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Royal Caribbean - Part 4
From SN Guides
At the end of 2000 the leading cruise operators were: -
All of the companies were engaged in a continuous new-building programme. Deliveries of RCI’s 137,000 grt Explorer of the Seas class continued until 2003 and Celebrity’s 90,000 grt Millennium class until 2002. These vessels are described in detail in Part 3, which also covers the major technical problems encountered by the Millennium class.
RCI Vantage Class Absolute Panamax
The RCI and Celebrity ships were built to the same general concepts, but the German shipyard avoided the worst problems that afflicted the French built vessels. The power plant adopted for both classes consists of two General Electric LM2500+ gas turbines, each driving a Brush alternator developing 25MW. In addition a waste heat boiler is used to power a Fincantieri steam turbine driving a smaller Brush alternator developing 9MW. The ship’s propulsion uses up to 39MW of the 59MW available, with the remainder being used to provide all other shipboard electrical requirements. The system provides further steam for fresh water production, laundry, galley, air conditioning and other needs. This power plant has very good environmental characteristics, with an 80% reduction in NOx emissions and (by using higher quality fuel) a 98% reduction in SOx emission. Although in 2000 the fuel consumption for the ships was higher than a conventional diesel electric propelled ship, the power plant is very compact and frees space for an additional 40 passenger and 20 crew cabins. Unfortunately since 2000 fuel costs have escalated so dramatically that the trade-off is no longer economical and the new ships are now very expensive to operate. The plant is also very inflexible. As there are only two gas turbines the minimum electrical power available is 25MW, which is far more than is required when the ship is in port.
In 2006 it was decided to retrofit each of the ships with an additional 11.2 MW generating set powered by a 16-cylinder Wärtsilä 38 diesel engine. The new engines will more economically provide the base load power for the ships when they are in port.
The Meyer Werft hull-form is entirely different from that developed by Chantiers de l’Atlantique for the Celebrity vessels and has not encountered the vibration problems experienced in Millennium. The propulsors used in the German built ships are of the Azipod design, manufactured by ABB. Unlike the French Mermaid units fitted in the Celebrity vessels, the Azipods have been trouble free in service.
The internal layout of the two classes of vessels is broadly similar, with the Vantage Class incorporating the standard RCI features, including a Viking Crown Lounge on the upper deck, ahead of the funnel and over the atrium.
The basic specification of the Vantage Class was – 90,090 grt; 293.2 metres Loa; 32.2 metres beam; 2,100 passengers on the basis of 2 passengers per cabin; 2,500 passengers max; 858 crew; service speed 24 knots.
The ships the class were delivered: -
After WW2 P&O gradually changed and increasingly diversified away from its traditional business. In the end P&O had its finger in a very large number of pies, but nowhere did it control the dish. The shares became increasingly unpopular and lagged behind the market until P&O was in a very dangerous financial situation. The total of the individual values of the great collection of companies owned by P&O became significantly greater than the stock market value of P&O itself. This created an ideal situation for someone to buy P&O, then to sell off each of the subsidiary companies and make a handsome profit. This almost happened in 1983, when Trafalgar House made a bid for P&O, but a young, new P&O director called Jeffrey Sterling organised a spirited defence of the company and the raid was repulsed.
Sterling was appointed as Chairman of P&O and led the company into the 21st Century. Unfortunately he intensified the diversification process, until in the mid 1990s there was a near mutiny by the major shareholders. They made it clear to the by then Lord Sterling, that if he and the other directors wanted to keep their jobs, P&O must become focussed in one or two sectors and the rest of the operations sold off.
Sterling reluctantly complied with these demands. Sadly P&O was in so many activities that for years available capital investment was rationed between them and their growth was stunted. Even the very large P&O companies had been left behind by their rivals. P&O cruise shipping business was certainly in this situation. In 1970 the P&O passenger fleet of 15 passenger ships was the largest in the world. By 2000 when P&O Princess Cruises was floated off as a new quoted company its position had fallen to be only the third largest cruise group in the world and over 30 years it had only grown to 17 cruise ships. Despite this, the market value of the new cruise company was about 150% of the value of all of the remainder of P&O. Lord Sterling became chairman with Peter Ratcliffe as Managing Director of P&O Princess.
From Ratciffe’s perspective Carnival was a better proposition. Carnival has brilliantly created a federal structure where each of its companies has a high degree of central support coupled with freedom of action to fully exploit their brand. By contrast RCCL was essentially a monolithic structure that came close to destroying it one major acquisition, Celebrity Cruise. On the other hand Micky Arison was famous for never parting with one unnecessary dollar and it would be very difficult to structure a deal that would satisfy the Princess shareholders unless there was a competitive take over situation. A further problem was the possibility that the competition regulators in US or Europe would veto the creation of a joint Carnival / Princess company controlling almost 50% of the cruise industry.
