News

RCCL books $400 million impairment charge against Pullmantur and its fleet

Details: Written by Kari Reinikainen Kari Reinikainen; Category: Top Headlines Top Headlines; Published: 23 October 2015 23 October 2015

Royal Caribbean Cruises Ltd (RCCL), the world’s second largest cruise shipping group, has booked a $400 million impairment charge against the assets and brand name of Pullmantur, its Spain and Latin America focused brand.

“The Company conducts an analysis of the carrying value of its assets on a regular basis. In past quarters, management has acknowledged the weakness in the economies of Latin America, and the impact of this weakness on Pullmantur. Unfortunately, the economic outlook in Latin America has deteriorated further in recent months and, as a result, the brand is re-focusing on its core market of Spain. These factors triggered the company to record a non-cash impairment charge of $399.3 million, primarily related to its goodwill, its trademark and trade names and a reduction in the carrying value of select vessels in the Pullmantur fleet,” the company said in a statement, it said, adding that this eliminates all intangibles at Pullmantur.

“As the company right-sizes the brand, restructuring and related charges of approximately $5 to $10 million associated with the new strategy will be booked in future quarters. In addition, as previously anticipated, we will be eliminating the two-month reporting lag for the Pullmantur brand,” RCCL said.

This will start in the first quarter of 2016, and is expected to be immaterial to the company's results. All the adjustments will be excluded from our key metrics for transparency and comparability purposes. "The right-sizing of the Pullmantur fleet will better balance supply with demand for the brand in the Spanish market," said Richard D. Fain, chairman and chief executive officer. "These changes should put Pullmantur on a more successful course for the future."

Carnival plc's Chinese joint venture could follow AIDA Cruises' model

Details: Written by Kari Reinikainen Kari Reinikainen; Category: Top Headlines Top Headlines; Published: 21 October 2015 21 October 2015

The new cruise brand Carnival Corporation & plc's British holding company Carnival plc and its two Chinese business partners will launch in China could be based on the model of AIDA Cruises, the Carnival group's German brand, said Alan Buckelew, COO of Carnival Corporation & plc.

"We think there's an opportunity for an AIDA type brand, more focused on the Chinese market than international but we need to do research on that. In many categories, products made in China are not seen as having the same value and quality as those abroad. Services are a different animal than products," Buckelew said at a conference call today.

AIDA Cruises features food market type dining, with table service alternative dining options at an extra charge.

"This new brand won't be of any scale for five to 10 years. Initially it won't have any impact. We think that developing the China market is a very positive thing for the cruise industry. It opens up a large, vibrant market. Allows us to further diversify our sourcing."

Moving on to recent news about China's economic setbacks, Buckelew said: "The best proxy for us is outbound tourism, up 12% this year. Our yields remain strong. We put our ships where we can earn the most money. We made that investment with Costa where we were willing to take losses. We don't take losses for strategic growth anymore. The beauty of our industry is if China was to slow down we could move our ships somewhere else

Carnival group's China operations fall under UK holding company

Details: Written by Kari Reinikainen Kari Reinikainen; Category: Top Headlines Top Headlines; Published: 21 October 2015 21 October 2015

Carnival Corporation & plc group's Chinese operations, including a new Chinese brand the launch of which was unveiled today, are part of the group's UK domiciled holding company Carnival plc, said Alan Buckelew,COO of Carnival Corporation & plc, at a conference all.

"All of our operations in China fall under the PLC part of our Carnival Corporation and David Dingle is the lead; he's been very active from the beginning. Equally likely is the newly created will fit within the UK tonnage tax structure so there is a positive UK story which made it appropriate for us to sign the deal in the presence of Cameron (British prime minister David Cameron) and Xi (Chinese president XI Jinping). Just as the Chinese government is greatly looking forward to developing with us, the British government is looking forward to playing its part in the development," Buckelew said..

When asked to comment on the value of the deal Carnival signed with China State Shipbuilding Corporation (CSSC) and China Investment Corporation (CIC) in London to form a joint venture to launch a Chinese cruise brand, he said: "Very hard to put a value on it, alternative business plans that show a range of different ships we can bring into this joint venture. This is a 25-year deal. What we will actually end up building and buying in 25 years is hard to forecast. Both sides are quite happy with … an investment of $4 billion in the first ten years. Capital investment. In total, this is meant to be an ongoing concern."

"The intention now that we've agreed to all the terms for the joint venture is to move, once we get final governmental approval is to move immediately into implentation phase. Not a specific set of dates but that will be the first order of business: Agreeing on final business plan and introduction of vessels," he continued.

The new joint venture aims to buy second hand vessels to start the operation and then to build ships in China. "The Chinese government has been very vocal about developing service industries, and cruising is specially mentioned as an industry they want to encourage from both the shipbuilding and travel perspective," Buckelew stated.