Carnival Corp. sees a silver lining in difficult second quarter


Carnival Corp. reported that its second-quarter profit fell 93%, but Carnival Corp. CEO Mickey Arison said the good news was that pricing held steady for most brands and that onboard revenue was stronger than expected.

Unrelated good news was the Miami Heat’s clinching of the NBA championship on Thursday night.

Arison, who owns that professional basketball franchise, claimed exhaustion but sounded jubilant, saying that Queen’s song “We Are The Champions” was still reverberating through his brain. Micky Arison, CEO

Then it was down to business, although excitement about the Heat’s win continued to pop up throughout the call.

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

Arison said cruise ticket prices held firm close to sailing, except for Costa. That, plus higher-than-expected onboard revenue, drove yields higher.

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

Carnival Corp. executives were pleased with the company’s marketing and cost-containment efforts. Among those marketing efforts was steep discounting (20-30%) at Costa. The spring discounts sparked a 25% increase in bookings, Carnival Corp. said.

Howard Frank, Carnival's vice chair and chief operating officer, said that 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 Costa Concordia accident. High transatlantic airfares and the eurozone crisis are also hurting European cruises both in home markets and the U.S. Spain was particularly hard hit, but the U.K. and German markets were holding up, the company said.

Carnival Corp. said it did not introduce discounts until its research indicated people would respond to cheaper prices, and that didn't happen until the end of March and early April.

Overall, Carnival Corp.’s bookings remain within their normal parameters — cruise ships are generally 85-95% booked for the third quarter — albeit in the lower part of that range. Generally, pricing will probably be slightly lower at least through the third quarter.

The number of first-time cruisers is down, but Arison said he hopes that market segment will bounce back next year.

Follow Kate Rice on Twitter @krtravelweekly.


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