10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 1-11884

ROYAL CARIBBEAN CRUISES LTD.

(Exact name of registrant as specified in its charter)

Republic of Liberia	98-0081645
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1050 Caribbean Way, Miami, Florida 33132
(Address of principal executive offices) (zip code)

(305) 539-6000
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     There were 213,517,798 shares of common stock outstanding as of July 14, 2008.

ROYAL CARIBBEAN CRUISES LTD.

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements		1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3. Quantitative and Qualitative Disclosures About Market Risk		29
Item 4. Controls and Procedures		29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		30
Item 4. Submissions of Matters to a Vote of Security Holders		31
Item 6. Exhibits		32
SIGNATURES		33

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)

	Quarter Ended
	June 30,
	2008			2007
Passenger ticket revenues	$	1,140,077		$	1,066,991
Onboard and other revenues		443,697			414,334
Total revenues		1,583,774			1,481,325
Cruise operating expenses:
Commissions, transportation and other		284,735			268,630
Onboard and other		117,315			102,169
Payroll and related		163,343			142,300
Food		82,096			75,797
Fuel		174,299			126,081
Other operating		269,211			250,552
Total cruise operating expenses		1,090,999			965,529
Marketing, selling and administrative expenses		196,548			193,195
Depreciation and amortization expenses		127,277			121,718
Operating Income		168,950			200,883
Other income (expense):
Interest income		3,015			6,451
Interest expense, net of interest capitalized		(81,086	)		(85,516	)
Other (expense) income		(6,130	)		6,927
		(84,201	)		(72,138	)
Net Income	$	84,749		$	128,745
Earnings per Share:
Basic	$	0.40		$	0.61
Diluted	$	0.40		$	0.60
Weighted-Average Shares Outstanding:
Basic		213,482			212,633
Diluted		214,280			214,157

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)

	Six Months Ended
	June 30,
	2008			2007
Passenger ticket revenues	$	2,177,980		$	1,937,407
Onboard and other revenues		834,879			767,044
Total revenues		3,012,859			2,704,451
Cruise operating expenses:
Commissions, transportation and other		542,675			488,315
Onboard and other		195,835			168,573
Payroll and related		317,582			279,580
Food		165,098			148,982
Fuel		332,533			243,415
Other operating		499,462			478,005
Total cruise operating expenses		2,053,185			1,806,870
Marketing, selling and administrative expenses		401,489			379,379
Depreciation and amortization expenses		251,667			237,676
Operating Income		306,518			280,526
Other income (expense):
Interest income		5,523			10,951
Interest expense, net of interest capitalized		(159,034	)		(165,996	)
Other income		7,349			12,089
		(146,162	)		(142,956	)
Net Income	$	160,356		$	137,570
Earnings per Share:
Basic	$	0.75		$	0.65
Diluted	$	0.75		$	0.64
Weighted-Average Shares Outstanding:
Basic		213,404			212,478
Diluted		214,398			214,101

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

	As of
	June 30,			December 31,
	2008			2007
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	387,158		$	230,784
Trade and other receivables, net		250,557			313,640
Inventories		118,343			96,813
Prepaid expenses and other assets		187,453			137,662
Derivative financial instruments		300,308			213,892
Total current assets		1,243,819			992,791
Property and equipment, net		13,244,859			12,253,784
Goodwill		844,162			797,791
Other assets		1,128,196			937,915
	$	16,461,036		$	14,982,281
Liabilities and Shareholders’ Equity
Current liabilities
Current portion of long-term debt	$	430,754		$	351,725
Accounts payable		255,487			222,895
Accrued expenses and other liabilities		489,738			533,674
Customer deposits		1,442,338			1,084,359
Hedged firm commitments		164,422			146,642
Total current liabilities		2,782,739			2,339,295
Long-term debt		5,941,206			5,346,547
Other long-term liabilities		689,785			539,096
Commitments and contingencies (Note 5)
Shareholders’ equity
Preferred stock ($0.01 par value; 20,000,000 shares authorized; none outstanding)		—			—
Common stock ($0.01 par value; 500,000,000 shares authorized; 223,817,723 and 223,509,136 shares issued, June 30, 2008 and December 31, 2007, respectively)		2,238			2,235
Paid-in capital		2,942,910			2,942,935
Retained earnings		4,211,195			4,114,877
Accumulated other comprehensive income		315,043			120,955
Treasury stock (11,056,529 and 11,026,271 common shares at cost, June 30, 2008 and December 31, 2007, respectively)		(424,080	)		(423,659	)
Total shareholders’ equity		7,047,306			6,757,343
	$	16,461,036		$	14,982,281

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)

	Six Months Ended
	June 30,
	2008			2007
Operating Activities
Net income	$	160,356		$	137,570
Adjustments:
Depreciation and amortization		251,667			237,676
Changes in operating assets and liabilities:
Decrease (increase) in trade and other receivables, net		68,149			(25,930	)
Increase in inventories		(20,341	)		(10,158	)
Increase in prepaid expenses and other assets		(47,747	)		(112,080	)
Increase in accounts payable		26,604			7,559
(Decrease) increase in accrued expenses and other liabilities		(15,143	)		76,041
Increase in customer deposits		354,894			513,490
Other, net		(17,008	)		(1,022	)
Net cash provided by operating activities		761,431			823,146
Investing Activities
Purchases of property and equipment		(1,313,168	)		(1,075,814	)
Cash received on settlement of derivative financial instruments		253,872			45,056
Other, net		(28,515	)		(10,108	)
Net cash used in investing activities		(1,087,811	)		(1,040,866	)
Financing Activities
Debt proceeds		1,098,105			1,897,780
Debt issuance costs		(12,006	)		(10,048	)
Repayments of debt		(511,634	)		(1,514,686	)
Dividends paid		(96,017	)		(66,339	)
Proceeds from exercise of common stock options		3,372			16,427
Other, net		495			2,593
Net cash provided by financing activities		482,315			325,727
Effect of exchange rate changes on cash		439			(162	)
Net increase in cash and cash equivalents		156,374			107,845
Cash and cash equivalents at beginning of period		230,784			104,520
Cash and cash equivalents at end of period	$	387,158		$	212,365
Supplemental Disclosure
Cash paid during the period for:
Interest, net of amount capitalized	$	172,448		$	137,499

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

     As used in this quarterly report on Form 10-Q, the terms “Royal Caribbean,” the “Company,” “we,” “our” and “us” refer to Royal Caribbean Cruises Ltd. and the terms “Royal Caribbean International,” “Celebrity Cruises,” “Pullmantur Cruises,” “Azamara Cruises” and “CDF Croisières de France” refer to our cruise brands. In accordance with cruise vacation industry practice, the term “berths” is determined based on double occupancy per cabin even though many cabins can accommodate three or more passengers. This report should be read in conjunction with our annual report on Form 10-K for the year ended December 31, 2007.

Note 1. General

Description of Business

     We are a global cruise company. We own five cruise brands, Royal Caribbean International, Celebrity Cruises, Pullmantur Cruises, Azamara Cruises, and CDF Croisières de France. In addition, we have a 50% investment in a joint venture with TUI Travel PLC, formerly First Choice Holidays PLC, which operates the brand Island Cruises. We also have a 50% investment in a joint venture with TUI AG which will operate the brand TUI Cruises.

Basis for Preparation of Consolidated Financial Statements

     The unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Estimates are required for the preparation of financial statements in accordance with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates.

     All significant intercompany accounts and transactions are eliminated in consolidation. We consolidate entities over which we have control, usually evidenced by a direct ownership interest of greater than 50% and variable interest entities where we are determined to be the primary beneficiary. For affiliates where significant influence over financial and operating policies exists, usually evidenced by a direct ownership interest from 20% to 50%, the investment is accounted for using the equity method.

     We believe the accompanying unaudited consolidated financial statements contain all normal recurring accruals necessary for a fair presentation. Our revenues are seasonal and results for interim periods are not necessarily indicative of results for the entire year.

Note 2. Summary of Significant Accounting Policies

Recently Adopted Accounting Standards

     In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a formal framework for measuring fair value and expands disclosures about fair value measurements. Broadly, SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 applies prospectively to fair value

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measurements performed after the required effective dates as follows: on January 1, 2008, the standard applied to the measurements of fair values of financial instruments and recurring fair value measurements of non-financial assets and liabilities; on January 1, 2009, the standard will apply to non-recurring measurements of non-financial assets and liabilities such as our measurement of potential impairments of goodwill, other intangibles and other long-lived assets. On January 1, 2008, we adopted the provisions of SFAS 157 for our measurement of fair value of financial instruments and recurring fair value measurements of non-financial assets and liabilities. These provisions did not have a material impact on our consolidated financial statements. We do not expect the adoption of the remaining provisions of SFAS 157 to have a material impact on our consolidated financial statements.

     SFAS 157 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

1.	Level 1 Inputs — Quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.
2.	Level 2 Inputs — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
3.	Level 3 Inputs — Inputs that are unobservable for the asset or liability.

     The availability of observable inputs can vary and is affected by a wide variety of factors. To the extent that valuation is based on inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value of a specific asset or liability may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

     Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. For our financial instruments that are recorded at fair value, fair value is measured as follows:

     Exchange-traded equity securities and mutual funds: Fair value is based on quoted prices in active markets. Valuation of these items does not entail a significant amount of judgment and the inputs that are significant to the fair value measurement are Level 1 in the fair value hierarchy.

     Derivative Financial Instruments: Our derivative financial instruments consist of foreign currency forward contracts and interest rate, cross currency and fuel swaps. Fair value is derived

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using valuation models that utilize the income valuation approach. These valuation models take into account the contract terms such as maturity, as well as other inputs such as exchange rates, fuel types, fuel curves, interest rate yield curves, creditworthiness of the counterparty and the Company, as well as other data points. The data sources utilized in these valuation models that are significant to the fair value measurement are Level 2 in the fair value hierarchy.

     In conjunction with the adoption of SFAS 157, we adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 provides an option, on an instrument-by-instrument basis, for certain financial instruments and other items that are not otherwise measured at fair value, to be reported at fair value with changes in fair value reported in earnings. After the initial adoption, the election is generally made at the acquisition of the instrument and it may not be revoked. At adoption, we did not elect to apply the fair value option to any eligible items, and accordingly, the adoption of the standard did not have an impact on our consolidated financial statements.

Future Application of Accounting Standards

     In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations,” (“SFAS 141R”). SFAS 141R requires the acquiring entity in a business combination to recognize the full fair value of assets acquired and liabilities assumed in the transaction whether full or partial acquisition, establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed, requires expensing of most transaction and restructuring costs, and requires the acquirer to disclose all information needed to evaluate and understand the nature and financial effect of the business combination. SFAS 141R applies to all transactions or other events in which an entity obtains control of one or more businesses, including combinations achieved without transfer of consideration, for example, by contract alone or through the lapse of minority veto rights. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first fiscal year beginning after December 15, 2008. We are currently evaluating the impact SFAS 141R may have on our consolidated financial statements.

     In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51,” (“SFAS 160”). SFAS 160 requires reporting entities to present noncontrolling (minority) interests as equity as opposed to as a liability or mezzanine equity and provides guidance on the accounting for transactions between an entity and noncontrolling interests. SFAS 160 is effective the first fiscal year beginning after December 15, 2008, and interim periods within that fiscal year. SFAS 160 applies prospectively as of the beginning of the fiscal year SFAS 160 is initially applied, except for the presentation and disclosure requirements which are applied retrospectively for all periods presented subsequent to adoption. We are currently evaluating the impact SFAS 160 may have on our consolidated financial statements.

     In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement No. 133 (SFAS 133),” (“SFAS 161”). SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. SFAS 161

7

will be effective for our fiscal 2009 interim and annual consolidated financial statements and the relevant disclosures will be added at such time.

Reclassifications

     Reclassifications have been made to prior year amounts to conform to the current year presentation.

Note 3. Earnings Per Share

     A reconciliation between basic and diluted earnings per share is as follows (in thousands, except per share data):

	Quarter Ended				Six Months Ended
	June 30,				June 30,
	2008		2007		2008		2007
Net income for basic and diluted earnings per share	$	84,749	$	128,745	$	160,356	$	137,570
Weighted-average common shares outstanding		213,482		212,633		213,404		212,478
Dilutive effect of stock options and restricted stock awards		798		1,524		994		1,623
Diluted weighted-average shares outstanding		214,280		214,157		214,398		214,101
Basic earnings per share	$	0.40	$	0.61	$	0.75	$	0.65
Diluted earnings per share	$	0.40	$	0.60	$	0.75	$	0.64

     Diluted earnings per share did not include options to purchase 4.6 million and 3.0 million shares for the second quarters of 2008 and 2007, respectively, and 4.5 million and 3.0 million shares for the first six months of 2008 and 2007, respectively, because the effect of including them would have been antidilutive.

Note 4. Long-Term Debt

     In April 2008, we drew in full the $530.0 million available under an unsecured term loan due through 2015. The loan bears interest at LIBOR plus an applicable margin; currently the all-in weighted average rate is approximately 3.72%. The proceeds were used towards the purchase of Independence of the Seas, the third Freedom-class ship for Royal Caribbean International, which was delivered in April 2008.

