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Saga reports strong improvement in cruise sector

Saga, the British lifestyle company that focuses on customers over the age of 50, has reported a strong improvement in the profitability of its two ship cruise operations in six months to July, year on.

Revenue rose to £43.3 million from £38.1 million in the same period last year, while gross profit increased to £8.6 million from £4.5 million. Operating margin improved to 5.2% from 1.6%.

“Total passenger days in the Cruising business were up 13,000 (8.1%) through improved load factors on both of Saga's ships.  Together with improved per diem yields and higher on-board revenues, this resulted in a £5.2 million (13.6%) increase in revenue from the Cruising business,” the company said in a statement.

“In the Cruising business, we have extended the Saga brand into Third Party Cruising, through agreements with four separate cruise lines. Initial demand for this product has been strong and, encouragingly, 30% of the demand has originated from new customers - those that have not booked a cruise or holiday with us before - with a further 19% of the demand from people who have not holidayed or cruised with us for over 3 years,” Saga said.

The company owns the 37,000 gross ton Saga Sapphire and 19,000 gross ton Saga Ruby II, both of which were built in Germany in 1981.

UPDATED: Pacific Aria and Pacific Eden to receive huge revamp before Australia debut

Pacific Aria and Pacific Eden, the two ships P&O Cruises Australia will introduce in November 2015, will assume a completely different identity to their present Holland America Line ones in a major refit. Tillberg Design in Sweden has been resposible for designing the new interiors of the two ships that were built in the early 1990s as Statandam and Ryndam.

They will feature residential feel on outer decks, boutique winery experience and culinary school, a report in Herald Sun says.

Instead of the traditional buffet, the ships will feature an area known as The Pantry including a variety of food outlets from a gourmet deli to fresh fish and chips.

P&O Cruises senior vice president Tammy Marshall said the concept would take dining at sea into new waters. “It will be a haven for food lovers, offering a contemporary relaxed vibe as guests indulge and discover what’s in The Pantry,” Marshall said.

A total of 15 bars and restaurants will be on board the ships including Dragon Lady serving Pan-Asian cuisine and Angelo’s Italian restaurant named after photographer Angelo Frontoni.

Guests will also be able to learn to cook some of the dishes on offer, at the ship’s Open Kitchen with a culinary school and dedicated Chef’s Table dining area.

A new Cellar Door will provide guests with a boutique winery experience, and celebrity chef Luke Mangan’s popular Salt Grill will become the Salt Grill Bar on the Pacific Aria and Eden.

Marshall said the new look and feel of the ships would extend to the pool area, with day beds, sheer white curtains and outdoor rugs and lamps providing a luxury residential feel and a great setting for entertainment day or night, the report stated.

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Pacific Aria and Pacific Eden, the two cruise ships Carnival Corp & plc group unit P&O Cruises Australia will receive from sister company Holland America Line, will undergo a massive revamp that will significantly change the ambiance of the ships before they enter service on the Australia market in November 2015.

The ships, currently known as Statendam and Ryndam, will rase the British flag before entry into service with the Australian company.

The buffet on both ships will be replaced by The Pantry, which offers interactive dining like "you’ve never seen it before.," the company saod, calling it a foodie haven. "A range of stylish, individual outlets offer contemporary Australian and international cuisine like fine cheeses and Mexican street food,” the company said in a statement.

“Enjoy the café vibe as you relax at an intimate table for two or join friends at the high tables and communal benches. Night or day, there’s something for everyone in The Pantry, making it the perfect venue for a quick bite, long lunch or romantic open-air dinner.”

The Waterfront restaurant will occupy the lower level of the current two deck high main dining room.  “Enjoy classic and cutting-edge Australian cuisine in a plush, modern surrounding. Materials and a colour scheme inspired by natural Australia sees wooden details and soft colours throughout,” the company said.

Dragon Lady, an Asian fusion restaurant, will occupy the port side of the upper level of the former main dining room, while an Italian restaurant will be introduced in the starboard side of the same space. Salt Grill by Luke Magnan, a feature that has already been introduced ion the other three ships of the company, will be located forward of the Italian restaurant.

“Guests onboard Pacific Aria and Pacific Eden can choose from two separate pool areas - the adults-retreat The Oasis and the main pool deck. And this is not your regular cruise ship pool area. With understated décor in a grand yet relaxed setting, the design brings the indoors, outdoors, creating the perfect place for daytime relaxing and night time cocktails.” P&O Cruises Australia said.

In all, there will be 15 bars, restaurants and cafes on the early 1990s built ships that are of 55,000 gross tons each.

CBR Odo Commentary - China and Costa brightest spots in Carnival interims

Carnival Corp & plc, the Anglo American cruise shipping group that is the largest company in the business, earlier this week reported strong third quarter financial year 2013-14 interims.

Group President and Chief Executive Officer Arnold Donald said in a statement: “Strong close-in demand and higher onboard spending helped drive significantly better than expected third quarter results and 15 percent year-over-year earnings improvement.”

“Our Asia operations performed particularly well during the quarter, driven by a double-digit yield increase in our China program, further solidifying our industry leading presence in this important emerging cruise market. “

“Our continental European operations also enjoyed strong yield and profit improvement in the quarter, reflecting continued progress for the Costa brand.”

