Monday, January 11, 2010

Royal Caribbean Receives Settlement from Rolls Royce - More Good News For The Millennium-Class Ships.

Celebrity Cruise Line's parent, Royal Caribbean, sued Rolls Royce and Alstom Power Conversion over the multitude of problems Celebrity had with its Millennium-class ships (Millennium, Infinity, Summit and Constellation) pod propulsion systems.  Over the initial years there were a number of cruises which were canceled or modified due to problems associated with bearing failures in the pods designed and provided by the companies.

While the problems have been significantly reduced (to the point that they are no longer noticed and are not news to the cruising public) the costs have been significant and RCCL sought $300 million in damages.  While Alstom settled with a payment of $38 million a while back, it appears that Rolls Royce will be making payment/compensation of around $68 million this quarter. 

I am sure there is more to the settlement than simply the payment of dollars.  Issues concerning warranties, part support, etc. are obviously going to be part of a package that would not be set forth in the required announcement of a $68 million gain by RCCL.

Further, I am sure the RCCL initial demand included the worst case scenario of the expense associated with the replacement of the systems and the anticipated lost revenues.  As such, I think it is clear that RCCL has recouped a very significant portion of its losses and has secured support for these now better performing pods for a significant period of time.

As I will outline in another post, this good news comes on the heels of Celebrity announcing that a number of the very successful aspects of the Solstice-class ships are going to be retrofitted into the Millennium-class ships.