8

Note 5. Commitments and Contingencies

     Capital Expenditures. As of June 30, 2008, the expected dates our ships on order will enter service and their planned berths are as follows:

	Expected to	Approximate
Ship	Enter Service	Berths
Royal Caribbean International:
Oasis-class:
Oasis of the Seas	4th Quarter 2009		5,400
Allure of the Seas	4th Quarter 2010		5,400
Celebrity Cruises:
Solstice-class:
Celebrity Solstice	4th Quarter 2008		2,850
Celebrity Equinox	3rd Quarter 2009		2,850
Celebrity Eclipse	3rd Quarter 2010		2,850
Unnamed	3rd Quarter 2011		2,850
Unnamed	4th Quarter 2012		2,850
Total Berths			25,050

     The anticipated aggregate cost of these ships is approximately $7.2 billion, of which we have deposited $522.2 million as of June 30, 2008. Approximately 15.0% of the aggregate cost was exposed to fluctuations in the euro exchange rate at June 30, 2008. As of June 30, 2008, we anticipated overall capital expenditures, including the seven ships on order, will be approximately $1.9 billion for 2008, $2.0 billion for 2009, $2.2 billion for 2010, $1.0 billion for 2011 and $1.0 billion for 2012.

     Litigation. A purported class action lawsuit that had been filed in April 2005 in the United States District Court for the Southern District of Florida alleging that Celebrity Cruises improperly requires its cabin stewards to share guest gratuities with assistant cabin stewards was dismissed in March 2006 on the basis that it should be arbitrated pursuant to the arbitration provision in Celebrity’s collective bargaining agreement. The suit sought payment of damages, including penalty wages under the U.S. Seaman’s Wage Act. In June 2007, the dismissal was affirmed by the United States 11th Circuit Court of Appeals and plaintiff’s petition requesting that the United States Supreme Court grant certiorari jurisdiction over the action was subsequently denied. In February 2008, Plaintiff submitted a notice to arbitrate the claim pursuant to Celebrity’s collective bargaining agreement and arbitration is currently pending. We are not able at this time to estimate the impact of this proceeding.

     In January 2006, a purported class action lawsuit was filed in the United States District Court for the Southern District of New York alleging that we infringed rights in copyrighted works and other intellectual property by presenting performances on our cruise ships without securing the necessary licenses. The suit seeks payment of damages, disgorgement of profits and a permanent injunction against future infringement. In April 2006, we filed a motion to sever and transfer the case to the United States District Court for the Southern District of Florida. The motion is pending. We are not able at this time to estimate the impact of this proceeding.

     We have a lawsuit pending in the Circuit Court for Miami-Dade County, Florida against Rolls Royce, co-producer of the Mermaid pod-propulsion system on Millennium-class ships, for the recurring Mermaid pod failures. We are not able at this time to estimate the outcome of the Rolls

9

Royce proceeding.

     In July 2006, a purported class action lawsuit was filed in the United States District Court for the Central District of California alleging that we failed to timely pay crew wages and failed to pay proper crew overtime. The suit seeks payment of damages, including penalty wages under the U.S. Seaman’s Wage Act and equitable relief damages under the California Unfair Competition Law. In December 2006, the District Court granted our motion to dismiss the claim and held that it should be arbitrated pursuant to the arbitration provision in Royal Caribbean’s collective bargaining agreement. In January 2007, the plaintiffs appealed the order to the United States Ninth Circuit Court of Appeals. We are not able at this time to estimate the impact of this proceeding.

     The Miami District Office of the U.S. Equal Employment Opportunity Commission (“EEOC”) has alleged that certain of our shipboard employment practices do not comply with U.S. employment laws. In June 2007, the EEOC proposed payment of monetary sanctions and certain remedial actions. Following discussions with the EEOC regarding this matter, the EEOC informed us that they transferred the matter to its legal unit for litigation review. To date, no legal proceedings have been initiated. We do not believe that this matter will have a material adverse impact on our financial condition or results of operations.

     In July 2008, we settled our pending case against Pentair Water Treatment (OH) Company (formerly known as Essef Corporation) for claims stemming from a 1994 outbreak of Legionnaires’ disease on one of Celebrity Cruises’ ships. Pursuant to the terms of the settlement agreement, we will be paid, net of costs and payment to insurers, approximately $18.0 million. This award will be recognized in our consolidated financial statements in the third quarter of 2008.

     In March 2008, a purported class action was filed against us, Celebrity Cruises and a related party, Celebrity Catering Services, in the United States District Court, Southern District of Florida alleging that we improperly deducted amounts from the gratuities paid to our shipboard servers, waiters, bar tenders and other personnel in our bar and restaurant departments. The suit also alleged that such persons were not properly compensated for their hours worked. The suit sought payment of damages, including penalty wages under the U.S. Seaman’s Wage Act. The suit was dismissed in June 2008 and ordered to arbitration in accordance with the terms of the applicable collective bargaining agreement. We are not able at this time to estimate the impact of this proceeding.

     In connection with a review of our fuel supplement by the Florida Attorney General’s office, the Company agreed in March 2008 to eliminate the fuel supplement on any bookings made on our Royal Caribbean International, Celebrity Cruises and Azamara Cruises brands prior to our November 16, 2007 announcement of the supplement. As a result, we have eliminated or refunded in full the fuel supplement for the affected bookings, the amount of which aggregated approximately $21.0 million. The Company and Celebrity Cruises also amended their 1997 Assurances of Voluntary Compliance with the Florida Attorney General’s office regarding cruise fare disclosures to address fuel supplement disclosures. The resolution of these matters did not affect the previously announced investigation by the same office to determine whether there is or has been a violation of state or Federal anti-trust laws in connection with the setting by us and other cruise line operators of our respective fuel supplements. We are cooperating with the Attorney General’s office in connection with this investigation and are not able at this time to estimate the impact of this investigation.

     In April 2008, five consolidated purported class actions were voluntarily dismissed by the plaintiffs in the United States District Court for the Southern District of Florida. The actions, which

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had been filed in February and March, 2008 alleged that we, other cruise lines and a trade association violated Federal anti-trust laws or state deceptive and unfair trade practices laws by conspiring to fix the prices of the fuel supplements announced by the various cruise lines or misleading consumers as to the relationship between each cruise line’s fuel costs and the fuel supplements it is charging its customers.

     In April 2008, a purported class action was filed against us, Celebrity Cruises and a related party, Celebrity Catering Services, in the United States District Court, Southern District of Florida, alleging that we underpaid wages and overtime pay for our shipboard personnel. The suit also alleged that we improperly deducted amounts from the gratuities paid to certain of our shipboard restaurant personnel. The suit sought payment of damages, including penalty wages under the U.S. Seaman’s Wage Act. In June 2008, the court dismissed the case and ordered the parties to arbitration in accordance with the terms of the applicable collective bargaining agreements. We are not able to estimate the impact of this proceeding.

     In June 2008, a purported class action arbitration claim was made against us alleging that we required shipboard personnel of our Royal Caribbean International brand to pay for their own employment commencement expenses in violation of our collective bargaining agreement. We are not able at this time to estimate the impact of this proceeding.

     We are routinely involved in other claims typical within the cruise vacation industry. The majority of these claims are covered by insurance. We believe the outcome of such claims, net of expected recoveries, will not have a material adverse impact on our financial condition or results of operations.

     Other. Under the Brilliance of the Seas operating lease, we have agreed to indemnify the lessor to the extent its after-tax return is negatively impacted by unfavorable changes in corporate tax rates, capital allowance deductions and certain unfavorable determinations which may be made by United Kingdom tax authorities. These indemnifications could result in an increase in our lease payments. We are unable to estimate the maximum potential increase in our lease payments due to the various circumstances, timing or a combination of events that could trigger such indemnifications. Under current circumstances we do not believe an indemnification in any material amount is probable.

     Some of the contracts that we enter into include indemnification provisions that obligate us to make payments to the counterparty if certain events occur. These contingencies generally relate to changes in taxes, increased lender capital costs and other similar costs. The indemnification clauses are often standard contractual terms and are entered into in the normal course of business. There are no stated or notional amounts included in the indemnification clauses and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses. We have not been required to make any payments under such indemnification clauses in the past and, under current circumstances, we do not believe an indemnification in any material amount is probable.

     If any person other than A. Wilhelmsen AS. and Cruise Associates, our two principal shareholders, acquires ownership of more than 30% of our common stock and our two principal shareholders, in the aggregate, own less of our common stock than such person and do not collectively have the right to elect, or to designate for election, at least a majority of the board of directors, we may be obligated to prepay indebtedness outstanding under the majority of our credit facilities, which we may be unable to replace on similar terms. If this were to occur, it could have an adverse impact on our liquidity and operations.

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Note 6. Shareholders’ Equity

     We declared cash dividends on our common stock of $0.15 per share during the first and second quarters of 2008 and 2007.

Note 7. Comprehensive Income

     Comprehensive income includes net income, foreign currency translation adjustments and changes in the fair value of derivative instruments that qualify as cash flow hedges. The cumulative changes in fair value of the derivatives are deferred and recorded as a component of accumulated other comprehensive income until the hedged transactions are realized and recognized in earnings.

Comprehensive income was as follows (in thousands):

	Quarter Ended					Six Months Ended
	June 30,					June 30,
	2008		2007			2008			2007
Net income	$	84,749	$	128,745		$	160,356		$	137,570
Changes related to cash flow derivative hedges		93,396		17,202			198,152			37,769
Foreign currency translation adjustments		202		(2,876	)		(4,064	)		(3,021	)
Total comprehensive income	$	178,347	$	143,071		$	354,444		$	172,318

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Note 8. Fair Value Measurements

     Assets that are recorded at fair value have been categorized based upon the fair value hierarchy described in Note 2. Summary of Significant Accounting Policies.

     The following table presents information about the Company’s financial instruments recorded at fair value on a recurring basis as of June 30, 2008 (in thousands):

			Fair Value Measurements
			at Reporting Date Using
Description	Total		Level 1		Level 2		Level 3
Assets:
Derivative financial instruments1	$	769,501	$	—	$	769,501	$	—
Investments2		20,573		20,573		—		—
Total Assets	$	790,074	$	20,573	$	769,501	$	—
Liabilities:
Derivative financial instruments3	$	66,500	$	—	$	66,500	$	—
Total Liabilities	$	66,500	$	—	$	66,500	$	—

1	- Consists of foreign currency forward contracts and interest rate, cross currency and fuel swaps.
2	- Consists of exchange-traded equity securities and mutual funds.
3	- Consists of interest rate swaps and foreign currency forward contracts.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Concerning Factors That May Affect Future Results

     Certain statements under this caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this document constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. Words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “goal”, “intend”, “may”, “plan”, “project”, “seek”, “should”, “will”, and similar expressions are intended to identify these forward-looking statements. Forward-looking statements do not guarantee future performance and may involve risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements. Examples of these risks, uncertainties and other factors include, but are not limited to the following:

• general economic and business conditions,

• vacation industry competition and changes in industry capacity and overcapacity,

• the impact of tax and environmental laws and regulations affecting our business or our principal shareholders,

• the impact of changes in other laws and regulations affecting our business,

• the impact of pending or threatened litigation,

• the delivery of scheduled new ships,

• the impact of emergency ship repairs, including the related lost revenue,

• the impact of problems encountered at shipyards, including industrial actions, shipyard insolvency or financial difficulties,

• the impact on prices of new ships due to shortages in available shipyard facilities, component parts and shipyard consolidations,

• negative incidents involving cruise ships including those involving the health and safety of passengers,

• reduced consumer demand for cruises as a result of any number of reasons, including geo-political and economic uncertainties and the unavailability or cost of air service,

• fears of terrorist attacks, armed conflict and the resulting concerns over safety and security aspects of traveling,

• the impact of the spread of contagious diseases,

• the availability under our unsecured revolving credit facility, cash flows from operations and our ability to obtain new borrowings and raise new capital on terms that are favorable or

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	consistent with our expectations to fund operations, debt payment requirements, capital expenditures and other commitments,
•	changes in our stock price or principal shareholders,
•	the impact of changes in operating and financing costs, including changes in foreign currency, interest rates, fuel, food, payroll, insurance and security costs,
•	the unavailability of ports of call,
•	weather.

     The above examples are not exhaustive and new risks emerge from time to time. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a further discussion of risk factors related to our business, see Part I, Item 1A. Risk Factors in our annual report on Form 10-K for the year ended December 31, 2007.

Terminology

     Our revenues are seasonal based on demand for cruises. Demand is strongest for cruises during the North American summer months and holidays.

     Our revenues consist of the following:

     Passenger ticket revenues consist of revenue recognized from the sale of passenger tickets and the sale of air transportation to and from our ships.

     Onboard and other revenues consist primarily of revenues from the sale of goods and/or services onboard our ships not included in passenger ticket prices, cancellation fees, sales of vacation protection insurance, pre- and post-cruise tours, Pullmantur Cruises’ land-based tours and hotel and air packages. Also included are revenues we receive from independent third party concessionaires that pay us a percentage of their revenues in exchange for the right to provide selected goods and/or services onboard our ships.

     Our cruise operating expenses consist of the following:

     Commissions, transportation and other expenses consist of those costs directly associated with passenger ticket revenues, including travel agent commissions, air and other transportation expenses, port costs that vary with passenger head counts and related credit card fees.

     Onboard and other expenses consist of the direct costs associated with onboard and other revenues. These costs include the cost of products sold onboard our ships, vacation protection insurance premiums, costs associated with pre- and post-cruise tours and related credit card fees. These costs also include minimal costs associated with concession revenues, as the costs are mostly incurred by third party concessionaires.

     Payroll and related expenses consist of costs for shipboard personnel.

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     Food expenses include food costs for both passengers and crew.

     Fuel expenses include fuel and related delivery and storage costs, including the financial impact of fuel swap agreements.

     Other operating expenses consist primarily of operating costs such as repairs and maintenance, port costs that do not vary with passenger head counts, vessel operating lease costs, costs associated with Pullmantur Cruises’ land-based tours, vessel related insurance and entertainment.

