Carnival Corporation: On Course for Recovery

Carnival Corporation: On Course for Recovery

Cash from operations is turning positive and the company has turned the corner of its recovery trajectory, according to Carnival Corporation CEO Arnold Donald, who spoke on today’s second-quarter business update call with analysts.

“We are aggressively ramping up to full operations, driving higher occupancy on our ships, and focused on increasing revenues,” Donald said.

Bookings are expected to continue to improve during the rest of the year and reach historical levels in 2023, according to David Bernstein, executive vice president and CFO. He also said that there is the potential that EBITDA will be greater in 2023 than it was in 2019. The wild card is the cost of fuel. The target for 2023 is to carry 14 million guests.

Contributing to the recovery will also be fleet optimisation, reallocating ships to the strongest markets, such as introducing the new Costa by Carnival brand in North America.

Donald noted that European markets are in many ways more challenging than North America from a consumer standpoint as it relates to travel and added that moving Costa ships was also about right-sizing the Italian brand. A big chunk of Costa’s capacity has been in China, he said, and with that market closed, it made more sense to expand the strong North American market than to put all that capacity in Europe.

Bernstein added that North America and Europe are headed in the right direction, but that the company’s North American brands are doing better than their European counterparts.

As for other headwinds, such as the impact of the recession, Donald said the industry is resilient, offering a strong value proposition and that people feel entitled to their vacations. In addition, there is a tailwind of pent-up demand, he added, and the relaxing of health protocols is also expected to attract more people who may have been on the sidelines.

As for any other allocation moves, Donald said: “We are very pleased with our portfolio of brands but will always have an open mind to do what makes sense for our shareholders.”

He also said that since 2019, the company has shed 23 less efficient ships while adding nine larger, more efficient ships, including more premium-priced staterooms, while reducing operating expenses, including fuel, on a per available guest day basis.