.6 million last year. The earnings forecast was raised by $22 million as a result of the strong Q2 results, Liberty said.

In the second quarter, RCCL earned $137.7 million, up from $24.7 million a year earlier. Revenue rose to $1.98 billion, from $1.88 billion. Net yields, a measure of revenue per unit of available capacity, rose 2.6% during the quarter despite continued weak pricing in the Caribbean.

"Higher pricing for close-in European sailings propelled us above the top end of our guidance for the quarter," Liberty said. "While the environment in the Caribbean remains promotional, our European itineraries continue to resonate well with strong demand from all markets."

Within Europe, Liberty said sales of cruises in the Black Sea were stressed by tensions between Russia and Ukraine, but that was offset by strength in the Mediterranean.

Fain said confidence in accelerating profitability at RCCL was driven by four factors: brand strength; the ability to adjust globally to changes in demand; growth in Asia, and China in particular; and the recovery of the Pullmantur brand to more normal levels.


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