     We do not allocate payroll and related costs, food costs, fuel costs or other operating costs to the expense categories attributable to passenger ticket revenues or onboard and other revenues since they are incurred to provide the total cruise vacation experience.

Non-GAAP Financial Measures

     Available Passenger Cruise Days (“APCD”) are our measurement of capacity and represent double occupancy per cabin multiplied by the number of cruise days for the period. We use this measure to perform capacity and rate analyses to identify our main non-capacity drivers which cause our cruise revenue and expenses to vary.

     Gross Cruise Costs represent the sum of total cruise operating expenses plus marketing, selling and administrative expenses.

     Gross Yields represent total revenues per APCD.

     Net Cruise Costs represent Gross Cruise Costs excluding commissions, transportation and other expenses and onboard and other expenses (each of which is described under the Terminology heading). In measuring our ability to control costs in a manner that positively impacts net income, we believe changes in Net Cruise Costs to be the most relevant indicator of our performance. A reconciliation of historical Gross Cruise Costs to Net Cruise Costs is provided below under Summary of Historical Results of Operations. We have not provided a quantitative reconciliation of projected Gross Cruise Costs to projected Net Cruise Costs due to the significant uncertainty in projecting the costs deducted to arrive at this measure. Accordingly, we do not believe that reconciling information for such projected figures would be meaningful.

     Net Debt-to-Capital is a ratio which represents total long-term debt, including current portion of long-term debt, less cash and cash equivalents (“Net Debt”) divided by the sum of Net Debt and total shareholders’ equity. We believe Net Debt and Net Debt-to-Capital, along with total long-term debt and shareholders’ equity are useful measures of our capital structure. A reconciliation of historical Debt-to-Capital to Net Debt-to-Capital is provided below under Summary of Historical Results of Operations.

     Net Revenues represent total revenues less commissions, transportation and other expenses and onboard and other expenses (each of which is described under the Terminology heading).

     Net Yields represent Net Revenues per APCD. We utilize Net Revenues and Net Yields to manage our business on a day-to-day basis as we believe that it is the most relevant measure of our pricing performance because it reflects the cruise revenues earned by us net of our most significant variable costs, which are commissions, transportation and other expenses and onboard and other expenses. A reconciliation of historical Gross Yields to Net Yields is provided below under

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Summary of Historical Results of Operations. We have not provided a quantitative reconciliation of projected Gross Yields to projected Net Yields due to the significant uncertainty in projecting the costs deducted to arrive at this measure. Accordingly, we do not believe that reconciling information for such projected figures would be meaningful.

     Occupancy, in accordance with cruise vacation industry practice, is calculated by dividing Passenger Cruise Days by APCD. A percentage in excess of 100% indicates that three or more passengers occupied some cabins.

     Passenger Cruise Days represent the number of passengers carried for the period multiplied by the number of days of their respective cruises.

     The use of certain significant non-GAAP measures, such as Net Yields and Net Cruise Costs, allow us to perform capacity and rate analysis to separate the impact of known capacity changes from other less predictable changes which affect our business. We believe these non-GAAP measures provide expanded insight to measure revenue and cost performance in addition to the standard U.S. GAAP based financial measures. There are no specific rules or regulations for determining non-GAAP measures, and as such, there exists the possibility that they may not be comparable to other companies within the industry.

Summary of Historical Results of Operations

Highlights for the second quarter of 2008 include:

• Total revenues increased 6.9% to $1.6 billion from total revenues of $1.5 billion for the same period in 2007. Net Yields increased by approximately 1.0% compared to the same period in 2007.

• Net Cruise Costs per APCD increased by approximately 6.7% compared to the same period in 2007.

• Fuel expenses per APCD, net of the financial impact of fuel swap agreements, increased 31.0% per APCD as compared to the same period in 2007.

• Our Debt-to-Capital ratio increased to 47.5% as of June 30, 2008 compared to 45.7% as of December 31, 2007. Similarly, our Net Debt-to-Capital increased to 45.9% as of June 30, 2008 compared to 44.7% as of December 31, 2007.

• We took delivery of Independence of the Seas, the third Freedom-class ship for Royal Caribbean International. To finance the purchase, we drew in full $530.0 million from an unsecured term loan due through 2015. The loan bears interest at LIBOR plus an applicable margin. Currently, the all-in weighted average rate is approximately 3.72%.

• We finalized our contract with Meyer Werft to build a fifth Solstice-class ship for Celebrity Cruises, for an additional capacity of approximately 2,850 berths, which is expected to enter service in the fourth quarter of 2012. We have a financing commitment for approximately 80.0% of the contract price.

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• We closed on our joint venture transaction with TUI AG to operate TUI Cruises. Celebrity Galaxy, a 1,850-berth ship currently part of Celebrity Cruises, will be sold to TUI Cruises to serve as its first ship and will sail under a new name beginning in May 2009.

• We announced The Scholar Ship, our education program at sea for graduate and undergraduate students, ceased operations. The Scholar Ship operated a 29,000-ton ocean liner under a seasonal vessel operating lease agreement. This will not have a material impact on our financial condition or results of operations.

     Operating results for the quarter and six months ended June 30, 2008 compared to the same periods in 2007 are shown in the following table (in thousands, except per share data):

	Quarter Ended June 30,												Six Months Ended June 30,
	2008						2007						2008						2007
				% of Total						% of Total						% of Total						% of Total
				Revenues						Revenues						Revenues						Revenues
Passenger ticket revenues	$	1,140,077			72.0	%	$	1,066,991			72.0	%	$	2,177,980			72.3	%	$	1,937,407			71.6	%
Onboard and other revenues		443,697			28.0	%		414,334			28.0	%		834,879			27.7	%		767,044			28.4	%
Total revenues		1,583,774			100	%		1,481,325			100	%		3,012,859			100	%		2,704,451			100	%
Cruise operating expenses:
Commissions, transportation and other		284,735			18.0	%		268,630			18.1	%		542,675			18.0	%		488,315			18.1	%
Onboard and other		117,315			7.4	%		102,169			6.9	%		195,835			6.5	%		168,573			6.2	%
Payroll and related		163,343			10.3	%		142,300			9.6	%		317,582			10.5	%		279,580			10.3	%
Food		82,096			5.2	%		75,797			5.1	%		165,098			5.5	%		148,982			5.5	%
Fuel		174,299			11.0	%		126,081			8.5	%		332,533			11.0	%		243,415			9.0	%
Other operating		269,211			17.0	%		250,552			16.9	%		499,462			16.6	%		478,005			17.7	%
Total cruise operating expenses		1,090,999			68.9	%		965,529			65.2	%		2,053,185			68.1	%		1,806,870			66.8	%
Marketing, selling and administrative expenses		196,548			12.4	%		193,195			13.0	%		401,489			13.3	%		379,379			14.0	%
Depreciation and amortization expenses		127,277			8.0	%		121,718			8.2	%		251,667			8.4	%		237,676			8.8	%
Operating Income		168,950			10.7	%		200,883			13.6	%		306,518			10.2	%		280,526			10.4	%
Other income (expense):
Interest income		3,015			0.2	%		6,451			0.4	%		5,523			0.2	%		10,951			0.4	%
Interest expense, net of interest capitalized		(81,086	)		(5.1	%)		(85,516	)		(5.8	%)		(159,034	)		(5.3	%)		(165,996	)		(6.1	%)
Other (expense) income		(6,130	)		(0.4	%)		6,927			0.5	%		7,349			0.2	%		12,089			0.4	%
		(84,201	)		(5.3	%)		(72,138	)		(4.9	%)		(146,162	)		(4.9	%)		(142,956	)		(5.3	%)
Net Income		84,749			5.4	%		128,745			8.7	%		160,356			5.3	%		137,570			5.1	%
Diluted EPS	$	0.40					$	0.60					$	0.75					$	0.64

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     Selected historical statistical information is shown in the following table:

	Quarter Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
Passengers Carried		989,722			959,694			2,021,390			1,878,559
Passenger Cruise Days		6,619,144			6,403,995			13,232,069			12,433,982
APCD		6,362,851			6,041,961			12,694,950			11,858,007
Occupancy		104.0	%		106.0	%		104.2	%		104.9	%

     Gross Yields and Net Yields were calculated as follows (in thousands, except APCD and Yields):

	Quarter Ended June 30,							Six Months Ended June 30,
	2008		2007		% Change			2008		2007		% Change
Passenger ticket revenues	$	1,140,077	$	1,066,991		6.8	%	$	2,177,980	$	1,937,407		12.4	%
Onboard and other revenues		443,697		414,334		7.1	%		834,879		767,044		8.8	%
Total revenues		1,583,774		1,481,325		6.9	%		3,012,859		2,704,451		11.4	%
Less:
Commissions, transportation and other		284,735		268,630		6.0	%		542,675		488,315		11.1	%
Onboard and other		117,315		102,169		14.8	%		195,835		168,573		16.2	%
Net revenues	$	1,181,724	$	1,110,526		6.4	%	$	2,274,349	$	2,047,563		11.1	%
APCD		6,362,851		6,041,961		5.3	%		12,694,950		11,858,007		7.1	%
Gross Yields	$	248.91	$	245.17		1.5	%	$	237.33	$	228.07		4.1	%
Net Yields	$	185.72	$	183.80		1.0	%	$	179.15	$	172.67		3.8	%

     Gross Cruise Costs and Net Cruise Costs were calculated as follows (in thousands, except APCD and costs per APCD):

	Quarter Ended June 30,							Six Months Ended June 30,
	2008		2007		% Change			2008		2007		% Change
Total cruise operating expenses	$	1,090,999	$	965,529		13.0	%	$	2,053,185	$	1,806,870		13.6	%
Marketing, selling and administrative expenses		196,548		193,195		1.7	%		401,489		379,379		5.8	%
Gross Cruise Costs		1,287,547		1,158,724		11.1	%		2,454,674		2,186,249		12.3	%
Less:
Commissions, transportation and other		284,735		268,630		6.0	%		542,675		488,315		11.1	%
Onboard and other		117,315		102,169		14.8	%		195,835		168,573		16.2	%
Net Cruise Costs	$	885,497	$	787,925		12.4	%	$	1,716,164	$	1,529,361		12.2	%
APCD		6,362,851		6,041,961		5.3	%		12,694,950		11,858,007		7.1	%
Gross Cruise Costs per APCD	$	202.35	$	191.78		5.5	%	$	193.36	$	184.37		4.9	%
Net Cruise Costs per APCD	$	139.17	$	130.41		6.7	%	$	135.18	$	128.97		4.8	%

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     Net Debt-to-Capital was calculated as follows (in thousands):

	As of
	June 30,			December 31,
	2008			2007
Long-term debt, net of current portion	$	5,941,206		$	5,346,547
Current portion of long-term debt		430,754			351,725
Total debt		6,371,960			5,698,272
Less: Cash and cash equivalents		387,158			230,784
Net Debt	$	5,984,802		$	5,467,488
Total shareholders’ equity	$	7,047,306		$	6,757,343
Total debt		6,371,960			5,698,272
Total debt and shareholders’ equity		13,419,266			12,455,615
Debt-to-Capital		47.5	%		45.7	%
Net Debt		5,984,802			5,467,488
Net Debt and shareholders’ equity	$	13,032,108		$	12,224,831
Net Debt-to-Capital		45.9	%		44.7	%

Outlook

     On July 21, 2008, we announced the following guidance for the full year and third quarter of 2008 which remains materially unchanged:

Full Year 2008

     We expect Net Yields to increase in the range of 3% to 4% compared to 2007.

     We expect Net Cruise Costs per APCD to increase in the range of 6% to 7% compared to 2007. Excluding fuel, we expect Net Cruise Costs per APCD to increase approximately 1% compared to 2007.

     We do not forecast fuel prices and our cost outlook for fuel is based on current “at-the-pump” prices including any hedge impacts. If fuel prices for the full year 2008 remain at the level of July 21, 2008, fuel expenses for the full year 2008 would be approximately $772.0 million. This amount is $86.0 million higher than our guidance provided on April 24, 2008, and represents a negative impact of $0.40 per share versus our previous guidance. For the full year 2008 our fuel consumption is approximately 50% hedged and historically our fuel costs have correlated well over time with the change in West Texas Intermediate crude (WTI). Assuming our fuel prices move in tandem with WTI, a $10 change in WTI would result in a change in our fuel costs of approximately $20.0 million for the full year 2008, after taking into account existing hedges.

     We expect a 5.0% increase in capacity in 2008, primarily driven by the addition of Independence of the Seas, which entered service in May 2008, a full year of Liberty of the Seas, the addition of Ocean Dream, which entered service in March 2008 and the addition of Celebrity Solstice, which will enter service in the fourth quarter of 2008.

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     Depreciation and amortization expenses are expected to be in the range of $530.0 million to $540.0 million, and interest expense is expected to be in the range of $330.0 million to $340.0 million.

     Other income (expense) will include an $18.0 million gain from the settlement of a pending lawsuit in the third quarter of 2008.

     On July 21, 2008, we announced a cost savings initiative expected to save approximately $125.0 million annually. This initiative is a response to the reduction in our profitability caused primarily by the increase in fuel prices. As part of this initiative, we are eliminating approximately 400 shore-side positions. In addition, we discontinued some non-core operations, including The Scholar Ship. The elimination of the shore-side positions and the discontinuation of non-core operations are expected to be concluded by the end of the third quarter of 2008. As a result of this initiative, we expect to incur charges, all of which are cash charges, of approximately $15.0 million, or $0.07 per share in the third quarter of 2008, comprised of termination benefits and contract termination costs.

     Based on the expectations above, and assuming that fuel prices remain at the level of July 21, 2008 “at-the-pump” prices, we continue to expect full year 2008 earnings per share to be in the range of $2.55 to $2.65 including the restructuring charges.

