Fuel Surcharge on the Heels of Record Profits - What's the Real Story?

[ChevyCruiser]

RCCl reports record profits:

 

http://www.rclinvestor.com/phoenix.zhtml?c=103045&p=irol-newsArticle&ID=1065428&highlight=

 

and then announces a fuel surcharge

 

http://www.rclinvestor.com/phoenix.zhtml?c=103045&p=irol-newsArticle&ID=1078918&highlight=

 

Especially interestng to me was the line in the profit report:

 

Fuel prices were up 7.1% versus the third quarter of 2006, but cost per APCD was down about 1.9% mainly due to energy saving and other fuel initiatives. The average at-the-pump price for the quarter was $473 per metric ton versus $442 per metric ton in 2006

 

 

APCD is the available passenger cruise day

[Daisydog7]

Sounds like greed to me. Fuel prices have been higher in the past with no fuel surcharge imposed. Why now? I particularly don't like the imposition of the fuel surcharge after the price has already been agreed on and contract made. What? Can I now write to RCCL and say that since my income has unexpectedly gone down, I require them to refund part of my cruise payment on a deal we made last summer? Hah! I can hear the hoots of derision and catcalls from here. Want me to write them and try it?

[negc]

Have you checked the financial reports from the major oil companies recently? That's where to look, if you want to see outrageously high profits and yet the price of gasoline at the pump goes higher and higher. When we see local gas prices return to some semblance of normality, we may see the reduction or elimination of fuel surcharges, but until then, wherever you look, not just in the cruise industry, fuel charges are a fact of life.:rolleyes:

[rsinj]

Sounds like greed to me. Fuel prices have been higher in the past with no fuel surcharge imposed. Why now? I particularly don't like the imposition of the fuel surcharge after the price has already been agreed on and contract made. What? Can I now write to RCCL and say that since my income has unexpectedly gone down, I require them to refund part of my cruise payment on a deal we made last summer? Hah! I can hear the hoots of derision and catcalls from here. Want me to write them and try it?

 

It is odd that they made it on existing reservations - I would say that is greed. I suppose their contention might be that you have just as much right to cancel your reservation if you haven't made final payment and get a full refund. But again, it still doesn't seem right that they can retroactively add the surcharge. I think NCL did the right thing on this issue, said what date it would begin to effect all new reservations, and did the right thing by existing reservation holders and those who made reservations before the set date.

 

Now, unfortunately since we have this fuel surcharge in place, regardless of what the price of oil does, it is here with us and is not going away and like all other things, will only go up in the future.

 

Like all other things as well, ultimately the actions of the company are driven by supply and demand. As you rightly point out, they are making good money right now. However, they are also expanding pretty rapidly, have a good amount of competition, and are taking a good size risk with the Genesis ships. When they hit their limits, or make a misstep and demand falls (for whatever reason), and they can no longer fill the ships for the price they want (including the fuel surcharge), the pendulum will swing the other way and they'll be forced to adjust their prices down - with or without the fuel surcharge.

 

Howard

[CGTNORMANDIE]

FUEL SURCHARGES ON THE HEELS OF RECORD PROFITS??? Sounds like more record profits...:D

[TEXASMUNK]

Don't have a problem with it. Record profits means the product will remain or improve. Fuel Surcharge...Oil has gone from the $40's to the $90's, prefer they add the surcharge and not downgrade the product.

[Dive Master]

FUEL SURCHARGES ON THE HEELS OF RECORD PROFITS??? Sounds like more record profits...:D

 

 

I believe you "hit the nail on the head".

[Gonzo70]

I am 100% in favor of the fuel surchagre, but would have preferred if they made it for new reservations only. RCL is a publicly traded, growing company and as such it is important thay they have record profits - otherwise they would be forced to make very significant cuts in service that would make the recent cuts look like a cake walk. Despite your comments, energy costs have been skyrocketing and will almost certainly be costing RCL more in '08 than they did in '07.

[rsinj]

Record profits means the product will remain or improve.

 

Hate to be the one to let you know, that is not how business works.

 

Howard

[summerman]

I am 100% in favor of the fuel surchagre, but would have preferred if they made it for new reservations only. RCL is a publicly traded, growing company and as such it is important thay they have record profits - otherwise they would be forced to make very significant cuts in service that would make the recent cuts look like a cake walk. Despite your comments, energy costs have been skyrocketing and will almost certainly be costing RCL more in '08 than they did in '07.

