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Odo – Cruise Business Commentary: United States might be commercial success and huge technical challenge

  • Written by Kari Reinikainen

The plans of Crystal Cruises to reintroduce the 1952 built Trans-Atlantic liner United states back to the sea after major rebuilding probably are commercially viable, but the technical challenges to rebuild the ship may be even more formidable.

As built, the ship was powered by a massive Westinghouse steam turbine set, which was fed by eight boilers. The power plant reportedly delivered 241,785 shp and gave the vessel a trial sped of 41.77 knots.

However, such a system is enormously fuel hungry and Crystal Cruises would most likely to be forced to replace it with a more contemporary power plant. This is a major cost item.

A modern power plant would be much lighter than the original one, and although none of our team members is a naval architect, it must be fair to assume that this would impact stability of the vessel – even more so as rendering of Crystal Cruises’ plans show additional decks in the superstructure. They mean more weight.

The ship’s hull has outstanding fine lines, quite unlike any other modern passenger ship with the exception of Queen Mary 2, the Cunard Line flagship.

This means that the ship is an excellent sea boat – ample evidence of that must have accrued during the 17 years it served on the north Atlantic. However, it will probably also mean limitations to additional weight at least in the forward part of the vessel from stability points of view.

What is certainly means that modular cabins that are built ashore and slotted in on board could not be used in the hull. These would have to be built on the spot, on board. This is expensive.

On the positive side, it must fair to assume that if reintroduced as an 800 passenger luxury market vessel – this would be less than half of the ship’s original capacity – United States would probably be a very high end of the market product.

Although it is 46 years since it last went to sea, its name and history could probably still have a lot of equity in them from a marketing point of view.

Crystal Cruises’ plans call for operating the ship on the North Atlantic, in addition to cruises from US ports. The North Atlantic run, today only served by Queen Mary 2 for a handful of times per year, could probably offer great potential.

Sometimes one cannot but wonder if the modern cruise industry still lives in the memory of the bad years of the 1960s when liner voyages were a certain recipe for financial disaster, or so obsessed by its business model, that it does not really seem to think of the possibility of starting to use passenger ships in passenger transport across the oceans addition to just as platforms for holiday.

Crystal Cruises plans to reintroduce United States to sea

  • Written by Kari Reinikainen

Crystal Cruises, the luxury cruise line owned by Genting Hong Kong, may reintroduce the 1952 built United States to the sea, the company said in a statement.

Should the plans be realised, the 60,000 gross ton vessel would be transformed into an 800-guest-capacity vessel, featuring 400 suites measuring about 350 square feet with dining, entertainment, spa and other luxury guest amenities that are true to the ship’s storied history.

“Features of the original SS United States such as the Promenade and Navajo Lounge will be retained, while new engines and sophisticated marine technology will be installed to maintain her title as the fastest cruise vessel in the world,” Crystal Cruises said, adding that the vessel would operate trans-Atlantic voyages from New York and long cruises from other US ports.

However, as Crystal President and CEO Edie Rodriguez said in the statement, it is not sure that the company will proceed with the plans: “We are honoured to work with the SS United States Conservancy and government agencies in exploring the technical feasibility study so we can ultimately embark on the journey of transforming her into a sophisticated luxury cruise liner for the modern era.”

The company also committed to covering all costs associated with preserving the ship while undertaking a technical feasibility study, which is expected to be completed by the end of 2016.

United States was built in 1952 and it was the fastest ever passenger ship to operate on any ocean liner service. However, the introduction of jet airliners soon rendered this merit worthless and due to mounting losses, the ship was laid up in 1969. Several attempts to revitalise it, including one by Norwegian Cruise Line when it was owned by what is Genting Hong Kong now early in the millennium, were introduced, but so far none of them have been resulted in reactivation of the ship.

