Royal Caribbean bounces back on cost cutting

Royal Caribbean Cruises Ltd. shares, which jumped $4.04, or 17.8 percent, to close at $26.74, also got a boost from a drop in oil prices during the session. The stock had lost 6 percent Monday as investors anticipated the Miami-based company's second-quarter earnings report.

In a conference call with investors on Tuesday, Chairman and CEO Richard Fain said the current situation, including soaring fuel prices and the economic downturn, "is unlike anything we've experienced in our industry's history."

The company said late Monday that it will cut 400 land-based jobs and reduce some noncore investments to contend with fuel prices, which spiked 55 percent during the quarter.

"Our goal of $125 million is a stretch, but we are determined to achieve it and to make it last," Fain said of Royal Caribbean's cost cutting plan.

It reported that second-quarter earnings dropped 34 percent from the same period a year earlier to $84.7 million, or 40 cents a share, meeting the low end of the company's guidance of 40 cents to 45 cents per share.

Net yield rose 1 percent, slightly below the company's forecast of 2 percent growth. Net yield, a key profitability gauge, is the company's rate of return after subtracting expenses such as taxes.

The jobs to be cut range from officer-level positions to clerical. The company is also eliminating an educational program for college students called "The Scholar Ship."

It expects to incur about $15 million, or 7 cents a share, in third-quarter charges related to the restructuring.

Fain said, however, that cruise demand and bookings are holding up. He attributed lower-than-expected second-quarter yields to a disappointing performance by the company's Spanish brand, Pullmantur Cruises, which was hurt by a grounding incident and a weak Spanish economy.