New Ships for 2015

| Tuesday, 30 Oct. 2012

Carnival Breeze is the most recent Carnival ship

Is it a sign of a financial recovery, or just a sign of some confidence that recovery will soon occur, when three cruise lines order brand new cruise ships? Let's not get too excited. In fact, when a cruise line orders a new cruise ship it will still takes two to three years before the ship is completely built and the full and final payment to the shipyard becomes due.

In the last week, before Hurricane Sandy stole all the headlines, we got news that three new cruise ships by three different cruise lines are either ordered, or are soon to be ordered for vessels to be delivered in 2015.

First came the extremely exciting news that Royal Caribbean is under negotiation to build a third ship in the largest and most elaborate cruise ship class in the world - a triplet to Oasis of the seas and her sister Allure of the Seas. This ship order is significant because these ships are so amazing that their very existence has already been considered a leap of faith.

The fact that Oasis at 220,000 gross tons is at least 30% larger than the next largest cruise ship in the world has allowed these ships to command a higher price - almost twice what a person will pay to cruise on almost any other Caribbean cruise, even aboard brand new ships from competing cruise lines.

But the danger in building too many of these beautiful ships is that the new ones will cannibalize the premium prices that the originals command. I don't think Royal Caribbean would risk that, and so the decision to go forward says to me they have reason to believe there will soon be even greater demand for these beautiful mega cruise ships.

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New Ships from Carnival Corp.

The week after the third Oasis story leaked out, Carnival Corp. the parent company for Carnival, Costa, Cunard, Holland America, Princess and Seabourn put out a more demonstrative announcement that the parent company is ordering two brand new cruise ships; one for for its Holland America brand and another for its own Carnival Cruise Line brand.

The Holland America Line ship will be a 99,000-ton, 2,660-passenger ship. A memorandum of agreement was signed with Italian shipbuilder Fincantieri for delivery in fall 2015.

This will be a new class for Holland America, although the size is very similar to the Vista-class vessels the line already has in service, each named after the "four corners of the earth;" the Oosterdam, the Noordam, the Zuiderdam and the Westerdam. The new ship will enter service five years after the last Holland America ship, the Nieuw Amsterdam, was delivered in 2010.

The Carnival ship will be a 135,000-ton, 4,000-passenger vessel for Carnival Cruise Lines scheduled for delivery in winter 2016. This will also be an entirely new class of vessel, to be launched four years after the introduction of Carnival Breeze, which debuted in spring 2012.

The total cost for the two vessels combined, which includes the U.S. dollar denominated contract price and all owner's costs, will be approximately $195,000 per lower berth (about $1.2-billion total), and the memorandum of agreement is subject to customary closing conditions, including execution of shipbuilding contracts and financing.

According to Micky Arison, chairman and CEO of Carnival Corporation & plc, these orders are in keeping with Carnival Corp's strategy of introducing two to three new ships per year across the corporation's ten brands. The goal is to time the introduction of any new ships to allow each brand to grow its passenger base enough to justify a new ship.

Including the new builds announced today, Carnival Corporation & plc now has nine new ships scheduled for near-term delivery - two for 2013, two for 2014, three for 2015 and two for 2016. Arison also noted that the new ships could replace existing capacity after the possible sales of older ships.

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