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(Updated) Brexit – business as usual for cruise industry

  • Written by Teijo Niemelä

Alan Lam reporting from Hamburg

On the second day of Seatrade Cruise and River Cruise Convention - currently underway in Hamburg, Germany - the topic of Brexit came under scrutiny.

The general consensus among the industry leaders is one of “business as usual”. None of the cruise lines has reported any negative impact on customer confidence and booking behaviour changes on account of the impending Brexit. The UK cruise business is still booming.

Although the biggest threat to the industry is one of uncertainty, “Fourteen months into the process we still don’t know anything about Brexit,” said Tim Reardon, Policy Director – Taxation, Ferry and Cruise, UK Chamber of Shipping. But all the indications suggest Brexit makes no difference to cruise business.”

Others in the industry share this view. “The business is buoyant,” said Stuart Leven, Vice President, EMEA and Managing Director, RCL Cruises Ltd.
“We have not seen any indication at all of the negative impact on customer confidence. Customers are resilient. I think one area of concern is the short-term currency fluctuation. The buoyancy remains as we go through the process. We are now selling cruises for after the three-year moratorium period of Brexit. There is no indication of slowing down.”

Leven also pointed out possible benefits of Brexit for the UK cruise business. “We always see the pitfalls,” he said, “but there could be benefits from Brexit. We just need to keep our focus as we go through the process,” he went on. “We are not making any itinerary changes because of Brexit.”

Looking at the broader picture there appears to be no changes based on Brexit. However, examining Brexit in detail, there are many questions need to be answered, especially those concerning free movement of passengers and labour. “I don’t think anybody will go mad and start to raise barriers,” said Thanos Pallis, Secretary General, MedCruise. “There might be some adjustments relating to customs control and duty-free sales, for example, but no major worries concerning the arrival of British passengers in short to medium term. In the longer term, everything will settle down in time once we have a clearer picture.”

The question of proposed visa requirement for UK citizens travelling to other EU countries was raised perfunctorily and dismissively. But it does not seem to have deterred either the cruise industry or its customers. If anything, the post-Brexit investment in the UK is intensifying. “We have shipping clients who are investing heavily in the UK and growing even though there is a looming Brexit,” said Javed Ali, Legal Consultant, Hill Dickinson. “We have clients from Italy who are relocating 400 staff to the UK.”

Neither the UK government nor EU has said anything to the cruise industry about Brexit. So uncertainty and currency fluctuation it brings are the only threats perceived by the industry for the moment. On the whole it is business as usual as far as Brexit is concern.

Carnival Corporation and Meyer Werft begins construction of world’s first fully LNG-powered cruise ship

  • Written by Teijo Niemelä

Carnival Corporation & plc, the world's largest leisure travel company, marked the official beginning of construction for the first of its seven next-generation cruise ships that will be fully-powered by liquefied natural gas (LNG) with a keel-laying ceremony at Seatrade Europe in Hamburg.

Pioneering a new era in the use of low-carbon fuels, these new ships will be the first in the cruise industry that can use LNG to generate 100 percent of their power both in port and on the open sea – an innovation that will reduce exhaust emissions to help protect the environment and support Carnival Corporation’s aggressive sustainability goals. These seven ships, with delivery dates between 2018 and 2022, will be built by leading German and Finnish shipbuilders Meyer Werft and Meyer Turku.

Arnold Donald, president and CEO of Carnival Corporation, together with Bernard Meyer, CEO of Meyer Yards, Michael Thamm, CEO of Costa Group and Carnival Asia, and representatives of three of the Carnival Corporation brands that will receive the LNG ships – David Dingle, chairman of Carnival UK; Neil Palomba, president of Costa Cruises; and Felix Eichhorn, president of AIDA Cruises – gave the official “full steam ahead” signal for the keel laying of the first ship of the new LNG generation, AIDAnova, which will be delivered by Meyer Werft Papenburg in fall 2018.

