P&O Princess Cruises (POC) has reported internet earnings of $163.0 million, or $0.94 per ADS, on revenues of $776.0 million for the third quarter ended Sept. 30, 2001, in comparison with internet earnings of $150.6 million, or $0.88 per ADS, on revenues of $778.1 million for the third quarter of 2000.
POC was capable of enhance its internet earnings year-over yr primarily attributable to a discount in its tax fee, but additionally absorbed a $12 million one-time cost arising from the terrorist assaults of Sept. 11. ($5 million for what POC referred to as the “instant disruption” and $7 million in extra promotion prices.) The monetary affect of the assaults was restricted by lack of revenue insurance coverage.
POC reported 2,526,000 passenger cruise days for the third quarter of this yr, in comparison with 2,288,000 final yr.
In accordance with POC CEO Peter Ratcliffe, the 2002 earnings outlook is unsure and can be closely influenced by the political and financial setting that prevails from January to March 2002. “That is crucial reserving interval for quarters two and three, which make a disproportionate contribution to full-year earnings,” Ratcliffe stated.
“We had already launched into a significant value effectivity program previous to Sept. 11 which now we have now accelerated,” Ratcliffe added. “We’ve got new budgets in place for 2002 and we count on to ship a unit value discount of round seven % in 2002 along with the 5 % financial savings made in 2001.
“There is just one rule,” Ratcliffe stated, “Price financial savings shall not have an effect on the product or security and safety. Our financial savings will assist offset a few of the inevitable yield pressures in 2002,” Ratcliffe stated.
Feedback
In accordance with POC, internet income yields, together with onboard income, had been 5 % decrease on a like-for like foundation in comparison with the third quarter of 2000. POC attributed this discount to Princess, which skilled aggressive buying and selling situations notably in Alaska, the corporate stated in a ready assertion. POC stated there dangerous been a major improve in capability in Alaska in 2001.
Ratcliffe additionally pointed to the cruise business’s inherent flexibility. “We’re capable of redeploy ships,” he stated, “to reduce the affect of occasions that may have a disproportionate affect on anyone program.”
He stated the strengths of POC included its excessive return on funding capital and low curiosity prices.
Influence of 9/11
The instant affect on Princess Cruises was the diversion of ships to Boston from New York. Second was the short-term disruption of air journey inside and out of the U.S. The Golden Princess’ remaining European cruise of the season needed to be cancelled in consequence and occupancy on different cruises was diminished.
For 2002, Princess stated it has transferred capability from Europe to Alaska and from what the corporate calls unique trades and the Southern Caribbean to itineraries out of Los Angeles. (Nonetheless, the so-called unique commerce could have extra capability in 2002 than 2001.)
Adjustments have additionally been made to numerous itineraries to exclude ports within the Jap Mediterranean and the Center East. This has affected some P&O Cruises (UK) itineraries within the fourth quarter of 2001 and a few of Princess’ 2002 itineraries.
Whereas the corporate could have misplaced a few of the ahead reserving momentum for Alaska and Europe, which generally begins in September, Ratcliffe stated he believed Princess will catch up. He additionally stated that the reserving sample could change with extra cruises nearer to house.
Ratcliffe stated that Princess has not but thought-about delaying the introduction of latest ships, saying that the contracts are agency. “We favor to see how issues stabilize earlier than we make such choices,” he stated.
Capability Adjustments
For 2002, Princess will provide 1.6 million passenger cruise days in Alaska in comparison with 1.3 million in 2001; 870,000 passenger cruise days to the West Coast of Mexico, in comparison with 220,000 in 2001; and 980,000 passenger cruise days on its so-called “unique and different cruises” in comparison with 950,000 in 2001.
Princess’ European capability will lower to 500,000 passenger cruise days in 2002 from 780,000 in 2001; the Panama Canal will see a lower to 730,000 from 830,000, and even the Caribbean will see Princess minimize capability, albeit barely, to 2.1 million from 2.2 million passenger cruise days in 2001.
9 Months
For the nine-month interval ended Sept. 30, 2001, P&O Princess reported internet earnings of $270.0 million, or $1.56 per ADS, on revenues of $1,965.7 million, in comparison with internet earnings of $277.7 million, or $1.63 per ADS, on revenues of $1,939.1 million for a similar interval final yr. A discount within the tax fee was offset by elevated working prices and curiosity expense.
P&O Princess reported 7,096,000 passenger cruise days for the nine-month interval this yr, in comparison with 6,498,000 final yr.
Outlook
Previous to Sept. 11, POC stated that reserving volumes had been consistent with the rise in capability. The corporate stated there have been additionally indicators of some yield stabilization after the reductions skilled within the fourth quarter of 2000 and the primary three quarters of 2001.
However within the first two weeks after Sept. 11, Princess skilled a internet lack of 20,000 bookings. Whereas bookings have since picked up, Ratcliffe stated bookings had fallen behind projections by some 40,000. “That’s solely 5 % of the corporate’s annual quantity, nonetheless,” he stated. “And now we have time to make it up.”
In Europe, POC stated bookings for the upcoming winter and spring seasons have been working at 65 % of the anticipated fee. POC added that the markets are responding to promotions.
The group expects to sail greater than 95 % full within the fourth quarter of 2001, with common costs some 5 % under final yr’s fourth quarter.
POC stated it was troublesome to evaluate the primary quarter of 2002, noting that the group was lower than 60 % booked for this era at press time. Ratcliffe admitted the corporate was working behind for the primary quarter and anticipated yields to be down as properly.
POC stated there was a disruption of the conventional reserving cycle and the political local weather remains to be very unsure. “It’s clear that now we have to make use of the value mechanism greater than would usually be the case with a view to keep the required tempo of bookings,” the corporate stated.
For 2002, crucial quarters for earnings are Q2 and Q3 and the result for these quarters will rely totally on the political and financial circumstances that prevail within the January to March 2002 interval, POC stated.
The largest challenges Princess could face in 2002 goes again to Alaska with extra capability, contemplating that market’s aggressive scenario in 2001, and by introducing a lot extra capability on the Mexican Riviera.