Third Quarter 2008

     We expect Net Yields will increase approximately 2% compared to 2007.

     We expect Net Cruise Costs per APCD to increase approximately 10% compared to 2007. Excluding fuel, we expect Net Cruise Costs per APCD to increase in the range of 1% to 2% compared to 2007.

     We do not forecast fuel prices and our cost outlook for fuel is based on current “at-the-pump” prices including any hedge impacts. If fuel prices for the third quarter of 2008 remain at the level of July 21, 2008, fuel expenses for the third quarter 2008 would be approximately $224.0 million. For the third quarter of 2008 our fuel consumption is approximately 44% hedged and historically our fuel costs have correlated well over time with the change in WTI. Assuming our fuel prices move in tandem with WTI, a $10 change in WTI would result in a change in our fuel costs of approximately $11.0 million for the third quarter of 2008, after taking into account existing hedges.

     We expect a 3.9% increase in capacity, primarily driven by the addition of Independence of the Seas, which entered service in May 2008, and the addition of Ocean Dream, which entered service in March 2008.

     Depreciation and amortization is expected to be in the range of $138.0 million to $143.0 million and interest expense is expected to be in the range of $83.0 million to $88.0 million.

     Other income (expense) will include an $18.0 million gain from the settlement of a pending lawsuit in the third quarter of 2008.

     On July 21, 2008, we announced a cost savings initiative expected to save approximately $125.0 million annually. This initiative is a response to the reduction in our profitability caused primarily by the increase in fuel prices. As part of this initiative, we are eliminating approximately 400 shore-side positions. In addition, we discontinued some non-core operations, including The Scholar Ship. The

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elimination of the shore-side positions and the discontinuation of non-core operations are expected to be concluded by the end of the third quarter of 2008. As a result of this initiative, we expect to incur charges, all of which are cash charges, of approximately $15.0 million, or $0.07 per share in the third quarter of 2008, comprised of termination benefits and contract termination costs.

     Based on the expectations above, and assuming that fuel prices remain at the level of current “at-the-pump” prices, we continue to expect third quarter 2008 earnings per share to be in the range of $1.65 to $1.70 including the restructuring charges.

Quarter Ended June 30, 2008 Compared to Quarter Ended June 30, 2007

Revenues

     Total revenues for 2008 increased $102.4 million or 6.9% to $1.6 billion from $1.5 billion for the same period in 2007. Approximately $78.7 million of this increase is attributable to an increase in capacity of 5.3%. The increase in capacity is primarily due to a full quarter of Liberty of the Seas, which entered service in May 2007, the addition of Independence of the Seas, which entered service in May 2008, and the addition of Ocean Dream, which entered service in March 2008. The remaining increase of $23.7 million is due primarily to an increase in ticket prices partially offset by the 2% decrease in Occupancy.

     Onboard and other revenues included concession revenues of $60.6 million in 2008 compared to $59.4 million for the same period in 2007. The increase in concession revenues was primarily due to the increase in capacity mentioned above.

Cruise Operating Expenses

     Total cruise operating expenses for 2008 increased $125.5 million or 13.0% to $1.1 billion from $965.5 million for the same period in 2007. Approximately $51.3 million of this increase is attributable to the 5.3% increase in capacity. The remaining increase of $74.2 million was primarily driven by increases in fuel expenses, and to a lesser extent payroll and related expenses. Fuel expenses, which are net of the financial impact of fuel swap agreements, increased 35.9% per metric ton in 2008 as compared to 2007 primarily as a result of increasing fuel prices. As a percentage of total revenues, fuel expenses were 11.0% and 8.5% in 2008 and 2007, respectively. The increase in payroll and related expenses was due to an increase in inflationary and other cost pressures.

Marketing, Selling and Administrative Expenses

     Marketing, selling and administrative expenses for 2008 increased $3.3 million or 1.7% to $196.5 million from $193.2 million for the same period in 2007. The increase was primarily due to increases in headcount and other costs associated with personnel, the write-off of certain shore side assets, and exit costs associated with our decision to cease the operations of The Scholar Ship in the second quarter. These increases were partially offset by a change in the employee forfeiture rate assumption related to our stock-based employee compensation plans that resulted in a benefit of approximately $8.2 million in the second quarter of 2008.

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Depreciation and Amortization expenses

     Depreciation and amortization expenses for 2008 increased $5.6 million or 4.6% to $127.3 million from $121.7 million for the same period in 2007. This increase is primarily due to a full quarter of Liberty of the Seas, which entered service in May 2007, and the addition of Independence of the Seas, which entered service in May 2008.

Other Income (Expense)

     Interest expense, net of interest capitalized, decreased to $81.1 million in 2008 from $85.5 million in 2007. Gross interest expense decreased to $91.6 million in 2008 from $94.5 million in 2007. The decrease was primarily due to lower interest rates, partially offset by a higher average debt level. Interest capitalized increased to $10.5 million in 2008 from $9.0 million in 2007 primarily due to a higher average level of investment in ships under construction.

     Other expense increased to $6.1 million in 2008 from other income of $6.9 million in 2007 for a net change of $13.0 million when comparing these periods. The net change was primarily due to a $13.8 million gain in 2007 related to certain derivatives instruments associated with our ship construction firm commitments denominated in euros that did not qualify for hedge accounting treatment which did not recur in 2008.

Net Yields

     Net Yields increased 1.0% in 2008 compared to 2007 primarily due to the increase in ticket prices as mentioned above. Occupancy in 2008 was 104.0% compared to 106.0% in 2007. The decrease in occupancy was a result of itinerary changes.

Net Cruise Costs

     Net Cruise Costs increased 12.4% in 2008 compared to 2007 due to the 5.3% increase in capacity mentioned above and a 6.7% increase in Net Cruise Costs per APCD. The increase in Net Cruise Costs per APCD was primarily driven by increases in fuel expenses, and to a lesser extent, payroll and related expenses. Fuel expenses represented 5.0 percentage points of the overall increase in Net Cruise Costs per APCD.

Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

Revenues

     Total revenues for 2008 increased $308.4 million or 11.4% to $3.0 billion from $2.7 billion for the same period in 2007. Approximately $190.9 million of this increase is attributable to an increase in capacity of 7.1%. The increase in capacity is primarily due to a full six months of Liberty of the Seas, which entered service in May 2007, the addition of Independence of the Seas, which entered service in May 2008, and the addition of Ocean Dream, which entered service in March 2008. The remaining increase of $117.5 million is due primarily to an increase in ticket prices.

     Onboard and other revenues included concession revenues of $120.6 million in 2008 compared to $116.5 million for the same period in 2007. The increase in concession revenues was primarily due to the increase in capacity mentioned above.

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Cruise Operating Expenses

     Total cruise operating expenses for 2008 increased $246.3 million or 13.6% to $2.1 billion from $1.8 billion for the same period in 2007. Approximately $127.5 million of this increase is attributable to the 7.1% increase in capacity. The remaining increase of $118.8 million was primarily driven by increases in fuel expenses, and to a lesser extent payroll and related expenses. Fuel expenses, which are net of the financial impact of fuel swap agreements, increased 33.3% per metric ton in 2008 as compared to 2007 primarily as a result of increasing fuel prices. As a percentage of total revenues, fuel expenses were 11.0% and 9.0% in 2008 and 2007, respectively. The increase in payroll and related expenses was due to an increase in inflationary and other cost pressures.

Marketing, Selling and Administrative Expenses

     Marketing, selling and administrative expenses for 2008 increased $22.1 million or 5.8% to $401.5 million from $379.4 million for the same period in 2007. The increase was primarily due to increases in headcount and other costs associated with personnel, the write-off of certain shore side assets, and exit costs associated with our decision to cease the operations of The Scholar Ship in the second quarter. These increases were partially offset by a change in the employee forfeiture rate assumption related to our stock-based employee compensation plans that resulted in a benefit of approximately $8.2 million in the second quarter of 2008.

Depreciation and Amortization expenses

     Depreciation and amortization expenses for 2008 increased $14.0 million or 5.9% to $251.7 million from $237.7 million for the same period in 2007. This increase is primarily due to a full six months of Liberty of the Seas, which entered service in May 2007, and the addition of Independence of the Seas, which entered service in May 2008.

Other Income (Expense)

     Interest expense, net of interest capitalized, decreased to $159.0 million in 2008 from $166.0 million in 2007. Gross interest expense decreased to $182.4 million in 2008 from $185.1 million in 2007. The decrease was primarily due to lower interest rates, partially offset by a higher average debt level. Interest capitalized increased to $23.4 million in 2008 from $19.1 million in 2007 primarily due to a higher average level of investment in ships under construction.

     Other income decreased to $7.3 million in 2008 from other income of $12.1 million in 2007. The decrease was primarily due to a gain of $19.1 million in 2007, related to certain derivatives instruments associated with our ship construction firm commitments denominated in euros that did not qualify for hedge accounting treatment which did not recur in 2008. The effect of this gain was partially offset by a $7.0 million in foreign currency exchange gains in 2008.

Net Yields

     Net Yields increased 3.8% in 2008 compared to the same period in 2007 primarily due to increases in ticket prices as mentioned above. Occupancy in 2008 was 104.2% compared to 104.9% in 2007.

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Net Cruise Costs

     Net Cruise Costs increased 12.2% in 2008 compared to 2007 due to the 7.1% increase in capacity mentioned above and a 4.8% increase in Net Cruise Costs per APCD. As mentioned above, the increase in Net Cruise Costs per APCD was primarily driven by increases in fuel expenses, and to a lesser extent, payroll and related expenses. Fuel expenses represented 4.4 percentage points of the overall increase in Net Cruise Costs per APCD.

Recently Adopted, and Future Application of, Accounting Standards

Refer to Note 2. Summary of Significant Accounting Policies to our financial statements for further information on Recently Adopted Accounting Standards and Future Application of Accounting Standards.

Liquidity and Capital Resources

Sources and Uses of Cash

     Cash flow generated from operations provides us with a significant source of liquidity. Net cash provided by operating activities was $761.4 million for the first six months of 2008 compared to $823.1 million for the same period in 2007. This decrease was primarily a result of timing of receipts on our customer deposits and timing of payments on our accrued expenses and other liabilities. The decrease was partially offset by the timing of collection on our trade accounts receivable and the timing of payments on our prepaid expenses and other assets.

     Net cash used in investing activities was $1.1 billion for the first six months of 2008 compared to $1.0 billion for the same period in 2007. The increase was primarily due to an increase in capital expenditures of approximately $237.4 million primarily due to the increase in number of ships under construction, partially offset by an increase in settlements of approximately $208.8 million on our foreign currency forward contracts.

     Net cash provided by financing activities was $482.3 million in the first six months of 2008 compared to $325.7 million for the same period in 2007. The change was primarily due to a decrease in repayments of debt of approximately $1.0 billion, partially offset by a decrease in debt proceeds of approximately $799.7 million during the first six months in 2008 compared to the same period in 2007. During the first six months of 2008, we drew $565.0 million on our unsecured revolving credit facility. We made debt repayments on various loan facilities and capital leases, including a payment of approximately $150.0 million to retire our 6.75% senior notes due March 2008. In addition, we made approximately $245.0 million in payments towards our unsecured revolving credit facility. During the first six months of 2008, we received $3.4 million in connection with the exercise of common stock options and paid cash dividends pertaining to the fourth quarter of 2007 and the first and second quarters of 2008 on our common stock of $96.0 million. Net Debt-to-Capital increased to 45.9% as of June 30, 2008 compared to 44.7% as of December 31, 2007.

     Interest capitalized during the first six months of 2008 increased to $23.4 million from $19.1 million for the same period in 2007 due to a higher average level of investment in ships under construction.

Future Capital Commitments

     Our future capital commitments consist primarily of new ship orders. As of June 30, 2008, we had two ships of a new Oasis-class designated for Royal Caribbean International and five Solstice-class

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ships, designated for Celebrity Cruises, on order for an aggregate additional capacity of approximately 25,050 berths. The aggregate cost of the seven ships is approximately $7.2 billion, of which we have deposited $522.2 million as of June 30, 2008. Approximately 15.0% of the aggregate cost of ships was exposed to fluctuations in the euro exchange rate at June 30, 2008.

     As of June 30, 2008, we anticipated overall capital expenditures, including the seven ships on order, will be approximately $1.9 billion for 2008, $2.0 billion for 2009, $2.2 billion for 2010, $1.0 billion for 2011 and $1.0 billion for 2012.

Contractual Obligations and Off-Balance Sheet Arrangements

     As of June 30, 2008, our contractual obligations were as follows (in thousands):

	Payments due by period
			Less than		1-3		3-5		More than
	Total		1 year		years		years		5 years
Long-term debt obligations(1)	$	6,318,860	$	426,543	$	1,549,538	$	1,412,760	$	2,930,019
Capital lease obligations(1)		53,099		4,211		7,058		3,664		38,166
Operating lease obligations(2)(3)		536,961		62,178		114,811		314,921		45,051
Ship purchase obligations(4)		6,023,173		801,200		3,738,675		1,483,298		—
Other(5)		592,501		92,910		136,013		134,399		229,179
Total	$	13,524,594	$	1,387,042	$	5,546,095	$	3,349,042	$	3,242,415

(1)	Amounts exclude interest.
(2)	We are obligated under noncancelable operating leases primarily for a ship, offices, warehouses and motor vehicles.
(3)	Under the Brilliance of the Seas lease agreement, we may be required to make a termination payment of approximately £126.0 million, or approximately $251.2 million based on the exchange rate at June 30, 2008, if the lease is canceled in 2012. This amount is included in the 3-5 years column.
(4)	Amounts represent contractual obligations with initial terms in excess of one year.
(5)	Amounts represent future commitments with remaining terms in excess of one year to pay for our usage of certain port facilities, marine consumables, services and maintenance contracts.

     As a normal part of our business, depending on market conditions, pricing and our overall growth strategy, we continuously consider opportunities to enter into contracts for the building of additional ships. We may also consider the sale of ships. We continuously consider potential acquisitions and strategic alliances. If any of these were to occur, they would be financed through the incurrence of additional indebtedness, the issuance of additional shares of equity securities or through cash flows from operations.

     Under the Brilliance of the Seas operating lease, we have agreed to indemnify the lessor to the extent its after-tax return is negatively impacted by unfavorable changes in corporate tax rates, capital allowance deductions and certain unfavorable determinations which may be made by United Kingdom tax authorities. These indemnifications could result in an increase in our lease payments. We are unable to estimate the maximum potential increase in our lease payments due to the various circumstances, timing or a combination of events that could trigger such indemnifications. Under current circumstances we do not believe an indemnification in any material amount is probable.

     Some of the contracts that we enter into include indemnification provisions that obligate us to make payments to the counterparty if certain events occur. These contingencies generally relate to changes in taxes, increased lender capital costs and other similar costs. The indemnification clauses are often standard contractual terms and are entered into in the normal course of business. There are no stated or notional amounts included in the indemnification clauses and we are not able to estimate

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the maximum potential amount of future payments, if any, under these indemnification clauses. We have not been required to make any payments under such indemnification clauses in the past and, under current circumstances, we do not believe an indemnification in any material amount is probable.

     Other than the items described above, we are not party to any other off-balance sheet arrangements, including guarantee contracts, retained or contingent interest, certain derivative instruments and variable interest entities, that either have, or are reasonably likely to have, a current or future material effect on our financial position.

Funding Sources

     As of June 30, 2008, our liquidity was $1.3 billion consisting of approximately $0.4 billion in cash and cash equivalents and $0.9 billion available under our unsecured revolving credit facility. During April 2008, we exercised our option to enter into committed financing for approximately 80% of the contract price of Celebrity Solstice which is expected to enter service in November 2008. We also have either financing commitments or government guarantee commitments for financing for a portion of the contract price of each of our other newbuild orders. We must elect to use these commitments within certain time frames and they are each subject to customary funding conditions.

     We have contractual obligations of approximately $1.4 billion due during the twelve-month period ending June 30, 2009. We believe these contractual obligations could be funded through a combination of cash flows from operations, drawdowns under our available unsecured revolving credit facility, the incurrence of additional indebtedness (including indebtedness under the above described commitments), and the sales of equity or debt securities in private or public securities markets. We believe our existing unsecured revolving credit facility, cash flows from operations, our ability to obtain new borrowings and/or raise new capital or a combination of these sources will be sufficient to fund operations, debt payment requirements, capital expenditures and other commitments over the next twelve-month period. However, there can be no assurances that these sources of cash will be available in accordance with our expectations. In April 2008, Standard and Poor’s lowered our credit rating from BBB- with a negative outlook to BB+ with a stable outlook. The lowering of our credit rating will increase our interest expense under certain of our existing credit facilities and could impact adversely the costs, terms and/or accessibility of any new financing. We do not believe that any of the foregoing will have a material impact on our results of operations.

     As of June 30, 2008, we had a working capital deficit of $1.5 billion which was comparable to our working capital deficit of $1.3 billion as of December 31, 2007. Our June 30, 2008 deficit included $1.4 billion of customer deposits received on sales of cruises collected in advance of sailing and initially recorded as customer deposit liabilities on our balance sheet. Substantially all customer deposits represent deferred revenue rather than an actual current cash liability. We generate substantial cash flows from operations and we believe we have the financial liquidity and flexibility to finance and/or refinance our obligations. This business model allows us to maintain this working capital deficit and still meet our operating, investing and financing needs. We expect that we will continue to have working capital deficits in the future.

     Our financing agreements contain covenants that require us, among other things, to maintain minimum net worth, fixed charge coverage ratio and limit our Net Debt-to-Capital ratio. We were in compliance with all covenants as of June 30, 2008.

     If any person other than A. Wilhelmsen AS. and Cruise Associates, our two principal

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shareholders, acquires ownership of more than 30% of our common stock and our two principal shareholders, in the aggregate, own less of our common stock than such person and do not collectively have the right to elect, or to designate for election, at least a majority of the board of directors, we may be obligated to prepay indebtedness outstanding under the majority of our credit facilities, which we may be unable to replace on similar terms. If this were to occur, it could have an adverse impact on our liquidity and operations.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

     For a discussion of certain market risks related to our business, see Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our annual report on Form 10-K for the year ended December 31, 2007. There have been no significant developments or material changes with respect to our exposure to the market risks previously reported in Form 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     Under the supervision and with the participation of our management, including our Chairman and Chief Executive Officer and Executive Vice President and Chief Financial Officer, we carried out an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this quarterly report and concluded that those controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

     There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 and 15d-15 during the quarter ended June 30, 2008 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

     It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     As reported in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, in February 2008 a notice was filed to arbitrate a class action claim alleging that Celebrity Cruises improperly requires its cabin stewards to share guest gratuities with assistant cabin stewards. The claim seeks payment of damages, including penalty wages under the U.S. Seaman’s Wage Act. Arbitration is currently pending. We are not able at this time to estimate the impact of this proceeding.

     As reported in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, judgment was entered in February 2008 in favor of Celebrity Cruises in its case in New York federal court against Pentair Water Treatment (OH) Company (formerly known as Essef Corporation) for claims stemming from a 1994 outbreak of Legionnaires’ disease on one of Celebrity Cruises’ ships. Both parties filed notices to appeal the judgment. In July 2008, the parties settled the case. Pursuant to the terms of the settlement agreement, we will be paid, net of costs and payment to insurers, approximately $18.0 million. This award will be recognized in our consolidated financial statements in the third quarter of 2008.

     As reported in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, a purported class action was filed in March 2008 against us, Celebrity Cruises and a related party, Celebrity Catering Services, in the United States District Court, Southern District of Florida alleging that we improperly deducted amounts from the gratuities paid to our shipboard servers, waiters, bar tenders and other personnel in our bar and restaurant departments. The suit also alleged that such persons were not properly compensated for their hours worked. The suit sought payment of damages, including penalty wages under the U.S. Seaman’s Wage Act. The suit was dismissed in June 2008 and ordered to arbitration in accordance with the terms of the applicable collective bargaining agreement. We are not able at this time to estimate the impact of this proceeding.

     As reported in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, in April 2008, five consolidated purported class actions were voluntarily dismissed by the plaintiffs in the United States District Court for the Southern District of Florida. The actions, which had been filed in February and March 2008, allege that we, other cruise lines and a trade association violated Federal anti-trust laws or state deceptive and unfair trade practices laws by conspiring to fix the prices of the fuel supplements announced by the various cruise lines or misleading consumers as to the relationship between each cruise line’s fuel costs and the fuel supplements it is charging its customers.

     In April 2008, a purported class action was filed against us, Celebrity Cruises and a related party, Celebrity Catering Services, in the United States District Court, Southern District of Florida, alleging that we underpaid wages and overtime pay for our shipboard personnel. The suit also alleged that the parties improperly deducted amounts from the gratuities paid to certain of our shipboard restaurant personnel. The suit sought payment of damages, including penalty wages under the U.S. Seaman’s Wage Act. In June 2008, the court dismissed the case and ordered the parties to arbitration in accordance with the terms of the applicable collective bargaining agreements. We are not able to estimate the impact of this proceeding.

     In June 2008, a purported class action arbitration claim was made against us alleging that we

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required shipboard personnel on our Royal Caribbean International brand to pay for their own employment commencement expenses in violation of our collective bargaining agreement. We are not able at this time to estimate the impact of this proceeding

     We are routinely involved in other claims typical within the cruise vacation industry. The majority of these claims are covered by insurance. We believe the outcome of such claims, net of expected recoveries, will not have a material adverse impact on our financial condition or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

     On May 13, 2008, Royal Caribbean Cruises Ltd. held its annual meeting of shareholders. The shareholders voted on (1) the election of four directors to terms ending in 2011, (2) the proposal to approve the Royal Caribbean Cruises Ltd. 2008 Equity Incentive Plan, (3) the proposal to ratify the appointment of PricewaterhouseCoopers LLC as the independent registered certified public accounting firm for 2008 and (4) a shareholder proposal set forth in the proxy statement.

     The nominees for directors were elected based on the following votes:

Nominee	Votes For		Votes Withheld
Laura D.B. Laviada		182,030,129		889,062
Eyal Ofer		181,070,045		1,849,146
William K. Reilly		179,932,469		2,986,723
Arne Alexander Wilhelmsen		179,204,245		3,714,947

     The proposal to approve the Royal Caribbean Cruises Ltd. 2008 Equity Incentive Plan received the following votes:

157,093,633	Votes for approval
17,137,484	Votes against
58,436	Abstentions
8,629,639	Broker non-votes

     The proposal to ratify the appointment of PricewaterhouseCoopers LLP as the independent registered certified public accounting firm for 2008 received the following votes:

182,801,366	Votes for approval
70,735	Votes against
47,090	Abstentions
0	Broker non-votes

     The shareholder proposal set forth in the proxy statement received the following votes:

44,213,871	Votes for approval
129,716,664	Votes against
357,897	Abstentions
8,630,760	Broker non-votes

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Item 6. Exhibits

10.1	Royal Caribbean Cruises Ltd. 2008 Equity Incentive Plan.
31	Certifications required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities and Exchange Act of 1934.
32	Certifications pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ROYAL CARIBBEAN CRUISES LTD. (Registrant)
	/s/ BRIAN J. RICE
	Brian J. Rice
Date: July 25, 2008	Executive Vice President and      Chief Financial Officer      (Principal Financial Officer)

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EX-10.1

Exhibit 10.1

Royal Caribbean Cruises Ltd.
2008 Equity Incentive Plan

Table of Contents

Section		Page
1.	Purpose and Effectiveness		1
2.	Definitions and Rules of Construction		2
3.	Eligibility and Participation		5
4.	Stock Subject to Plan		5
5.	Forms and Terms of Awards Under the Plan		6
6.	Exercises of Stock Options		13
7.	Events Affecting Plan Reserve or Plan Awards		14
8.	Administration		17
9.	Government Regulations and Registration of Shares		18
10.	Miscellaneous Provisions		19
11.	Amendment and Termination of this Plan		20

Section 1. Purpose and Effectiveness

     (A) The purpose of this 2008 Equity Incentive Plan (the “Plan”) is to promote the success of Royal Caribbean Cruises Ltd., a Liberian corporation (the “Company”), by providing a method whereby both employees and directors of the Company and its Affiliates may be encouraged to increase their proprietary interest in the Company’s business. By offering incentive compensation opportunities that are based on the Company’s common stock, the Plan will motivate Participants to achieve long-range goals, further identify their interests with those of the Company’s other shareholders, and promote the long-term financial interest of the Company. The Plan is further intended to aid in attracting and retaining persons of exceptional ability and leadership qualities to become officers, employees, and directors of the Company and its Affiliates.

     (B) The Plan was adopted by the Board of Directors on March 7, 2008 and shall be subject to approval at the 2008 annual meeting of the Company’s shareholders. Any Awards granted under the Plan prior to such shareholder approval shall be conditioned upon such shareholder approval and shall be null and void if such approval is not obtained.

     (C) No Awards may be granted under the Plan following the 2018 annual meeting of the Company’s shareholders.

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Section 2. Definitions and Rules of Construction

     (A) Defined Terms. Capitalized terms not defined elsewhere in the Plan shall have the following meanings (whether used in the singular or plural):

     (i) “Affiliate” means any business entity, regardless of whether organized as a corporation, limited liability company, partnership or any other legal form, in which the Company has (i) an ownership of 50% or greater, or (ii) in the sole discretion of the Committee, a significant interest.

     (ii) “Agreement” means a written instrument, which need not be executed by the Participant, that sets out the terms of the grant of an Award, as any such Agreement may be supplemented or amended from time to time.

     (iii) “Award” means any award or benefit granted under the Plan, as further defined in Section 5(A) of the Plan.

     (iv) “Beneficiary” means the individual(s) designated by the Participant to succeed to his/her rights in all Awards granted to him/her under the Plan in the eventuality of his/her death or Disability.

     (v) “Board” means the Board of Directors of the Company.

     (vi) “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute or statutes thereto. Reference to any specific Code section shall include any successor section.

     (vii) “Committee” means the Compensation Committee of the Board.

     (viii) “Company” means Royal Caribbean Cruises Ltd., a Liberian corporation and any successor entity.

     (ix) “Date of Grant” means the date on which the Committee takes the corporate actions necessary to fix the major terms of an Award to a specified Eligible Individual, including, in the case of an Option, the number of Shares subject to the Option and the applicable Exercise Price.

     (x) “Director” means a duly elected or appointed member of the Board or the Board of Directors of an Affiliate.

     (xi) “Disability” means permanent and total disability as defined in Section 22(e) of the Code.

     (xii) “Eligible Individual” means an Employee or Director who is described in Section 3(A) of the Plan.

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     (xiii) “Employee” means an individual who is employed by the Company or any Affiliate.

     (xiv) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor statute or statutes thereto. Reference to any specific ERISA section shall include any successor section.

     (xv) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute or statutes thereto. Reference to any specific Exchange Act section shall include any successor section.

     (xvi) “Executive Officer” means executive officer as defined in Rule 3b-7 under the Exchange Act, provided that, if the Board has designated the executive officers of the Company for purposes of reporting under the Exchange Act, the designation by the Board shall be conclusive for purposes of the Plan.

     (xvii) “Exercise Price” means the price that must be paid by an Optionee upon exercise of an Option to purchase a share of Stock.

     (xviii) “Fair Market Value” of a Share of Stock as of any date means the mean between the highest and lowest reported sale prices of the Stock (i) on the date on the principal exchange or market on which the Stock is then listed or admitted to trading, or (ii) if the day is not a date on which such exchange or market is open, the last preceding date on which there was a sale of such Stock on such exchange or market, or (iii) as otherwise determined by the Committee if the Stock is not listed on an Exchange.

     (xix) “Option” means a right to purchase from the Company a stated number of Shares at an Exercise Price and for a period of time established by the Committee.

     (xx) “Optionee” means an Eligible Individual who has received an Option under this Plan, for the period of time during which such Option is held in whole or in part.

     (xxi) “Option Shares” means, with respect to any Option granted under this Plan, the Stock that may be acquired upon the exercise of such Option.

     (xxii) “Participant” means an Eligible Individual who has received an Award under this Plan.

     (xxiii) “Plan” means this Royal Caribbean Cruises Ltd. 2008 Equity Incentive Plan, as amended from time to time.

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     (xxiv) “Secretary” means the secretary of the Company or his/her designee.

     (xxv) “Settlement Date” means the date on which Stock, cash, cash equivalents, or any combination thereof are transferred by the Company to a Participant with respect to, and in settlement of, a prior contractual commitment made by the Company to such Participant under the Plan in the form of Restricted Stock Units, Stock Appreciation Rights or Performance Shares.

     (xxvi) “Shares” or “Stock” mean shares of the common stock of the Company, par value $.01, subject to any adjustments made under Section 7 of the Plan or by operation of law.

     (xxvii) “Subsidiary” of the Company means any present or future subsidiary (as that term is defined in Section 424(f) of the Code) of the Company An entity shall be deemed a subsidiary of the Company for purposes of this definition only for such periods as the requisite ownership or control relationship is maintained.

     (xxviii) “Substitute Awards“ shall mean Awards granted in assumption of, or in substitution for, outstanding awards previously granted by a company acquired by the Company or with which the Company combines.

     (xxix) “Termination of Service”, “Terminate” or “Termination” occurs when a Participant ceases to be an Employee of, or ceases to be a Director of, the Company and its Affiliates, as the case may be, for any reason.

     (xxx) “Vest”, “Vested”, and “Vesting” means, with respect to any portion of an Award, that the Award will not be forfeited by the Participant pursuant to the provisions of this Plan in the event the Participant Terminates Service with the Company or any Affiliate.

     (xxxi) “Vesting Date” with respect to any Award granted hereunder means the date on which such Award becomes Vested, as designated in or determined in accordance with the Plan and with the Agreement with respect to such Award. If more than one Vesting Date is designated for an Award, reference in the Plan to a Vesting Date in respect of such Award shall be deemed to refer to each part of such Award and the Vesting Date for such part.

     (B) Rules of Construction. Where the context permits, words in any gender shall include the other gender, words in the singular shall include the plural, and the plural shall include the singular.

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Section 3. Eligibility and Participation

     (A) The persons who shall be eligible to participate in the Plan and to receive Awards shall be such Employees (including officers) and Directors as the Committee, in its sole discretion, shall select. Awards may be made to Eligible Individuals who hold or have held Awards under this Plan or any similar plan or other awards under any other plan of the Company. Holders of Options and other types of Awards granted by a company acquired by the Company or with which the Company combines are eligible for grant of Substitute Awards hereunder. Any member of the Committee shall be eligible to receive Awards while serving on the Committee.

     (B) Awards may be granted by the Committee at any time and from time to time to new Participants, or to then Participants, or to a greater or lesser number of Participants, and may include or exclude previous Participants, as the Committee shall determine. All Awards made to members of the Board shall be recommended by the Committee and approved by the full Board. Except as required by this Plan, Awards granted at different times need not contain similar provisions. The Committee’s determinations under the Plan (including without limitation, determinations of which individuals, if any, are to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the agreements evidencing same) need not be uniform and may be made by it selectively among individuals who receive, or are eligible to receive, under the Plan.

Section 4. Stock Subject to Plan

     (A) Subject to the following provisions of this Section 4 and to the provisions of Section 7, the maximum number of Shares with respect to which any Awards may be granted, including Awards of Incentive Options as defined in Section 5(A)(i), during the term of the Plan shall be 5,000,000. During any calendar year, no one individual shall be granted, under this Plan, Awards with respect to more than 500,000 Shares. Shares underlying Substitute Awards shall not reduce the number of Shares remaining available for issuance hereunder.

     (B) During the term of this Plan, the Company will at all times reserve and keep available the number of Shares that shall be sufficient to satisfy the requirements of this Plan. Shares will be made available from the currently authorized but unissued shares of the Company or from shares currently held or subsequently reacquired by the Company as treasury shares, including shares purchased in the open market or in private transactions.

     (C) The grant of any Award hereunder shall count, equal in number to the Shares represented by such Award as determined under Section
4(A), towards the share maximum indicated in Section 4(A). To the extent that (i) any outstanding Option for any reason expires, is terminated, forfeited or canceled without having been exercised, or if any other Award is forfeited or otherwise does not result in the delivery of Shares by the Company, and (ii) any Shares covered by an Award are not delivered because the Award is settled in cash, such Shares shall be deemed to have not been delivered and shall be restored to the share maximum.

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Section 5. Forms and Terms of Awards Under the Plan

     (A) In General. The Committee may grant any of the following types of Awards, either singly or in combination with other Awards:

     (i) Incentive Stock Options. An incentive stock option (an “Incentive Option”) is any Option that complies with the requirements of Section 422 of the Code.

     (ii) Nonqualified Stock Options. A nonqualified stock option (a “Nonqualified Option”) is any Option that is not an Incentive Option.

     (iii) Stock Appreciation Rights. A Stock Appreciation Right is an Award in the form of a right to receive, upon surrender of the right, but without other payment an amount based on appreciation in the value of Stock over a base price established in the Award payable in Stock, at times and upon conditions (which may include a Change of Control), as may be approved by the Committee.

     (iv) Stock Awards. Stock awards may be in the form of Shares not subject to any restrictions or limitations imposed by this Plan (“Bonus Stock”), or of Restricted Stock. Restricted Stock is an Award of Shares that is issued to a Participant such that the Participant is thereupon the legal owner of such Shares with all of the attendant rights and privileges of ownership, but remains subject to a risk of forfeiture of such ownership back to the Company for a period of time specified on the Date of Grant. Such forfeiture may be conditioned on the continued performance of services or the achievement of individual, divisional, or corporate goals. Restricted Stock will also be subject to restrictions on transfer and such other restrictions on incidents of ownership as the Committee may determine, for the same period of time as the risk of forfeiture.

     (v) Restricted Stock Units. A Restricted Stock Unit is an Award payable in cash or Stock and represented by a bookkeeping credit, in which both the number of Shares and the Settlement Date (subject to any subsequent deferral election by the Participant) are fixed on the Date of Grant. The value of each Restricted Stock Unit equals the Fair Market Value of a share of Stock, as such value may change up to the date the Restricted Stock Unit is settled. Further, the settlement of the Award may be made contingent, in the sole discretion of the Committee, upon (A) solely continued service, or (B) other limitations or restrictions. Restricted Stock Units are not outstanding shares of Stock and do not entitle a Participant to voting or other rights or dividends with respect to Stock, unless and until actually paid out in the form of Stock. The restrictions and limitations imposed on Restricted Stock Unit Awards may vary among Participants and from year to year, and the Committee may assign varying titles to different forms of Restricted Stock Units.

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     (vi) Performance Shares. A Performance Share is a variable Award payable in cash or Stock and represented by a bookkeeping credit, in which the number of Shares (or value thereof) to be transferred to the Participant at the end of a performance measurement period will be a function of both continued service and the relevant achievement of individual, divisional or corporate goals. The value of each Performance Share equals the Fair Market Value of a share of Stock, as such value may change up to the date the Performance Share is settled.

     (B) Provisions Applicable to All Forms of Awards.

     (i) Subsequent to the grant of any Award, the Committee may, at any time before the complete expiration of such Award, accelerate the time or times at which such Award may become nontransferable, exercisable and/or settled, in whole or in part.

     (ii) To the extent that the Company is required to withhold any Federal, state or other taxes in respect of any compensation income realized by the Participant in respect of shares acquired pursuant to an Award, or in respect of the exercise, settlement, or vesting of any such Awards, then the Company shall deduct from either Shares or any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or other taxes required to be so withheld. If such payments are insufficient to satisfy such Federal, state or other taxes, then such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Company in its sole discretion.

     (C) Provisions Applicable to Options and Stock Appreciation Rights.

     (i) Subject to the limitations of the Plan, the Committee shall designate from time to time those Eligible Individuals to be granted Options, the time when each Option shall be granted, the number of Shares subject to such Option, whether such Option is an Incentive Option or a Nonqualified Option, and the Exercise Price of the Option Shares. Options shall be evidenced by Agreements in such form and containing such terms and provisions not inconsistent with the provisions of the Plan as the Committee may from time to time approve. Each Optionee shall be notified of such grant and a written Agreement shall be delivered by the Company to the Optionee. Subject to the other provisions of the Plan, the same person may receive Incentive Options and Nonqualified Options at the same time and pursuant to the same Agreement, provided that Incentive Options and Nonqualified Options are clearly designated as such.

     (ii) Option Agreements may provide that the grant of any Option under the Plan, or that Stock acquired pursuant to the exercise of any Option, shall be subject to such other conditions (whether or not applicable to an Option or Stock received by any other Optionee) as the Committee determines appropriate, including, without limitation, provisions conditioning exercise upon the occurrence of certain events or performance or the passage of time,

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provisions to assist the Optionee in financing the purchase of Stock through the exercise of Options, provisions for forfeiture, restrictions on resale or other disposition of shares acquired pursuant to the exercise of Options, provisions conditioning the grant of the Option or future Options upon the Optionee retaining ownership of Shares acquired upon exercise for a stated period of time, and provisions to comply with federal and state securities laws and federal and state income tax and other payroll tax withholding requirements.

     (iii) The price at which Shares may be purchased upon exercise of an Option shall be fixed by the Committee on the Date of Grant and may not be less than 100% of the Fair Market Value of the Option Shares on the Date of Grant or, if specified by the Committee, on a date subsequent to the Date of Grant that is identified as the effective date of the Award. All Options shall specify the term during which the Option may be exercised, which shall be in all cases ten years or less.

     (iv) No Option may be exercised in part or in full before the date(s) therefore set forth in its terms, other than in the event of acceleration as provided in Section 7. No Option may be exercised after the Option expires by its terms as set forth in the applicable Agreement. In the case of an Option that is exercisable in installments, installments that are exercisable and not exercised shall remain exercisable during the term of the Option. The grant of an Option shall impose no obligation on the Optionee to exercise such Option.

     (v) Subject to the terms of the Plan and the applicable Agreement, Options and Stock Appreciation Rights shall be subject to vesting during a period of at least one year following the date of grant, provided that Options and Stock Appreciation Rights may vest in part on a pro-rata basis prior to the expiration of any vesting period, and provided, further, that up to five percent of Shares available for grant under this Plan may be granted without regard to the requirements of this sentence.

     (vi) No Option shall be transferable other than by will or the laws of descent and distribution, other than pursuant to an order issued by a court of competent jurisdiction in connection with the divorce or bankruptcy of the Participant. During the lifetime of the Optionee, the Option shall be exercisable only by such Optionee or his/her court-appointed legal representative or transferee. Notwithstanding anything herein to the contrary, the Committee may, in its sole discretion, provide in the applicable Agreement evidencing a Nonqualified Option that the Optionee may transfer, assign or otherwise dispose of an option (i) to his/her spouse, parents, siblings and lineal descendants, (ii) to a trust for the benefit of the Optionee and any of the foregoing, or (iii) to any corporation or partnership controlled by the Optionee, subject to such conditions or limitations as the Committee may establish to ensure compliance with any rule promulgated pursuant to the Exchange Act, or for other purposes. The terms applicable to the assigned Option shall be the same as those in effect for the Option immediately prior to such assignment and shall be set forth in such

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documents issued to the assignee as the Company may deem appropriate. If an Optionee has a Termination of Service by reason of his/her death or Disability prior to the expiration date of his/her Option, or if an Optionee dies subsequent to his/her Termination of Service on account of such Disability but prior to the expiration date of his/her Option, and in either case all or some portion of such Option is Vested and exercisable pursuant to the terms of this Plan and of the Option Agreement, such Option may be exercised by the Optionee or by the Optionee’s estate, personal representative or beneficiary, as the case may be, at any time prior to the earlier of (i) one year following the date of the Optionee’s death or disability, or (ii) the expiration date of such Option.

     (vii) An Optionee or a transferee of an Option shall have no rights as a shareholder with respect to any Share covered by his/her Option until he/she shall have become the holder of record of such Share, and he/she shall not be entitled to any dividends or distributions or other rights in respect of such Share for which the record date is prior to the date on which he/she shall have become the holder of record thereof.

     (viii) Except in connection with a transaction described in Section 7(A) or in connection with the grant of Substitute Awards, the Committee shall not, without first having obtained the approval of the shareholders of the Company, effect the cancellation of any or all outstanding Options under the Plan and the substitution therefore of new Options covering the same or different number of Shares but with an exercise price per share based on the Fair Market Value per Share on the new option grant date.

