Royal Caribbean Cruises Ltd. and Rolls-Royce announced today that they have reached a suitable and amicable resolution to the lawsuit regarding the Mermaid pod-propulsion system on Celebrity Cruises’ Millennium-class ships.

When they were first designed and implemented, podded propulsion was a significant technological advance over traditional shaft propulsion, but it experienced a number of technical issues in the early years of use. However, working together, Royal Caribbean and Rolls-Royce have been successful in improving the reliability of the design. Mermaid pods are installed on four Celebrity ships – Millennium, Summit, Infinity and Constellation.

“We look forward to continuing our alliance with Rolls-Royce for many years to come,” said Daniel J. Hanrahan, president and chief executive officer, Celebrity Cruises. “Rolls-Royce has one of the best reputations for reliability, and guests and travel agents should feel confident in Rolls-Royce’s assurances of the reliability of the Mermaid pods.”

“We are not only satisfied to have reached a solution with Celebrity Cruises, but that we have been able to improve and enhance the Mermaid pod’s reliability,” said John Paterson, President-Marine, Rolls-Royce. “We look forward to the opportunity to continue contributing to Celebrity’s high operating standards now, and in the future.”

The settlement will generate a net increase of approximately $65 million in Other Income/(expense) in Royal Caribbean’s 2010 first quarter results.