“In addition, our summer Caribbean product successfully attracted nearly 20 percent more guests than the prior year, reinforcing the popularity of the world’s largest cruising region,” Donald added. 

In our opinion, the continued recovery of the Costa Crociere brand from the aftermath of the sinking of Costa Concordia in 2012 is particularly encouraging, given the challenging business environment in Continental Europe, which is a key source market for the company.

Donald’s upbeat comments regarding China, where Costa also operates, produced the second very encouraging news. The continued growth of the Chinese market is very important not only for the Carnival group, but also for Royal Caribbean Cruises Limited (RCCL), the industry’s number two and also Star Cruises whose home market is in the Far East.

This is good news also for MSC Cruises and Norwegian Cruise Line. As Genting Hong Kong group that owns Star cruises on which it wants to concentrate its cruise operations, continues to reduce its stake in Norwegian, we think the rapidly expanding Norwegian brand will also want to gain foothold in China in the future. The recent acquisition of Prestige Cruise Holdings paves the way for such a move.

Carnival Corporation COO Alan Buckelew to relocate to China

Carnival Corporation & plc, the world's largest cruise company, yesterday announced Alan Buckelew, Chief Operations Officer, will be expanding his leadership role by relocating to China to more closely oversee the company's growing operations in the country.

"As the world's largest cruise company with a portfolio of nine industry-leading global cruise lines, we are the clear market leader in China and very well positioned to continue working with officials in China to help the country meet its goal of becoming one of the most important cruise markets in the world," said Arnold Donald, CEO of Carnival Corporation & plc.  "Today's announcement underscores our deep commitment to China as a market of great strategic importance for our company. Alan is one of the most respected leaders in the industry and having him on the ground in China will add great strength to our operation and growth opportunities in China."

Buckelew's experience in Asia is extensive, previously serving as the CEO of Princess Cruises before taking on the assignment of Chief Operations Officer for Carnival Corporation & plc.  In his expanded role, he will lead all of the company's initiatives in China, while also continuing to provide oversight of all maritime and port operations around the world and a number of related functions as part of his COO role.

"We are excited about our cruise ships currently serving the Chinese market and the vast potential to grow our business in China in the months and years to come," Buckelew said. "Our team in China is dedicated and passionate about delivering a unique experience designed to exceed the expectations of every guest who boards one of our ships."

This past May, the company announced Costa Serena will deploy year-round in China next year, making Carnival Corporation the first global cruise company with four ships based in China, one of the world's fastest-growing cruise markets. Costa Cruises plans to debut Costa Serena in Shanghai in April 2015, where it will join Costa Victoria and Costa Atlantica, other Costa ships already deployed in China. The move will increase Costa's overall capacity in Asia by 74 percent.

In addition to Costa Serena, Princess Cruises – another iconic Carnival Corporation brand – began home-porting the Sapphire Princess out of Shanghai this past summer.

Adding a third ship based in China this year increases Carnival Corporation's total 2014 capacity in the country by 66 percent. In 2015, with four ships based in China for the first time, Carnival's industry-leading capacity is expected to jump 140 percent over a two-year period.

"As we execute our strategy to accelerate growth in China, we have the benefit of eight years of experience in China to not only help guide our expansion, but also find unique ways to delight our guests with the joy of cruising," Buckelew said.

With a career spanning more than 37 years in the cruise industry, Buckelew served as chief executive officer of Princess Cruises from June 2007 and served as the line's president since February 2004. In addition, he also served as chief operating officer for Cunard Line from 2004 to 2007.

Buckelew has a breadth of experience across cruise operations, having served as executive vice president responsible for Princess's strategic planning, marketing and yield management services. Before that, he held various other high-level executive positions in customer service, shared services and yield management. He also held roles as chief information officer and chief financial officer of Princess.

Buckelew served in US Army in 1969 and 1970. He holds an MBA and bachelor's degree from the University of California at Los Angeles.

Carnival Corporation & plc reports third quarter earnings

Carnival Corporation & plc announced non-GAAP net income of $1.2 billion, or $1.58 diluted EPS for the third quarter of 2014 compared to non-GAAP net income for the third quarter of 2013 of $1.1 billion, or $1.38 diluted EPS. For the third quarter of 2014, U.S. GAAP net income, which included net unrealized gains on fuel derivatives of $15 million, was $1.2 billion, or $1.60 diluted EPS. For the third quarter of 2013, U.S. GAAP net income, which included impairments net of unrealized gains on fuel derivatives of $139 million, was $934 million, or $1.20 diluted EPS. Revenues for the third quarter of 2014 were $4.9 billion, compared with $4.7 billion the prior year.

Carnival Corporation & plc President and Chief Executive Officer Arnold Donald noted, “Strong close-in demand and higher onboard spending helped drive significantly better than expected third quarter results and 15 percent year-over-year earnings improvement. Our Asia operations performed particularly well during the quarter, driven by a double-digit yield increase in our China program, further solidifying our industry leading presence in this important emerging cruise market.  Our continental European operations also enjoyed strong yield and profit improvement in the quarter, reflecting continued progress for the Costa brand. In addition, our summer Caribbean product successfully attracted nearly 20 percent more guests than the prior year, reinforcing the popularity of the world’s largest cruising region,” Donald added.  

