The effects of record-high fuel costs are
trickling down from cruise lines to their ports and passengers, and
those costs continue to surge.
Cruise lines say
they are taking pains to ensure that the passenger experience is
not affected by slight changes in itineraries, embarkation and
arrival times and slower cruising speeds, all meant to take the
edge off fuel costs.
In addition to
freshening a 5-year-old itinerary, Carnival Cruise Lines said part
of the reason it eliminated Aruba from the Carnival Destinys 2007
route was to save on fuel.
By removing Aruba
from the itinerary, we are able to offer two new ports of call
while at the same time achieve significant fuel savings, said Vance
Gulliksen, a Carnival Cruise Lines spokesman.
Last week, parent
company Carnival Corp. cut its 2006 profit outlook for the second
time this year, citing fuel costs as a major reason. Carnival CEO
Micky Arison said in March that at $331 per metric ton, fuel costs
were 33% higher this year than last.
Carnival said that
the forward curve for fuel for the remainder of the year is
approximately $372 per metric ton.
Aruba is not
thrilled that a ship that called there 52 times last year will not
be coming back in 2007.
I regret this
deeply, since Aruba is the perfect destination for the Carnival
Cruise Lines guests, said Kathleen Rojer of Aruba Cruise Tourism. I
sincerely hope that Carnival Cruise Lines will reconsider their
position and that they will change their minds.
Cruises, President Dan Hanrahan said the company was looking at
everything that affected fuel consumption, but the line would
rather rearrange stops on its routes than eliminate or substitute
By going on the
same course but in a different order we can reduce fuel, Hanrahan
said. We wont do anything that has a detrimental impact on our
Other cruise lines
are slowing their roll. Michael Sheehan, a Royal Caribbean Cruises
spokesman, said Royal Caribbean International was making slight
alterations in arrival or departure times ... and is altering the
speed of ships while at sea to gain the greatest fuel
times mean the ship can cruise more slowly and burn less fuel.
Sheehan said there were other ways the line was saving fuel,
including using fewer lights or different types of bulbs (LEDs
rather than halogens) and turning off air-conditioning in
unoccupied areas of the ship.
Naturally, as we
look forward, we are giving even greater attention to itinerary
planning in terms of timing, speeds and distances, he
Cruise lines such
as EasyCruise and Oceania are less susceptible to fuel cost
increases because they dont spend as much time cruising as other
Our ships have
always spent so much time in port, we spend more on costs
associated with port operations than fuel, said Tim Rubacky,
director of corporate communications for Oceania Cruises.
Last summer Crystal
Cruises and Regent (then Radisson) Seven Seas imposed fuel
surcharges on passengers to counter surging fuel costs. That was
when crude oil prices had reached $58 a barrel. With prices now in
the mid-$70 range, a new round of surcharges might be on the
Weve talked about
it but havent implemented any further increases, said Mimi
Weisband, vice president of public relations for Crystal
SeaDream Yacht Club
imposed a fuel surcharge eight weeks ago. It is part of what it
calls a government, port, document issuance, fuel surcharge and
We have passed on
the fuel increases to the passenger, said Ernie Beyl, SeaDreams
spokesman. It varies on the region where the cruise takes
Ken Dubbin, a
former Carnival Corp. and Royal Caribbean executive, now runs K.
Dubbin & Partners, a consulting business that advises companies
on mergers, acquisitions and fuel hedging -- securing fuel at an
agreed price at a future date.
that hedging is a superior method of handling the volatility of
high oil costs compared with buying on the spot market or
implementing surcharges and reduction tactics.
At the end of the
day, all of these conservation activities that the lines are
working on from an operational perspective would probably not
amount to more than 5% in consumption savings, he said. They would
have to make dramatic changes, like reducing the number of port
calls, for example. They cant do that competitively.
Dubbin said hedging
fuel has proven to be a prudent approach. He cited his own study which found that Southwest Airlines, an
industry leader in fuel hedging, saved $892 million in 2005, while
American Airlines, which hedged far less, saved only $149 million
and realized a significant loss in 2005 as a result.
Some lines are
still in denial, Dubbin said. They think prices are going to drop
back to $50 or $60 a barrel. I dont think well see that.
Analysts are also
strongly pushing cruise lines to hedge fuel.
Hedging helps you
in terms of forecasting quarter-to-quarter costs, said Tim
Gallagher, Carnival spokesman. It make things more predictable, but
in the long run it will cost money, as there is a cost to
reporter Johanna Jainchill, send e-mail to [email protected].