"Effective November 10, 2008, fuel supplement charges will be eliminated from all Regent Seven Seas Cruises voyages departing in 2010. In addition, the company has established specific guidelines under which the fuel supplement may be reimbursed to guests sailing on voyages departing in 2009.
"For voyages departing in 2009, the company will continue to apply a $15 per guest per day fuel supplement. Fuel supplement charge adjustments, if any, will be determined on a quarterly basis. Refunds, in the form of Shipboard Credits, will automatically be applied to all reservations to which a fuel supplement had previously been charged if the quarterly closing price on the New York Mercantile Exchange of West Texas Intermediate fuel is below $65 per barrel two weeks prior to the beginning of the upcoming calendar quarter.
"Frank Del Rio, Chairman of Prestige Cruise Holdings, parent company of RSSC, stated that the company was implementing these changes due to the recent decline in fuel prices. "If oil stabilizes below $65 per barrel, we are confident that we can effectively eliminate the need to charge our guests a separate fuel supplement. However, we must see stability in fuel pricing on a mid- to long-term basis as there could still be significant volatility in the marketplace," stated Del Rio."
I think what is implied, but not stated, is that Regent and Oceania - who have maintained the highest fuel supplement charges in the industry on both a per day and cruise total basis - will be adjusting their 2010 prices to incorporate a cushion against fuel increases as others have done.
Showing posts with label fuel supplements. Show all posts
Showing posts with label fuel supplements. Show all posts
Tuesday, November 4, 2008
Friday, October 24, 2008
Celebrity and Royal Caribbean to End Fuel Supplements
Effective November 10, 2008 Celebrity Cruises and Royal Caribbean Cruise Line will no longer charge fuel supplement for cruises scheduled to depart on or after January 1, 2010.
For 2009 and 2010 cruises booked prior to November 10, 2008 RCCL will determine on a quarterly basis whether fuel supplements will be refunded. Refunds, in the form of an onboard credit, will be provided if the closing price of West Texas Intermediate fuel is $65 or less, at the closing time of the New York Mercantile Exchange, two weeks prior to the beginning of the upcoming calendar quarter. When those conditions are met, an onboard credit will be provided to all guests on sailings that begin during the upcoming calendar quarter.
Put simply, adjustments will be made only four (4) times a year. That will be done two weeks prior to the beginning of each calendar quarter. So, for example, if on March 16, 2009 the price of oil is $65 those cruises departing during the period of April -June 2009 would have the fuel supplement refunded by way of an onboard credit.
This is a far less cumbersome formula than that being implemented by Carnival. I think it may be a balancing between using an understandable method with some of the risk spread versus trying to be as accurate as possible. I can't say that one is "better" than the other. What I can say is that I am glad this is happening sooner rather than later.
For 2009 and 2010 cruises booked prior to November 10, 2008 RCCL will determine on a quarterly basis whether fuel supplements will be refunded. Refunds, in the form of an onboard credit, will be provided if the closing price of West Texas Intermediate fuel is $65 or less, at the closing time of the New York Mercantile Exchange, two weeks prior to the beginning of the upcoming calendar quarter. When those conditions are met, an onboard credit will be provided to all guests on sailings that begin during the upcoming calendar quarter.
Put simply, adjustments will be made only four (4) times a year. That will be done two weeks prior to the beginning of each calendar quarter. So, for example, if on March 16, 2009 the price of oil is $65 those cruises departing during the period of April -June 2009 would have the fuel supplement refunded by way of an onboard credit.
This is a far less cumbersome formula than that being implemented by Carnival. I think it may be a balancing between using an understandable method with some of the risk spread versus trying to be as accurate as possible. I can't say that one is "better" than the other. What I can say is that I am glad this is happening sooner rather than later.
Friday, October 10, 2008
Carnival Brands Drop Fuel Surcharge For New 2010 Bookings- UPDATED
In a move that I felt was long in coming...as I felt was the drop in oil prices...Carnival Corp. has announced today that effective October 31, 2008 it will eliminate the fuel supplement charge on all new 2010 bookings on any of its lines (Seabourn, Cunard, Holland America, Princess, Carnival and Costa) and will, instead, institute a modest price increase.
If you have booked a cruise with a fuel supplement you may be entitled to an onboard credit dependent on the future price of fuel. Essentially, for any 2008, 2009 or 2010 cruise where a fuel supplement has been charged, if the price of light sweet crude oil on NYMEX (a primary oil trading exchange) remains below US$70 per barrel for 25 consecutive days ending 5 days before your cruise departs you will receive an onboard credit equal to the fuel supplement already charged. But if the price fluctuates above US$70 a barrel for even one day during the period, the fuel supplement remains. Put another way, starting 30 days before your cruise if the price stays below US$70 until at least 5 days before you cruise, you get your money back.
