When Carnival ordered 3 ships for AIDA/Costa back in August, there was a provision for a second ship for Costa. Rumor has it that Carnival my be close to picking up that option.

Here’s what I wrote back in August:

[The deal] calls for one ship for Italian/European brand Costa Crociere. The unnamed vessel will come in at 132,500grt. making her the largest for Costa and 3rd largest in Carnival Corp (QM2 and Royal Princess are larger). Pax numbers are, 3,700 lower berths, 4,928 total guests. Delivery of the USD$794 million vessel will be 2014. She will be constructed in the [Fincanteri] yard.

If true, it signifies that the Costa brand is not going anywhere. After the Concordia disaster, it seemed like everyone in the media was calling for Carnival plc. to dissolve the brand.

More photos below:

Carnival Breeze conducts sea trials as it gets ready for its debut June 3 in Venice.
 

The Carnival Breeze which is currently in the final stages of construction at the Fincantieri shipyard in Monfalcone, Italy, had a full contingent of officers, technicians, and engineers on board thoroughly testing the ship’s sophisticated navigation, technical and mechanical systems.
 

Carnival Breeze will offer a variety of innovations, including the line’s first Thrill Theater.
 

Following its inaugural 12-day cruise that departs Venice June 3 and arrives in Barcelona June 15, Carnival Breeze will operate a summer schedule of Mediterranean voyages from Barcelona through October 25.
 

• Bonsai Sushi – Carnival’s first full-service sushi restaurant, Bonsai Sushi offers a wide variety of Asian-inspired delicacies with a contemporary decor featuring artwork by world-renowned graffiti artist Erni Vales, colorful koi kites flown during impromptu celebrations, and, of course, several Bonsai trees. Located along Promenade Deck, Bonsai Sushi includes a number of varieties of sushi, sashimi, and rolls along with bento boxes and the venue’s own interpretation of a sushi boat – in this case, a sushi “ship” – with prices ranging from $1 for appetizer-sized portions to $15 for a sushi ship for two.
• Fat Jimmy’s C-Side BBQ – Reminiscent of a backyard barbecue, this complimentary open-air dining venue located on Promenade Deck offers a mouth-watering array of grilled favorites, including barbecued chicken breast, kielbasa, Italian sausage, and Fat Jimmy’s signature item, pulled pork sandwiches, along with traditional sides like baked beans, potato salad, coleslaw and mini-corn muffins.
• Guy’s Burger Joint – fresh-made burgers, hand-cut fries and innovative toppings created in partnership with Food Network personality Guy Fieri.
• BlueIguana Cantina – offering authentic tacos and burritos that can be personalized by diners at an extensive salsa and toppings bar.
• The Punchliner Comedy Brunch presented by George Lopez – featuring hilarious comedic performances and an extensive menu of brunch-time favorites.
• “The Comfort Kitchen” – new venue located within Lido Marketplace offering American-style “comfort food.”
• Serenity – salads, sandwiches, wraps and other light fare available at the ship’s exclusive adults-only retreat.
• The Taste Bar – complimentary bite-size offerings inspired by popular Carnival dining venues, along with a signature cocktail tied to that eatery’s particular theme available for purchase.
• Sea Dogs – a hot dog-shaped cart within the SportSquare outdoor recreation area offering all-beef franks and traditional toppings (debuts on Carnival Breeze in November).

It’s little surprise that the company has failed to recapture pre-recession highs, as its key metrics look worse than they did before the crash. Free cash flow, again erratic over the five-year period, is up just more than 4% from 2007, although Carnival spent a lot of time in 2009 and 2010 cash-flow negative. Royal Caribbean, on the other hand, grew revenue at a faster rate and barely managed to eke out positive profit growth after an atrocious 2010.

Since the tragic disaster of the Costa Concordia in January and the subsequent fire on the Allegra, the key factor hasn’t been what Carnival was going to do to get customers back on its cruise ships, but what could be done to improve the image of Carnival CEO Micky Arison.

My primary beef with Mr. Arison was his delayed response (more than one week, according to The Wall Street Journal) to the Costa Concordia tragedy and his lack of response just six weeks later regarding the fire on the Costa Allegra. He seemed concerned more with the Miami Heat, which he owns, than Carnival Cruise Lines, leaving shareholders as an afterthought.

The one disaster that captured attention like the Costa Concordia in recent memory was the BP (NYS: BP) oil spill. The stock plunged, there were boycotts, and it seemed like the world would end for BP. Even the executive incompetence mirrors Carnival. But BP’s stock has rebounded despite the massive costs of the oil spill. I’m afraid shorting Carnival now would be like shorting BP at the bottom, which would have ended in a losing bet.