 

I Can understand your point but it should have been to new bookings only after dec 10

i am from the uk and had booked our cruise in november 07 for next september and i have had an confirmation of my deposit come through stating they were after the fuel surcharge.

wouldn't you think they would put it in the small print of there brouchure warning customers about this problem as it isn't a new thing of fuel costs rising we have known about our utilities rising for the last couple of years

[wraithe]

While I would have preferred they made the surcharge for new reservations only, I'm not going to quibble about it. As a stockholder and happy sailor, I'm quite proud that they've made money to buy new ships, upgrade the ships they have and still pay me a dividend. Profits in a corporation eventually go back into the product if the corporation is going to survive.

 

As far as high gas prices, what have you done to reduce the price of gas? Until the demand goes down, the price will stay up.

 

1) Have you cut back on driving?

 

2) Do you gang up errands, ie. wait until you need two or three things in the same area before you start the car, or still run to the grocery store to get a single head of lettuce?

 

3) Have you slowed down? Funny how the same people you see b*tching at the gas pump will pass you on the highway doing 15 or 20 mph above the speed limit. Doesn't take a rocket scientist to realize that more speed is exponentially more fuel. The ratio is as follows, Power is proportional to Speed cubed. So if it takes 25 horsepower to make your car do 40 mph, it will take 25 * 2^3 or 200 horsepower to make it do 80. Eight times as much horsepower requires 8 times as much fuel to cover the same distance.

 

Just wondering?? Oil is a commodity, ruled by supply and demand, as long as the demand is there, prices will stay high. So do something about it, cut back and spread the word, maybe if enough of us cut back, it will help lower the price.

[ChevyCruiser]

So do something about it, cut back and spread the word, maybe if enough of us cut back, it will help lower the price.

 

 

I agree, I'm cutting back on my on-board spending to make up for the fuel surcharge!

[Lightsluvr]

I agree, I'm cutting back on my on-board spending to make up for the fuel surcharge!

 

That is precisely what we intend to do. No more photos, no shopping in the onboard shops, no bingo, one glass of wine instead of a bottle.

 

LL

[TEXASMUNK]

Let us remember, Corporations create jobs, 90% of the people that hold stock in corporations are the 'little guys' not the evil doers it is so easy to portray.

 

RCI has historically been profitable, management has done a quality job of growing the company while maintaining the product that the majority of the customer base expects.

 

The evil oil companies have functioned on a 7% margin for years. When a barrel of oil cost $20, their margin was 7%, today at $90 the margin is still 7%.

 

The highest profit made off a gallon of gas is not the oil company or the refinery or the corner gas station, it is the local, state and Federal government. At $3.00 a gallon, they still take, on average, 43 cents.

 

When is the last time your local politician (your politician is a good guy, it is all the others that are the bad guys) offered to cut you some slack on your 43 cents?

 

The fuel surcharge is a bummer but they have had to do it in the past and who knows, it may rear its ugly head in the future.....

 

No, I am not arguing how it was imposed, there is a thread with 2,300+ posts speaking to this evil....this is not one of them.

 

RCI, keep doing what you have been doing well for years.

[FL_Cruiser64]

That is precisely what we intend to do. No more photos, no shopping in the onboard shops, no bingo, one glass of wine instead of a bottle.

 

LL

 

You did all this for $10/day?

[Brad1185]

Don't have a problem with it. Record profits means the product will remain or improve. Fuel Surcharge...Oil has gone from the $40's to the $90's, prefer they add the surcharge and not downgrade the product.

 

They are doing both, surcharge and downgrade with latest round of cutbacks, its all happening together right now.

 

I dont mind the surcharge I do mind the downgrades.

[dfishner]

That is precisely what we intend to do. No more photos, no shopping in the onboard shops, no bingo, one glass of wine instead of a bottle.

 

LL

We decided to do the same thing to compensate for the addition of the fuel charge.. One drink less per day for the both of us makes up for the additional fuel charge. No big deal.

 

RCI has the right to make as much money as they can as long as they still deliver a quality product at a reasonable cost.

[ChevyCruiser]

You did all this for $10/day?

 

Sure it's $10.00 a day, but if $10.00 a day is no big deal, then why did RCI implement it?

 

To me, it's a matter of principle and as the consumer I can choose what I spend. I choose to cruise because it's a good value, but that good value doesn't mean I'm obligated to run the sea pass account up on all the extras.

