Saturday, March 28, 2009

Carnival Corp. To Cut Ships From Alaska Due To Tax

Carnival Corp. Chairman Micky Arison said his cruise company doesn't like Alaska's $50 head tax and plans to pull ships from the state's ports, according to a recent report. Advanced bookings and ticket prices for Alaska cruises are down significantly, the company said during an earnings conference call reporting first-quarter results. Lower fuel prices, cost-cutting and other one-time benefits helped cruise operator Carnival Corp. raise its profit 10 percent in its fiscal first quarter, far exceeding Wall Street's expectations, the company reported March 24. Competitor Royal Caribbean is also reducing capacity in 2010, and Arison said his company also will cut capacity in the same year, and may make further cuts in 2011. Carnival Corp. is leader in Alaska, with 15 ships this year and a notable land-based operation for cruise tours that includes hotels, trains and buses. He did not give details on what would be cut, according to the report. Arison said it is evident that since the initiative that passed in 2006, tourism growth to Alaska stopped immediately. Arison added that the economic impact will also be felt in western Canada, Vancouver in particular. Carnival has already announced the Carnival Spirit will be based in Seattle in 2010, rather than in Whittier and Vancouver, where it is home-ported this year. Overall, Carnival has maintained strong booking volumes by slashing cruise prices. The Miami-based company lowered its forecast for fiscal 2009 earnings, however, in part because prices have remained weak for cruises booked for the second half of this year, according to reporters."Given the significant slowdown in the global economy, I think it is fair to say that this has been one of the most challenging booking environments we have ever experienced," said Vice Chairman and Chief Operating Officer Howard Frank during a conference call with investors. For the quarter that ended Feb. 28, earnings grew to $260 million, or 33 cents per share. That's up from $236 million, or 30 cents per share, a year ago. Carnival said its revenue fell 9 percent to $2.86 billion, from $3.15 billion in the first fiscal quarter of 2008. The cruise line has achieved a 10 percent year-over-year increase in bookings but was forced to slash prices to "levels not seen in recent years," Frank said. "It was strong volumes against very lousy rates," Arison added. Bookings for the most expensive cruises, particularly those to remote regions of Alaska, have fallen further than less expensive Caribbean jaunts. Carnival said budget-conscious vacationers also cut spending on gambling, shore excursions, shopping and photos during their cruises, although they continued to spend on spas and drinks. "As expected, 2009 will be a challenging year for the industry, but it is encouraging that consumers are willing to spend money on attractively priced vacations," said Susquehanna Financial Group's Robert LaFleur. At the end of the first quarter, Carnival reported $3.7 billion of liquidity and said it will not need new financing for 2009. The company noted it will continue to look for opportunities to improve its liquidity. Carnival shares slipped 48 cents, or 2.1 percent, to $22.83 in trading March 24, after gaining as much as 7 percent early in the session. The stock has traded between $14.85 and $43.54 during the past 52 weeks.

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