DOWNLOAD THE MARINE LOG FEATURES CALENDAR FOR 2003

Which line will be the first back in the newbuilding market? The last several months have proved the validity of several well accepted basics about the cruise market. The big get bigger. What Micky wants, Micky gets. And, demand expands to meet capacity. (This last one has always proved a little bit difficult for anyone with any formal education in economics to grasp. Nonetheless, just accept it.) The latest figures available from CLIA, the Cruise Lines International Association, show that more than 2 million North American vacationers cruised during the third quarter of 2002—a 17 percent increase over the same period in 2001. CLIA member lines reported a third quarter average industry occupancy level of 97.9 percent. For the first three quarters of 2002, the number of North American cruise passengers sailing on CLIA member lines is up 9.5 percent over the same period last year, for a total of 5.56 million cruisers, and on a worldwide basis, 6.43 million guests sailed on CLIA-member cruise lines. According to Mark Conroy, CLIA chairman and president of Radisson Seven Seas Cruises, that put the industry is on to hit a 2003 total of 7.4 million cruisers carried. Since 1981, cruise passenger growth has increased an average of 8.4 percent annually, keeping pace with the annual average capacity growth of 7.6 percent. According to CLIA, capacity under contract or planned is expected to increase at an average of 7.9 percent over the next five years. Don't take too rosy a view of things, though. We are living in trying times and the economic situation is not an easy one. On Feb 26, 2003 (after publication of the print version of this feature) Zacks.com assigned a a Zacks Rank of 5 (Strong Sell) to Carnival Corp. shares. This means that Zacks, which rates shares primarily on the basis of earnings estimate revisions, believes that Carnival shares "should most likely be sold or avoided for the next 1 to 3 months." Here's why: "Carnival Corporation (NYSE:CCL) is one of the world's largest multiple-night cruise companies. In its 10-K filing with the Securities and Exchange Commission from earlier this month, CCL said that while year-to-date 2003 booking volumes are equal with last year's levels, bookings have not increased commensurate with the increase in its 2003 capacity. The company said bookings have been impacted the economic environment, concern over a war with Iraq, and security alerts from various national governments. CCL now expects first quarter net revenue yields to be about equal with last year, compared to its earlier guidance of a 1% to 3% rise. Over the past seven trading days, estimates for this year and next have eroded by about 14 cents and 15 cents respectively, with all of the company's most recent earnings estimate revisions for this year moving to the downside. CCL is one of the biggest and most recognizable names in its space, and should be able to improve nicely in a more complimentary time. However, the industry remains challenged at the moment, and investors may want to hold off on a CCL position until its earnings estimates gain some upward mobility." Jitters such as these explain why lines have been largely staying away from the shipyards. While the industry still has a substantial backlog of ships on order at world yards, since 9/11 newbuilding orders have been scarce and cruise lines have held off on exercising existing options. Just last month, Royal Caribbean Cruises Ltd. announced it had deferred options on a fifth and sixth Radiance-class ship. The options involve ships scheduled for deliveries in 2005 and 2006. Royal Caribbean and Germany’s Meyer Werft shipyard, Papenburg, Germany, agreed to extend the options to Sept. 19, 2003. Nonetheless, if passenger numbers continue to rise and capacity levels remain high, we can expect lines to look to expand. STARTUP BY STELIOS Interestingly, cruise shipping might start to follow traditional shipping trends in one respect. In most shipping sectors, activity in the newbuilding sector is usually preceded by a little action on Joe's Used Ship Lot. That could start to happen. Tanker owner turned budget airline entrepreneor Stelios Haji-Ioannou, founder of Stelmar Tankers and more recently of Easy Jet has reportedly pinpointed 13 ships he intends to charter to sail round the Mediterranean in the summer and the Caribbean in the winter offering a no-frills cruise service. Costs will be pared by taking bookings on the internet, charging separately for food and entertainment, and similar economies. WHO IS IN LINE TO BUILD? Meantime, back in the cruising main stream, the question shipbuilders are asking is who will be back at the shipyard inquiry window first? Insiders believe Disney Cruise Line will soon be looking and both Radisson and Carnival’s Costa operation are also rumored to be poised to start shopping. WHERE TO BUILD? The interesting question, of course, is who will get any new orders placed in the near future (other, that is, than exercised existing options). At the height of the ordering boom prior to 9/11, order books at the four premier cruise ship building yards, Kvaerner Masa-Yards, Fincantieri, Chantiers de l’Atlantique and Meyer Werft, were sufficiently full that one or two other yards were starting to get a little of the spillage. That’s changed and all the Big Four yards would now be more than happy to book another cruise ship order. The yard with the best chance of getting the first answer will, of course, be the one with the sharpest pencil. However, the yards’ ability to trim prices is going to be limited by such factors as the rise in the exchange rate of the Euro and the pain of some past bruisings. MORE Recommend This Page Enter an email address HOME