“Today marked a significant milestone in the construction of this next-generation of Carnival Corporation ships featuring our ‘green cruising’ design, which will be the most environmentally friendly ships in our company’s history,” said Donald, the corporation’s CEO. “We are committed to continuing to reduce air emissions and improving air quality by evaluating both new and established solutions, including LNG. We are proud to be on the forefront of advancing LNG as a fuel source for the cruise industry, and we appreciate our long-standing partnership with Meyer Werft and Meyer Turku. We look forward to the delivery of these beautiful and innovative ships that will help us meet our top goal – to provide extraordinary vacation experiences for our guests that exceed all of their expectations.”

“We thank Carnival Corporation and AIDA Cruises very much for their trust and their pioneering decision to implement LNG technology onboard their cruise ships,” said Meyer. “The corresponding infrastructure is now being developed at numerous ports – Carnival Corporation has made a decision that not only benefits the environment, but that also is highly important for the whole cruise industry.”

Following the introduction of AIDAnova in 2018, Carnival Corporation’s Costa Cruises brand will debut the industry's next cruise ship that can be powered completely by LNG on the open seas in 2019 – the first steel-cutting ceremony for this ship is scheduled at the Meyer Turku shipyard in the coming week. LNG-powered ships for Carnival Cruise Line and P&O Cruises (UK) will follow in 2020. Costa Cruises and AIDA Cruises will each receive an additional LNG-powered ship in 2021, followed by an additional LNG-powered ship for Carnival Cruise Line in 2022.

Pioneering LNG fuel for the cruise industry

In October 2016, Carnival Corporation signed a framework agreement with Shell Western LNG B.V. (Shell) to be its supplier of marine LNG to power the first two of its new LNG ships for AIDA Cruises and Costa Cruises with itineraries visiting popular European ports. As part of the agreement, the ships will utilize Shell's infrastructure in cruise ports to refuel with LNG throughout their itineraries. The vessels, equipped with dual-fuel engines, are the first of a new generation of cruise ships fully powered by LNG both while in port and at sea – an industry first and an environmental breakthrough that will improve air quality with cleaner emissions.

In 2015, as a pilot project, AIDAsol from the company's AIDA Cruises brand was the first cruise ship in the world to be supplied with power by an LNG Hybrid barge and, last year, the newly delivered AIDAprima became the first cruise ship to routinely use LNG with a dual-fuel powered engine while in port. Its sister ship, AIDAperla, debuted this April with the same technology.

In additional to utilizing LNG, Carnival Corporation and its brands implement extensive measures to deliver on its commitment to continue to keep guests and crew members safe and comfortable, protect the environment, develop and provide opportunities for its workforce, strengthen its stakeholder relations and enhance the communities in which the company visits and operates. Those measures are detailed in the company's recently release 2016 sustainability report and newly created sustainability website.

Asia Cruise Forum opens in Jeju: South Korea to diversify its cruise business

  • Written by Kari Reinikainen

Teijo Niemela reports from Jeju, South Korea

The fifth annual Asia Cruise Forum opened this morning in Jeju – a South Korean island strategically located on cruise itineraries between China and Japan. Jeju has been a great success story with a rapid expansion of cruise ship calls during the last few years, largely thanks to the development of Chinese cruise market.

However, earlier this year the fortunes reversed, as Chinese government banned Chinese tour groups to visit in South Korea. This has hit Jeju especially hard which has received 92% of its cruise business from China. In total, last year the number of cruise passengers visiting in Jeju reached 1.2 million. Just five years ago the number was 60,000.

Kim Young-Choon, Minister of Ocean and Fisheries said on his opening speech that the Ministry wants to diversify the market trying to attract more cruise ships to call South Korea from Japan, Taiwan and Southeast Asian countries. Taiwan itself is now the largest Asian cruise market after China. On the wish list is also to create home-porting business in South Korea, and develop the local source market, which is still on its infancy compared some other Asian countries.

South Korea continues also to invest its infrastructure. The Jeju Cruise Port has just experienced significant upgrades and can accommodate two cruise ships simultaneously. Next year Jeju expects to open the new Seogwipo Cruise Port, which also can accommodate two cruise ships simultaneously – one of them being the size of 220,000 gross tons.

