CARNIVAL IN ROUGH SEAS

scalise12 · March 10, 2012

Carnival in rough seas as cruise season starts

By SAMANTHA BOMKAMP | Associated Press – 2 hrs 48 mins ago

NEW YORK (AP) — Carnival Corp. cut its profit forecast nearly in half Friday, another sign of the challenges the company and cruise industry face after the capsizing of the Costa Concordia in January.

Cruise line operators entered 2012 thinking they could start charging passengers more again after offering widespread discounts following the 2007-2009 recession. But just two weeks into the year, 32 people died when Carnival's Costa Concordia sank off the coast of Italy.

The incident happened during a critical period for the cruise industry referred to as "wave season." It's a time when a large number of travelers book cruises for the year.

As a result, bookings dropped off even as the company lowered prices, Carnival said Friday. Rival Royal Caribbean Cruises Ltd. has also said its bookings took a significant hit.

Carnival's bookings improved gradually during the quarter, which ended Feb. 29, but the company had a further setback when another Costa ship — the Allegra — caught fire and lost power late in the month, leaving passengers without working toilets, running water or air conditioning for three days.

The two incidents and higher fuel prices prompted the Miami company to slash this year's profit forecast to between $1.40 per share to $1.70 per share from $2.55 to $2.85 per share. Revenue for the year, after expenses, could fall as much as 4 percent.

Excluding the Costa business, Carnival says the revenue figure will likely be flat. Bookings at the Costa line, which has suspended marketing, remain "significantly behind the prior year at lower prices," Carnival said.

For the first quarter of fiscal 2012, Carnival posted a loss of $139 million, or 18 cents per share. A year ago, it earned $152 million, or 19 cents per share.

Revenue rose 5 percent to $3.58 billion. Analysts expected a loss of 7 cents per share with revenue of $3.56 billion.

Last month Royal Caribbean Cruises Ltd. said it's hard to determine what impact the tragedy will have on its 2012 revenue, but it said the accident has already hit bookings significantly.

Unlike plane tickets or hotel rooms which are mostly booked directly by customers on the internet, most cruises are sold by travel agents. That makes it harder to gauge the impact of an accident like the Concordia wreck.

Micky Arison, Carnival's CEO, said the company's North American brands such as Carnival Cruise Lines, Princess Cruises and Holland America, still expect a "modest improvement" in yield — what the company makes from passengers after removing expenses — this year. European brands expect slightly lower yields because of the slowdown in some European economies.

Arison also indicated Carnival intends to hold the line on pricing despite the Concordia accident. "Any consumers holding out for deeper than normal discounts may be disappointed," he said.

Jefferies analyst Ian Rennardson said he feels like Carnival's outlook is a "worst case scenario." The "new guidance, which draws a line in the sand from which the company can build," overshadowed the better than expected results for the first quarter, he said.

Shares of Carnival fell 38 cents to close at $30.57. The stock lost about 16 percent in the days following the Concordia wreck, and has not recovered much from a January low of $29.36.

Rennardson is optimistic that Carnival can regain its footing. He expects the Costa brand to resume marketing to the public soon and believes the hard line on pricing will pay off, allowing Carnival to bolster revenue and eventually raise prices on a large scale next year.

sailingrose · March 10, 2012

I'm not a Carnival fan to start with but I've seen way too many issues with their ships the last few years. I'm talking mechanical as well as human error. The 2 Costa issues this year and a year ago the Carnival Splendor dead in the water off the coast of Mexico. I would have liked to try Costa but I won't now.

coloradocruisers · March 10, 2012

I think my RCI stock went down some too.

RayColey · March 12, 2012

Across the board the cruise industry has been hurt by Costa's troubles. Economy is looking better, though, so look for the stocks to bounce back later on this year.