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Mechanical failure forces Viking Ocean to cancel cruise

Viking Ocean, the new ocean cruise operator, is experiencing a major operational setback in the Baltic on account of a mechanical issue occurred on board Viking Star, forcing the company to cancel the remaining portion of a cruise itinerary. Alan Lam reports.

According to the company, the highly unusual mechanical issue is related to the electric transformers in one particular part of the ship’s propulsion system. The malfunction has no impact on the engines or generators, but it requires effort to repair. While the work continues, the operator is unable to continue with the cruise. After a considerable deliberation, Viking Ocean made the difficult but necessary decision to cancel the remaining portion of the itinerary, citing safety and customer enjoyment as being its paramount concern.

The ship has been docked in Tallinn since Thursday, the 30th of July, five days after its departure from Stockholm on the 15-day Viking Homelands itinerary.

The company has offered two alternatives to its more than 900 guests on board: 1) for guests who decide to return home, Viking will make flight arrangement 
from Tallinn in the timeliest manner possible; 2) for those who wish to remain in the Baltic for as long as they have planned, the company will host them onboard the ship until Tuesday, the 4th of August, and then fly them to Bergen, where they will be accommodated in a local hotel for the remainder of the scheduled cruise period and they will be offered local excursions.

The 47,800 gross ton Viking Star is the first vessel in the company’s emerging fleet. Between now and the end of the next year the line expects deliveries of two more units of similar capacities - Viking Sky and Viking Sea.

Genting Hong Kong to sell its casino business

Genting Hong Kong, the owner and operator of Star Cruises and Crystal Cruises, is to offload its casino business based on Jeju Island, South Korea. Alan Lam reports.

Having reported a major lift of earnings in the first half of 2015, as a result of its gradual exit from share ownership in Norwegian Cruise Line Holding, Genting Hong Kong now plans to exit from its land based casino business on Jeju Island, ostensibly to focus further on its cruise business. This move follows the company’s recent announcement of a major expansion for its newly acquired Crystal Cruises brand.

The disposal could see the group putting even more resources into expanding its better performing cruise business.

Disposing of a casino business may seem counterintuitive to the operator of Star Cruises, which is inextricably intertwined with gaming. When looking closely at the status quo of the gaming industry in Asia, a different picture emerges. In the last decade, the industry experienced a massive expansion in various parts of the Asia Pacific region, driven mainly by the outbound Mainland Chinese travellers.

Because of China’s recent anti-corruption policy, which also cracks down on conspicuous consumption and vice activities of its citizens, casino businesses in Asia have suffered. Many major venues in Macau, for example, have seen their revenues fallen by as much as 50% so far this year.

Genting’s shifting of focus is therefore logical. Moreover, it is clear that there is a mounting demand for financial resources from the group’s cruise business expansion strategy. Disposing gaming assets will help ease the situation.

RCCL raises 2015 EPS forecast by $0.15 to up to $4.75

Royal Caribbean Cruises, Ltd., the world's second largest cruise shipping group, says it has updated its full year Adjusted EPS guidance to a range of $4.65 to $4.75.

"The $0.15 increase versus April guidance is driven by beneficial currency and fuel rates. Better than expected performance in the Caribbean and China in Q2, and a modest increase in costs are essentially offsetting each other and are neutral to earnings. The cost increase in the second half of the year is for some additional marketing activities focused on 2016," the company said in a statement.

Constant-Currency Net Revenue Yields are now expected to increase in the range of 2.9% to 3.9%, versus previous guidance of 2.5% to 4.0%, and Net Cruise Costs excluding fuel are expected to be better than flat, versus previous guidance of flat to down 1%.

Bookings since the April earnings call have been healthy and the company continues to be booked ahead of last year in both load factor and available passenger day (APD). A solid Caribbean environment is more than off-setting softness on Latin American sailings associated with our Pullmantur brand.

Taking into account current fuel pricing, interest rates, currency exchange rates and the factors detailed above, the company expects 2015 Adjusted EPS to be in the range of $4.65 to $4.75 per share.

"Momentum in the Caribbean continues at a solid pace, and our strong booked position in the third and fourth quarters gives us confidence as we move through the second half of 2015," said Jason T. Liberty, chief financial officer. "The trajectory of our brands is firmly on course for another record year of earnings, with healthy trends extending into the first quarter of 2016."

