Royal Caribbean Cruises (RCC) attributed strong Q2 results to good pricing and good occupancy, with a 12.4 percent increase in capacity year-over year, as well as onboard sales that have also done exceptionally well, according to Chairman and CEO Richard fain.

Jack Williams, president of Royal Caribbean International and Celebrity Cruises added that the brands had 25 percent less capacity left to sell for the balance of the year compared to last year.

With a booking curve that continues to move further out and a pricing environment that continues to be strong, RCC is forecasting full year earnings per share in the range from $2.25 to $2.40 compared to $1.42 for 03, $1.79 for 02, $1.32 for 01 and $2.31 for 00.

RCC reported net income of $122.2 million, or $0.59 per share, on revenues of $1,143 million for the second quarter ended June 30, 2004, compared to net income of $55.7 million, or $0.28 per share, on revenues of $905.8 million for the same quarter last year.

Fain also explained how RCC's strategic pricing is driving the results - focusing on booking the ships early at good prices and not being dependent on filling up at the last moment (which often means discounting). But RCC is also seeing strong demand in close, he added. "We have been able to hold the prices close in," Fain underscored.

Pointing to Celebrity, Fain said: "Our premium brand offers experiences that cannot be found elsewhere. And, X-PEDITION has proven to be an excellent addition to the brand, while Cirque du Soleil is creating market buzz."

Fain also noted that the stretching of the Enchantment of the Seas provides better economics than building a new ship. "We get 100 percent of the revenue of the (151 extra) cabins," he explained, but not 100 percent of the costs since we do not have to hire extra marine crew nor does the ship burn any more fuel."

At an estimated project cost from $48 million to $54 million, the per berth construction cost is estimated by Cruise Industry News to range from $241, 172 to $261,589, including an estimated $25 million for eight weeks of interrupted service.

Fain said he thought there will be more lengthenings and upgradings in the future, adding that RCC will look at projects on a case by case basis. But he made no mention of some of the aging Celebrity ships.

New Ships

RCC has not decided whether to exercise the option on a second Ultra Voyager yet, but Fain said: "We have seen the benefits of how powerful yield improvement can be. We will build based on getting better pricing. Once you go post-Panarnax, you have a lot of alternatives in how you design vessels.

"Strategically, we intend to protect our market share and expect to grow (our) capacity at an average rate of four to six percent per year."

Meanwhile, RCC faces a flat capacity growth environment in 2005 and must drive earnings through higher prices, increased onboard spending and cost controls.

Good Everywhere

Williams outlined RCC's Q2 deployment and pointed out that yield was not down in any market, but up in most. Forty percent of the capacity was in the Caribbean seven-day market with bookings and pricing ahead of last year. With seven percent of the capacity, Alaska was also well ahead of last year. But Europe, with eight percent of the capacity, was described by Williams as ''unbelievable" with bookings and yields well ahead of last year.