Carnival Corp. net income down for Q2 as bookings recover

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Carnival Corp.'s second-quarter profits plummeted 93%, but there was a silver lining: Fleetwide bookings have been improving since March, and onboard revenue was stronger than expected.

Carnival Corp. reported net income of $14 million for the second quarter, down from $206 million a year earlier. The company is still recovering from the Costa Concordia wreck and a fire aboard the Costa Allegra as well as from broader market forces such as the fallout from high airfares to Europe and the eurozone crisis.

Micky Arison, Carnival Corp.'s chairman and CEO, said cruise ticket prices held firm close to sailing, except for Costa. That, plus higher-than-expected onboard revenue, drove yields higher.

A 3% improvement in yields for its North American brands slightly offset lower yields in Europe, Australia and Asia (although these figures did not include Costa).

Carnival Corp. executives said they were pleased with the company's marketing and cost-containment efforts.

Among the marketing efforts was steep discounting of 20% to 30% at Costa. The spring discounts sparked a 25% increase in bookings for Costa, executives said. That helped fill a booking hole caused by the Concordia accident.

Cost containment efforts were more successful than anticipated; the company expects its net cruise costs, except for fuel, to be down slightly from last year.

Howard Frank, Carnival Corp.'s vice chairman and COO, said price reductions at the end of March helped stimulate a rebound in booking across brands and regions. Some price reductions were not a response to the Concordia accident. The company said it did not introduce discounts until its research indicated people would respond to cheaper prices, which didn't happen until the end of March.

High transatlantic airfares and the eurozone crisis are hurting European cruises both in the U.S. and European markets. Spain was particularly hard hit, but the U.K. and German markets were holding up, the company said.

Overall, Carnival Corp.'s bookings remain within their normal parameters. Cruise ships are generally 85% to 95% booked for the third quarter.
"Even though we're behind, there's not that much left to sell in the third quarter," Arison said. Generally, pricing will probably be slightly lower at least through the third quarter.

Most cruise lines have been trying to hold pricing steady for as long as possible and discounting only as they close in on departure dates.

Arison said his instincts suggested that seasoned cruisers would come back first, while first-time cruisers would continue to hesitate to try cruising. The numbers are bearing that out.

"Experienced cruisers understand both the value and the safety of the product," Arison said. He added that he hoped the passing of time would help ease concerns and that the number of first-time cruisers would "bounce back."

He said that direct bookings, fleetwide, were holding steady at 19% and added that while Carnival has no "aspirations" when it comes to direct bookings, he does expect that sales channel to increase "with the passing of generations and the improvement of technology."

For cruise news, follow Kate Rice on Twitter @krtravelweekly.

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