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Cost initiatives and guidance (although timing did help to some extent) for 2014 are encouraging.  As expected, the demand environment remains challenging with 2014 yield guidance 'slightly down', which was below Street expectations.


  • 4Q 
    • Better than expected ticket/onboard (mainly occurred at Carnival Cruise lines: 5 cent impact, lower fuel, favorable FX)
      • Net ticket yields declined due NA brands (-6%, lower yields at premium brands and Carnival)
        • EAA brands: +3% 
      • Net onboard and other
        • EAA brands +2% (increase at Costa offset by declines in other Euro brands), NA brands flat 
      • NCC- higher advertising expense due to timing between 4Q and 1Q 2014
    • Capacity increased 3%
  • Has seen significant recovery in brand perception of Carnival brand from their surveys
  • Costa brand surveys were also very encouraging.  EAA brands (ex Costa) was weak and EAA yields for FY 2013 was -2%
  • Large capacity increase in Caribbean starting in F2Q; still facing ongoing challenging economic environment in Southern Europe
  • For 1H 2014: fleetwide volumes during last 13 weeks running well ahead of prior outpacing capacity at prices that are lower. Despite the recent high volumes, the cumulative bookings for the first half on a fleetwide basis are still behind at lower prices.
  • Expecting lower yields in 1H 2014. North American brands impacted by challenging comps 
  • EAA brands face ongoing economic environment challenges in southern Europe, the loss of the attractive red sea program, and close in bookings curve that is impacting first half.
  • 3Q 2014
    • Fleetwide occupancy is similar to last year while pricing is flat.  Still expect positive yields in 3Q
  • Booking patterns:
    • Caribbean:  behind both on price and occupancy; represents 60% capacity of 1H 2014 and +40% in 3Q of NA brands
    • Alaska: behind on price but well ahead on occu
      • Booking volumes solid
    • European progam for NA brands showing signs of strength, particularly in 3Q where pricing/occupancy up nicely
    • EAA:  Euro program represent 60% of EA capacity; sees sequential improvement in YoY pricing and in each quarter from 1Q to 3Q.  Booking volumes for Euro programs have been nicely higher as well.
  • 2014 cost forecast:  cost per ALBD will be up only slightly
    • Timing of expenses factored into the reduced cost guidance from September's
    • Found ways to do some of vessel enhancement and service thereby reducing drydock days
  • There will be a more efficient Seaborne ship to replace three smaller original ships in 2016
  • Experienced faster recovery for Carnival brand than originally anticipated
  • Cautious on whether current pace of recovery is sustainable

Q & A

  • Some Carnival ships will sail with empty cabins in back half of year but just a couple of points of occu.
  • Costa up double digits in 4Q (we saw this in our pricing survey); other brands down; overall EAA yields up 2%
  • Costa: 2014 pricing is recovering but it is early
  • Cost mgmt initiatives: port and inventory mgmt; less brochures printed-save $$$, will carry forward into 2014
  • 1H 2014:  good bookings at lower prices; however, they remain at lower end or slightly below (couple of % points) historical bookings curve 
  • Costa/Carnival recovery period: 2-3 years 
    • Costa recovery impeded by weak Euro economy; hence, Costa recovery may take longer than the 2-3 years
  • Advertising spend:  invested heavily in Carnival and investing in other brands. Will continue in 1Q. For FY 2014, advertising spend substantially ahead of 2012 and higher than 2013.
  • Capex guidance:  2014 ($2.9 bn), 2015 ($2.8 bn), 2016 ($2.9 bn)
  • 2014 Asia: 5% capacity; yields in Asia a little bit below corporate average. May expand in that region in the future
    • Have sourced 250k passengers. Will source 500k passengers in 2014
  • Long-term 2-3% fuel consumption reduction each year.  4% goal for 2014
  • 1H 2014:  Both quarters need catching up in bookings.
  • 2014 capacity growth:  1.8% (1Q), 4.9% (2Q), 2.5% (3Q), 4.5% (4Q); FY (2.8%)
  • Say lay off other vessels but that will be evaluated on an ongoing basis
  • 2015:  will continue focus on costs
  • Long-term:  expect NCC ex fuel (flat to half of inflation)
  • Every % point in yield equates to 15 cents on EPS
  • 40 cent EPS band - prudent before Wave season
  • 2014 maintenance capex:  $1.4 bn (2014, 2015), $1.0 bn (2016)
  • Costa
    • -15% in 2012
    • +4% in 2013
    • expect continued recovery in 2014
  • Premium brands (Holland/Princess)
    • Europe consumer base weaker
    • Significant supply increase in premium segment
  • Fair to say that more than majority of $265MM higher EICA costs will disappear.  Will discuss in detail in 10K.
  • Overall web bookings higher
  • Marketing campaigns have been helping Carnival
  • 2014 onboard yield: up a little over 1%