Repercussions From Damaged Ship Propeller Expected to Drive Down RCCL's 2Q Profits
Celebrity Cruises said on Monday it expects the cancellation of a 14-day European voyage as a result of a damaged ship propeller to drag down second-quarter profits of parent Royal Caribbean Cruises Ltd. The company said repairs, refunds and other compensation to the 1,696 passengers aboard its Galaxy ship will hurt Royal Caribbean's profits for the quarter by $.04 to $0.5 a share. Analysts had on average estimated earnings for Royal Caribbean, the world's number two cruise group behind Carnival Corp., at $.40 a share. Celebrity canceled the cruise so a damaged propeller on the Galaxy can be repaired, spokeswoman Lynn Martenstein said. Celebrity staff continued to investigate, but suspect Galaxy's port propeller was damaged on Saturday as the 858-ft.
ITF Targets Liberian Flag
The International Transport Workers Federation (ITF) has launched a campaign to bring down the Liberian shipping flag, which it accuses of bank-rolling a savage conflict in Sierra Leone. At least one ship owner has already been shaken by the allegations surrounding the flag and says it is looking at alternatives. Liberia receives tens of millions of dollars each year from respectable ship operators such as Royal Caribbean International and Germany's Hamburg Sud, seeking a favorable commercial environment for shipping in return for cash. Royal Caribbean said it was taking the issue seriously. "We've been in discussions with the (U.S.) State Department and we're considering other alternatives," Royal Caribbean's Lynn Martenstein said.
Mechanical Problems, Late Deliveries Continue to Plague Industry
A stagnant economy, threat of overcapacity and canceled cruises due to repairs and late deliveries have conspired to slow the hyper-growth cruise industry has enjoyed for the past decade. Even last year's new Millennium, which burst onto the cruise scene with its new gas turbine propulsion, had its share of troubles. Despite unparalleled reassurance by Celebrity that Millennium's propulsion problem was remedied, Infinity, its sistership, which was delivered this past Spring, recently experienced new problems with faulty bearings in its propulsion system — forcing the line to cancel two weeks of sailings. In addition, Celebrity's Galaxy dealt with a damaged propeller, causing lost money and cruises on that vessel.
Lawsuit Accuses RCCL of Bogus Taxes
A lawsuit filed on Friday is claiming that Royal Caribbean Cruises and subsidiary Celebrity Cruise Lines overcharged passengers at least $150 million in fraudulent taxes. "We are outraged by the actions of the attorneys filing this suit," said Lynn Martenstein, vice president, Corporate Communications. "We actually pay more in government taxes and fees than we charge our guests," she explained, citing a preliminary analysis of guest charges and payments made to government. Using actual figures paid by two of the plaintiffs as examples, the RCCL said they were charged $26 and $40, respectively, for government taxes and fees. The company, in turn, paid approximately $45 and $58, respectively, to cover such taxes and fees.
