Should merchant ships transiting high risk areas carry small arms for defense against pirates?

Selected crew should be trained and have guns available
Professional armed security teams should be hired
No guns on merchant ships, ever

June 18, 2009

Carnival results beat guidance

Carnival Corporation & plc (NYSE/LSE: CCL; NYSE: CUK) shares were up today after operating results beat the company's March guidance.

The cruise giant reported net income of $264 million, or $0.33 diluted EPS, on revenues of $2.9 billion for its second quarter ended May 31, 2009. Net income for the second quarter of 2008 was $390 million, or $0.49 diluted EPS, on revenues of $3.4 billion.

Chairman and CEO Micky Arison indicated that operating results were better than the March guidance due primarily to lower than expected net cruise costs and better than expected pricing on close-in bookings. This was partially offset by higher fuel prices and the impact from disruptions of Mexican cruises in response to the U.S. Centers for Disease Control (CDC) recommendations against non-essential travel to Mexico which reduced second quarter earnings by approximately $0.03 per share.

Commenting on second quarter results, Arison said, "We were pleased with the quarterly operating results in light of the current economic environment. During the quarter, our operating companies remained focused on reducing costs which is expected to continue through the remainder of the year."

A variety of energy conservation programs resulted in a six percent reduction in fuel consumption during the quarter which helped to mitigate some of the recent fuel price increases.

On a constant dollar basis net revenue yields (revenue per available lower berth day) decreased 9.8 percent for Q2 2009. Net revenue yields in current dollars decreased 16.8 percent due to unfavorable currency exchange rates. Gross revenue yields in current dollars decreased 17.3 percent.

Excluding fuel, net cruise costs per available lower berth day ("ALBD") for Q2 2009 was 1.0 percent higher on a constant dollar basis due to more vessels in dry-dock this quarter.

Including fuel, net cruise costs per ALBD decreased 9.6 percent on a constant dollar basis (decreased 15.6 percent in current dollars). Gross cruise costs per ALBD decreased 16.5 percent in current dollars.

Fuel price decreased 43 percent to $304 per metric ton for Q2 2009 from $530 per metric ton in Q2 2008 but was above the March guidance of $285 per metric ton.

"During the quarter, we also made great strides on our strategic initiatives to better position the company for the future," Arison said. Carnival continued to expand its global presence in the second quarter through the deployment of a second vessel to its emerging brand in China, and the successful delivery of three new vessels for its European brands --AIDA Cruises' 2,050-passenger AIDAluna and Costa Cruises' 2,260-passenger Costa Luminosa and 2,990-passenger Costa Pacifica.

The company also entered into $1.7 billion of financing since the first quarter, including a euro 550m loan from the European Investment Bank (EIB), to help finance Costa's newbuilding program. This is the first time the EIB has provided capital to the cruise sector.

"Since the start of the year we have completed more than $2.8 billion in financing at very favorable rates, which clearly demonstrates our ability to access capital in very difficult credit markets," Arison said.

2009 Outlook

Since March, booking volumes for the second half of 2009 are running 26 percent ahead of the prior year. Although booking levels for the remainder of the year are still behind, the higher booking volumes have enabled the company to close the gap to approximately three percentage points from last year's levels. However, ticket prices for these bookings are at substantially lower levels.

Arison noted, "As we have progressed throughout the year, booking volumes have continued to accelerate with less discounting, as consumers have come to recognize the extraordinary value proposition our cruise vacations represent."

The company continues to expect full year net revenue yields, on a constant dollar basis, to decrease 10 to 12 percent. The company now forecasts a 14 to 16 percent decline in net revenue yields on a current dollar basis for the full year 2009 compared to 2008 caused by unfavorable changes in currency exchange rates. Although the company has experienced pricing pressure on net revenue yields for its Mexican deployments in the wake of the CDC's travel advisory, it has been more than offset by improved expectations for its broader deployments worldwide.

The company continues to expect net cruise costs excluding fuel for the full year 2009 to be in line with the prior year on a constant dollar basis. However, based on current spot prices for fuel, forecasted fuel costs for the full year have increased $233 million, or $0.29 per share, since the previous guidance. This has been partially offset by favorable changes in currency exchange rates of $0.06 per share. The company's revised 2009 guidance is based on current spot prices for fuel of $416 per metric ton and currency exchange rates of $1.39 to the euro and $1.61 to sterling.

Taking all the above factors into consideration, the company now forecasts full year 2009 earnings per share to be in the range of $2.00 to $2.10, compared to its previous guidance range of $2.10 to $2.30.

"Higher forecasted fuel prices and the impact of the CDC travel advisory have reduced 2009 earnings by approximately $0.40 per share, but the midpoint of our guidance was reduced by only $0.15 per share as a result of strengthening yields in other deployments, favorable currency movements and lower costs," Arison said.

Third Quarter 2009

Third quarter constant dollar net revenue yields are expected to decline in the 14 to 16 percent range (down 19 to 21 percent on a current dollar basis). Net cruise costs excluding fuel for the third quarter are expected to be approximately 1 percent higher on a constant dollar basis. Excluding the impact of the $26 million insurance settlement received in the 2008 third quarter, net cruise costs excluding fuel are expected to be down 1 percent on a constant dollar basis.

Based on current fuel prices and currency exchange rates, the company expects earnings for the third quarter of 2009 to be in the range of $1.15 to $1.19 per share, down from $1.65 per share in 2008.

During the third quarter the company will take delivery of the first of a new class of vessel for The Yachts of Seabourn, the 450-passenger Seabourn Odyssey which will debut in Europe.

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