Tag Archives: Carnival Corporation

Arison on Carnival Corp.’s post-Concordia changes

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There was some interesting back-and-forth last week in federal court between Carnival Corp. chairman Micky Arison and U.S. District Court Judge Patricia Seitz that started out predictably but veered into unexpected territory.

Arison had been summoned to a status conference in the ongoing probation proceedings that Carnival is involved in as a result of Princess Cruises pleading guilty to environmental crimes in 2016.

Seitz was there to hold Carnival’s feet to the fire, in a bid to stop continuing violations of environmental laws that have put her in a position of having to harangue Carnival about the problems.

Then she took a less confrontational tack.

“What do you love about being in your business, Mr Arison?”

Arison, one of the few people in a room full of lawyers and consultants who have actually worked on a cruise ship, recounted his 50-year career at Carnival, which included 32 years as its CEO.

“I’m very proud of what we’ve accomplished,” Arison said. “Obviously we wouldn’t be here if we were perfect.”

Seitz then expressed her admiration for how Carnival reformed some of its processes after the sinking of the Costa Concordia on Jan. 13, 2012.

“That was the worst day of my life,” Arison admitted in a hoarse voice.

Arison told Seitz that the Concordia illustrates some of the unique dilemmas in the cruise business that are not always understood by those outside the industry. As an example, he said, Carnival Corp. trains its bridge officers to work as a team. But the Italian Coast Guard, which trains Carnival’s Italian officer corps, had a different approach.

That meant that creating a uniform safety culture across Carnival’s 10 brands was hard to achieve.

“The Italian rules at that time were archaic,” Arison said. “The captain was the master. Other team members [on the bridge] could not question the captain.” Arison said Carnival lobbied hard with the Italian government to change the rules, but only after the Concordia accident were the changes made.

Seitz also had praise for the Arison Maritime Center, which Carnival opened in 2016 in Almere, the Netherlands. There, the company trains 6,500 bridge and engineering officers annually, in state-of-the-art simulators. That also gives the company a roadmap for change, she said.

Arison said that his family — and himself personally — was proud of having created the training centre. “We never put our name on a building in Miami,” he added, despite plenty of offers. “That was one building we were proud to put our name on.”

Carnival’s Q3 profit rises, but storm clouds are on the horizon

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Carnival Corp. reported higher third quarter-net income, but reduced its outlook for the 2019 fiscal year and said that business in Europe and the U.S. had eroded since it last reported results three months ago.

Reacting to the mix of news, investors pushed Carnival shares down 7% in mid-morning trading on Thursday.

Carnival said net income for the quarter ended Aug. 31 was $1.78 billion, up from $1.71 billion a year earlier, while revenue rose to $6.53 billion from $5.84 billion.

Carnival also reported higher earnings adjusted for nonrecurring factors, but forecast that earnings for the full year would fall in the range of $4.23 to $4.27 a share, compared to a previous range of $4.25 to $4.35 put forth in June and actual results of $4.26 a share in 2018.

Carnival blamed higher anticipated fuel prices for the reduction.

“We achieved additional cost improvements largely driven by leveraging our scale, offsetting the earnings impact due to voyage disruptions from the combined impact of Hurricane Dorian, the tensions in the Arabian Gulf and the delayed delivery of Costa Smeralda,” Carnival CEO Arnold Donald said in a statement.

“A further reduction in guidance for ticket and onboard revenue worth 6 cents per share in part contributed to by the high level of close-in voyage disruptions was also offset. However, due to an 8 cent a share impact from the recent spike in fuel prices caused by geopolitical events, we are reducing our full-year guidance for 2019 by 5 cents a share,” Donald said.

Carnival said it expects it’s North America and Australia segment yields to be up for the year, but slightly less than previous guidance while its Europe and Asia segment is still expected to be down for the year but slightly more than previous guidance.

It also said: “Cumulative advanced bookings for the first half of 2020 are ahead of the prior year at prices that are in line compared to 2019 on a comparable basis. Since June, both booking volumes and prices for the first half of next year have been running lower than the prior year.”

By mid-afternoon Thursday, Carnival shares were trading at $44.14, off 8.2% from Wednesday’s close.

Cruise Lines Could Face Major Drydock Challenge Following Hurricane Damage

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Grand Bahama Shipyard

The cruise industry could be looking at a monumental impact to their operations following Hurricane Dorian if the Grand Bahama Shipyard’s capacity is taken offline or further limited following an April incident.

The go-to-yard for drydocks and refurbishments in the cruise industry is partly owned by both Carnival Corporation and Royal Caribbean Cruises.

It is ideally located in the Bahamas, meaning little out-of-service transit time on the way to or from various deployment regions, including the Caribbean in the winter.

The yard is regularly used by cruise vessels from almost all cruise lines for mandatory class drydocking and refurbishment work.

There are few alternatives for big vessels in the region. Shipyards in Newport News, Virginia, and Mobile, Alabama, both have facilities that can handle larger vessels but are generally used for naval purposes and are known to be well booked ahead of time.

Deytens, located in South Carolina, has also played host to the expedition and luxury ships and mid-sized vessels over the years.

Costs at U.S.-based facilities are also higher, and there are challenges in bringing in skilled labour and large amounts of the hotel and marine supplies from foreign countries that are needed for large scale refurbishments, which often see spending of up to $3 million per day in supplies and labour.

With reported widespread damage in Freeport, operations to the yard could be impacted. Housing both permanent and temporary workers could prove challenging unless accommodation vessels are brought in.

Another expensive option could be the Boka Vanguard, a semi-submersible heavy transport vessel operated by Netherlands-based Boskalis, which helped provide a platform for emergency repairs to the Carnival Vista earlier this year.

In Curacao, Damen Shipyards offers a drydock option and has plenty of cruise experience.

Cruise lines could also choose to wet-dock their vessels at industrial piers just about anywhere. The upside being the vessel would be empty and available for hotel refit. Crane access could be limited making logistics of getting supplies off and on the ship challenging.

However, classification societies require ships to come out of the water at regular intervals for inspection.

The most likely option, however, is the regular drydock facilities in Europe. The question is whether they have available space when needed, and the impact of moving ships that were scheduled to drydock in the Bahamas to Europe, mixing up some itineraries and deployment.

Cancelling a scheduled drydocking for the third or fourth quarter of 2019 or early 2020 and replacing it with a normal sailing would also pose challenges with a short booking window.