Financial Services

Royal Caribbean Cruises CEO blames higher fuel costs as a headwind on earnings

Royal Caribbean Cruises is seeking ways to improve its energy consumption to fend off the negative impact of higher fuel costs, Chairman and CEO Richard Fain told CNBC on Thursday.

“The best way to control our cost on fuel is to use less energy and that’s good for the environment, that’s good for our bottom line,” said Fain, but he did not elaborate.

Fain appeared on “Power Lunch” after the cruise line narrowed its full-year earnings projections to between $8.75 to $8.85 per share, blaming rising fuel and foreign exchange expenses as headwinds.

Royal Caribbean reported lower-than-expected revenue of nearly $2.8 billion for the third quarter. On an adjusted per-share basis, however, the company exceeded estimates with earnings of $3.98.

“The other thing we have to do is continue to outperform in terms of satisfying our customers,” Fain said.

Royal Caribbean does not forecast fuel prices and budgets fuel consumption on current pump prices. It expects to spend $191 million on fuel in the final quarter, and a total of $706 million in 2018, according to the company’s earnings report.

“Since the beginning of the year, we’ve overcome $115 million worth of headwinds from foreign exchange and fuel,” said Fain, who has been chairman and CEO since 1988. “There may be timing differences, but our business remains absolutely on track.”

Looking ahead, Fain said early bookings for 2019 are better than they were at this time last year and at higher rates.

“That means we have more assurance about what’s going to happen and we have less than we otherwise would have had to sell,” he said. “Having less inventory … and having higher prices on what we have sold all goes well for 2019.”

Royal Caribbean is anticipating a boost in business from Silversea Cruises, a high-end line that it bought a controlling stake back in June for $1 billion.


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