Loss at Star Cruises widens sixfold

[Jason]

Demand fails to match expansion of North American unit[/size]

By Kelvin Wong, Bloomberg News

HONG KONG:

Higher salaries and related expenses at NCL Group helped increase Star Cruises' operating costs 14.6 percent to $440 million in the three months ended Dec. 31, the company, based in Hong Kong said in a statement to the Hong Kong stock exchange.

NCL Group failed to sell enough Caribbean and Hawaii trips to fully use its growing capacity, Star Cruises said. Larger rivals Royal Caribbean Cruises and Carnival also added capacity and the heightened competition made it more difficult to raise prices, said Lim Kok Thay, chairman of Star Cruises.

NCL Group "is not achieving the pricing needed to support its higher U.S. flag operating costs," Lim said in the statement. "The addition of capacity, both NCL's and their foreign flag competitors, has outstripped demand in the short term."

Shares of Star Cruises declined 4.49 percent to 2.34 Hong Kong dollars, or 30 U.S. cents at the midday trading break Monday, after falling as much as 12.8 percent earlier.

Operating loss was $72.5 million, compared with a profit of $12.6 million a year earlier, the cruise operator said in the statement issued Sunday. Star Cruises said it booked an impairment loss of $30.6 million in relation to a ship and its Orient Lines trade name, without providing more details.

Sales rose 6.1 percent to $547 million from $515.5 million. The company's loss per share was 2.58 cents. Net loss in the fourth quarter of 2005 was $25.7 million.

For the full year, Star Cruises had a loss of $156.2 million, or 2.76 cents a share, compared with a profit of 17.9 million, or 0.32 cents a share. Sales rose to $2.34 billion from $1.97 billion.

The company, controlled by Genting of Malaysia, operates under its own brand and also Norwegian Cruise Line, NCL America, Orient Lines and Cruise Ferries.

Genting, based in Kuala Lumpur, indirectly holds 36.3 percent of Star Cruises through Resorts World, which manages Southeast Asia's largest casino, outside the Malaysian capital.

Star Cruises and Genting won a bid to build casinos in Singapore and to establish a Universal Studios theme park. In July, Singapore ended a four-decade gambling ban.

Genting, through its Singapore-listed unit Genting International, raised its investment in the developer that is building the Singapore resort to 525 million Singapore dollars, or $340 million, from 117.9 million dollars. Star Cruises will raise its investment to 175 million dollars from 39.3 million dollars, Genting said last month.

[SMB]

You've got to wonder what will happen to the industry when these new mega-super-gigantic-monster-huge cruise ships start coming online.

[TheSkipper]

As these new ships keep coming on line they simply add berths which must be filled every week and the competition is getting greater and greater. This is the reason cruising today is no more expensive that it was 20 years ago when we started cruising. In fact, many of the prices are cheaper. They have to fill those berths.

This is also the reason cruising has become more expensive AFTER you board the ship. They have got to make up for the deeply discounted staterooms. So we are paying more for everything on board from pictures, booze, "themed" resturants and they are pushing more bingo, art auctions, etc. etc.

[Longboysfan]

The Skipper brings up a good point.

The prices have not gone up that much - if at all in the past few years.

They have not even paced the inflation index.

I am wondering the same thing. Will the lines be able to attract enough new cruisers to fill the number of berths needed to run at a profit.

I know the new ships take this into consideration when they run.

As because they have more people on board they need not have the staf ratio of a smaller ship.