Carnival Corporation has announced it will dispose of 18 ships this fiscal year. This will generate a 12% reduction in capacity and a structurally lower cost base.
Six months after Carnival Corporation paused cruise operations across its global fleet, this past weekend, the company successfully completed its first seven day cruise on Italian brand Costa.
In an effort to emerge from the current crisis as a leaner more efficient company, Carnival Corporation has announced it plans to accelerate the exit of 18 less efficient ships from its fleet.
A more efficient and younger fleet
Carnival Corporation – the company behind Carnival Cruise Line, Princess Cruises, Holland America Line, Seabourn, P&O Cruises (Australia), Costa Cruises, AIDA Cruises, P&O Cruises (UK) and Cunard – expects future capacity to be moderated by the phased re-entry of its ships, the removal of capacity from its fleet and delays in new ship deliveries.
Since the pause in guest operations, Carnival Corporation has accelerated the removal of ships in fiscal 2020 which were previously expected to be sold over the ensuing years. At this moment the company expects to dispose of 18 ships, eight of which have already left the fleet.
In total, the 18 ships represent approximately 12 percent of pre-pause capacity and only three percent of operating income in 2019.
The company estimates that the sale of less efficient ships will result in future operating expense efficiencies of approximately two percent per available lower berth day (“ALBD”) and a reduction in fuel consumption of approximately one percent per ALBD.
Carnival Cruise Line
In line with Carnival Corporation’s plan to accelerate the removal of less efficient ships from its fleet, Carnival Cruise Line has announced the sale of Carnival Fascination and Carnival Imagination. Both ships had previously been put on long-term lay-up status.
The sale of Carnival Fascination, launched in 1994, and Carnival Imagination, introduced in 1995, follows the sale of Carnival Fantasy and Carnival Inspiration in July.
Upon return to operations, Carnival will still operate four upgraded Fantasy-class ships – Carnival Ecstasy, Carnival Sensation, Carnival Elation and Carnival Paradise – which feature additional balcony staterooms as well as enhanced dining and entertainment options that are part of the line’s Fun Ship 2.0 enhancement program.
Related to its ongoing ship enhancement program and the current pause in cruise operations, Carnival also confirmed that it is delaying the return to guest operations for four ships until after scheduled dry dock enhancements are completed in the first half of 2021.
The four impacted ships and resulting cancelled itineraries include:
- Carnival Magic itineraries operating from Miami will be cancelled until Mar. 13, 2021
- Carnival Paradise itineraries operating from Tampa will be cancelled until Mar. 19, 2021
- Carnival Valor itineraries operating from New Orleans will be cancelled until Apr. 29, 2021 (including the transatlantic cruise from New Orleans on Jan. 25, 2021 and the return from Barcelona on Feb. 26, 2021)
- Carnival Spirit itineraries operating from Brisbane will be cancelled through May 16, 2021, with the first sailing being the Singapore to Brisbane voyage embarking on June 12, 2021.
Carnival Corporation also expects only two of the four ships originally scheduled for delivery in 2020, following the start of the pause, to be delivered prior to the end of 2020. Furthermore the company expects only five of the nine ships originally scheduled for delivery in fiscal 2020 and 2021 to be delivered prior to the end of fiscal year 2021. Carnival currently also only expects 9 cruise ships and 2 smaller expedition ships, of the 13 ships originally scheduled for delivery prior to the end of fiscal year 2022, to be delivered by then.
Based on the actions taken to date and the scheduled newbuild deliveries through 2022, the company’s fleet will be more efficient with a roughly 13 percent larger average berth size and an average age of 12 years in 2022 versus 13 years, in each case as compared to 2019.
With a stretched out newbuild order book and a pause on new ship orders, Carnival will have no deliveries in 2024 and only one delivery in 2025, allowing the company to pay down debt and create increasing value for shareholders.