 

Since RCI can and has implemented a fuel surcharge on my existing cruise reservations, I plan to recoup that surcharge by reducing on-board spending accordingly.

 

After my next cruise, I plan to send them a letter with a pre-surcharge cruise sea pass account statement with the new post-surcharge sea pass account statement and inform them that I have offset the fuel charge by reducing my shipboard spending by XX dollars so that the net impact to RCI is equal or greater than the fuel surcharge.

[ChevyCruiser]

Here's what RCI says about the fuel surcharge on their website:

 

The supplement will assist the company in offsetting the widespread increases in fuel prices that have more than doubled in recent years.

 

And here's what they say in a press release about tird quarter profits:

 

Fuel prices were up 7.1% versus the third quarter of 2006, but cost per APCD was down about 1.9% mainly due to energy saving and other fuel initiatives. The average at-the-pump price for the quarter was $473 per metric ton versus $442 per metric ton in 2006.

 

 

Fuel costs doubled when they are trying to justify the surcharge, but fuel prices were only up 7.1% when they are talking to their stockholders.

 

Makes you wonder what the real story is!

[JanineM]

Here is what I was told by an analyst ...

 

Royal Caribbean, like other cruiselines and "big" users of fuel purchases options in oil in order to lock in future prices. Because the price of oil has risen steadily over the past many months, they have not had the opportunity to purchase additional futures at a lower price.

 

As I understand it, RCCI had "prepurchased" oil at, say $60 a barrel. They now must purchase oil futures at $92 (or whatever it closed at on Monday), thus they are clearly buying futures at a higher price than they were a year ago. Same thing for airlines. These types of industries are constantly buying/selling in futures in order to lock in the best rate they can. I don't know how many of us could have foreseen the dramatic increase in oil prices. If we could have, we would have made a bunch of money!

 

It's a matter of economics. If people don't like it they are always welcome to make another choice for their vacations, but I will admit that it is a bit of a bummer. We have 35 days of cruising booked for 2008, so that does cut into my souvenir shopping!

[Mark_K]

Here's what RCI says about the fuel surcharge on their website:

 

The supplement will assist the company in offsetting the widespread increases in fuel prices that have more than doubled in recent years.

 

And here's what they say in a press release about tird quarter profits:

 

Fuel prices were up 7.1% versus the third quarter of 2006, but cost per APCD was down about 1.9% mainly due to energy saving and other fuel initiatives. The average at-the-pump price for the quarter was $473 per metric ton versus $442 per metric ton in 2006.

 

 

Fuel costs doubled when they are trying to justify the surcharge, but fuel prices were only up 7.1% when they are talking to their stockholders.

 

Makes you wonder what the real story is!

One is talking about general fuel prices, the other is talking about what they had to pay.

 

The issue for them is what fuel is going to cost them in 2008-2009, not what it cost in the first three quarters of 2007.

[mxylpic]

Sure it's $10.00 a day, but if $10.00 a day is no big deal, then why did RCI implement it?

 

To me, it's a matter of principle and as the consumer I can choose what I spend. I choose to cruise because it's a good value, but that good value doesn't mean I'm obligated to run the sea pass account up on all the extras.

 

Since RCI can and has implemented a fuel surcharge on my existing cruise reservations, I plan to recoup that surcharge by reducing on-board spending accordingly.

 

After my next cruise, I plan to send them a letter with a pre-surcharge cruise sea pass account statement with the new post-surcharge sea pass account statement and inform them that I have offset the fuel charge by reducing my shipboard spending by XX dollars so that the net impact to RCI is equal or greater than the fuel surcharge.

 

Why did they do it? Because industries are like herd animals -- they all do the same thing at the same time. Watch gas prices at your local stations. All go up and down in lockstep. Same thing with airline ticket prices, or amusement park prices. One company announces an increase and all others follow suit. This is the part that makes no sense. One would think that if RCI resisted and did NOT implement a fuel surcharge it would put them at a competitive advantage compared to the others. I guess it's more a case of "they are getting it, why shouldn't we."

 

As far as "reducing" spending to compensate -- good luck with that. 1. I'm on vacation and going to enjoy myself and not try to figure out which drink I should skip to make up for a fuel charge that is really a very small percentage of the cost of cruising. And 2, it really won't matter to RCI. Logically they figure their fares to make a profit even if you don't spend one dime on board. On board spending is the icing on the cake.

 

But regardless, have a great cruise. I know I will. :rolleyes: