Royal Caribbean has reached an agreement with manufacturer Rolls-Royce over a lawsuit regarding the Mermaid pod-propulsion system on Celebrity Cruises’ Millennium-class ships.

Podded propulsion is a technological advance over traditional shaft propulsion, which had developed technical issues in the early years of its installation.

The companies said they have improved the reliability of the design.

Mermaid pods are installed on four Celebrity ships: Millennium, Summit, Infinity and Constellation.

The company expects the settlement to generate a net increase of nearly $65m in other income in Royal Caribbean’s 2010 first quarter results.