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.

At Celebrity 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 them.

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 guests experience.

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 efficiency.

Earlier departure 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 said.

Cruise lines such as EasyCruise and Oceania are less susceptible to fuel cost increases because they dont spend as much time cruising as other lines do.

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 way.

Weve talked about it but havent implemented any further increases, said Mimi Weisband, vice president of public relations for Crystal Cruises.

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 handling fee.

We have passed on the fuel increases to the passenger, said Ernie Beyl, SeaDreams spokesman. It varies on the region where the cruise takes place.

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.

Dubbin maintained 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 hedging.

To contact reporter Johanna Jainchill, send e-mail to [email protected].


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