Cruise Lines Quicken New Ship Orders

Nov 12, 2012

October was a big month for new ship announcements. Along with Norwegian Cruise Line’s statement that a ship larger than Breakaway has been ordered for 2017, Royal Caribbean International (RCI) announced that it is in negotiations for a third Oasis-class ship and Carnival Corporation stated that the company has reached an agreement for the construction of two new vessels: a 99,000-ton ship for Holland America Line (HAL)and a 135,000-ton newbuild for Carnival Cruise Lines.

The newbuilds are a welcome breakthrough for European shipyards, hit hard by uncertainty during the slowdown in orders over the past few years of economic stress. Since the skilled workers who build ships typically work from contract to contract, it is vital for the yards to keep the flow of work moving.

In Carnival’s case, a memorandum of agreement has been signed with Italian shipbuilder Fincantieri, with whom the company has worked for more than 20 years, for the construction of two newbuilds. These are HAL’s 2,660-passenger ship, scheduled for delivery in fall 2015, and a 4,000-passenger ship for Carnival, scheduled for delivery in winter 2016. The total cost for the two vessels combined will be approximately $195,000 per lower berth.

The HAL ship, which will be a new class of vessel for the line, will enter service five years after the most recent new ship for the line, the Nieuw Amsterdam, delivered in 2010. The Carnival newbuild will also launch a new class in 2014, four years after the introduction of Carnival Breeze this year.

Carnival Corporation & plc currently has nine new ships scheduled for delivery — two for 2013, two for 2014, three for 2015 and two for 2016. However, this does not mean a drastic expansion in the number of beds available. Chairman and CEO Micky Arison noted that the addition of new tonnage is expected, to some extent, to replace existing capacity reductions from possible sale of older ships.

Although RCI has not entered into an agreement at this point, chairman Richard Fain included in an announcement in the company’s third quarter financial results in late October that it is in negotiations for the possible construction of a third Oasis-class ship that would be delivered in middle to late 2016, and hopes to place an order by the end of the year. The cost of the new ship is expected to be less per berth than either of the first two.

“The Oasis of the Seas and Allure of the Seas have proven themselves to be exceptionally attractive ships by generating the highest guest satisfaction ratings in the fleet coupled with very compelling financial returns,” said Fain. “Ordering another such ship for delivery in 2016 — at a lower cost and with better energy efficiency — is very consistent with our balanced goals of prudent growth, return improvement and debt reduction.”

This third Oasis-class order is in addition to the two Sunshine-class vessels RCI has ordered that are in the process of construction at Germany’s Meyer Werft shipyard. Rumor has it that the STX shipyard in Turku, Finland, which built the first two Oasis ships, is the strong contender for the order.

The new 4,100-passenger Sunshine-class ships will be smaller than Oasis and Allure, to provide flexibility in itinerary planning, with some geographical regions commanding smaller passenger loads than others.

In addition to the two 4,000-passenger Breakaway-class ships under construction at Meyer Werft, for delivery in April 2013 and January 2014, Norwegian announced in October that it is ordering the largest ship in its fleet at 4,200 passengers, scheduled for delivery in October 2015. The Breakaway Plus order also went to Meyer Werft, and carries an option for a second vessel for spring 2017.

CEO Kevin Sheehan said the order was meant to build on the momentum generated by the Breakaway ships.

“The new order further solidifies our commitment to continued innovation in terms of guest experience and will incorporate technical and environmental advances as well,” said Sheehan.