When Carnival Glory arrives in Boston next year, it will do so with some new dining, bar and entertainment options, including Guy’s Burger Joint, EA SPORTS bar and Punchliner Comedy Club presented by George Lopez. The new features will be added during a dry dock in November 2012, all part of the line’s ongoing “Fun Ship 2.0” enhancement program.

Carnival Glory’s 2013 schedule from Boston will encompass four-day cruises to Saint John, New Brunswick, departing Sundays and five-day voyages to Saint John and Halifax, Nova Scotia, departing Tuesdays and Thursdays, from June 4 to July 7. Carnival is the only cruise line offering short cruises from Boston. Carnival Glory will also offer three seven-day cruises departing June 9 and July 14 and 21, 2013, visiting Portland, Maine; Saint John; Halifax; and Sydney, Nova Scotia.

Carnival held their annual shareholders meeting in Miami last week and well, it will be one that Carnival plc. CEO Micky Arison will not forget anytime soon. A Miami version of Occupy Wall Street calling themselves 1Miami, came to protest Carnival plc’s corporate tax structure. Carnival is a registered company in Panama but has their HQ in Miami. This is a perfectly standard structure in the Maritime industry.

Apparently 1Miami has no understanding of the industries they protest.

JOHN HONEYWELL wrote probably the best account of the event:

 The more irate the activists became, the more frustrated was Arison. “I’m so insulted by your question that I can’t answer,” he told one. To another, who persisted in alleging Carnival paid only 1 per cent tax, he responded: “Regardless of how many times I say we paid $400m, you’re going to ignore that?’

A woman who wanted to know how much of the company’s taxes funded the Miami Jackson Memorial Hospital, chanted “Pay your fair taxes” over and over, before having the microphone wrestled from her by bouncers.

Arison responded: “How insulting your rant has been,” and then pointed out that children at the hospital are treated in the Carnival Cares for Kids unit.

The activists were eventually ejected from the room at the W hotel in Miami Beach.

photo via Forbes

Carnival Triumph currently docked in Galveston

Blame this on the Concordia. Literally. Due to a $10 million lawsuit filed in federal court in Galveston by relatives of a German tourist who died on the Concordia, a judge based in Galveston has prohibited the ship from leaving port.

The ship is scheduled to leave at 4:00pm CT

The sheer ignorance of this action by the judge (of course it HAS to be in Texas) and the frivolous lawsuit (which legally MUST be filled in Miami or Italy, not Texas) makes my blood boil. I think the Judge needs to read CruiseInd.

UPDATE: 2:09pm John Heald stated on his Facebook page that embarkation has commenced.

Cruise Critic got this from Carnival:

"We are aware of the situation and are working through the appropriate legal channels to resolve it. The litigation in question relates to a matter that involved a European-based cruise line that is a sister line to Carnival Cruise Lines. We are optimistic that the issues regarding the Carnival Triumph will be resolved and the ship will depart on its scheduled voyage later today."

Bloomberg states:

“court finds that the conditions for an attachment of defendants’ joint and collective property within this district, mainly the MS Carnival Triumph, appear to exist upon an admiralty and maritime claim.”

Passenger on board Triumph: Sign at the door saying ship is under command by US Federal Marshals and will only move w/ their permission.

— Mikey Faust (@mikeycruiseblog) March 31, 2012

UPDATE: 2:18pm U.S. Marshals are onboard the ship. This is typical in a ship arrest.

UPDATE: 2:20pm The judge is U.S. Magistrate Judge John Froeschner

UPDATE: 3:47pm Embarking passengers have reported that it appears that everything is still set for ontime sailing.

UPDATE: 3:54pm  Pretty quiet on the pier. It looks like all pax, stores and luggage have been loaded. About an hour to sailing

UPDATE: 4:08pm I was able to track down the actual legal Complaint:  Google Docs

UPDATE: 4:23pm Just finished reading the 13 page document. In short, because the plaintiff could not find either  Carnival plc. or Utopia Cruises Inc., registered in the state of TX, the law allowed them to arrest the vessel that was present in the state. On an amusing note, the plaintiffs want the defendants to present the Voyage Data Recorder, private emails between Micky Arison (Carnival Corp.) and Pier Foschi (Costa), the Captain of Concordia (Schettino )’s laptop. I guess the plaintiffs lawyer, of Gilman & Allison, LLP, Pearland, TX, wants to do his own investigation. Good luck getting them out of Italian official’s possession.

Anyways, basically the plaintiff was able to show that Utopia Cruises Inc., is nothing more than a Panamanian shelf company for the sole purpose of registering the ship. However since Carnival plc takes and declares revenues and expenditures on her, they state that Carnival plc are the owners. Since there is no Carnival plc present in the state of Texas, they allowed the U.S. Marshals to arrest the ship, since it was property of Carnival plc.

