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November 16, 2010

Splendor voyage cancelations will hit Carnival earnings

Carnival Corporation expects fourth quarter earning to take as a result of voyage distruptions following last week's engine room fire on Carnival Splendor.

Carnival Cruise Lines has canceled Splendor sailings through the departure of January 9, 2011, to allow time for repairs. The cruise ship is scheduled to re-enter service on January 16, 2011.

Guests who were scheduled to sail on the canceled voyages will receive a full refund of their cruise fare and air transportation costs, along with a 25 percent discount on a future cruise. Carnival is contacting travel agents and guests on the affected sailings and providing assistance in finding alternate cruises. Travel agent commissions on the cancelled sailings will be protected.

If all that sounds expensive for the cruise line -- it is. Parent Carnival Corporation & plc said today that it estimates that the total impact from voyage disruptions and related repair costs will result in an approximate $0.07 reduction in the company's 2010 fourth quarter earnings per share. To put that in perspective, the company's last quarterly dividend, announced last month, was $0.10 per share.

Carnival Splendor was towed to San Diego following the fire which occurred off the Mexican coast on November 8. Carnival says that "a team from the U.S. Coast Guard, NTSB and flag authorities, along with Carnival's engineers and technicians, is currently on board investigating the cause of the fire. Carnival personnel are being assisted by representatives of the shipyard that built the vessel [Fincantieri] and other manufacturers of engine room components in assessing damage and necessary repairs."

According to the NTSB:

The investigation of the fire that occurred in an engine room of the Carnival Splendor on November 8 is being investigated by Panama, the country under which the vessel was flagged.

Since the majority of passengers aboard the Carnival Splendor were citizens of the United States, the U.S. Coast Guard requested to join the investigation, and Panama consented.

The Coast Guard requested that the National Transportation Safety Board provide them with technical assistance. The NTSB and Coast Guard frequently work together on marine accident investigations, and the NTSB responded by providing two experts to assist the Coast Guard in their involvement in Panama's investigation.

All information on the progress of the investigation will be released by the Panama Maritime Authority.

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