When Ratcliffe took the initiative by telephoning Richard Fain, the advantages of a merger were obvious to Fain. It would enable RCCL to overtake Carnival and create the largest cruise company in the world. Fain was afraid however, that RCCL was merely being used to provoke a better offer from Carnival. After considerable debate with his fellow directors he agreed to go ahead. A private meeting was arranged at Fain’s Florida home for the morning of 9 September 2001. When the news of the New York and Washington terrorist atrocities came through, the meeting was abandoned.
Discussions were subsequently restarted however, which attempted to meet the major constraints of both parties. The negotiations led to acceptance by both Boards of Directors of the concept of a dual-listed corporation, so that the merged Princess could remain on the London stock exchange, thus avoiding the situation where the considerable number of British pension funds and trusts would be obliged to sell if they became shareholders in an overseas corporation. Against the advice of Radcliffe the deal also included a thinly disguised American style “poison pill” where both companies would invest $500 million to create a new Mediterranean cruise company but if any other organisation (i.e. Carnival) gained control of Princess before 1 January 2003 the entire joint venture would go to Royal Caribbean. A public announcement was made on 20 November 2001. As Radcliffe had warned the Mediterranean joint venture concept was very controversial and bitterly criticised in Britain as a denial of shareholder rights. Carnival responded with an opening counter offer, which was rejected by P&O Princess. This initiated several rounds of competitive manoeuvring from the two American companies, lasting well into 2002.
During the early months of 2002, the Board of P&O Princess remained steadfastly loyal to Royal Caribbean, not the least because of the substantial penalty which was payable should another offer be accepted before 1 January 2003. Nevertheless the shareholders increasingly began to support Carnival. To Fain’s chagrin Ratcliffe was also failing to fully support him and made no effort to actually form the Mediterranean company. It was a replay of the Carnival / Royal Caribbean take-over fight of 1988, but this time Fain was being frozen out. The turning point was a General Meeting called on 14 February 2002 to approve the final Royal Caribbean offer.
The Royal Caribbean strategy was to emphasise the likelihood of any Carnival offer being blocked by the monopoly regulators in the USA, the EEC or the UK. The Royal Caribbean offer was final. If it was not accepted, Royal Caribbean hinted that they would walk away and no deal would be possible. To Fain’s astonishment, just before the meeting, the British authorities announced that the Royal Caribbean offer also needed regulatory approval. Many felt that the Establishment was showing its resentment against Fain’s “Poison Pill” strategy.
On the eve of the meeting Carnival increased its conditional offer above the value of Royal Caribbean’s, also on a dual listing basis and Micky made the brilliant public proposal that the meeting should merely fail to either agree or reject the Royal Caribbean offer. That would give Carnival time to seek regulatory approval, so enabling it to make an unconditional offer. In the meanwhile Royal Caribbean could only walk away by foregoing its $500 million. Fain was caught by his own defence.
The hostility of the shareholders to the Royal Caribbean strategy resulted in the Extraordinary General Meeting continuing into the small hours of the next day, at which point the meeting was postponed indefinitely. From this point onwards, it was clear that Royal Caribbean would only succeed if they obtained regulatory approval and Carnival failed.
All regulatory approvals were in fact granted to both offers. The Carnival argument that although the combined Carnival / Princess operations represented about 50% of the cruise business, it would only be about 5% of the total vacation industry was accepted. The merger was finalised on 17 April 2003. Micky Arison had won a massive victory in his long running feud with Richard Fain. As a minor consolation prize, RCCL received a termination of negotiations payment of $62.5 million, which after professional costs resulted in a $33 million net profit and contribution to its cash balances.
In 2002 the travelling public had just started to regain confidence when the war in Iraq began. As a consequence the RCCL net profit recovered in 2002, but only to $351 million and it was 2004 before net profits reached $475 million and squeezed past the year 2000 figure. In 2005 RCCL achieved a record net profit of $663 million. Despite booming total revenue figures, the Group’s fortunes have been slowly subsiding since 2005, to $663 million in 2006 and $603 million in 2007. Increasing fuel costs have been a contributory factor in these declining profits. It should be noted that Carnival’s annual profits were about $2billion higher than RCCL, throughout the period, while Star/NCL were loss making.
In 2002 RCI also obtained the exclusive use of the entire Bahamas island of Coco Cay, to supplement the use of its existing Labadee beach resort. The company invested $20 million in the creation of facilities on the island. Carnival also has similar arrangements in Bahamas.
The basic specification of Xpedition was – 2,842 grt; 88.5 metres Loa; 14.0 metres beam; 92 passengers on the basis of 2 passengers per cabin; 96 passengers max; 54 crew; service speed 13.5 knots.
The revised basic specification of Enchantment of the Seas was – 81,278 grt; 301.8 metres Loa; 32.2 metres beam; 2,252 passengers on the basis of 2 passengers per cabin; 2,750 passengers max; 864 crew; service speed 22 knots.