The plaintiff is suing Carnival plc and Utopia for a standard Death on the High Seas Act claim.

UPDATE: 4:43pm Pictures of the stickers onboard the Triumph right now: (from Twitter and Mikey’s Cruise Blog):

UPDATE: 4:53pm Situation possibly resolved! Working on a confirmation…

UPDATE: 4:55pm :

@mikeycruiseblog crew resp for drill.Capt is speaking now

— Sims Family Travel (@SimsTravel) March 31, 2012

"we have reached an agreement and should be released to sail shortly" #carnivaltriumph

— Sims Family Travel (@SimsTravel) March 31, 2012

UPDATE: 5:04pm : Oh sheesh. Passengers are taking their pictures next to the signs… (via cruisecritic)

UPDATE: 5:08pm : Some people are asking what would happen if she were to just leave, while being under arrest? Quick answer: the Pilots would never board her to sail her out.

UPDATE: 5:12pm : Cruise Director John Heald just posted on Facebook:

Great news for thosevsailing[sic] on the Carnival Triumph today.
We have reached agreement on this matter and are expecting the US Marshals to release the ship verysoon[sic]. The safety briefing has commenced and we should be sailing shortly.
See you here tomorrow

UPDATE: 5:38pm : SHES LEAVING RIGHT NOW

UPDATE: 5:38pm : Now that she has successfully set sail, I’d like to thank all of you that have been following along with me today. It was quite an adventure!

I’ll still be following this story incase something else develops with the pending legal action in the Texas courts.

An odd choice, but exciting nonetheless. Carnival announced yesterday that the Carnival Conquest will reposition over to Miami in November 2013 to make room for the Carnival Sunshine (ex-Carnival Destiny) in NOLA. New Orleans originally lost the Conquest to Galveston after Katrina, and they only recently got her back after the Magic arrived in Galveston. Carnival was hesitant to increase tonnage in NOLA due to slow sales, but things appear to be turning around.

Now Carnival will mark the US Debut of the heavily renovated Carnival Sunshine with 7 night routes from Louisiana.

Other interesting fallout: Carnival revised their long term outlook for 2012. They dropped full year earnings from originally $2.55 to $2.85 in December, then to $2.07 to $2.34 in January and now to $1.55 per share. Excluding Costa, bookings are up, but still behind last year. Including Costa, they are significantly behind. They appeared to be hanging on by a thread with only the Concordia tragedy, now that they have the Allegra fiasco, they appear to be on life support. Perhaps a time to end the Costa Brand?

Carnival’s full Q1 report is below after the jump:

