Carnival Misadventures Mar Cruise Operator’s Recovery From Concordia Wreck
Several new incidents involving vessels of Carnival Corp. (CCL), owner of the Costa Concordia passenger liner that ran aground off Italy in January, are clouding the cruise operator’s recovery as peak booking season enters its final leg.
In the past week, 22 passengers of the Carnival Splendor were robbed during a land excursion in Puerto Vallarta, Mexico, and two of the company’s British ships were turned away in Argentina after visiting the Falkland Islands, as part of a long-running dispute between the South American country and the U.K.
Another of Miami-based Carnival’s Italian liners, the Costa Allegra, suffered an onboard fire Feb. 27 and is being towed to the Seychelles, where it is expected to dock tomorrow. Today, the U.S. House of Representatives begins hearings on cruise ship safety.
Carnival, the world’s biggest cruise operator, has dropped 12 percent since Jan. 13, when the Costa Concordia struck rocks and partially sank, killing at least 25 people. The incident led Carnival to reduce marketing in the January to March period during which one-third of all voyages are arranged.
The publicity is “not something you need during peak booking season,” said Rachael Rothman, an analyst with Susquehanna Financial Corp. in New York. She changed her rating on Carnival shares to “neutral” from “positive” on Jan. 17 due to the potential hit to cruise bookings and prices this year. “Our issue was that you couldn’t ascertain a fair value if you didn’t know what demand would be.”
Mexico Excursion Suspended
Carnival suspended the Mexico excursion and has apologized to guests, according to a statement from Vance Gulliksen, a company spokesman.
The company’s Genoa-based Costa Crociere unit has been supplying passengers on the powerless Allegra with flashlights and fresh bread and “doing everything possible to make the situation onboard more comfortable,” according to a statement from Buck Banks, an outside spokesman for Carnival. The situation on the ship is “regular,” Costa Crociere said in an e-mailed statement today. The company has booked 600 airline seats and 400 hotel rooms for possible accommodation needs, it said.
Passengers have gathered on outside decks as “a slight breeze helps make the situation more comfortable,” Costa Crociere said yesterday. The ship is being towed to the Seychelles by a French fishing vessel and is expected to arrive tomorrow at 9 a.m. local time in Mahe, an island in the Seychelles.
Prior to the Concordia crash, Carnival had said annual earnings could rise as much as 17 percent to $2.85 a share in 2012. About $71 million in costs related to the accident, as well fuel and currency adjustments, may reduce results by as much as 51 cents a share, the company said in a Jan. 30 Securities and Exchange Commission filing.
Carnival’s namesake brand and its other lines, including Princess and P&O Cruises, operate separately, Gulliksen said in an e-mail. The Concordia shipwreck has affected those lines as well as Carnival’s competitors. Excluding Costa Cruises, fleetwide bookings declined in the mid-teens in percentage terms through Jan. 25, the most recent period for which information was available.
“The cruise industry has an outstanding historical safety record and we are fully confident in the long-term fundamentals of our business,” Gulliksen said.
Bookings at rival Royal Caribbean Cruises Ltd. (RCL) fell by the low-to-mid teens afterward in percentage terms, the Miami-based company said in a Feb. 2 statement. Before the Concordia accident, bookings were running 5 percent ahead of 2011 levels. The world’s cruise liner market is “beginning to see some ticket pricing declines,” UBS analyst Robin M. Farley wrote in a note dated yesterday.
“We’re in uncharted territory and our traditional models simply don’t cover events like this,” Royal Caribbean Chief Executive Richard Fain said on a conference call that day.
Carnival added 0.9 percent to $30.27 at 10:36 a.m. New York trading and has declined 7.3 percent this year, compared with a 9.4 percent gain for the S&P 500 Index. Royal Caribbean rose 2.9 percent to $28.88 and has gained 17 percent this year.
The Costa Concordia remains half submerged and on its side. Divers searching the wreckage found eight more bodies on Feb. 22, according to the Italian Civil Protection Agency. Seven people are still missing, the agency said.
A total of nine Costa Crociere employees are under probe in connection with the Concordia crash. The cruise line is “absolutely certain” its staff acted correctly, it said in an e-mailed statement on Feb. 22.
Italian consumer associations have started advising clients on damage claims. Codacons, an Italian consumer group that filed a suit against Carnival in Miami on Jan. 27 with New York law firm Proner and Proner, said on its website yesterday that damages relating to Costa Allegra passengers will have to be “adequately paid back.”
Italy is sending Coast Guard experts to the Seychelles to probe the Costa Allegra accident along with local authorities and assist passengers, according to a government spokeswoman.
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