Carnival Cruise FY 2Q15 Earnings Call Notes

Building next generation ships

“we finalized the contract with Meyer to build four, state-of-the-art ships designed to provide an exceptional vacation experience tailored to our guest’s preferences.

This was part of our largest strategic partnership announced in March with Meyer in both Germany and Finland and with Fincantieri area in Italy to build nine ships over four year period from 2019 to 2022 and keeping with our measured capacity growth strategy.

These next generation ships will be the most efficient ever build with a total guest capacity of 6,600 through an innovative design pairing incredible cabins with even more innovative use of the ship public spaces.

Adding price per berth, in line with our existing order book, these ships will significantly enhance the return profile of our fleet. Moreover these next generation ships will pioneer a new era in the use of sustainable fuels through our green cruising designs, representing the first cruise ships to be powered FC by LNG”

A lot of macroeconomic difficulties in Europe

“As we had said before in the notes, there is a lot of macroeconomic difficulties in Europe. The economy seems to be bouncing along at the bottom”

Biggest competition is land based travel because we get 1/2 of all people who cruise

“First of all for us our business is pretty straightforward and so we consider our competition to be land based vacation. We have very differentiated product offerings versus the other cruise companies.”

“One of every two people cruise in the world, cruise with us and anything that generates interest in cruising automatically helps us and frankly it helps the other companies as well. So that is the focus of it and we think we’re seeing some success, there are some variables in any given year in any given market at any given time.”

First time cruisers up a lot especially from China

“first time cruisers are up dramatically, now there is a number of things that contribute to that beyond this year, I guess last year we were 3.4 million first time cruisers whereas the year prior we were like something like 2.7 or 2.8 or something. But there are number of things that drive that, number one we have got lot of first time cruisers elsewhere in China”

Industry capacity growing in 4-5% range

“Yes I think first of all overall the capacity growth for the industry is in the 4% to 5% range and our capacity growth along with vessels that we take out of service is going to be less than that. So we are totally focused on measured capacity growth.”

We’re still low penetrated in overall vacation market

“And we feel that with China in particular but even without China and the existing markets that that level of growth as long as we’re creating demand because we’re still relatively low penetrated as an industry as cruise industry in the overall vacation market that there is ample opportunity to create the relative scarcity to get yields off over time and to have them be up and still the greatest vacation value there is while providing the greatest vacation experience there.”