The Star Cruises Group posted a loss of $200.9 million, or $2.77 per share, on revenues of $2.6 billion for the year ended Dec. 31, 2007, compared to a loss of $156.2 million, or $2.76 per share, on revenues of $2.3 billion for 2006.

Star said that net revenues increased by 12.1 percent compared to 2006 primarily due to a 10.7 percent increase in capacity and a 1.3 percent increase in net revenue yield. The increase in yield was primarily due to an increase in ticket prices for the NCL Group, according to StarCapacity was up due the addition of the Pride of Hawaii, the Norwegian Pearl and the Norwegian Gem, entering service in May 2006, Nov. 2006 and Oct. 2007, respectively, partially offset by the departure of the Norwegian Crown in November 2007. Group occupancy was 102.9 percent in 2007 compared with 100.9 percent in 2006. According to Star, ship operating expenses were up 2.2 percent on a per passenger day basis due to higher fuel costs and higher other operating expenses, as well as charter fees for the Crown, the Marco Polo and the Superstar Gemini.

The increase in ship operating expenses were partially offset by lower payroll and related costs at NCL America and the receipt of certain insurance proceeds.

Q4

The Star Cruises Group posted a loss of $123.6 million, or $1.66 per share, on revenues of $620.6 million for the fourth quarter ended Dec. 31, 2007, compared to a loss of $147.6 million, or $2.58 per share, on revenues of $54 7 .1 million for the fourth quarter the year before.

According to Star, a 17. 7 percent increase in net revenue was due to an 8.5 percent capacity increase and an 8.4 percent increase in net revenue yield. Passenger ticket prices and onboard revenues were up year-over-year. Group occupancy was 103 percent in the fourth quarter of 2007, compared to 101 percent last year.

Turn-Around Scenarios

While work is underway to turn the company around – especially the NCL brand with its new 50- percent owner, Apollo Management – Star lost nearly $17 per passenger per day in 2007, up from losing nearly $15 per passenger per day in 2006. Apollo has stated that the keys to making NCL profitable is to be able to increase ticket prices and onboard spending, while reducing expenses.

Increasing Revenues

Star did not break out numbers for NCL for Cruise Industry News, but for the group as a whole, revenues per passenger per day were $217.49 in 2007, compared to $227.99 for Carnival Corporation  and $231.22 for Royal Caribbean Cruises.

In order to overcome its 2007 loss of $200.9 million, Star/NCL would have had to generate $17 more per passenger, per day, or $234.50, to break even. And, to reach a net income margin in the neighborhood of 10 percent, Star/NCL would need to generate revenues in the range of $260 per passenger per day with the same cost structure as today.

Reducing Costs

On the cost side, Star/NCL reported total costs and expenses of $210.36 per passenger per day in 2007, compared to $180.30 for Carnival and $197.33 for Royal Caribbean.

If Star/NCL could have reduced its total costs and expenses per passenger per day to $200 (lacking the economies of scale of Carnival and Royal Caribbean), the loss for 2007 would have been $78.1 million instead of $200.9 million.

If at the same time, Star/NCL could also have reduced its financial and impairment costs to $100 million per year (other income and expenses) relative to its size, compared to Carnival and Royal Caribbean, it would have been able to report net income of $107.3 million.

Combination

So if costs were reduced ( as outlined above) and revenues were increased to $225 per passenger per day, Star/NCL, would have been able to report net income of $196.2 million for 2007 for a net margin of7.4 percent. But the stakes are tall, requiring revenues of $7 more per passenger per day and $10 less in costs per passenger per day.

 Meanwhile, in the short term, NCL is planning to spend $50 million upgrading its onboard product, which corresponds to a cost increase of more than $4 per passenger per day based on the reported passenger days for the Star/NCL Group for 2007.