     (ix) The following additional provisions shall be applicable to Incentive Options, but only if, and to the extent, required by section 422 of the Code:

          (a) Incentive Options shall be specifically designated as such in the applicable Agreement, and may be granted only to those Eligible Individuals who are both (i) Employees of the Company and/or a Subsidiary, and (ii) citizens or resident aliens of the United States.

          (b) To the extent the aggregate Fair Market Value (determined as of the time the Option is granted) of the Stock with respect to which any Incentive Options granted hereunder may be exercisable for the first time by the Optionee in any calendar year (under this Plan or any other compensation plan of the Company or any Subsidiary thereof) exceeds $100,000, such Options shall not be considered Incentive Options.

          (c) No Incentive Option may be granted to an individual who, at the time the Option is granted, owns directly, or indirectly within the meaning of Section 424(d) of the Code, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any Subsidiary thereof, unless such Option (i) has an exercise price of at least 110% of the Fair Market Value of the Stock on the Date of Grant of such option; and (ii) cannot be exercised more than five years after the Date of Grant.

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          (d) The Exercise Price for Incentive Options shall not be less than the Fair Market Value of the Stock on the Date of Grant.

     (x) Each of the above provisions with respect to the granting, vesting, transferability and exercise of Options, except to the extent they are applicable solely to (i) the actual purchase of stock and payment of consideration or (ii) Incentive Options, shall also apply to the grant of Stock Appreciation Rights by the Committee under the Plan.

     (D) Provisions Applicable to Restricted Stock and Restricted Stock Units.

     (i) Awards of Restricted Stock and Restricted Stock Units shall be subject to the right of the Company to require forfeiture of such Shares or rights by the Participant in the event that conditions specified by the Committee in the applicable Agreement are not satisfied prior to the end of the applicable vesting period established by the Committee for such Awards. Conditions for repurchase (or forfeiture) may be based on continuing employment or service or achievement of pre-established performance or other goals and objectives. Subject to the terms of the Plan and the applicable Agreement, Restricted Stock or Restricted Stock Units shall be subject to vesting during a period of at least three years following the date of grant, provided that vesting during a period of at least one year following the date of grant is permissible if vesting is conditioned upon the achievement of Performance Goals imposed on the Award pursuant to paragraph (F)(ii) below, and provided, further, that Restricted Stock or Restricted Stock Units may vest in part on a pro-rata basis prior to the expiration of any vesting period, and provided, further, that up to five percent of Shares available for grant under this Plan may be granted without regard to the requirements of this sentence.

     (ii) A Restricted Stock Unit may provide the Participant with the right to receive dividend equivalent payments with respect to Stock subject to the Award (both before and after the Stock subject to the Award is earned, vested, or acquired) (“Dividend Equivalents”), which payments may be either made currently or credited to an account for the Participant, and may be settled in cash or Stock, as determined by the Committee. Any such settlements, and any such crediting of dividends or dividend equivalents or reinvestment in shares of Stock, may be subject to such conditions, restrictions and contingencies as the Committee shall establish, including the reinvestment of such credited amounts in Stock equivalents. A Participant may not accrue Dividend Equivalents during any calendar year in excess of $500,000.

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     (iii) Shares represented by Restricted Stock Awards may not be sold, assigned, transferred, pledged or otherwise encumbered, except as permitted by the Committee, during the applicable vesting period. Such Shares shall be evidenced in such manner as the Committee may determine. Any certificates issued in respect of such Shares shall be registered in the name of the Participant and, unless otherwise determined by the Committee, deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). To the extent Shares of a Restricted Stock Award become nonforfeitable, the Company (or such designee) shall deliver such certificates to the Participant or, if the Participant has died, to the Participant’s Beneficiary. Each certificate evidencing stock subject to Restricted Stock Awards shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Award. Any attempt to dispose of stock in contravention of such terms, conditions and restrictions shall be ineffective. During the restriction period, the Participant shall have all the rights of a shareholder for all such Shares, including the right to vote and the right to receive dividends thereon as paid.

     (E) Provisions Applicable to Restricted Stock Units and Performance Shares. The Committee may provide in the terms of a Restricted Stock Unit or Performance Share Award for the elective deferral by the Participant of the receipt of the actual payment of cash or Stock otherwise due and payable to the Participant pursuant to such Award. In providing for such deferral, the Committee shall limit eligibility, and shall specify such rules regarding the timing and other features of the deferral, so as to comply with all applicable sections of ERISA, section 409A of the Code, and the constructive receipt and similar doctrines of the internal revenue laws.

     (F) Provisions Applicable to Qualified Performance-Based Compensation.

     (i) Designation as Qualified Performance-Based Compensation. The Committee may structure the terms and provisions of Stock Awards, Restricted Stock Units, Dividend Equivalents or Performance Shares granted to an Employee so that such Awards may constitute “qualified performance-based compensation” under section 162(m) of the Code, in which case the provisions of this paragraph (F) shall apply. The Committee may also grant Options or SARs under which the exercisability of the Options or SARs is subject to the achievement of performance goals as described in this paragraph (F) or otherwise.

     (ii) Performance Goals. When Awards are made under this paragraph (F), the Committee shall establish in writing (a) the objective performance goals that must be met, (b) the period during which performance will be measured, (c) the maximum amounts that may be paid if the performance goals are met, and (d) any other conditions that the Committee deems appropriate and consistent with the requirements of section 162(m) of the Code for the Awards to qualify as “qualified performance-based compensation.” Under 162(m) of the Code the performance goals shall satisfy the requirements for “qualified performance-based compensation,” including the requirement that the achievement of the goals be substantially uncertain at the time they are established and that the performance goals be established in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the performance goals have been met. The Committee shall not have discretion to increase the amount of compensation that is payable, but may reduce the amount of compensation that is payable, pursuant to Awards identified by the Committee as “qualified performance-based compensation.”

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     (iii) Criteria Used for Objective Performance Goals. The Committee shall use objectively determinable performance goals based on one or more of the following criteria: stock price, earnings per share, price-earnings multiples, net earnings, operating earnings, revenue, number of days sales outstanding in accounts receivable, productivity, margin, cost management, EBITDA (earnings before interest, taxes, depreciation and amortization), net capital employed, return on assets, shareholder return, return on equity, return on invested capital, growth in assets, unit volume, occupancy rates, sales, cash flow, market share, performance relative to a comparison group designated by the Committee, or strategic business criteria consisting of one or more objectives based on meeting specified revenue goals, market penetration goals, customer growth, customer satisfaction, geographic business expansion, acquisition or investment goals, cost targets or goals relating to investments, acquisitions or divestitures. The performance goals may relate to one or more business units or the performance of the Company as a whole, or any combination of the foregoing. Performance goals need not be uniform as among Participants. Such goals may be determined on an absolute or relative basis or as compared to specific competitor(s), peers or indices. The Committee may exclude the impact of any event or occurrence which the Committee determines should appropriately be excluded, including without limitations (a) restructurings, discontinued operations, extraordinary items and other unusual or non-recurring changes (b) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management or (c) a change in applicable accounting standards.

     (iv) Timing of Establishment of Goals. The Committee shall establish the performance goals in writing either before the beginning of the performance period or during a period ending no later than the earlier of (i) 90 days after the beginning of the performance period or (ii) the date on which 25% of the performance period has been completed, or such other date as may be required or permitted under applicable regulations under section 162(m) of the Code.

     (v) Certification of Results. Prior to any payment of an Award intended to qualify as performance-based compensation, the Committee shall certify the performance results for the performance period specified in the Award after the performance period ends. The Committee shall determine the amount, if any, to be paid pursuant to each Award based on the achievement of the performance goals and the satisfaction of all other terms of the Award.

     (vi) Maximum Awards Payable. Notwithstanding any provision contained in this Plan to the contrary, the maximum amount of “qualified performance-based compensation” payable to any one Participant under the Plan for a given performance period is 500,000 shares, or in the event such performance-based compensation is paid in cash, the equivalent cash value thereof on the last day of the performance period to which such Award relates.

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Section 6. Exercises of Stock Options

     (A) An Option may be exercised in whole or in part at any time during the term of such Option as provided in the Agreement; provided, however, that (i) unless otherwise provided by Section 7, an Option may be exercised only while the Optionee is an Employee or Director, and (ii) each partial exercise shall be for whole Shares only. Unless otherwise provided by Section 7 or in the Agreement, that portion of an Option that has not become Vested as of the date the Optionee ceases to be an Employee or Director shall lapse and be null and void.

     (B) Each Option, or any exercisable portion thereof, may only be exercised by delivery to the Secretary or his/her office, in accordance with such procedures for the exercise of Options as the Company may establish from time to time, of (i) notice in writing signed by the Optionee (or other person then entitled to exercise such Option) that such Option, or a specified portion thereof, is being exercised; (ii) payment in full for the purchased Shares or adequate provision therefor; (iii) such representations and documents as are necessary or advisable to effect compliance with all applicable provisions of Federal or state securities laws or regulations; (iv) in the event that the Option or portion thereof shall be exercised by any individual other than the Optionee, appropriate proof of the right of such individual to exercise the Option or portion thereof; and (v) full payment to the Company of all amounts which, under federal, state or other law, it is required to withhold upon exercise of the Option or adequate provision therefor.

     (C) Except as noted in this paragraph, upon receiving notice of exercise and payment, the Company will cause to be delivered to the Optionee, as soon as practicable, a certificate in the Optionee’s name for the Shares purchased, and shall evidence such transfer on the books and records of the Company. The Shares issuable and deliverable upon the exercise of an Option shall be fully paid and nonassessable. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

     (D) The method or methods of payment of the purchase price for the Shares to be purchased upon exercise of an Option and of any amounts required for tax withholding purposes shall be determined by the Company and may consist of (i) cash, (ii) check, (iii) the tendering, by either actual delivery or by attestation, of whole shares of Stock, valued at Fair Market Value as of the day of exercise, (iv) through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable written instructions to (a) a brokerage firm acceptable to the Company to effect the immediate sale of the purchased shares and remit to the Company, out of the

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sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Federal, state and other employment taxes required to be withheld by the Company by reason of such exercise, and (b) the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale. The permitted method or methods of payment of the amounts payable upon exercise of an Option may be transacted by the Optionee or by a broker designated by him/her (other than a payment described in clause (iv) above), and, if other than in cash, shall be set forth in the applicable agreement or (v) such other means as may be approved by the Committee from time to time, including without limitation, by the withholding from the number of Shares otherwise issuable upon exercise of the Option that number of shares having an aggregate Fair Market Value on the date of exercise equal to the Exercise Price.

     (E) Each Agreement shall require that an Optionee pay to the Company, at the time of exercise of a Nonqualified Option, such amount as the Company deems necessary to satisfy the Company’s obligation to withhold federal or state income or other applicable taxes incurred by reason of the exercise or the transfer of Shares thereupon. To the extent permitted by the Agreement, an Optionee may satisfy such withholding requirements by having the Company withhold from the number of Shares otherwise issuable upon exercise of the Option that number of shares having an aggregate Fair Market Value on the date of exercise equal to the amount required by law to be withheld.

Section 7. Events Affecting Plan Reserve or Plan Awards

     (A) If the Company subdivides its outstanding shares of Stock into a greater number of shares of Stock (including, without limitation, by stock dividend or stock split) or combines its outstanding shares of Stock into a smaller number of shares (by reverse stock split, reclassification or otherwise), or any stock dividend, extraordinary cash dividend, reclassification, recapitalization, reorganization, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase Stock, or other similar corporate event (including mergers or consolidations) affects the Stock such that an adjustment is required in order to preserve the benefits or potential benefits intended to be made available under this Plan, then the Committee shall, in such manner as it may deem equitable and appropriate, make such adjustments to any or all of (i) the number of shares of Stock reserved for the Plan, (ii) the number of shares subject to outstanding Options and other Awards, (iii) the Exercise Price with respect to outstanding Options, and any other adjustment that the Committee determines to be equitable; provided, however, that the number of shares subject to any Option shall always be a whole number. The Committee may provide for a cash payment to any Participant of an Award in connection with any adjustment made pursuant to this Section 7.

     (B) Any such adjustment to an Option shall comply with Section 409(A) and any other applicable provisions of the Code and shall be made without a change to the total Exercise Price applicable to the unexercised portion of the Option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices), and shall be final and binding upon all Participants, the Company, their representatives, and all other interested persons.

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     (C) In the event of a transaction involving (i) a merger or consolidation in which the Company is not the surviving company or (ii) the sale or disposition of all or substantially all of the Company’s assets, provision shall be made in connection with such transaction for the assumption of Awards theretofore granted under the Plan, or the substitution for such Awards of new options of the successor corporation, with appropriate adjustment as to the number and kind of Shares and the purchase price for Shares thereunder. Alternatively, in the discretion of the Committee, the Plan and the Awards issued hereunder shall terminate on the effective date of such transaction if appropriate provision is made for payment to the Participant of an amount in cash equal to the value of the number of Shares subject to the Awards (to the extent such Awards have not been exercised) taking into account the transaction less the aggregate exercise price for such Awards (to the extent such Awards have not been exercised) taking into account the transaction. Further, any obligations under the Plan to deliver Shares of Stock in the future shall be similarly adjusted.

     (D) If a Participant has a Termination of Service by reason of his/her death or Disability, then notwithstanding any contrary waiting period, installment period or vesting schedule in any Agreement or in the Plan, unless the applicable Agreement provides otherwise, each outstanding Award granted to such Participant shall immediately become Vested and, if an Option, exercisable in full in respect of the aggregate number of shares covered thereby and, if a Restricted Stock Unit, Stock Appreciation Right or Performance Share Award, promptly settled.

