Royal Caribbean Cruises LTD. (RCL) has reported net income of $105.5 million, or $0.55 per share on revenues of $707.8 million for its first quarter ended March 31, 2000, compared to net income of $90.2 million, or $0.49 per share, on revenues of $610.0 million for its first quarter last year.

The company attributed the 17 percent increase in net income and 16 percent increase in revenues primarily to a 15.3 percent increase in capacity, and in particular, to strong market response towards the Voyager of the Seas.

However, RCL CEO Richard Fain voiced words of caution regarding the future outlook, referring to a "very competitive pricing environment," adding that net yields for the remainder of the year would be flat or up slightly from 1999, a result he characterized as "less than earlier hoped."

In a conference call, RCL executives also pointed out that increased fuel costs would impact earnings at a rate of $0.01 to $0.02 per quarter.

In the days following the announcement of quarterly results, RCL shares dropped 15 percent, from $24 10/16 to $20 13/16, compared to a 52-week high/low of $58 7/8-$19 13/16.

RCL reported 3,024,269 passenger days in the first quarter of 2000, up 14.9 percent from the previous year. Occupancy was 101.7 percent, a 0.4 percent decline from the same period in 1999.

CFO Richard Glasier noted a decrease in the mix of air/sea passengers this quarter, down from 47 percent in first quarter 1999 to 38 percent this year, but noted that the air component was offered at break-even prices, thus the change in mix had little impact on net revenues.

Glasier said the finalization of two options for additional Voyager-class ships at Kvaerner Masa-Yards is contingent upon the yard securing financing.

Glasier also said that RCL would spend an estimated $10 million during its first year developing its new Seattle-based Alaska tour company, for purchases of motorcoaches, rail cars, etc.

Another major initiative will be announced very shortly, according to President Jack Williams. "We will be introducing a brand new Internet booking site for consumers, to complement our CruiseMatch 2000 online tool for agents. The new site will provide richer content, and allow consumers, if they so choose, to book cruises online."

'Difficult' Markets

Although RCL officials touted their record first­ quarter earnings, the market apparently focused more on comments regarding the current pricing environment, and its impact on net yields.

While characterizing the overall pricing as "very competitive," executives noted several areas in particular. According to Williams, "The seven-night Caribbean market is absorbing the most capacity; for the industry as a whole it's up about 25 percent."

Further, Williams noted, "We're seeing a little bit more pressure on pricing in Alaska now, especially during the shoulder seasons. There's been a lot of competitive pricing in the last few weeks," he added, predicting "flat yields in Alaska" this year.

In addition, Williams also noted the importance of RCL developing new products as its fleet expands, citing the new short-cruise Royal Caribbean International (RCI) product out of Seattle, the RCI and Celebrity Cruises products in South America, RCI' s Royal Journey program, the new Aruba-homeported cruises of Celebrity, and RCI's new year-round presence in Port Canaveral. He said that new market startups such as these experience the most pricing pressure, but that increased demand should lead to a subsequent increase in pricing.