The revised basic specification of Century was – 70,606 grt; 248.5 metres Loa; 32.2 metres beam; 1,826 passengers on the basis of 2 passengers per cabin; 2,253 passengers max; 843 crew; service speed 21.5 knots.
The additional space has been used to provide more public entertainment facilities. One of the innovations is a FlowRider surfing pool. FlowRider is an artificial sheet wave surfing environment incorporated in many water-parks and hotels. The rider slides down a ramp on a wakeboard into the curl of a wave, where an array of high-output water-pumps produces a sheet of water approximately 2 inches thick over a fixed, foam-padded surface. The FlowRiders onboard Freedom of the Seas and her sisters produce waves at a speed of 30 MPH. The water recirculates through a reservoir at up to 60,000 gallons a minute.
There are thirty-one passenger saloons in the ship, ranging from the 2,105 passenger, three-deck high main restaurant to the 20 passenger, Concierge Lounge. The sun-deck contains a large number of activities, including two, glass-bottomed whirlpools that are cantilevered over the side of the ship.
The basic specification of Freedom of the Sea was – 154,407 grt; 338.9 metres Loa; 38.6 metres beam; 3,634 passengers on the basis of 2 passengers per cabin; 4,375 passengers max; 1,396 crew; service speed 21.6 knots.
The three ships in the class were delivered: -
Renaissance Cruises became bankrupt in 2001 and Pullmantur chartered R Five in 2002 from Cruiseinvest, the French financial organisation set up to build the Renaissance fleet. R Six was added to the charter in 2003. The two ships were renamed Blue Dream and Blue Star respectively. Pullmantur also acquired Superstar Aries (the former HAPAG Europa) from Star Cruises and renamed her Holiday Dream. The Blue Dream charter was terminated in 2004, but confusingly Blue Star was renamed Blue Dream and a third R-class ship followed in 2006, when Pullmantur bought the Delphin Renaissance and renamed her Blue Moon. Later the same year the Pullmantur fleet grew to six ships when the Pacific Sky was purchased from P&O Cruises Australia and renamed Sky Wonder.
• Pacific (ex Pacific Princess, ex Sea Venture) Built by Nordseewerk 1971. 20,186 grt; 168.7 metres Loa; 24.6 metres beam; 648 passengers on the basis of 2 passengers per cabin; 751 passengers max; 317 crew; service speed 20 knots.
• Holiday Dream (ex SuperStar Aries, ex SuperStar Europe, ex Europa ) Built Bremer Vulkan 1982. 37,301 grt; 199.6 metres Loa; 28.5 metres beam; 752 passengers on the basis of 2 passengers per cabin; 758 passengers max; 380 crew; service speed 21 knots.
• Sky Wonder (ex Pacific Sky, ex Sky Princess, ex Fairsky) Built by Chantiers de l’Atlantique 1984. 46,087 grt; 240.7metres Loa; 27.8metres beam; 1,212 passengers on the basis of 2 passengers per cabin; 1,585 passengers max; 615 crew; service speed 19 knots.
• Blue Dream (ex Blue Star, ex R Six) Built by Chantiers de l’Atlantique 2000. 30,277 grt; 181.0metres Loa; 25.5metres beam; 702 passengers on the basis of 2 passengers per cabin; 702 passengers max; 372 crew; service speed 18 knots.
• Blue Moon (ex R Seven) Built by Chantiers de l’Atlantique 2000. 30,277 grt; 181.0metres Loa; 25.5metres beam; 702 passengers on the basis of 2 passengers per cabin; 702 passengers max; 372 crew; service speed 18 knots.
Once again, RCCL seems to be having difficulties in creating an operational structure that motivates the management of the staff of the companies it acquires. The chief executive of Pullmantur Cruises has resigned and left with a significant number of its management team. They have formed Quail Cruises and bought Pacific from Pullmantur. More changes are due to follow in 2008. The up- market ship Holiday Dream is leaving the Pullmantur fleet to establish a new RCCL company CDF Croisières de France. It will be replaced by the former P&O Cruises Australia ship Pacific Star as Ocean Dream and a further ship is set to join the Pullmantur fleet in late 2008, when RCI's Sovereign of the Seas will be transferred as the Sovereign. The overall effect of these changes is that the newest and most luxurious Pullmantur ships have been removed and replaced by older tonnage that is less competitive in other markets.
The Major Cruise Operators - 2007
Carnival Corporation & plc
Fleet total – 84 cruise ships – 164,098 passengers
Royal Caribbean Cruises Ltd
Fleet total – 38 cruise ships – 73,775 passengers
The passenger figures in the above table are on the standard cruise industry basis of two passengers per cabin, ignoring additional Pullman berths.
Royal Caribbean History