June 18 (Bloomberg) -- Carnival Corp., the biggest cruise- line operator, reported second-quarter profit that beat analysts’ estimates and said discounting is starting to let up.

Net income dropped 32 percent to $264 million, or 33 cents a share, the Miami-based company said today in a statement. That topped the 29-cent average of 13 estimates compiled by Bloomberg. Sales fell 13 percent to $2.95 billion in the quarter ended May 31. Analysts projected $2.98 billion on average.

The company, which runs cruise lines including Seabourn, Princess and Cunard, has cut prices to boost demand and fill its ships. Fares have improved on some itineraries since the end of March, executives said today on a conference call, describing the trend as “encouraging.”

“Bookings going forward seem to be getting a little bit better in certain markets and certain brands,” Robin Diedrich, an Edward Jones & Co. analyst in St. Louis, said today in an interview. “They are a little bit more bullish on Caribbean, and European brands holding up better and getting a bit better pricing than what we had been expecting a few months ago.”

Carnival rose $1.72, or 7.5 percent, to $24.77 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have declined 1.9 percent this year.

Carnival forecast 2009 earnings of $2 to $2.10 a share, less than the $2.10 to $2.30 projected in March, citing higher- than-anticipated fuel prices and the H1N1 flu virus.

Swine Flu Impact

During the quarter, cancellations and cruises rearranged to avoid outbreaks of swine flu eroded some of the benefits of cost-cutting and lower fuel prices.

The flu reduced earnings by 3 cents a share, the cruise company said. Carnival said on May 18 that rerouting ships because of a U.S. government recommendation against non- essential travel to Mexico, due to swine flu, would reduce profit by 5 cents a share, with most of the cost recorded in the second quarter.

More than 50 passengers and crew on a Carnival South Pacific cruise ship tested positive for the virus last month.

“We have started tweaking prices on a variety of brands,” Chief Operating Officer Howard Frank said today on a conference call. “Since the end of March we have seen both volumes increasing and yields starting to turn and start to improve.”

Onboard spending by passengers has declined less than ticket prices, executives said on today’s call.

Costs Tumble

Daily cruise costs fell 16 percent from a year earlier, helped by lower fuel expenses, currency changes and other reductions, Carnival said. Ship-fuel expenses dropped to an average of $304 a metric ton from $530 last year. The company expects to pay an average of $353 a metric ton this year, compared with the $279 it had forecast earlier.

Net revenue yields, an industry measure of ticket prices, decreased 17 percent, including currency fluctuations, and 9.8 percent excluding them, Carnival said.

Excluding shifts in currency values, yields will fall 10 percent to 12 percent this year, Carnival reiterated today. The decline may be as much as 16 percent when currency changes are factored in, the company said. In March the company said yields could drop as much as 18 percent on that basis.

Carnival sails 92 ships under its namesake cruise line, as well as P&O, AIDA, Costa Cruises, Ibero and Ocean Village. It has 13 new vessels scheduled for delivery through 2012.

Beyond 2012, ship capacity growth “will be slower but it won’t be zero,” Chairman and Chief Executive Officer Micky Arison said on today’s call.

To contact the reporter on this story: Beth Jinks in New York at bjinks1@bloomberg.net

Last Updated: June 18, 2009 16:22 EDT