Cruise order book: big yards share order windfall

From Carnival’s new-style multiple ship contracts to confirmed orders for the Meyer-acquired yard at Turku, builders are benefiting as operators step up their expansion programmes. By David Mott

Cruise order book: big yards share order windfall
Viking christened Viking Star at her homeport of Bergen in Norway
This article was first published in the Autumn/Winter 2015 issue of International Cruise & Ferry Review.

Though the spike in new cruise ship deliveries does not come until 2016 when 11 new vessels are due, this year’s seven debutantes include major additions to the fleets of Carnival Corporation, Royal Caribbean International and Norwegian Cruise Line, as well as a ground-breaking order for cruising’s first gas ships.

But even more significant than numbers are contract values which, reflecting the increased size and complexity of the latest ships, meant that the industry order book at the end of the first quarter was worth 25% more than 12 months before, at US$23.4 billion.

As well as this strong statistical showing, there were two other recent events of significance, one of them major. The first development was the launch of the first new cruise line in a decade – Torstein Hagen’s Viking Ocean Cruises, which saw its first ship, Viking Star, named at its homeport of Bergen in Norway. But overshadowing that was a multiple order from Carnival Corporation in March for nine unspecified and unallocated ships with deliveries over the four-year period from 2019 to 2022. Fincantieri will build five of the ships and Meyer Werft, the German company which now includes the Turku yard in Finland, the remaining four.

In addition, less than three months later, to the surprise of some, Carnival put into place the first four vessels, all of them with Meyer Werft and Meyer Turku. The record-breaking dimensions of the vessels, which will go to the Costa Group, are 6,600 passengers in total, with 5,000 lower beds, and a gross tonnage of 180,000gt.

But by far the most significant part of the order is that the ships will be the cruise industry’s first gas-powered vessels, with a dual-power arrangement of LNG for the open sea and the option of using bunker fuel in port. It can safely be assumed that all nine ships will have this fuel arrangement with the LNG stored onboard. Two of the contracted vessels will go to the German market’s AIDA Cruises, part of Costa, but it has not yet been decided how the other two ships will be assigned within the Costa umbrella.

Bo-Erik Blomqvist, SVP of corporate shipbuilding for Carnival, told ICFR that “long-term strategic agreements with shipbuilding partners” would enable the group to create a new generation of ships that will be the most efficient in its history and unlike anything built in the past. A crucial part of this was the creation of an innovative platform (hull) for future orders, he said. Arnold Donald, group CEO, said the new vessels would make more efficient use of ship spaces largely through the efforts of group chairman, Micky Arison, for many years Carnival’s shipbuilding guru, and Costa CEO, Michael Thamm. The new ships will replace less efficient capacity at the same cost per berth, added Donald.

Bernard Meyer, chief executive of Meyer Weft, pointed out his yard has already successfully built seven ships for AIDA. But in the Far East there is a less happy picture where the first of two AIDA ships at Mitsubishi was delayed six months to an autumn delivery because of the number of design changes, the yard claimed. There is a second ship due out early in 2016. Last year the yard reported losses of US$600m on the contracts, throwing its future in the cruise business into doubt. Elsewhere within Carnival, Ben Clement, VP of newbuildings at Carnival Cruise Line, said its 25th and largest vessel, Carnival Vista, was “on target to be delivered next May”. She will feature the industry’s first IMAX cinema and brewery at sea. A sister is due in service in the spring of 2018.

P&O Cruises’ 3,600-berth Britannia, which adds 25% to overall fleet capacity, was the first new ship to be delivered this year as the owner’s eighth and biggest vessel. Chief executive, David Noyes, said: “We do not normally disclose our bookings, but I can say the Royal naming by the Queen stirred a lot of interest.” He described the £473 million he signed off to pay for the ship as one of his most significant business decisions. As market leader, P&O carries 40% of the UK market and up to 98% of its customers are British.

