Carnival Corp. beats expectations with $264M profit in Q2
By Johanna Jainchill
Carnival Corp. beat its own and Wall
Street’s expectations by posting a $264 million profit for the quarter ended May 31.
Carnival’s shares jumped June 18, the
day the numbers were released; it said that
despite being down 32% from last year’s Q2
profit of $390 million, close-in cruise prices
were higher than expected.
During a conference call with analysts,
Carnival said that it managed significant
cost savings during what COO Howard
Frank called the “most significant slowdown in the world economy in our lifetime.”
“We have taken further steps to reduce
shoreside and operating costs, which will
continue to benefit us in the future,” Frank
said. “We will emerge as a far stronger and
more profitable business than before.”
Carnival said that net revenue yields decreased 9.8% during the second quarter
(down 16.8% in current dollars due to unfavorable currency exchange rates).
Frank said that the Carnival brands had
never experienced such a decline in yields.
“The reaction by revenue management
is to get the business first, and if they leave
something on the table, they want to be
able to fill up the ships,” he said. “That’s
been the model.”
will become less and less of an issue.”
Looking ahead, Carnival said that third-quarter occupancy is behind where it was one year
ago, and that pricing is
The third quarter is suffering from high
exposure in Alaska, where Carnival said it
has experienced its steepest pricing decline.
In the quarter, 28% of the company’s capacity is in Alaska, 19% is in
Europe and 36% is in the
Carnival said that Eu-
rope prices were down but not as much as
it originally anticipated, thanks to recent
strong demand for Europe cruises.
In addition, Carnival said that most of
its European brands have not suffered the
price declines experienced by the North
American brands. The exception is in Spain,
where Iberocruceros has suffered Europe’s
steepest decline due to the country’s very
weak economy, Carnival said.
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By doing that, Frank said, booking volume
was up 26% for the second half of 2009, but
ticket prices were substantially lower.
“Despite the soft economy and rising
rates of unemployment, we’ve seemed to
find price point to incentive” the vacation
market, Frank said.
Energy conservation programs resulted in
a 6% reduction in fuel consumption during
the quarter, which helped to mitigate recent
fuel price increases, Carnival said.
Frank said that during the quarter there
was a modest improvement in pricing for
its premium brands, but that its contemporary products suffered due to the travel
warning to Mexico because of the H1N1
swine flu outbreak.
Carnival said that despite that, flu-relat-ed revenue losses were largely offset by improvements in its other global itineraries.
In addition, the company said that its
Mexico itinerary booking volume rebounded quickly and continued to be strong.
Carnival Chairman and CEO Micky Arison had strong words related to the flu issues.
“We are talking about a flu that is no
worse, and with symptoms that appear to
be milder, than the seasonal flu,” Arison
said. “We are trying to deal with it port by
port and government by government. The
World Health Organization said from the
very beginning that there should be no restriction on travel. And yet some governments have panicked, and hopefully, over
time, as we work hard to educate people, it
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