Kloster Cruise Limited has reported net results of $35 million in 1990 compared to $43 million in 1989. The reduced earnings were attributed to the Gulf conflict which primarily affected the Royal Viking Sun according to a statement from Vard, parent company of Kloster Cruise.

Kloster Cruise achieved near break-even results in the fourth quarter. Year-to-date earnings were reported to be $35.9 million after the third quarter, compared to $35 million after the fourth quarter.

Vard also stated that war in the Middle East will affect the operations of Royal Viking Line and Royal Cruis Line, and that it expects to post a loss in the first quarter of 1991. Althought, Vard expects the year as whole to be a profitable for its cruise operations.

Unpredictable Year

While it previously looked as if 1991 would be a long and tough year for Kloster Cruise, company sources said that the last two weeks had produced record bookings for the next three to six months.

At the same time, Kloster has introduced a broad promotional program for Norwegian Cruise Line, including its “Cruising in Pairs” program in which second passengers sail free for cruise-only bookings on selected sailings of the Norway, Seaward, Westward, Sunward II and Southward. The program also includes a 50 percent discount off published rates to second passengers on air/sea bookings of selected sailings of the Norway, Seaward and Westward.

While the promotion is capacity controlled and limited to certain time periods within 1991, it applies to 228 sailings of the respective vessels. For the Norway, 29 out of 35 sailings are part of the program, from April 20 through December 14; 29 out of 30 sailings of the Seward, from May 5 through December 15; all 26 Bermuda sailings of the Westward; all 74 sailings of the Sunward II, from May 3 through December 20; and 36 out of 84 cruises of the Southward.

At least one travel agent meanwhile has advertised 50 percent off any seven-day cruise in any cabin category on any seven-day NCL ship through March 24. A NCL spokesperson said that was only a test before “Cruising in Pairs” was launched.

In Alaska, RCL is offering two-for-ones after cancelling the Europe program of the Golden Odyssey.

Twenty percent early booking discounts are offered on the fall program, when the Golden Odyssey will sail six cruises along the Eastern Seaboard to New England and Canada, compared to four last year.

To boost bookings on its eight Scandinavia cruises aboard the Crown Odyssey, RCL is offering travel agents a free berth for every five berths they sell. While the special offer only applies to new bookings made after February 25, 1991, there is no limit to the number of free berths an agent may earn. A ten percent early booking discount off cruise fares has been extended until May 1.

RVL has revised some its sailings as well. The Royal Viking Sun will sail two East Coast spring cruises before crossing from Fort Lauderdale to Copenhagen in May – June. The new sailings replace previously scheduled itineraries in the Mediterranean and Western Europe.

The Royal Viking Sky will add two 14-day sailings to Alaska in August and September before being taken out of service September 15 which is earlier than previously announced. Pacific sailings are cancelled. The Royal Viking Sea will be taken out of service April 26 (1991) for refurbishment, before re-entering service for RCL as the Royal Odyssey in December.

1989, 1990, 1991…

According to sources, Kloster achieved increased load factors in 1990: 97.6 percent for RCL compared to 84 percent in 1989; 74.2 percent for RVL compared to 72.4 percent in 1989; and 100 percent for NCL compared to 99.8 percent in 1989.

Net per diems and onboard spending varied with NLC achieving an increased net per diem of $103.40 compared to $99.80 in 1989, and net onboard revenue of $20.50 compared to $19.70 in 1989. RVL, however, achieved reduced net per diems in 1990 of $197.40 compared to $225 in 1989. Net onboard revenue was also down at $19.50 compared to $21.10 the previous year. For RCL, net onboard revenue jumped from $14.40 in 1989 to $19.80 in 1990. Net per diems were $149.40 in 1990. No figure was available for 1989.

Thus, having improved the financial strength of the company over the last few years, Kloster was facing 1991 with a recession, a war and an industry environment of record discounting, plus substantial new tonnage being introduced into the seven-day market in the course of the year.

Outlook

It was apparently because of this that Kloster recently introduced a tough cost cutting program, trimmed its executive staffs and cut the existing RVL fleet back to one vessel plus another smaller ship to be introduced next year.

NCL will receive two new 1,200-passenger ships in 1992 and 1993.

In the meantime, company sources denied industry rumors that negotiations are underway that would lead to the sale of one, possibly two ships, to Premier Cruise Line, including the Royal Viking Sea. The company has previously said that the Royal Viking Sea will be “retired” in April of 1992 without divulging any further plans.

At the same time, Trygve Hegnar, CEO of Kloster Cruise, has long been known to want to demonstrate the company’s value to the financial markets and shareholders. The sale of a ship at the right price would allow him to do just that. Hegnar has often expressed that the company is under­ valued and that the market value of its cruise vessels is not recognized.

Earnings Forecast

While Kloster Cruise is confident that 1991 will also be a profitable year for the company, profits are likely to slump compared to 1990 and 1989, wtth NCL effectively discounting up 50 percent and RCL also offering discounts ranging as high as 50 percent. Moreover, both RCL and RVL are operating new cruises on very short lead-time, following vessel re­-deployment from the Mediterranean.

In addition, marketing and sales costs are expected to increase in light of the competition in the cruise market and to counter the negative effects of the recession. The costs for fuel and airlift are also up over last year.

Simply put, ticket revenues can be expected to be down in 1991, while costs will be up. It is unlikely that onboard spending, which increased from 1989 to 1990 for NCL and RCL, can continue to increase at the same rate, and will thus not be able to offset ticket revenues.

Financial analysts expect the recession to impact the economy through the first half of 1991, that, in combination with the loss of the Mediterranean season, can also be expected to curtail earnings through the rest of the year.

Near-Term

The reorganization and cost-cutting may have been vital to the company’s near term profitability. 1991 would seem to call for a lean organization with minimum overhead and maximum marketing muscle and flexibility. The company could be back on a profitable course as -early as the second quarter of 1991. It is also speculated that Kloster is preparing for another acquisition in the upscale market.

Yet, strong net earnings growth should realistically only be expected in 1992. By that time, the RVL fleet will be trimmed, the Royal Viking Queen will enter service, RCL will have three ships, and NCL will receive the first of its new 1,200-passenger ships.