     (E) If an Optionee has a Termination of Service for any reason other than his/her death or Disability prior to the expiration date of his/her Option, and all or some portion of such Option is Vested and exercisable pursuant to the terms of this Plan and of the Option Agreement, such Vested portion of the Option may be exercised by the Optionee at any time prior to the earlier of (i) twelve months following the date of the Optionee’s Termination, or (ii) the expiration date of such Option.

     (F) The Company may determine whether any given leave of absence constitutes a Termination of Service and, if it does not, whether the time spent on the leave will or will not be counted as vesting credit; provided, however, that for purposes of the Plan (i) a leave of absence, duly authorized in writing by the Company, if the period of such leave does not exceed 90 days, and (ii) a leave of absence in excess of 90 days, duly authorized in writing by the Company, provided (a) the Employee’s right to reemployment is guaranteed either by statute or contract, or (b) for the purpose of military service, shall not be deemed a Termination of Service.

     (G) Following a Change of Control, if a Participant has a Termination of Service within eighteen (18) months of such Change of Control, other than by reason of (i) death, (ii) Disability, (iii) termination for Cause, or (iv) termination by the Participant for other than Good Reason, then notwithstanding any contrary waiting period, installment period or vesting schedule in any Agreement or in the Plan, each outstanding Award granted to such Participant shall immediately become Vested, and, if an Option, exercisable in full in respect of the aggregate number of shares covered thereby.

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     (H) “Change of Control” shall mean (i) the acquisition by any individual, entity or group (other than the Company, Cruise Associates and/or A. Wilhelmsen AS or an affiliate of any of them) of beneficial ownership (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the then outstanding voting securities of the Company entitled to vote generally in the election of Directors (the ”Voting Securities”); (ii) during any period of 24 consecutive months, a majority of the Board shall no longer be composed of individuals (a) who were members of the Board on the first day of such period, or (b) whose election or nomination to the Board were approved by a vote of at least two-thirds of the members of the Board who were members of the Board on the first day of such period, or (c) whose election or nomination to the Board was approved by a vote of at least two-thirds of the members of the Board referred to in the foregoing subclauses (a) and (b); (iii) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”) unless, following such Business Combination (a) the beneficial owners of the Voting Securities of the Company immediately prior to the Business Combination beneficially own more than 50% of the combined voting power of the voting securities entitled to vote generally in the election of directors of the corporation resulting from such Business Combination, and (b) at least a majority of the board of directors of the corporation resulting from such Business Combination were members of the Company’s Board at the time of the action of the Company’s Board providing for such Business Combination; (iv) consummation of a reorganization, merger or consolidation with another corporation or business entity not already under common control with the Company, or the acquisition of stock or assets of such other corporation or business entity, if the market capitalization of the other corporation or entity, or the stock or assets acquired, is equal to or greater than the Company’s market capitalization immediately prior to the closing of such transaction; or (v) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

     (I) “Cause” shall mean (i) if such term is defined in an employment agreement between the Participant and the Company or Affiliate, as such term is defined therein or (ii) (a) an act of material dishonesty, including, without limitation, fraud, misappropriation, embezzlement, financial misrepresentation or other similar behavior, (b) conviction of, or the entry of a plea of guilty or nolo contendere to, the commission of a felony; (c) an action or failure to act that demonstrates a conflict of interest in which the person acts for his or her own benefit to the detriment of the Company; (d) an action or failure to act that constitutes a material breach of the person’s duties to the Company; or (e) the failure to follow the lawful directives of the Company provided that those directives are consistent with the person’s duties to the Company.

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     (J) “Good Reason” shall mean (i) if such term is defined in an employment agreement between the Participant and the Company or Affiliate, as such term is defined therein or (ii) (a) the assignment to the person without the person’s consent of any duties materially inconsistent with the person’s position (including status, offices and titles), authority, duties or responsibilities as they existed prior to the Change of Control; (b) any action by the Company which results in a material diminution in the person’s position, authority, duties, responsibilities, compensation or benefits as they existed prior to the Change of Control without the person’s consent; or (c) the Company requiring that the person relocate his or her principal business office more than 100 miles from the location existing prior to the Change of Control without the person’s consent.

     (K) In addition to any action required or authorized by the terms of an Award, the Committee may take any other action it deems appropriate to ensure the equitable treatment of Participants in the event of or anticipation of a Change of Control, including but not limited to any one or more of the following with respect to any or all Awards: (i) the acceleration or extension of time periods for purposes of exercising, vesting in, or realizing gains from, the Awards, (ii) the waiver of conditions on the Awards that were imposed for the benefit of the Company, (iii) provision for the cash settlement of the Awards for their equivalent cash value, as determined by the Committee, as of the date of the Change of Control; or (iv) such other modifications or adjustments to the Awards as the Committee deems appropriate to maintain and protect the rights and interests of Participants upon or following the Change of Control.

Section 8. Administration

     (A) The Plan shall be administered by the Compensation Committee of the Board unless a different committee is appointed by the Board.

     (B) The Committee’s administration of the Plan shall be subject to the following:

     (i) Subject to the provisions of the Plan, the Committee will have the authority and discretion to select from among the Eligible Individuals those persons who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of shares covered by the Awards, to establish the terms, conditions, performance criteria, restrictions, and other provisions of such Awards, and, subject to the restrictions of Section 11, to cancel or suspend Awards.

     (ii) To the extent that the Committee determines that the restrictions imposed by the Plan preclude the achievement of the material purposes of the Awards in jurisdictions outside the United States, the Committee will have the authority and discretion to modify those restrictions as the Committee determines to be necessary or appropriate to conform to applicable requirements or practices of those jurisdictions.

     (C) The Committee may delegate to one or more Directors or officers of the Company, or a committee of such Directors or officers, the authority, subject to such terms and limitations as the Committee shall determine, to grant Awards to, or to cancel, modify, waive rights with respect to, alter, discontinue, suspend or terminate Awards held by, Employees who are not officers or Directors of the Company for purposes of Section 16 of the Exchange Act provided, however, that any such delegation shall conform with applicable law and the requirements of any exchange on which the Company’s securities are listed.

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     (D) The Company and its Affiliates shall furnish the Committee with such data and information as it determines may be required for it to discharge its duties. The records of the Company and its Affiliates as to an Employee’s or Participant’s employment (or other provision of services), Termination of Service, leave of absence, reemployment and compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish to the Company such evidence, data, or information, as the Committee or the Company considers desirable to carry out the terms of the Plan.

     (E) The Committee is authorized, subject to the provisions of the Plan, to establish, amend and rescind such rules and regulations, as it deems necessary or advisable for the proper administration of the Plan and to take such other action in connection with or in relation to the Plan, as it deems necessary or advisable. Each action and determination made or taken pursuant to the Plan by the Committee, including any interpretation or construction of the Plan, shall be final and conclusive for all purposes and upon all persons.

     (F) No member of the Committee or the Board shall be personally liable for any action, determination or interpretation made by him/her or the Committee or the Board in good faith with respect to the Plan or any Award granted pursuant thereto.

     (G) The Committee, the Company, and its officers and Directors, shall be entitled to rely upon the advice, opinions or valuations of any attorneys, consultants, accountants or other persons employed to assist them in connection with the administration of the Plan.

Section 9. Government Regulations and Registration of Shares

     (A) The Plan, and the grant and exercise of Awards hereunder, and the Company’s obligation to sell and deliver stock under Options, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any regulatory or governmental agency as may be required.

     (B) The obligation of the Company with respect to Awards shall be subject to all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including, without limitation, the effectiveness of any registration statement required under the Securities Act of 1933, and the rules and regulations of any securities exchange or association on which the Stock may be listed or quoted.

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     (C) With respect to persons subject to Section 16 of the Exchange Act, it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act. In addition, it is the intent of the Company that Incentive comply with the applicable provisions of Section 422 of the Code, that grants of “qualified performance-based compensation” comply with the applicable provisions of Section 162(m) of the Code and that, to the extent applicable, all Awards comply with the requirements of Section 409A of the Code. To the extent that any legal requirement of Section 16 of the Exchange Act or Section 422,
162(m) or 409A of the Code as set forth in the Plan ceases to be required under such section, the Committee, in its sole discretion, may decide that the applicable Plan provision shall cease to apply. The Committee may revoke any Award if it is contrary to law, or may modify an Award to bring it into compliance with any valid and mandatory government regulation.

Section 10. Miscellaneous Provisions

     (A) Rights of Company. Nothing contained in the Plan or in any Agreement, and no action of the Company or the Committee with respect thereto, shall interfere in any way with the right of the Company or an Affiliate to terminate the employment of the Participant at any time, with or without cause. The grant of Awards pursuant to the Plan shall not affect in any way the right or power of the Company to make reclassifications, reorganizations or other changes of or to its capital or business structure or to merge, consolidate, liquidate, sell or otherwise dispose of all or any part of its business or assets.

     (B) Designation of Beneficiaries. Each Participant who shall be granted a Plan Award may designate a beneficiary or beneficiaries and may change such designation from time to time by filing a written designation of beneficiary or beneficiaries with the Company on a form to be prescribed by it, provided that no such designation shall be effective unless so filed prior to the death of such person.

     (C) Payroll Tax Withholding. The Company’s obligation to deliver shares of Stock or make payments under the Plan shall be subject to applicable federal, state and other tax withholding requirements. Federal, state, and other tax due upon the exercise of any Award may, in the discretion of the Company, be paid in shares of Stock already owned by the Optionee or through the withholding of shares otherwise issuable to such Optionee, upon such terms and conditions (including, without limitation, the conditions referenced in Section 6) as the Company shall determine which shares shall have an aggregate Fair Market Value equal to the required minimum withholding payment. If the Optionee shall fail to pay, or make arrangements satisfactory to the Committee for the payment to the Company of all such federal, state and other taxes required to be withheld by the Company, then the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to such Optionee an amount equal to federal, state or other taxes of any kind required to be withheld by the Company.

     (D) Employees Subject to Taxation Outside the United States. With respect to Participants who are subject to taxation in countries other than the United States, the Committee may grant Awards on such terms and conditions as the Committee deems appropriate to comply with the laws of the applicable countries, and the Committee may create such procedures, addenda and sub-plans and make such modifications as may be necessary or advisable to comply with such laws.

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     (E) Exclusion from Benefit Computation. By accepting an Award, unless otherwise provided in the applicable Agreement, each Participant shall be deemed to have agreed that such Award is special incentive compensation that will not be taken into account, in any manner, as salary, compensation or bonus in determining the amount of any payment under any health and welfare, pension, retirement or other employee benefit plan, program or policy of the Company or any Subsidiary. In addition, each Beneficiary of a deceased Participant shall be deemed to have agreed that such Award will not affect the amount of any life insurance coverage, if any, provided by the Company on the life of the Participant which is payable to such Beneficiary under any life insurance plan covering employees of the Company or any Subsidiary.

     (F) Use of Proceeds. Proceeds from the sale of Shares pursuant to Options granted under this Plan shall constitute general funds of the Company.

     (G) Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification, or revocation thereof, shall be in writing filed with the Company at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Company shall require.

     (H) Unfunded Status. Neither a Participant nor any other person shall, by reason or participation in the Plan, acquire any right in or title to any assets, funds or property of the Company or any Affiliate whatsoever, including, without limitation, any specific funds, assets, or other property which the Company or any Affiliate, in its sole discretion may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the Stock or amounts, if any, payable under the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any Affiliate shall be sufficient to pay any benefits to any person.

Section 11. Amendment and Termination of this Plan

     The Committee may at any time terminate, suspend or discontinue this Plan. The Committee may amend this Plan at any time, provided that no such amendment shall be made without the approval of the Company’s stockholders (a) to the extent that such approval is required by applicable law or by the listing standards of any applicable exchange(s) on or after the adoption of this Plan, (b) to the extent that such amendment would materially increase the number of securities which may be issued under the Plan, (c) to the extent that such amendment would materially modify the requirements for participation in the Plan, or (d) to the extent that such amendment would accelerate the vesting of any Restricted Stock or Restricted Stock Units under the Plan except as otherwise provided in the Plan.

     The Committee may at any time alter or amend any or all Award Agreements under this Plan to include provisions, or to effect a result, that would be authorized for a new Award under this Plan, so long as such an amendment would not require approval of the Company’s shareholders if such amendment were made to the Plan. Notwithstanding the foregoing, except as may be provided in Section 7(C), no such action by the Board or the Committee shall, in any manner adverse to a Participant, affect any Award then outstanding without the consent in writing of the affected Participant.

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EX-31

Exhibit 31

CERTIFICATIONS

I, Richard D. Fain, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Royal Caribbean Cruises Ltd.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 25, 2008

/s/ RICHARD D. FAIN  

     Richard D. Fain 

     Chairman and
     Chief Executive Officer
     (Principal Executive Officer) 

Exhibit 31

CERTIFICATIONS

I, Brian J. Rice, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Royal Caribbean Cruises Ltd.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 25, 2008

/s/ BRIAN J. RICE  

     Brian J. Rice 

     Executive Vice President and
     Chief Financial Officer
     (Principal Financial Officer) 

EX-32

Exhibit 32

     In connection with the quarterly report on Form 10-Q for the quarterly period ended June 30, 2008 as filed by Royal Caribbean Cruises Ltd. with the Securities and Exchange Commission on the date hereof (the “Report”), Richard D. Fain, Chairman and Chief Executive Officer, and Brian J. Rice, Executive Vice President and Chief Financial Officer, each certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1.	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Royal Caribbean Cruises Ltd.

Date: July 25, 2008

By:	/s/ RICHARD D. FAIN
	Richard D. Fain
	Chairman and      Chief Executive Officer      (Principal Executive Officer)
By:	/s/ BRIAN J. RICE
	Brian J. Rice
	Executive Vice President and      Chief Financial Officer      (Principal Financial Officer)