Carnival Corporation & plc announced non-GAAP net income of $13 million, or $0.02 diluted earnings per share for the first quarter of 2012.  Reported U.S. GAAP net loss was $139 million, or $0.18 diluted loss per share, which includes a non-cash write down for Ibero Cruises’ ("Ibero") goodwill and trademark assets of $173 million and net unrealized gains on fuel derivatives of $21 million.  Net income for the first quarter of 2011 was $152 million, or $0.19 diluted EPS.  Revenues for the first quarter of 2012 increased to $3.6 billion from $3.4 billion for the prior year.
First quarter 2012 results reflect Costa Concordia incident expenses of $29 million, including a $10 million insurance deductible related to third party personal injury liabilities. During the first quarter of 2012, the company also recorded an insurance recoverable of $515 million (euro 384 million), which offset the write off of the net carrying value of Costa Concordia as the ship has been deemed to be a constructive total loss.  
Carnival Corporation & plc Chairman and CEO Micky Arison noted, "All of us at Carnival Corporation & plc are deeply saddened by the Costa Concordia tragedy.  Our hearts go out to everyone affected, particularly the families of the deceased and missing.  The global cruise industry has an outstanding safety record and every one of our brands is committed to the well-being of our guests and crew.  Immediately following the Costa Concordia accident we ordered a thorough review, with the help of industry-leading experts, to understand what happened as well as to conduct an extensive audit of all safety and emergency response procedures across all of our cruise lines.  We will work tirelessly to understand what went wrong, and make sure it never happens again."
Key metrics for the first quarter 2012 compared to the prior year were as follows:
On a constant dollar basis net revenue yields (net revenue per available lower berth day, "ALBD") increased 2.9 percent for 1Q 2012 (up 3.7 percent excluding Costa), which was higher than the company’s December guidance, up 1.5 to 2.5 percent. Gross revenue yields increased 1.0 percent in current dollars.
Net cruise costs excluding fuel per ALBD increased 6.4 percent in constant dollars, higher than the December guidance, up 3.5 to 4.5 percent, due to a $34 million impairment charge related to Costa Allegra and the above referenced incident related expenses. As previously disclosed, the remaining increase from the prior year was primarily due to the higher number of dry-dock days. Gross cruise costs including fuel per ALBD in current dollars increased 6.6 percent.
Fuel prices increased 30 percent to $707 per metric ton for 1Q 2012 from $543 per metric ton in 1Q 2011, costing the company an additional $137 million.  They were also higher than December guidance of $652 per metric ton, costing an additional $46 million.
The company recorded $173 million of charges related to Ibero goodwill and trademark impairments primarily as a result of slower than anticipated Ibero capacity growth due to the current state of the Spanish economy.
During the first quarter, the company entered into zero cost collars for an additional 10 percent of its estimated fuel consumption for the second half of 2012 through fiscal 2015, bringing the total to approximately 20 percent over the same time period. The company recognized $21 million of net unrealized gains on its portfolio of fuel derivatives during 1Q 2012. For further information on the company’s fuel derivatives program see "Fuel Derivatives" below.      
2012 Outlook 
The company’s expectations for 2012 will be affected by the direct and indirect financial consequences of the Costa Concordia incident. 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. Booking volumes for Costa during the same period are running significantly behind the prior year at lower prices, however, Costa has curtailed virtually all of its marketing activities during this period.
Looking forward, Arison stated, "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." Arison also noted that the company’s cash flow remains strong and is expected to approach $3.3 billion in 2012 (including net insurance proceeds), which is sufficient to fund this year’s capital expenditure requirements and expected dividend distributions without the need for additional financing.  
Excluding Costa, the company forecasts full year 2012 net revenue yields, on a constant dollar basis, to be in line with the prior year. Including Costa, the company forecasts a decline in net revenue yields (constant dollars) of 2 to 4 percent. In order to maintain an orderly market, Costa has adopted a strategy of minimizing discounting and, if necessary, operating at reduced occupancy levels. Consequently, much of Costa’s anticipated yield decline is expected to result from lower occupancy levels.
The company continues to expect net cruise costs excluding fuel per ALBD for the full year 2012 to be in line with the prior year on a constant dollar basis. Based on the current spot prices for fuel, fuel costs for the full year 2012 are expected to increase $407 million compared to 2011, costing an additional $0.52 per share. At current exchange rates, full year 2012 net income is expected to be reduced by $57 million or $0.07 per share compared to 2011.
Taking all the above factors into consideration, the company forecasts full year 2012 non-GAAP diluted earnings per share to be in the range of $1.40 to $1.70, compared to 2011 non-GAAP earnings of $2.42 per share and the December guidance range of $2.55 to $2.85 per share.
Compared to its December guidance, the company has reduced the midpoint of its earnings expectations by $1.15 per share, of which $0.65 results from a decline in earnings for the Costa brand. The balance is due to reduced expectations for the remainder of the company, comprised of a $0.40 impact due to changes in fuel prices and currency exchange rates and $0.10 from earnings (excluding fuel and currency).
Arison stated, "Our company is resilient and we will continue to work through this challenging period.  We have every confidence that we will restore consumer faith in the Costa brand and the excellent reputation Costa’s management team has built for the organization which has a deep-rooted Italian heritage spanning more than 60 years. Carnival Corporation & plc expects to carry nearly 10 million guests on its global fleet this year and the long-term fundamentals of our business remain strong as consumers continue to place tremendous importance on quality and value when making vacation decisions.  Based on our solid operating cash flow, strong balance sheet and high investment grade credit ratings we are well positioned for the future and remain confident in our long-term outlook."
Second Quarter 2012 Outlook 
Second quarter constant dollar net revenue yields, excluding Costa, are expected to be flat to down slightly (decrease 2.5 to 3.5 percent compared to the prior year, including Costa). Net cruise costs excluding fuel per ALBD for the second quarter are expected to be flat to down 1.0 percent on a constant dollar basis compared to the prior year.  Fuel costs for the second quarter are expected to increase $85 million compared to the prior year, costing an additional $0.11 per share.  
Based on the above factors, the company expects non-GAAP diluted earnings for the second quarter 2012 to be in the range of $0.05 to $0.09 per share versus 2011 non-GAAP earnings of $0.26 per share.
During the second quarter, the company will take delivery of all three of its new ships for 2012, Costa Cruises’ 2,984-passenger Costa Fascinosa, AIDA Cruises’ 2,194-passenger AIDAmar and Carnival Cruise Lines’ 3,690-passenger Carnival Breeze

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