We wanted to share a quick update as to what the status of Royal Caribbean ordering a third Oasis class ship is and what the negotiations are looking like.

As you may recall, Royal Caribbean announced a few months ago it was in negotiations with STX Europe shipyards in Finland to possibly order a third Oasis Class ship.  The primary issue has been securing financing for the construction of the cruise ship, which is something Royal Caribbean has looked to the Finnish government in assistance with.

Last Thursday, the Finnish government rejected Royal Caribbean's financing proposal because the state was concerned about being a guarantor for the capital.  

Yesterday and today, the shipyard has become involved in the negotiations by trying to extert pressure on the Finnish government to make a deal happen.  The shipyard is concerned that Royal Caribbean will have the ship built elsewhere, jeopardizing a lot of money and jobs for the company.

Royal Caribbean needs a loan of about 50 million euros to cover the ship construction cost.  The Finnish government is concerned about giving out big project loans using tax payer money.

On the other hand, the STX Europe shipyards could lend the money to Royal Caribbean but the South Korean ownership group of STX want the Finnish government to take on more of the risk.  STX points out that around €100 million in tax revenue will be collected during the €300 million project lifetime.

From last we heard, representatives of the STX Europe shipyards are meeting today with Finnish government as well as the Ministries of Employment and Economy.

Finnish ship building firm STX Finland is now lobbying the Finnish government on behalf of Royal Caribbean to help facilitate a deal to avoid Royal Caribbean building its third Oasis-class cruise ship in Germany or France.

STX Finland's chief operating officer Jari Anttila commented on the importance of getting a deal done, "We have asked the government to reconsider the financial settlement."

The state owned financing firm, Finnvera, has reached an impasse with Royal Caribbean to securing a loan to allow the proposed ship to be built.

STX is concerned that if a deal is not reach soon between Royal Caribbean and Finnvera, the cruise giant may look to shipyards in Germany or France as alternatives.  STX has an advantage in that the first two Oasis class ships were built there and Royal Caribbean prefers for the third ship to be built there as well.

After a few weeks of rumors, Royal Caribbean officially announced two new all-inclusive beverage packages to all the ships in its fleet.  The new packages are available on seven-night or longer sailings now and will be available on every sailing by early 2013.

The two new beverage packages, Classic and Premium, allow guests to pay one price at the beginning of their cruise and enjoy unlimited alcoholic and non-alcoholic beverages for the duration of the cruise.

Classic Beverage Package

Cost: $45 per guest, per day (includes service charge)

Package includes: 

• beer
• house wines by the glass
• all non-alcoholic cocktails
• fountain soda
• juices

Premium Beverage Package

Cost: $55 per guest, per day (includes service charge)

Package includes: 

• beer
• frozen drinks
• all cocktails including premium brands
• house wines by the glass
• all non-alcoholic cocktails
• fountain soda
• juices

Both beverage packages must be purchased on the first day of the cruise.   Guests choosing either package also must purchase the package for guests 21 years old or older sailing in the same stateroom.

The two new packages are currently available on 13 ships and will be available on the remaining ships with seven-night or longer itineraries by early 2013.

Royal Caribbean executive vice president of operations, Lisa Lutoff-Perlo, commented on the addition, "Royal Caribbean is in the midst of an extensive revitalization program that will leave no ship untouched and includes enhancing the variety of new dining and beverage options for our guests.The addition of these new beverage and culinary packages creates a seamless vacation experience for our guests, providing them with a greater selection of choices and delivering it to them at an incredible value and convenience.”

Royal Caribbean announced today that NASDAQ has added the cruise line giant's stock as one of the top 100 companies in the world  for its sustainability practices by being added to the NASDAQ OMX CRD Global Sustainability Index.

The NASDAQ OMX CRD Global Sustainability Index tracks performance of companies that  are taking a leadership role in sustainability performance reporting. These companies have voluntarily disclosed their carbon footprint, energy usage, water consumption, hazardous and non-hazardous waste, employee safety, workforce diversity, management composition and community investing.

Royal Caribbean Chairman Richard Fain commented on the news, "Royal Caribbean's addition to the NASDAQ OMX CRD Global Sustainability Index is recognition of our status as a global leader for its sustainability practices. Conserving the marine environment is an integral part of our economic success. Our goal and that of our industry in general is to protect the marine environment and sustain the well-being of the people and destinations we serve. We appreciate the efforts made by NASDAQ and CRD Analytics to genuinely measure the performance of listed companies, and this recognition encourages and affirms our sustainability efforts."

Royal Caribbean CFO Brian Rice was profiled by the Wall Street Journal about how he is helping to cut costs from Royal Caribbean's supply chain to help the company's bottom line.  Cost cutting is especially important these days given the poor operating environment the cruise industry is dealing with.

“I’m still in the learning stages of the supply chain,” says Rice, who was put in charge of that function in September on top of his other CFO duties. “They’re helping me more than I’m helping them [right now].”

Rice's approach is to make sure the supply chain gets the resources it needs, rather than reorganizing or making major personnel moves. Rice cited an example of engineers sometimes having to take photos of ship parts that need to be replaced and email them to the mainland because they can't find the required part in the "obsolete" computer systems.

Rice believes by cutting costs from the supply chain, that should eventually lead to boosting Royal Caribbean's cash flow, which in turn will help trim debt overall.

Because Royal Caribbean has no new ships coming online in 2013, the company is opting to pay down its debt using much of its operating cash flow.  Rice says over time, it aims to reduce its debt to about 3.5 times its Ebitda from the roughly five times where it will end this year.

Royal Caribbean is getting into the spirit of today's special date of 12/12/12 by offering a special one-day only booking incentive.

If you book a cruise today on 12/12/12, you will get $12 in onboard credit per day, per stateroom.  If you book a suite, Royal Caribbean will double the offer to $24 per day, per suite.

Only one offer is available per stateroom. The deal is applicable on new, individual bookings and it doest not apply to groups. All booking must be made on December 12, 2012 and is valid on sailings departing between January 1 - December 31, 2013.

Royal Caribbean cruise prices in the Mediterranean will rise by 10% for the summer 2013 cruise season, which is a move to return price levels back to being consistent with what they were in the past.  

The effects of the Costa Concordia disaster forced Royal Caribbean to more aggressively price their cruises to meet the lower demand that was created.  But Royal Caribbean feels Europeans are returning to cruising and thus, the company wants to adjust their prices and schedule accordingly.

Royal Caribbean general manager Gianni Rotondo commented on the change, "At Genoa we have on a ship 3,800 passengers.  After three years in Italy, we can increment rates by 10% because of the fact that the customer that we have acquired must be compelled to book in advance, which removes the risk of reducing prices 45 days prior to departure."

In addition, Rotondo confirmed that five Italian ports for the upcoming summer season, adding Bari and Naples, "In Naples we can put Liberty of the Seas, the largest cruise ship operating in the Mediterranean, with excellent characteristics of onboard services."

Royal Caribbean has seen a gain in market share in the Mediterranean by 8-10% and further increases could be on the way.  Rotondo believes the final recovery of the cruise market could occur in mid-January, with the restoration of the usual advance booking for the summer holidays in the winter months.  This was the norm before the Concordia incident.

Looking at 2012 compared to 2010, Rotondo says combining 2012 and 2011, Royal Caribbean moved three times more passengers than in 2010 but at a decrease of 10% per fare on average.