Johanna Jainchill
Johanna Jainchill

*logoAnalysts were clearly sweet on Carnival Corp.'s surprise order for a new Carnival Cruise Lines ship as well as a promise that it would order one for Princess Cruises.

The move comes on the heels of excitement, and concern, about Royal Caribbean International’s delivery of the Oasis of the Seas, the world’s largest and most expensive cruise ship. The Oasis has at 5,400 lower berths and cost $1.5 billion.

The Wall Street Journal said in an article this week that the "Oasis, and several other super-sized ships that will launch soon, face stiff headwinds.

"Cruise lines have been able to fill their ships during the recession, but only by offering steep price discounts. Yields -- the amount they make on each passenger -- are down about 15% this year amid a broad drop in consumer spending," said the WSJ.

But Carnival Corp. CEO Micky Arison, who has been in the business for four decades, doesn’t seem fazed by the current state of the business. In fact, as he said in an interview last week, if he didn’t have faith in the cruise industry, "I’d be retired."

Arison and Carnival Corp. have not made billions by being impetuous. The company has not ordered a ship since December 2006. This was not a function of the economy but of record-high shipbuilding prices.

With current shipyard prices at 2004 levels, Arison said there was no reason not to build right now, but that orders still needed to be placed with prudence.

"It has to be done rationally," Arison said. "You have to be building ships at the right price and have the right operating costs so you can get a reasonable return at affordable prices and at great value to the consumer.

"If you’ve got those disciplines in place, the potential is tremendous."

To read the Q&A with Arison, click here.


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