Carnival Sees Recovery at Costa, Minor Impact in Middle East
By Theresa Norton Masek
September 25, 2012 12:19 PM
Carnival Corp. & plc executives continue to see improvement at its Italian line Costa Cruises, which saw demand plummet after the Jan. 13 Costa Concordia disaster. “Costa’s occupancies have caught up with last year’s but at lower prices,” Carnival COO Howard Frank said in a conference call with financial analysts about third-quarter results.
Fourth-quarter 2012 occupancy is flat, he explained, but an improvement over the 6 percent decline in the second and third quarters. A turnaround in both price and occupancy is expected in the second and third quarters of 2013. Overall, a loss of about $100 million is projected for the Costa brand this year. “We are expecting solid profitability for Costa in 2013,” Frank said.
Carnival Chairman and CEO Micky Arison noted that Costa will operate with three fewer ships next year, because the Costa Marina and Allegra were sold and the Concordia remains capsized near the Italian island of Giglio.
Also, one analyst asked if Carnival Cruise Lines had any negative reaction to the recently announced change in the commission tiers. “There was no change in the commission structure,” Arison said. “Carnival Cruise Lines is playing some catch-up on override targets. Virtually all other brands and most of our competitive brands adjust override targets, based on capacity increases, every year or every other year. Carnival Cruise Lines hadn’t done it in 10 years. So basically it was a catch-up based on capacity, which increased 50 percent in that time, and also simplifying the override goals, that’s all it was.”
The discussion also turned to the impact of continued unrest in the Middle East. Arison said the lines have changed some port calls but that it “hasn’t been much of an issue to date.” Most of the calls in those regions are over for this year, although the 927-passenger Costa Voyager is operating in the Red Sea this winter. “That could be an issue if this continues much longer,” he said.
For 2013, Carnival has about 6 percent of its total capacity in the Mediterranean in the first quarter, 17 percent in the second quarter, 25 percent in the third quarter, 28 percent in the fourth quarter and 19 percent overall for the year. The capacity is generally half in the Western Med and half in the Eastern, where the political unrest tends to affect cruise itineraries.