Carnival Halts Some Cruise Marketing, Plans Safety Review After Capsizing

Carnival Corp. (CCL), owner of the Costa Concordia cruise ship that ran aground last week, halted advertising for its Carnival Cruise Lines and announced a review of safety procedures in the aftermath of the accident.

Carnival suspended broadcast, digital and direct-mail marketing for its namesake line “for the time being,” Vance Gulliksen, a spokesman for the Miami-based company, said yesterday in an e-mail. Eleven people are confirmed dead in the Jan. 13 accident off the coast of Italy, with about 20 still missing. Carnival’s unit Costa Crociere SpA yesterday suspended the ship’s captain, Francesco Schettino, who was placed under house arrest on Jan. 17 for allegedly causing the shipwreck.

The world’s largest cruise operator waited almost a week to suspend advertising after the Concordia, carrying 4,200 passengers and crew, ran aground off Italy. Airlines and oil companies typically pull television ads following accidents with fatalities. The wreck occurred at the start of the cruise industry’s peak booking season.

“We’re not in a position to speak to individual brands’ plans, but they are each actively evaluating their marketing and advertising efforts,” Gulliksen said. The company is evaluating marketing across brands and regions, “with each brand being sensitive to their specific audiences.”

Internal Review

Rescue operations are currently suspended, Mario Pellegrini, the deputy mayor of Giglio said today. Italy’s Civil Protection Agency yesterday issued a weather warning for possible storms on the western coast of Italy, including Giglio, because of strong wind. Strong winds are currently affecting the other side of the island, Pellegrini said.

There’s a “high risk” that the 290-meter (951 feet) long ship, which is lying in an unsteady position, will slip off an underwater ledge and sink into a 70-meter-deep trough, threatening to rupture fuel tanks, Environment Minister Corrado Clini said yesterday in Parliament in Rome.

Carnival cruises depart mostly from the U.S., the Bahamas and the Caribbean, according to the line’s website. Its Costa Crociere SpA, the Genoa-based owner of the Costa Concordia, operates mostly in southern Europe. The company also owns the Princess, Seabourn, Holland America, Cunard and P&O for a total of 10 lines.

Carnival had been increasing television commercials for its cruise lines, according to data from Nielsen, which tracks U.S. TV audiences and advertising. Last year, Carnival ran 10,213 TV ads, a 12 percent increase from 2010.

The company said Captain James Hunn, a retired U.S. Navy captain and its senior vice president of maritime policy and compliance, will lead the safety review. Hunn has held senior positions at Carnival for almost a decade, focusing on corporate-wide efforts to establish maritime policy standards and overseeing health, environmental, safety, and security practices. The company also plans to bring in outside experts.

“This tragedy has called into question our company’s safety and emergency response policies and procedures, Micky Arison, Carnival’s chairman and chief executive officer, said in the statement. He said the goal was to “make sure this kind of accident doesn’t happen again.”

Moldovan Passenger

Italian prosecutors leading the investigation of the accident may seek to interview Domnica Cemortan, a 25-year-old Moldovan who has appeared in photographs during the cruise published by Italian newspapers, Corriere Della Sera reported.

Cemortan told Corriere in an interview published today that she bought a ticket so she could travel on the ship and spend time with friends on the crew. She said the captain stopped briefly, “at least a half an hour” before the accident, at the table where she was dining with former colleagues. “I’m not Captain Schettino’s lover,” she told Corriere, after hearing from friends in Italy who told her newspapers were reporting that she was involved romantically with him.

Costa Crociere said in a statement yesterday that Cemortan was a registered passenger on the ship. She told Romanian newspaper Adevarul that she had worked as a crew member on the ship and went to the bridge to help translate emergency messages into Russian for passengers as the Concordia was running aground. When she escaped the ship at 11:50 p.m., an hour after the evacuation was ordered, the captain was still on the bridge, she said.

‘Leaderless’ Rescue

Pellegrini, the deputy mayor of Giglio, told Bloomberg News the crew lacked a leader during rescue efforts near the island.

Carnival gained 4.5 percent to $31.91 yesterday in New York. The stock has declined 6.9 percent from the $34.28 close on the day of the accident.

The government plans to declare a state of emergency for the area at a Cabinet meeting today, as well as approve a measure that would restrict cruise ships from access to sensitive coastal regions.

Marine Sanctuary

Costa, Carnival’s Italian unit, has hired Smit Salvage, a unit of Royal Boskalis Westminster NV, to remove 500,000 gallons of fuel from the crippled cruise liner. The company will need two to four weeks to take the fuel off the ship, executives said on a conference call Jan. 17.

The ship is lying on its side off Giglio, an island of 1,500 inhabitants in winter who survive on fishing and tourism, located about 14 miles from the Tuscan coast. Giglio lies within the Santuario dei Cetacei, an area of roughly 87,500 square kilometers that in 1999 was declared by the governments of France, Italy and Monaco as a sanctuary for marine mammals such as dolphins and whales.

Carnival has insurance for damage to the vessel, with a deductible of about $30 million as well as insurance for third- party personal injury liability subject to an additional deductible of about $10 million for this incident, according to a Jan. 16 statement. The company self-insures for loss of use of the vessel.

Lost Bookings

For the year ending Nov. 30, the loss of the ship will cut earnings by about $85 million to $95 million, or 11 cents to 12 cents a share, Carnival has said. The company anticipates other costs that aren’t possible to determine at this time.

Cruise bookings haven’t dropped notably since the Concordia capsized off the coast of Italy, an industry executive said, while calling for a review of safety procedures.

There has been no significant reduction in activity so far since the Jan. 13 grounding, Christine Duffy, president and chief executive officer of the Cruise Lines International Association, said at a briefing in London yesterday.

Duffy said large cruise ships are safe and called for a review of regulations by the International Maritime Organization following the investigation into the Concordia incident. Carnival also said yesterday it supports an industry-sponsored review.

To contact the reporters on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net; Beth Jinks in New York at bjinks1@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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