Investments has also been made at other ports-of-call in South Korea, such as Busan and Incheon.

Meanwhile, difficulties to operate shorter itineraries from Chinese base ports has also affected the cruise operators. As they have now to bypass South Korea, some of them have changed their deployments. As an example, Princess Cruises will offer new ex-Taiwan itineraries on the new Majestic Princess next year, while re-deploying the Sapphire Princess to Europe. Dream Cruises’ President Thatcher Brown provided a figure for next year, that the lower berth capacity from China market may go down 18% compared 2017.

Genting Hong Kong reports sharp rise in cruise operating losses

  • Written by Kari Reinikainen

Genting Hong Kong, the rapidly expanding cruise shipping and shipbuilding group, has reported a sharp rise in operating loss of its cruise operations in the first six months of the year compared to the same period last year.

Operating loss (EBIT) deepened to $102.2 million from a $75.6 million loss in January-June last year. Revenues rose to $471.2 million from $383.9 million, reflecting bigger fleet.

“Passenger ticket revenue and onboard revenue increased significantly for the six months ended 30 June 2017 was mainly due to the full six months’ operation of Genting Dream and Crystal Mozart.

“However, additional depreciation of Genting Dream and Crystal Mozart, higher marketing costs and startup costs of new Crystal river ships resulted in segmental loss of our cruise and cruise-related activities,” the company said in a statement. It owns Crystal Cruises, Dream Cruise and Star Cruises.

In addition, higher overall operating and selling, general and administrative expenses including depreciation and amortisation as a result of full six months’ startup and newbuild activities of the shipyards in Germany in 2017 as compared with its two months’ post-acquisition activities for the six months ended 30 June 2016.

“Higher revenue of non-cruise activities was primarily contributed by revenue from its shipyard activities. The increase in segmental loss of our “non-cruise activities” was mainly due to startup costs of new Crystal AirCruises operations,” Genting Hong Kong said..

The group as a whole reported a first half net loss of $203.1 million, about four times the $54.5 million loss it booked in the first six months of 2016. Revenues rose to $532.5 million from $435.8 million.

The group’s equity and liabilities amounted to $6.1 billion on 30 June, of which $4.9 billion was financed by equity.

TUI reports continued strong cruise demand in Germany and UK as operating profit leaps

  • Written by Kari Reinikainen

TUI AG, the German tour operator that has its main listing in London, has reported a strong rise in the operating profit (EBITDA) of its cruise operations and said that the demand remains strong both in Germany and the UK.

The group’s cruise operations that comprise of a 50% stake in TUI Cruises in Germany plus the fully owned Hapag-Lloyd Kreuzfahren unit in Gernamny and Thomson Cruises in the UK, increased EBITDA by 49.3% to €67.1 million in the third quarter of the group’s financial year. This exceeded the 25.3% rise in turnover of the business, which reached €214.1 million.

In the first nine months of the group’s financial year, EBITDA rose to €147.5 million from €94.3 million, while revenues increased to €560.2 million from €479.9 million.

“TUI Cruises continues to deliver significant growth in its all inclusive German offering, whilst maintaining a strong occupancy and rate performance. Mein Schiff 6 was launched during the quarter, initially based in Kiel (Germany) before moving to New Jersey for itineraries in the USA and Caribbean,” TUI said in a statement.

“Thomson Cruises delivered significant growth in earnings, with continued modernisation of the fleet, including the launch of TUI Discovery 2 in the Mediterranean. There was also a good rate and occupancy performance across the fleet as UK demand for cruise remains very strong,” TUI continued.

Finally, earnings for Hapag-Lloyd Kreuzfahrten increased in the quarter, with overall increased average daily rate and good expedition cruise performance offsetting the lower number of operating days.

 

TUI Cruises. Occupancy rate remained stable at 101.2% in the third quarter year on, while that of Thomson cruises increased by one percentage point to 100.3%. Hapag-Lloyd Kreuzfahrten, however, experienced a drop in the figure to 73/1% from 73.4% in the third quarter of the TUI group’s financial year 2015-16.

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