The Norwegian Breakaway will set sail in May on its maiden
voyage to Bermuda with three Broadway shows, New York's famed
Rockettes and a send-off from Cardinal Timothy Dolan.
"Cardinal Dolan has agreed to bless the ship," said Kevin
Sheehan, CEO ofNorwegian Cruise Line (
), the suddenly hot operator of the 4,000-passenger vessel.
It'll be the largest cruise ship to berth in the Big Apple and
the first of up to four new megaships Norwegian plans to launch
over the next four years.
The Norwegian Getaway will be the next to sail early next
year, from Miami.
Miami-based Norwegian is building new megaships for the North
American market as other cruise lines are pulling back their
Meanwhile, its stock is hot, having soared 60% since the
firm's initial public offering in January.
"Norwegian is coming in with new ships when other lines are
slowing growth in North America," said Cruise Week editor Mike
Driscoll. "So there's a little opening for them to grow and not
face a lot of other new ships."
Norwegian, which will have 12 ships counting the Breakaway, is
much smaller thanCarnival (
) andRoyal Caribbean (
), which dominate the cruise industry. But it claims a younger
"Following capacity growth of 6% to 10% a year for most of the
millennium's first decade, the industry is headed for just 2% to
4% growth over the next three or four years," said Matthew Jacob,
cruise industry analyst with ITG Investment Research.
"That's as low as it's been for at least 15 years," he
Norwegian is growing much faster. But with recent high-profile
cruise accidents, is this a good time to be rolling out new
cruise ships? Norwegian thinks so.
"(The Breakaway) is selling extremely well and at a faster
pace than any other ship we've ever launched, and at
significantly higher prices," Sheehan said in a phone
Norwegian says fallout from Carnival's disabled Triumph last
month has been minimal and short-lived. Royal Caribbean stated in
a recent filing that it, too, hasn't seen bookings hurt in the
few weeks after the Triumph debacle.
Carnival, however, said earnings would take an 8- to 10-cent
per-share hit in the first half of 2013.
Carnival's stock fell nearly 2% Thursday after the Carnival
Dream was stuck in port at St. Maarten with more than 3,000
passengers prohibited from disembarking after the ship suffered
interruptions to elevators and restroom services.
Carnival is arranging for the passengers to fly home.
The cruise industry was impacted after the Carnival-operated
Costa Concordia tipped over off the coast of Italy in early 2012,
causing 32 deaths.
"That arguably was the industry's worst accident since the
Titanic," said Jacob.
The cruise industry was forced to discount heavily to fill
cabins, especially in Europe. Average pricing, Jacob says, was
down at least 10% last summer.
"The industry is well on its way to recovering, and pricing is
bouncing back from last year," Jacob said.
Even Mediterranean cruise demand is said to be improving a bit
this year. It had dropped off the last few years as Libya
exploded, Arab Spring uprisings spread in North Africa, and Egypt
and Athens erupted in riots, Driscoll says. Then came the
With less exposure to the European cruise market than Carnival
and Royal Caribbean, Norwegian hasn't been as affected by the
Though it targets the North American market, Norwegian offers
itineraries to the Caribbean, Bermuda, Central America and the
Mediterranean in addition to North American routes.
It's the only major cruise line to operate inter-island Hawaii
cruises that start and end in Hawaii, through its Pride of
Carnival and Royal Caribbean have multiple cruise brands vs.
Norwegian's one broad-market brand.
Carnival, for example, has six cruise lines from budget to
luxury: Carnival, Costa, Cunard, Holland America, Princess and
Having the entire fleet in one broad-market brand helps
Norwegian drive higher onboard revenue per capacity day and
higher margins than operators with a mix of brands, wrote UBS
Securities analyst Robin Farley in a recent initiation report on
Norwegian "hews to the upper center," writes Frommer's Cruise
Guides, which says its passengers are "younger and more active"
than those of other lines most similar to it.
As gigantic as the Breakaway is, it won't be Norwegian's
largest ship. That honor goes to the slightly larger 19-deck
Epic, which launched out of Miami in June 2010, looking like a
floating high-rise condominium as it lumbers out of port with
4,100 passengers and 1,750 crew members.
New ships typically fetch premium prices because they're,
well, newer and splashier. And they're more efficient, an
important factor now that fuel has become a cruise ship's biggest
cost. "Our margins will continue to improve as we build these new
ships," Sheehan said.
18 Quarters Of Growth
Norwegian has ticked off 18 straight quarters of earnings
gains, even during the economic downturn and when oil prices hit
$160 a barrel, he says.
In the fourth quarter, the first reported as a publicly traded
company, the cruise operator posted $5.6 million in net income,
or 4 cents a share, with net yield up 2.5% from the prior
Analysts expect earnings to grow 37% this year to $1.33 a
share and go up 65% in 2014, according to Thomson Reuters.
Revenue is seen growing 14% this year to nearly $2.6 billion and
21% in 2014.
Sheehan credits a management and operational shakeup begun
more than five years ago for the financial turnaround at the
43-year-old cruise company.
That was afterApollo Global Management (
) and TPG Capital invested $1 billion, taking a 50% stake,
leaving owner Genting Hong Kong with the other 50%.
After the recent IPO, Genting kept 43%, while Apollo retained
33% and TPG 11%. The public owns the rest.
Many of the new managers, including Sheehan, came from outside
the cruise industry. Sheehan was previously CEO of Cendant's
vehicle service division.
"We took a look at everything," Sheehan said. "A big part of
it was passion and getting the culture right."
The team trimmed a few older ships from the fleet. They also
revamped marketing to highlight the company's pioneering
"freestyle" vacation format, which lets passengers choose from
among multiple dining and entertainment venues.
Taking advantage of Apollo's and TGI's ties with gaming
operatorCaesars Entertainment (
), Norwegian partners with Caesars on promotions to draw casino
customers to its ships.
With onboard casinos, theatrical shows, music acts such as the
Blue Man Group, a ton of restaurants and an aqua park, one ad for
the Epic says, "Who needs Vegas?"