Is this finally the sandbagged guidance?



"Our base of business for 2012 is solid and booking volumes have gradually improved, which we believe is a testament to consumer confidence in the cruise industry's long-standing record of exceptional safety. Despite the slowdown in bookings, all of our North American brands are still expecting a modest yield improvement in 2012 while our European brands, excluding Costa, are expecting to have slightly lower yields due in part to the slowing European economies. Overall, based on current pricing trends, any consumers holding out for deeper than normal discounts may be disappointed." 


Mickey Arison - CEO




  • 1Q 
    • NA brands grew 4%; EAA brands grew 3%
    • Net ticket yield: 2.6%; Onboard yield: 3.7%
      • NA yield: 5.0%, driven by Caribbean; Caribbean represented 2/3 of NA capacity
      • Euro yield: flat
      • EAA onboard yield lower
    • 1/2 of the increase in NCC driven by Costa Concordia ("CC") and Costa Allegra ("CA")
  • 2012 NCC guidance unchanged from previous guidance
  • As time passes they are confident that their business will improve. In continental Europe, the impact of the accident has had a larger impact
  • Recently they have seen an improvement in European bookings
  • Costa will resume marketing in the next coming weeks
  • Rest of 2012 guidance
    • 2012 net yield (ex Costa) down 1.5% (in-line with 2011)
    • NA: slightly lower occupancy, higher prices
    • EAA: lower occupancy,higher prices
    • 7 wks post CC accident: 
      • Fleetwide: lower mid-to high single digits bookings at lower prices
      • NA: mid single digit decline in bookings at slightly lower prices; weakest itineraries had been European-based. Higher airfare affected NA European cruises
      • EAA (ex Costa): bookings lower in mid-teens range at lower prices. Spain/Germany hurt most; UK holding up
  • Costa brand
    • Relatively few cancellations since the incident
    • Future cruises were rebooked on other Costa cruises
    • Last week March 4: bookings were down 50%; up from 80-90% decline in bookings following accident
    • Estimate up to a year before bookings become normal
    • Holding pricing and sacrificing occupancy to maintain 'order in the markets'
    • Forecast loss of $100MM in 2012
  • 2Q guidance
    • Capacity: +2.7% (+2.9% NA, +2.2% EAA)
    • Fleetwide: higher pricing, flat occupancy 
    • NA: 56% of capacity in the Caribbean
      • Caribbean pricing nicely higher, same occupancy
      • All other itineraries: pricing higher, slightly lower occupancy
    • EAA (ex Costa): pricing slightly lower, lower occupancy
    • All other itineraries: lower pricing, lower occupancy
  • 3Q guidance
    • Capacity: +2.9% (+3.4% NA, +2.2% EAA)
    • Fleetwide: higher pricing, lower occupancy
    • NA capacity: 38% Caribbean (slightly higher); 34% Alaska (same YoY); 25% Europe (same YoY
      • Caribbean pricing: higher YoY; Alaska/Europe cruises flat YoY
    • EA capacity: 85% Europe (up from 82%); 
      • EAA pricing: higher, lower occupancy
  • 4Q guidance:
    • Capacity: +2.9% (+3.7% NA, +1.7% EAA)
    • Fleetwide pricing higher at lower occupancy
    • NA: pricing flat, lower occupancy
    • NA capacity: 43% Caribbean (slightly higher YoY); 13% Europe (same YoY);
      • Caribbean pricing higher, higher occupancy
      • Europe pricing higher, lower occupancy
      • All other itineraries: higher pricing, lower occupancy 
    • EAA: nicely higher pricing, lower occupancy 



