Kloster Cruise Limited has reported cruise earnings of $16.5 million for the third quarter ended September 30 up from $10.9 million in the same period last year. Earnings for the first nine months were slightly down, however, at $35.9 million compared to $36.2 million in 1989.

According to Vard, parent company to Kloster Cruise, both Norwegian Cruise Line and Royal Cruise Line contributed to the profits, but Royal Viking Line earnings were below expectations.

A spokesman for Vard said that RCL load factors had improved from 84 percent to 97 percent, but that RVL had dropped to 72 percent. The spokesperson said that fierce competition in the upscale market segment had hurt RVL more than expected.

At press time, Vard shares traded for NOK 97 up from NOK 95 at end of September compared to NOK 130 in June and a 1990 high of NOK 182.50. Vard's shares are also affected by that company's other divisions, however.

Westward

Kloster Cruise has also announced plans to transfer the Royal Viking Star from RVL to NCL, renaming her the Westward effective April 20, 1991. Meanwhile, the Royal Viking Star will sail on scheduled Caribbean itineraries.

Next season, the Westward will resume seven day cruises from New York to Bermuda from April 20 through October 12, calling at St. George's and Hamilton. During the winter season, however, she will sail seven-day cruises from Los Angeles to Acapulco, beginning October 26, calling at Cabo San Lucas, Mazatlan, Puerto Vallarta and Zihuatanejo­-Ixtapa.

The Westward, which was built in 1972 and expanded in 1981, will carry 790 passengers compared to 740 under the RVL flag. She is scheduled to resume Bermuda service in late spring 1992.

Kloster brought RVL into Bermuda market in 1989 in an attempt to introduce its product with shorter, lower-priced cruises, hoping that passengers would be enticed to return on the longer, more expensive, traditional RVL cruises.

Kloster had originally announced that the vessel would be transferred to NCL and renamed the Norwegian Star back in May of 1988.

The Westward leaves Kloster with three vessels in the RVL fleet to compete against newcomers Crystal Cruises and Seabourn Cruise Line. In 1992 RVL will receive a smaller 212-passenger vessel similar to the Seabourn vessels.

The Royal Viking Sea and the Royal Viking Sky were built in 1973, while the newest vessel, the Raval Viking Sun was built in 1988.

Corporate Strategy?

Industry sources speculate that RVL will receive one of Kloster's two newbuildings, probably the second vessel scheduled for delivery in 1993, while the older RVL vessels will eventually also be transferred to NCL.

By 1993, this would give RVL three practically new vessels, spanning the range from 212-, 740- and around 1,000-passengers. This combination in the very upscale segment could give RVL an edge in the competition against the 212-passenger Seabourn vessels, the 960-passenger Crystal Harmony, the 120-passenger sisterships of Cunard/Sea Goddess, and the aging Sagafjord and Vistafjord Cunard/NAC vessels.

At the same time, this speculative scenario also indicates that the very upscale market may be more limited than previously anticipated if RVL in effect reduces capacity.

Royal Cruise Line

Industry sources speculate that RCL would receive the second newbuilding at full 1,200-passenger capacity in 1992, giving the product potentially a three-ship fleet, although it is expected that the smaller vessel, the 472-passenger Golden Odyssey may also be transferred to NCL.

In face of the oncoming and anticipated competition from Holland America Line in this upscale market segment, RCL would seem to need new tonnage to maintain its marketshare.

Norwegian Cruise Line

NCL is the cornerstone of Kloster's cruise operations and the largest profitmaker. However, the line, which was once the largest Miami cruise operator, claiming to be "America's most popular cruise line" has been lagging behind its rivals in expansion.

The NCL vessels range from the 1,534-passenger Seawarg, which was built in 1988, to 2,000-passenger the Norway which saw the addition of 270 berths this fall, to the so-called "white fleet": the 730-passenger Skyward, the 752-passenger Southward; the 758-passenger Starward; and the 676-passenger Sunward II.

While analysts have long said that NCL should sell the white ships, these ships are not old by industry standards, having been built in 1968 through 1979, compared to the oldest vessel in the Carnival Cruise Line fleet, the Carnivale, which was built in 1956.

Instead, it appears that NCL is on a different course than the megaships being launched by its competition. Whether this is by choice is a different story since the company appeared to have been on shaky grounds while its competitors were ordering their megaships. Now, that may have been "luckf since Princess Cruises' increased presence in the Caribbean will give that market three major lines with big, new ships, and it is further expected that Princess will begin to "squeeze" Carnival and RCCL, as one analyst put it.

Nevertheless, the "white fleet" is nicely complemented by the Westward as well as by the possible addition of the other two RVL ships and the smaller RCL ship. This gives NCL a mid-sized product alternative, offering the cruise market a different experience than that offered by Carnival and RCCL or Princess.

Even the large Norway is different than the other big ships inasmuch as she is a transformed oceanliner, still offering some of the luxuries and glamour of times past. The Seaward is effectively mid sized at 1,534 passengers in today's market, although she represents the modern trend exemplified predominantly by the big ships. The smaller ships offer a different cruise experience than the big ships by virtue of their size; potentially different ports and itineraries; and flexibility in terms of redeployment.

Moreover, if NCL follows the small-ship course, its marketing muscle would impact other smaller lines who are operating in niche markets.

The bottom line for Kloster, however, will be determined by cost effectiveness, i.e., if the smaller ships will be able to offer a scale of economy enabling NCL to compete effectively against the other major lines.

1993

By the end of 1993, the speculative scenario would give RVL three ships and 1,960 berths; RCL two ships and 2,252 berths; and NCL 10 ships and 9,272 berths, for a total of 15 ships and 13,484 berths.

In comparison, Carnival Cruise Lines will have nine ships in its Carnival fleet with 12,548 berths; Holland America Line will have seven ships with 8 768 berths; and Windstar Cruises will have three ships and 450 berths, for a total of 19 ships and 21,766 berths.

RCCL will have nine ships and 14,104 berths in its RCCL fleet and two ships and 1,694 berths under the Admiral Cruises banner, for a total of eleven ships and 15,798 berths.

Princess Cruises will have nine ships and 10,754 berths.

One factor that could upset this scenario is an acquisition scenario whereby Kloster could leapfrog in size and/or into different markets.

Short-term

In the short term, the pressure is on Kloster to generate earnings on a quarterly basis. The addition of 270 berths on the Norway should contribute increased earnings in the fourth quarter of this year, while increased earnings in the first quarter of next year is more likely to based on increased yield and onboard spending, after which the Westward would help to boost earnings in the second and third quarters. The first newbuilding arrives in 1992.

At Kloster Cruise in Coral Gables, Robert Walters, Senior Vice President and Chief Financial Officer, expressed cautiously that he expected the fourth quarter certainly to be profitable, although he anticipated that it may be a little less profitable than the third quarter.

However, in today's gloomy economic climate, cruise lines may be satisfied if they can post profits at all, much less increase their profits.