Key metrics for the third quarter 2014 compared to the prior year were as follows:
•    On a constant dollar basis, net revenue yields (net revenue per available lower berth day or “ALBD”) increased 1.8 percent for 3Q 2014, better than June guidance of flat to down 1 percent. Gross revenue yields increased 2.5 percent in current dollars.
•    Net cruise costs excluding fuel per ALBD increased 0.5 percent in constant dollars,  better than June guidance of up 1 to 2 percent due to the timing of certain expenses. Gross cruise costs including fuel per ALBD in current dollars decreased 5.8 percent.
•    Fuel prices declined 3.5 percent to $650 per metric ton for 3Q 2014 from $674 per metric ton in 3Q 2013 and were less than June guidance of $673 per metric ton.
•    Fuel consumption per ALBD decreased over 3 percent in 3Q 2014 compared to the prior year.

During the third quarter, YouGov’s BrandIndex ranked Carnival Cruise Lines the most-improved U.S. brand in consumer perception in its mid-year 2014 Buzz Rankings Report.  A number of initiatives introduced by Carnival Cruise Lines, such as the Great Vacation Guarantee, Carnival LIVE Concert Series, Camp Ocean and Seuss at Sea, appear to be resonating with consumers. In addition, Princess Cruises recently announced an agreement with Italian shipbuilder Fincantieri to construct a new 3,600-berth vessel, which will enter service in 2017 based on the highly popular design platform introduced by sister ships Royal Princess and Regal Princess.  In keeping with the company’s strategy for measured capacity growth, this is the only newbuild scheduled to be delivered in 2017.

In June, Seabourn signed a multi-year agreement with UNESCO (United Nations Educational Scientific and Cultural Organization) to support the organization’s mission of safeguarding unique cultural and natural features around the world.  That announcement came on the heels of a five year agreement to support The Nature Conservancy’s global marine protection priorities.  These programs, combined with the company’s commitment to install exhaust gas cleaning technology on more than 70 ships, are among many initiatives underway to support the preservation of marine, environmental and cultural resources around the globe.

Outlook 

Based on the strength of third quarter net revenue yields and current booking trends, the company has increased its expectations for full year 2014 net revenue yields on a constant dollar basis to be in line with the prior year, from its previous guidance of down slightly.  Excluding fuel, the company expects full year net cruise costs per ALBD to be slightly higher compared to the prior year on a constant dollar basis. Taking the above factors into consideration, the company has increased its forecast for full year 2014 non-GAAP diluted earnings per share to be in the range of $1.84 to $1.88, better than both June guidance of $1.60 to $1.75 and 2013 non-GAAP diluted earnings per share of $1.58.
At this time, cumulative advance bookings for the first half of 2015 are ahead of the prior year at higher prices. Over the last quarter, fleetwide booking volumes for the first half of 2015 have been running ahead of the prior year at higher prices.

“The sustained improvement in booking trends as we have progressed through the year combined with yield increases in the second half of 2014 builds confidence that we will see continued yield growth in 2015 and beyond,” said Donald.  He also noted that new product initiatives and innovative marketing campaigns implemented across the brands over the past year are driving the improvement in consumer demand and pricing trends.

For fiscal 2015, net cruise costs excluding fuel per ALBD are expected to increase approximately three percent due primarily to a significantly higher level of dry-dock days scheduled next year to install new air emissions technology as well as other  technology designed to improve fuel efficiency.  The company expects the exhaust gas cleaning system or scrubber technology will be installed on approximately 70 percent of its fleet by 2016, thus enabling the company to meet the 2015 stricter air emissions standards as well as mitigate escalating fuel costs that will result from the new requirements.  The company anticipates the new regulations will result in higher fuel costs in 2015 of approximately $0.10 per share with that increase expected to be reduced by half in 2016 and mostly offset in 2017 based on the system roll-out.  Also, in 2016, the company will revert back to a more normalized dry-dock schedule, which will offset approximately half of the increase in 2015 net cruise costs excluding fuel.

“Our implementation of the air emissions technology is a sound investment in our company’s future and more importantly it will benefit the environment for years to come,” said Donald. “These technology investments are laying a solid foundation towards sustainable earnings improvement. Combined with our other strategic initiatives designed to foster revenue growth and contain costs, we are gaining momentum towards our goal of achieving double digit returns on investment over time,” Donald added.

Fourth Quarter 2014 Outlook

Fourth quarter constant dollar net revenue yields are expected to be up 1.5 to 2.5 percent compared to the prior year. Net cruise costs excluding fuel per ALBD for the fourth quarter are expected to be lower by 1.0 to 2.0 percent on a constant dollar basis compared to the prior year.

Based on the above factors, the company expects non-GAAP diluted earnings for the fourth quarter 2014 to be in the range of $0.15 to $0.19 per share versus 2013 non-GAAP earnings of $0.04 per share.

Viking Star