Considering that (a) most people just want to know the price of their cruise and do not care about the breakdown of the cost, and that tacking on a charge that has normally been included in the cruise price seems a bit offensive (even thought it was necessary), and (b) the cruise lines do not want to be seen as profiting from the unanticipated fall of artificially inflated oil prices, this reversion to the "old ways" makes a lot of sense. Hopefully the other cruise lines will follow.
If you have booked a cruise with a fuel supplement you may be entitled to an onboard credit dependent on the future price of fuel. Essentially, for any 2008, 2009 or 2010 cruise where a fuel supplement has been charged, if the price of light sweet crude oil on NYMEX (a primary oil trading exchange) remains below US$70 per barrel for 25 consecutive days ending 5 days before your cruise departs you will receive an onboard credit equal to the fuel supplement already charged. But if the price fluctuates above US$70 a barrel for even one day during the period, the fuel supplement remains. Put another way, starting 30 days before your cruise if the price stays below US$70 until at least 5 days before you cruise, you get your money back.
Considering that (a) most people just want to know the price of their cruise and do not care about the breakdown of the cost, and that tacking on a charge that has normally been included in the cruise price seems a bit offensive (even thought it was necessary), and (b) the cruise lines do not want to be seen as profiting from the unanticipated fall of artificially inflated oil prices, this reversion to the "old ways" makes a lot of sense. Hopefully the other cruise lines will follow.
Thursday, September 18, 2008
Fuel Supplements Remain: The Cost to Cruise...and How Farming Gives the Answer.
Every morning at 7:00 a.m. I enjoy my "Breakfast with the Farmers" at the local coffee shop. You never know what is going to be the topic or topics of the day. And, readers, you need to stay with me on this one. It will all come together; I am not just rambling!
Yesterday we were discussing the best way to install a French drain near a paddock...only to be interrupted by a phone call: One of the guys just shot the first 8 point buck of the season and we had to come outside to see it in the back of his truck. Then it was back inside to discussing Charley and Arnold, a gentleman farmer's two pet pigs and how they soon would transform from pets to dinner.
Today the topics were much different. One farmer asked us to guess what he was quoted per ton for a common fertilizer. Another guessed something he thought was outrageous: $600. Wrong: It was over $1,000. The farmers are thinking about accepting lower yields next year by not fertilizing this fall, as net they just might make more money...or at least not lose any.
Then another farmer said his diesel fuel supplier called offering him "off road" diesel for $3.10 a gallon. The farmer, actually be quite astute said, "Last year when oil was at $100 you were charging $2.49 a gallon. Oil is now $96, so you are way too high. Call me back when the price drops more." (We see the same thing at the gas pump, don't we?!)
Someone then noted that "off road" diesel was selling for less than home heating oil; which, of course, made no sense since it is a far more refined product. (Home heating oil has far more sulfur and particulates in it.) The reason was then given: The home heating oil companies purchased futures contracts and were saddled with the contracted for higher prices.
I then started thinking about the fuel supplements which the cruise lines are charging. Both Carnival Corp. and Royal Caribbean have stated in the just the past few days that they will not be reducing (or, heaven forbid) eliminating the fuel supplements now because the oil market is so volatile. I think it is a bit more than that, however.
Just as the guy who is selling the fertilizer today is incorporating the past months effects on his operating costs and just as the diesel fuel company is charging 25% more despite the current oil prices and just as the the home heating company is still being charged more (though they guessed months ago the price was a good one) so they have to charge you more, the cruise lines' operations and costs are not tied directly to the present day oil prices.
Also keep in mind that there was a good bit of hedging that the dollar would continue to drop, so many contracts might well have been priced keyed to the Euro. With dollar much stronger at present (which is based on the unexpected weakness in the European economy, rather than confidence in the U.S. one), the cost for the purchaser can also have increased since it now takes more Euros to equal a dollar.
So whether the cruise lines have longer term contracts or shorter term deliveries, the cost of fuel, lubricating oils, etc. are still much higher despite the current drop in oil prices. And with the current incredibly volatile market conditions, it would be reckless to simply key the fuel supplement only on the price of a barrel of unrefined oil. (There is, of course, another option: Quietly raise cruise prices to cover this fluctuating cost. I am not liking that idea at all and, to be sure, I am certain the cruise lines know that you don't either.)
As Laurel was chided by Hardy (am I dating myself), "Well, Stanley, this is another fine mess you have gotten us into!"
