Carnival cruises

Carnival lowers financial outlook after Triumph, ‘Fun Ship’ ship issues

 

hsampson@MiamiHerald.com

The world’s largest cruise line continued to make waves Friday as more of its “Fun Ships” reported technical problems that drew widespread attention.

For those keeping track — and at this point, plenty of people are — the tally of troubled Carnival Cruise Lines ships has reached four in just a few weeks. On Friday, the juggling act for the Miami-based cruise line included flying thousands of passengers home from the moored Carnival Dream in St. Maarten while monitoring the progress of the Legend, crawling back to port in Tampa with propulsion problems.

Carnival also said that its New Orleans-based Elation had experienced a “minor issue” with one of two steering mechanisms on March 9.

“The recent occurrences are most unfortunate and very concerning to us,” Carnival spokesman Vance Gulliksen said in an email.

“The cause of each of these incidents are unrelated to each other. We are currently conducting an in-depth review to understand what happened and apply any lessons that can be learned. That said, we would like to point out that Carnival carries some 4.5 million guests and operates thousands of cruises each year without incident.”

On the heels of the much-publicized Carnival Triumph fire and “floating petri dish” debacle in February, the newest troubles created yet another unwelcome batch of headlines.

“How long does it take before customers say they’re not doing this anymore?” said Christopher Muller, a professor in the School of Hospitality at Boston University. “I think you’re going to see it unraveling. This is death by 1,000 cuts. This is something that management can’t just say, ‘It’s OK and it’s rosy and everybody loves our cruise lines.’ ”

While executives with parent company Carnival Corp. did mention millions of happy customers in a hastily scheduled earnings call Friday morning, they also detailed the toll they expect recent events to take.

The company decreased its full-year earnings forecast significantly, blaming lower than expected revenues because of continued weakness in Europe, pricing promotions for Carnival Cruise Lines and lower onboard spending, as well as higher costs because of Triumph repairs, and upgrades that will be needed to address potential problems fleetwide.

After reporting a $1.3 billion profit for all of fiscal 2012, Carnival Corp. said it earned $37 million in the quarter that ended Feb. 28. That compares with a loss of $139 million a year earlier.

With the cloudier outlook, Carnival’s share price dropped more than 2 percent, closing Friday at $34.95.

Finding some silver lining in all the gloom, Carnival Corp. CEO and Chairman Micky Arison said that Carnival Cruise Lines booking levels for the week through Wednesday were up 25 percent compared to a year ago.

“That was in response to a promotion, but we’re not anticipating that the promotions will be much deeper than they were last year,” he said. A year ago, the company was still dealing with the aftermath of the deadly shipwreck of the Costa Concordia in Italy. Carnival Corp. owns the Italian Costa Cruises brand.

Arison said there was an initial drop in bookings after the Carnival Triumph lost power following an engine room fire in the Gulf of Mexico. Between Feb. 10 and 14, as the ship was towed to Mobile, Ala., passengers ate cold food and coped with a lack of hot water and working toilets.

“We had a double-digit decline in bookings,” Arison said during the call with analysts. “It wasn’t huge and it didn’t last very long.”

Carnival Corp. Vice Chairman and Chief Operating Officer Howard Frank said that in the past 10 years, the number of issues the company has suffered has been in line with the rest of the industry. The recent stretch, he said, has been an aberration.

“Sadly, we’ve just been hit by a run here that has been very unfortunate and hopefully we’ll get some reprieve from this going forward,” Frank said.

During the call, analysts peppered executives with questions about past problems, maintenance spending and the impact of recent events.

Later, Morningstar equity analyst Jaime Katz said in an interview that she thinks Carnival needs to tweak its advertising to get the safety message across.

While Katz said the recent spate of incidents “shouldn’t have happened,” she said Carnival seems to be reacting appropriately by checking all of its ships.

“Their fleet is much older than it was 10-15 years ago,” she said. “They require a little bit more maintenance to keep things up. I would guess that they were not negligent of it, but maybe it’s a little more difficult to stay on top of that and ascertain whether or not everything is at it should be.”

Carnival Cruise Lines CEO Gerry Cahill said earlier this week that the company is investigating its entire fleet to identify and correct problems similar to the Triumph, which lost power because cabling that connected the two engine rooms was damaged by the fire. The company said it expected roughly five cents a share or $40 million in costs related to upgrading existing ships with fixes related to that review, but executives stressed that number is preliminary.

Bob Peltz, a partner at Leesfield & Partners who represents passengers and crew members in lawsuits against cruise lines, said Carnival needs to show that it’s taking the issues seriously — not just talk about it.

“It has to be more than lip service,” said Peltz, chairman of the cruise line committee of the National Maritime Law Association. “I would be a little concerned. Each time there’s a problem, Carnival comes out and says ‘we’re going to great lengths to study it and learn from it.’ ”

But Miami cruise expert Stewart Chiron, CEO of CruiseGuy.com, said Carnival would not sail a ship that wasn’t seaworthy.

“A really bad decision can be devastating, not only for the cruise line, but the industry,” he said.

Chiron also pointed out that none of the recent problems have caused any injury to passengers. In the case of the Carnival Dream, passengers are being flown from St. Maarten on charter or scheduled flights to Orlando or their final destination all weekend.

“We’re just dealing with simple mechanical issues,” Chiron said. “If there was an issue where passenger safety was involved, I’d be much more concerned.”

This report was supplemented with information from The Associated Press. Miami Herald business editor Jane Wooldridge contributed to this report.

Read more Top Stories stories from the Miami Herald

Miami Herald

Join the
Discussion

The Miami Herald is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

The Miami Herald uses Facebook's commenting system. You need to log in with a Facebook account in order to comment. If you have questions about commenting with your Facebook account, click here.

Have a news tip? You can send it anonymously. Click here to send us your tip - or - consider joining the Public Insight Network and become a source for The Miami Herald and el Nuevo Herald.

Hide Comments

This affects comments on all stories.

Cancel OK

  • Marketplace

Today's Circulars

  • Quick Job Search

Enter Keyword(s) Enter City Select a State Select a Category