While it is too early to provide a detailed picture for 2016, first quarter bookings are running well ahead of last year at higher prices, with improvements in the Caribbean continuing at a robust pace.

Full year 2015 forecast:

Net Yields are expected to increase in the range of 2.9% to 3.9% on a Constant-Currency basis (down 1.1% to 0.1% As-Reported).

Net Cruise Costs (NCC) excluding fuel are expected to be better than flat on a Constant-Currency basis (down approximately 2.5% As-Reported), including some increased investment in marketing activities.

Adjusted EPS is expected to be in the range of $4.65 to $4.75 per share, a $0.15 increase from the mid-point of the company's previous guidance, driven by beneficial currency and fuel rates.
"The Double-Double introduced demanding but achievable targets for our organisation, and I am proud of our company's focus on delivering this program," said Richard D. Fain, chairman and chief executive officer. "We continue to focus on the strength of our brands to drive these improving results."

RCCL reports interim profit rise on strong Caribbean, China yields

Royal Caribbean Cruises Ltd., (RCCL), the world's second largest cruise shipping group, has reported a rise in both second quarter and first half interim profits on strong yields in the Caribbean and China markets plus favourable development of costs, the company said in a statement.

Group net profit rose to $184.9 million in the second quarter of the current year from $137.7 million in the same period a year ago. Revenues rose to $2.06 billion from $1.98 billion.

In the first six months of the year, the group profit rose to $230.2 million from $164.1 million although revenues only rose to $3.87 billion from $3.86 billion

"Overall, the year will be another solid step towards the Double-Double. Commercially, the business continues to perform as expected and the biggest drivers of our increased guidance are better foreign exchange and fuel rates," the company said in the statement.

It raised the following points regarding second quarter 2015 results:

Net Yields were up 4.2% on a Constant-Currency basis (down 0.2% As-Reported), modestly better than guidance mostly driven by strength in the Caribbean and China.

Net Cruise Costs ("NCC") excluding fuel were up 3.4% on a Constant-Currency basis (down 0.1% As-Reported), better than guidance mainly due to timing.

Adjusted Net Income of $185.0 million, or $0.84 per share, versus $146.7 million, or $0.66 per share in 2014.

US GAAP Net Income was $185.0 million or $0.84 per share, versus $137.7 million, or $0.62 per share in 2014.

Bridgepoint to sell Ponant to Artémis

Ponant, the specialist luxury cruise operator and market leader in specialist polar cruises, is to be sold by Bridgepoint to Artémis, the holding company of French entrepreneur Francois Pinault. The value of the transaction is not disclosed.

Headquartered in Marseilles, Ponant currently transports over 30,000 passengers per year to the polar regions and other locations, operating in the growing luxury cruise segment. It was acquired by Bridgepoint in 2012 from Groupe CMA CGM, the French container shipping company. Founded in 1988 and employing 189 personnel, Ponant has the youngest and best invested fleet in the market (currently five vessels with an average age of 2.5 years).

Under Bridgepoint ownership, the company has doubled sales to €140 million and tripled profits. This was achieved thanks to a combination of factors: 1) increasing and upgrading the capacity of the fleet by 11% p.a., boosted by the addition and funding of two new ships to the fleet and withdrawal of two older ones; 2) geographical expansion with opening of sales offices in China and Australia; and 3) the acquisition of TDI, a further sales distribution channel in the important North American cruise market.

Jean-Emmanuel Sauvée, Co-Founder and President of Ponant, said: "We have worked well with Bridgepoint during a period of expansion for our business. In the last three years we have introduced our specialist luxury cruises to new customers, launched new ships and grown our business significantly. Today, we are entering a new period with a similar shareholder who shares our vision and ambition for Ponant within specialist luxury cruise market."

Xavier Robert, partner of Bridgepoint in Paris, said: "The transformation and progress achieved by the company have been outstanding and we are proud to have worked with the management team and contributed to its success. The planned transaction ensures the continuity of the company's ambitions with the acquisition of our interests by a likeminded long-term shareholder."

The transaction is subject to standard Works Council and other EU clearances.