Cruise shares dive after RCCL unveils disappointing guidance

  • Written by Kari Reinikainen

Shares in the three largest cruise shipping group in the world fell sharply after Royal CaribbeanCruises, Ltd (RCCL) had unveiled 2016 earnings guidance that was weaker than what analysts had expected.

RCCL said it expected its adjusted earnings per share (EPS) to rise to the bracket of $5.90 to $6.10 in 2016 from $4.83 reported for 2015, but the forecast fell short of the $6.21 average of cruise industry analysts.

Shares in RCCL traded 14.15% down at $72.55 in New York at midday local time, while those in Carnival Corporation, the Panama domiciled but US headquartered holding company in the Carnival group, were 5.80% down at $46.13.

Also in New York, Norwegian Cruise Line Holdings was 8.69% down at $42.97.

In London, Carnival plc, the group’s British holding company, traded 5.4% down from the opening at £33.26.

“Taking into account current fuel pricing, interest rates, currency exchange rates and the factors detailed above, the company currently estimates 2016 Adjusted EPS will be in the range of $5.90 - $6.10 per share,” RCCL said in a statement.

RCCL forecasts full year 2016 EPS to rise to $5.90 to $6.10, below analyst average estimate

  • Written by Kari Reinikainen

Royal Caribbean Cruises Ltd. (RCCL), the world’s second largest cruise shipping group, forecasts its adjusted earnings per share (EPS) to rise to the bracket of $5.90 to $6.10 in 2016 from $4.83 reported for 2015, but the forecast falls short of the $6.21 of cruise industry analysts

“Taking into account current fuel pricing, interest rates, currency exchange rates and the factors detailed above, the company currently estimates 2016 Adjusted EPS will be in the range of $5.90 - $6.10 per share,” the company said in a statement.

It added that over the past several months the dollar has continued to strengthen relative to our basket of currency exposures, while fuel prices have lowered – resulting in a negative $0.14 impact to earnings per share for 2016. Additionally, interest rates have recently increased, which are negatively impacting earnings by $0.06 per share.

“Our booked position for 2016 is roughly equal to last year’s record high, and at higher rates. Continued strength from North American consumers is driving strong demand for North American products such as Caribbean, Alaska, and Bermuda which represent over 50% of capacity for the year,” RCCL said.

“These North American products combined with strong demand for Northern Europe and Asia sailings are expected to more than offset current pricing challenges impacting the Mediterranean, Australia and Brazil,” the company continued.

The company expects a Net Yield increase in the range of 2.0% to 4.0% on a Constant- Currency basis and flat to up 2% on an As-Reported basis for the full year. Net cruise costs (NCC) excluding fuel are expected to be up 1% or less on a Constant-Currency basis and up 0.5% or less As-Reported, RCCL stated.

RCCL final quarter profit doubles but full year falls on previous impairment charge

  • Written by Kari Reinikainen

Royal Caribbean Cruises Ltd. (RCCL), the world’s second largest cruise shipping group, has reported almost doubling of net profit in the final quarter of 2015 from the same period a year earlier, but the full year figure fell short of 2014 due to an impairment charge booked earlier this year.

Fourth quarter net profit amounted to $206.8 million compared to $109.8 million in the same period last year as total revenues rose to $1.90 billion from $ 1.81 billion.

However, the full year 2015 net profit of $665.7 million was well below the $764.1 million reached last year as an impairment charge of $411 million that was booked earlier this year against the assets of Pullmantur, the group’s Spanish subsidiary, depressed the bottom line. Revenues, however, rose to $8.30 billion from $8.07 billion.

“During 2015, the US Dollar strengthened while the price of fuel in world markets declined. While the impact of currency is immediate, there is a lag before a change in the price of fuel flows through to business. There continues to be an inverse relationship between the foreign exchange impact on our currency exposures and fuel prices, but the offsets are not exact, especially in the short term. For 2015, the net impact of currency and fuel was a negative $0.25 per share relative to our January guidance,” RCCL said in a statement.

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