UPDATE: Carnival Corp. just posted its earnings for the Third Quarter 2008 and they are quite strong. On the issue of fuel supplements Carnival Corp stated: Based on current spot prices for fuel of $598 per metric ton, full year 2008 fuel expense is now forecast to increase by $678 million compared to 2007, which will have the effect of reducing full year 2008 earnings by $0.83 per share. The existing fuel supplements in place, if entirely incremental, are expected to offset approximately 25 percent of the $678 million fuel price increase for 2008. With current supplements remaining in place for 2009, and assuming current spot prices stay in place for all of 2009, the company estimates that approximately 43 percent of the cumulative increase in fuel costs since 2007 would be offset.
Simply stated, the fuel supplements have only addressed 25% of the increase in fuel from 2007 and it is projected that if things stay the same they will still only offset 43% of next year's increased fuel costs (still compared to 2007). It seems that we will be keeping the fuel surcharges for quite a long time.
Yesterday we were discussing the best way to install a French drain near a paddock...only to be interrupted by a phone call: One of the guys just shot the first 8 point buck of the season and we had to come outside to see it in the back of his truck. Then it was back inside to discussing Charley and Arnold, a gentleman farmer's two pet pigs and how they soon would transform from pets to dinner.
Today the topics were much different. One farmer asked us to guess what he was quoted per ton for a common fertilizer. Another guessed something he thought was outrageous: $600. Wrong: It was over $1,000. The farmers are thinking about accepting lower yields next year by not fertilizing this fall, as net they just might make more money...or at least not lose any.
Then another farmer said his diesel fuel supplier called offering him "off road" diesel for $3.10 a gallon. The farmer, actually be quite astute said, "Last year when oil was at $100 you were charging $2.49 a gallon. Oil is now $96, so you are way too high. Call me back when the price drops more." (We see the same thing at the gas pump, don't we?!)
Someone then noted that "off road" diesel was selling for less than home heating oil; which, of course, made no sense since it is a far more refined product. (Home heating oil has far more sulfur and particulates in it.) The reason was then given: The home heating oil companies purchased futures contracts and were saddled with the contracted for higher prices.
I then started thinking about the fuel supplements which the cruise lines are charging. Both Carnival Corp. and Royal Caribbean have stated in the just the past few days that they will not be reducing (or, heaven forbid) eliminating the fuel supplements now because the oil market is so volatile. I think it is a bit more than that, however.
Just as the guy who is selling the fertilizer today is incorporating the past months effects on his operating costs and just as the diesel fuel company is charging 25% more despite the current oil prices and just as the the home heating company is still being charged more (though they guessed months ago the price was a good one) so they have to charge you more, the cruise lines' operations and costs are not tied directly to the present day oil prices.
Also keep in mind that there was a good bit of hedging that the dollar would continue to drop, so many contracts might well have been priced keyed to the Euro. With dollar much stronger at present (which is based on the unexpected weakness in the European economy, rather than confidence in the U.S. one), the cost for the purchaser can also have increased since it now takes more Euros to equal a dollar.
So whether the cruise lines have longer term contracts or shorter term deliveries, the cost of fuel, lubricating oils, etc. are still much higher despite the current drop in oil prices. And with the current incredibly volatile market conditions, it would be reckless to simply key the fuel supplement only on the price of a barrel of unrefined oil. (There is, of course, another option: Quietly raise cruise prices to cover this fluctuating cost. I am not liking that idea at all and, to be sure, I am certain the cruise lines know that you don't either.)
As Laurel was chided by Hardy (am I dating myself), "Well, Stanley, this is another fine mess you have gotten us into!"
UPDATE: Carnival Corp. just posted its earnings for the Third Quarter 2008 and they are quite strong. On the issue of fuel supplements Carnival Corp stated: Based on current spot prices for fuel of $598 per metric ton, full year 2008 fuel expense is now forecast to increase by $678 million compared to 2007, which will have the effect of reducing full year 2008 earnings by $0.83 per share. The existing fuel supplements in place, if entirely incremental, are expected to offset approximately 25 percent of the $678 million fuel price increase for 2008. With current supplements remaining in place for 2009, and assuming current spot prices stay in place for all of 2009, the company estimates that approximately 43 percent of the cumulative increase in fuel costs since 2007 would be offset.
Simply stated, the fuel supplements have only addressed 25% of the increase in fuel from 2007 and it is projected that if things stay the same they will still only offset 43% of next year's increased fuel costs (still compared to 2007). It seems that we will be keeping the fuel surcharges for quite a long time.
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