Slow Storm Season Boosts Royal Caribbean's Profit

Jason · November 2, 2006

Source: Douglas Hanks, Miami Herald

Fuel prices didn't fall quickly enough to boost fall profit at Royal Caribbean, but the Miami-based cruise line expects cheaper gas to lift its numbers next year.

In announcing a $345 million profit for the third quarter, Royal Caribbean executives sounded upbeat about the fall season and the relief it has brought from two chronic woes: hurricanes and fuel costs.

Passenger reviews were much kinder this year when compared to last, when storms disrupted itineraries and lashed favorite locales for shore excursions. And gasoline prices, while still more expensive than in 2005, are dropping to the point that the company expects to spend less on fuel in 2007.

"Fuel is actually down," Chairman Richard Fain told analysts Tuesday. "I can't remember the last time I said that."

Still, Royal Caribbean expects 2007 to be a flat year for bookings, with forecasts suggesting the start of the year -- prime cruising season for the Caribbean -- will be down slightly from a year ago.

Freedom of the Seas, the world's largest cruise ship launched in May, continued its strong showing, said Adam Goldstein, president of the Royal Caribbean International brand.

Also on Tuesday, Royal Caribbean's chief financial officer, Luis Leon, announced he would retire by the end of the year.

Leon, 53, joined the company in 2003 and will be replaced by Brian Rice, currently executive vice president of revenue performance.

Royal Caribbean's costs were lower than expected, allowing its $1.63 per share profit to beat the $1.59 consensus forecast from analysts. But third-quarter profit was still down 8 percent from a year ago, due to 2005's one-time gain of $44 million related to Royal Caribbean's selling stock it held in a British tour company. Without that influx of cash last year, the company said third-quarter profit would have increased 12 percent.

Revenue increased from $1.5 billion to $1.6 billion, a 6 percent gain.

Fuel currently costs Royal Caribbean $388 a ton, down from $442 a ton in the third-quarter.

The company expects prices to drop more and predicts fuel costs will be down $35 million in all.

This report was supplemented with material from the Associated Press.