Kloster Cruise has reported a loss of $4.3 million in the first quarter ended March 31, 1991 compared to net earnings of $10.3 million in the first quarter of 1990.

The loss would have been larger had the company not realized currency exchange earnings of $14.1 million.

According to a prepared statement from VARD, parent company to Kloster Cruise, the loss is mainly due to soft bookings and discounting following the Mideast War.

Vard also cautioned about a possible loss in the second quarter, while it said that increased bookings gave reason to expect improved results for the second half of the year.

RVL bit hard

While Kloster operates three cruise lines, Norwegian Cruise Line, Royal Cruise Line and Royal Viking Line, the Mideast conflict was reported to have struck RVL since last summer incurring losses of $15 million in 1990. The newest vessel however, the Royal Viking Sun was reported to have generated net earnings of $15 million.

The mixed results of the RVL fleet was given as the rationale for the company's decision to reduce RVL's capacity by 70 percent in 1992, only keeping the Sun of the previous four-ship fleet.

The Royal Viking Star has become the Westward which Vard said now operates with increased passenger capacity and substantially reduced crew for NCL.

The Royal Viking Sea is being rebuilt in Singapore partly with the help of its own crew, which, according to Vard, results in a significantly reduced building cost. The ship will be delivered to Royal Cruise Line at the end of the year.

The Royal Viking Sky, which was retired from service earlier this month will be sold or chartered, according to Vard, seemingly ending speculation focusing on the formation of a new European-based subsidiary.

When the 212-passenger Royal Viking Queen is delivered next February, RVL will have 30 percent of its former capacity. According to Vard, the restructuring is expected to result in a substantial increase in demand as well as load factor and per diems.

For 1991, however, Vard expects RVL to continue to suffer major losses.

More Cost Cutting

In addition, Kloster Cruise reported extensive cost saving actions on land and aboard the ships; transfer of RVL and RCL ships from "unsafe areas" to Alaska and Canada in 1991; and fixed price bunker contracts for the next two years at prices equivalent to $19.60 per barrel.

The company also noted that the one-time expenses encountered in connection with the transfer of ships from RVL and the losses resulting from the Mideast War would continue to influence cruise earnings in 1991, although an improvement is expected in the second half of the year.

At press time Vard shares traded at NOK 74 for A shares and NOK 70 for B shares. 1991 highs/lows are NOK 92 to NOK 50 for A shares and NOK 89 to NOK 52 for B shares.

First Quarter Results (in millions)

1991 1990 1989 1988
($4.3)      $10.3      $18.5      $6.6

First quarter revenues for Kloster Cruise were not disclosed. 1990 first quarter revenues were $208 million. First quarter revenues for 1989 and 1988 have previously not been available.

It is clear that the first quarter of 1991 has been a difficult one. Last year, this newsletter compared the first quarter of 1990 with the first quarter of 1988 and found that earnings then were only up slightly over the two year period on a per berth basis.

Since 1988, however , Kloster Cruise has trimmed costs, instituted a sophisticated yield management system and increased onboard spending. With soft bookings and discounting in the first quarter of this year, there was little more the company could do.

Executives for Kloster stated last spring that the first quarter results did not provide a good indication for the rest of the the year and promised a solid pick-up throughout the year with solid year-end results.

However, nobody could foresee the Mideast War.

Quarterly Earnings 1990 (in millions)

1Q 2Q      3Q 4Q
$10.3     $9 16.5      ($0.9)

1990 earnings were reported to be $35 million compared to $433 million in 1989; $34.8 million in 1988; $21.6 million in 1987; $15.6 million in 1986; $6 million in 1985; and $16.7 million in 1984.

At press time, no further information was available on the expected division of Vard into two companies, one of which would focus solely on cruise and passenger shipping.