  • Marketing/discounting will not be greater than last year
  • Close-in patterns are good
  • Biggest obstacle to bookings is that people are expecting lower prices, but that's not going to happen. Once people realize that, bookings should pick up
  • Really feel like the Costa impact will be short term in nature – just need to take the pain of lower occupancy and hold pricing
  • NA: Carnival outperforming premium brands
    • First timers: Carnival brand not having problems; other brands doing fine except with European cruises.
  • Ibero charge: 
    • They had projections of growing the brand over time. In reality they have reduced capacity by moving ships out of the market. And so when they pulled capacity out of the model it required a write down. They still believe in the Spanish market but Ibero is still struggling
    • It will take longer for the Spanish economy to return to strength so it became hard to justify growth in that market.
  • Why are they confident that the Costa impact will take a year to come back vs. longer or shorter?
    • That’s what the research has indicated using other examples of companies in crisis
    • Also the signs of positive trending that they are already seeing even without marketing. 
    • Will take a year or 2 to return to profitability
    • The capacity will also have 3 less ships than previously predicted for 2013
  • Markets with less Costa presence markets (ex. Germany, France, Italy, etc) showing some comeback 
  • Germany is showing signs of recovery while Italy is still very challenged
  • Overcapacity?
    • No. Growing at much slower pace (2-3 ships)
    • Allegra is for sale
    • Low single-digit global capacity growth
  • Too early to forecast 2013 but 'future is bright'
  • UK/Germany market weren't impacted by the Costa incident
  • AIDA brand: had taken down revenue yields due to CC;
    • Last week, bookings were higher YoY for the first time this year
  • Allegra: do not intend to put back into service
  • 2012 NCC flat guidance: advertising down in Q1, inflation is lower than previously expected
  • Higher safety regulations costs not expected in 2013
  • April/May easy comparisons
  • 300 itinerary changes made last year (mostly were Costa)
  • CC full removal date? 
    • Salvage process to begin after summer 
    • Duration: 10-12 months 
  • Onboard spending: do not expect a significant change; ex Costa, 1.5% increase for 2012 guidance; all major categories up including casino 1Q
  • Alaska: 'pretty consistent and solid but not spectacular'. Strength in Alaska may be at the expense of a weaker Europe
  • Costa improvement last 7 weeks: mainly due to occupancy gains
  • No need to obtain additional financing to fund capex
  • Dividend: long-term target (30-40%) sustainable
  • 2012/2013 Capex guidance: $2.6BN, $1.9BN (including $750MM other capex for existing fleet)



  • 1Q2012 results: 
    • EPS: loss of $0.18 (consensus $-0.06)
    • Constant $ net revenue yields: +2.9% (guidance of +2%)
    • Gross revenue yields (in constant $): +1%
    • Constant dollar net cruise costs: +6.4% (guidance of +4%)
    • Fuel: +30% YoY to $707/metric ton 
  • 2Q2012 guidance
    • Current dollar net revenue yields: -4% to -5%
    • Constant dollar net revenue yields: -2.5% to 3.5% 
    • Current dollar net cruise costs (ex. fuel): -2% to -3%
    • Constant dollar net cruise costs (ex. fuel): -1% to 0%
    • Fuel: $772/metric ton; 863k metric tons
    • EPS: $0.05-0.09 (consensus: $0.18)
  • FY2012 guidance:
    • Diluted EPS:$1.40-$1.70 (previous guidance: $2.07 to $2.34; consensus: $2.06)
    • Constant dollar net revenue yields: -2.0% to -4.0% 
    • Constant dollar net cruise costs (ex. fuel): -0.5% to 0.5%
    • Fuel: $766/metric ton
    • Fuel consumption: 3,382k
  • The company recognized $21 million of net unrealized gains on its portfolio of fuel derivatives during 1Q 2012.
  • 2012 outlook
    • "At this time, cumulative advance bookings, excluding Costa, for the remainder of 2012 are approximately 3 occupancy points behind the prior year with prices slightly higher than last year's levels (constant dollars). Since the date of the Costa Concordia incident in mid-January through February 26, fleetwide booking volumes, excluding Costa, have shown improving trends but are still running high single digits behind the prior year at slightly lower prices. There has been less impact on the company's North American brands than European brands."
  • 2012 Cash flow: $3.3 BN

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