Britannia’s rival out of Southampton this summer is Royal Caribbean International’s newly-launched Anthem of the Seas, the line’s second Quantum-class ship. Such has been the success of these two 4,200 berth vessels with passengers and the travel trade, it has been decided to order a fourth in the series with Meyer Werft for delivery in 2019 after Ovation of the Seas (due next summer). Investment in new ships in the five years to 2019 will total US$8 billion, peaking in 2018 at US$2.4 billion, RCL has disclosed. Like Quantum, Anthem is notable for its technical features such as the dodgem cars and the North Star cherry picker capsule which gives spectacular overhead views. There are also robotic bartenders as well as 18 different restaurants on board. Royal Caribbean International’s UK and Ireland managing director, Stuart Leven, said 80,000 people would travel on Anthem during the summer. “The UK and Ireland is our second largest market and of huge importance to us,” he added.

Torstein Hagen said his first oceangoing ship, Viking Star, was sold out for this year and three quarters full for next. With more port calls and the ability to get into less accessible ports with, by modern standards, small ships of less than 1,000 berths, he is trying to move ocean cruising towards the characteristics of his huge river fleet of about 60 boats. Destinations will be the true focus of the new ships, says the chairman. He said at the inauguration of the ship: “Ocean cruising is for the drinking man while river cruising is for the thinking man.” This apparently flippant remark encapsulates his philosophy for both sides of his cruising empire quite well.

There was just one discordant note in this smoothly-run launch when it was announced that delivery of the Viking Sky, the third and last of the confirmed vessels, will be delayed for eight months to February, 2017, as Fincantieri has moved her construction to its Ancona shipyard where the second vessel, Viking Sea, is being built, for more streamlined production. Quite what impact this delay will have on options for three more vessels is not clear, but it has always seemed likely all six vessels will be built sooner or later. Viking has also added 12 more river boats to its fleet, making more than 60 in all. Another six for next year have still to be confirmed.

Another new cruise line took a definitive step forward in June when Sir Richard Branson’s Virgin Cruises signed a letter of intent with Fincantieri for three 2,800-berth ships to be delivered in 2020, 2021 and 2022. A firm contract must be agreed by the fourth quarter of this year.

The rescue of the Turku shipyard by Meyer Werft and the Finnish Government was cemented further when Mein Schiff 4 was delivered by the yard to TUI Cruises, which confirmed that numbers 5 and 6 in the series will also be completed by 2017, making a fleet total of 14,000 beds. This confirmation is significant because there was a time when the Turku shipyard was in such a parlous state it looked unlikely any more ships would be built under the old STX ownership. Now there are also options for numbers 7 and 8 in the Mein Schiff series and Meyer Werft has assumed 100% ownership of the Turku yard by taking the Finnish Government’s 30% stake, a normal sequence of events in corporate rescues in that country.

Meyer Turku’s chief executive Jan Meyer, told ICFR: “Each ship in the series represents 5,000 man hours of work for the Turku labour force, with a significant part of that employment going to Finnish maritime.” Up to 80% of the materials are coming from the domestic (Finnish) market, said Meyer.

Christer Karlsson, SVP newbuildings at Norwegian Cruise Line, another Meyer Werft client, confirmed that the first of the line’s 163,000gt Breakaway Plus ships, the largest in the fleet, is exactly on schedule to be delivered by the German yard on 22 October. “But we have no firm plans to build anything larger at present,” he said. The ship, which has 4,200 beds, is distinguished from her predecessors by having two extra decks – one for passengers and another for general public use. She will have scrubber machinery to purify her fuel intake and incorporate the Safe Return to Port concept of earlier Norwegian Cruise Line ships. “I have just walked the ship and I think she will create a good deal of interest,” said Karlsson. There are three other vessels to follow in 2017, 2018 and 2019, all at Meyer Werft.

In mid-May, Hong Kong-based Genting, one of Norwegian’s major shareholders, completed the US$550 million acquisition of the ultra-luxury Crystal Cruises from NYK and said it would provide finance and design capability for a new Crystal ship to be delivered in 2018. However, there were no further details of this long-expected third Crystal ship.

Holland America Line is another fleet due to welcome its largest ship soon. The 99,000gt Koningsdam, the first of the new Pinnacle class, is due at the end of March 2016 from Fincantieri and is already proving popular with passengers and travel agents, according to HAL president Orlando Ashford. “There is great interest in her early itineraries and we are confident she will be a fantastic addition to our fleet,” he said. This first of class can take 2,660 passengers and is the line’s largest vessel. A second ship is booked for mid-2018 delivery.

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David Mott
By David Mott
Thursday, December 17, 2015