Carnival Cruise Lines taking 2 more ships from sister company Costa Cruise

[JasonOasis]

Today Carnival Cruise lines announced that in addition to Costa Luminosa which will sail from Australia later this year Carnival will also take Costa Venezia and Costa Firenze in 2023 and 2024 respectively.  Unlike Costa Luminosa which was built in 2009, and is over a decade old Costa Venezia was built in 2019 and Costa Firenze was built in 2021 when factoring in the global shut down of the cruise industry that makes these two ship practically brand new.

In an article on the website The Points Guy Carnival is on the record saying they will NOT rebrand Venezia or Firenze instead Carnival will sell cruises on these ships as Costa by Carnival.  They are calling it a brand-within-a brand and as such Carnival is saying as a result of not rebranding these ships passengers will be able to enjoy Italian ambiance, culture, and food but at the value they've come to expect from a Carnival cruise. According to The Points Guy Carnival hasn't released any itineraries for either of these new Carnival ships but did state Venezia would set sail from New York and Firenze would set sail from Long Beach once they are delivered to Carnival.

While this may be seen as good news for Carnival customers it means Costa Cruise Lines which Carnival Corporation owns would be left with just 10 ships in its fleet. At a time where European juggernaut MSC Cruise lines is expanding like wild fire in Europe and other places around the world and adding new ships it does beg the question what is going on over at Costa Cruise Lines that they need Carnival to take now a total of 3 ships off their hands?

https://thepointsguy.com/news/carnival-to-get-more-costa-ships/

[twangster]

I suspect what's going on is the inability to shake the legacy of Concordia.  

 

[cruisellama]

Sailed them once, and it was enough (just like Carnival).  Remember the service was exceptionally bad.

[Plumlee2028]

These ships were originally built for China.  I think the rationale of the brand within a brand is to keep the ships ready to move back to China in relatively short order.  Costa, as a brand, has done well historically in China.  But with Carnival growing their China based brand with two former Costa ships and new builds in China, its a lot of capacity in a market that is not doing well at the moment.  

Costa also recently took delivery of Costa Smeralda and Toscana which are by far their biggest ships.  Its a bunch of extra capacity.  

[smokeybandit]

1 hour ago, cruisellama said:

Sailed them once, and it was enough (just like Carnival).  Remember the service was exceptionally bad.

Sail Costa, it'll Costya

[JasonOasis]

During a conference call with investors Carnival Corporation refused to rule out selling one or more of their 9 brands to raise cash. Carnival did not dispute rumors that they could sell their Seabourn brand, Holland America brand or other brands as means to raise cash all the CEO said was the company would evaluate all options including the sail of brands.  

It was revealed that because of the Covid shut down Carnival Corporations debt has ballooned to $35.1 Billion dollars and the interest on that debt is costing Carnival $120 Million dollars every month.  Carnival reveal that while they are doing extremely well here in the U.S., they are not doing so well in Europe.  Although other cruise lines are doing well in Europe Carnival Corporation revealed they have experiencing more as they put it "challenges" in Europe in regards to demand.  This is why Carnival is taking 3 cruise ships from Costa one in 2022 will go permanently to Australia a 2nd Costa ship will set sail from New York starting in 2023 and a third Costa ship will set sail from Long Beach in 2024.  

According to Carnival's CEO they are moving and will move ships from brands that are experiencing weaker demand to brands where demand is strong.

https://thepointsguy.com/news/carnival-corporation-cruise-brand-sale-question/

[Matt]

I read the call transcript. Arnold gave the same answer Royal has given when asked about selling ships.  Given the right opportunity, yea, they'd sell.

The reality is that "right opportunity" isn't coming. No one is buying cruise ships with any kind of demand at the moment. 

IMO, their answer is like anyone's answer would they sell their house they're in right now.  "Yea, if someone gave me a million dollars, I'd sell my house right now". You're not ruling it out, but it's not going to happen.

[smokeybandit]

13 minutes ago, Matt said:

No one is buying cruise ships with any kind of demand at the moment. 

Except scrap yards

[JasonOasis]

1 hour ago, Matt said:

I read the call transcript. Arnold gave the same answer Royal has given when asked about selling ships.  Given the right opportunity, yea, they'd sell.

The reality is that "right opportunity" isn't coming. No one is buying cruise ships with any kind of demand at the moment. 

IMO, their answer is like anyone's answer would they sell their house they're in right now.  "Yea, if someone gave me a million dollars, I'd sell my house right now". You're not ruling it out, but it's not going to happen.

I know no one is buying cruise ships let alone an entire brand which is partly why Carnival is moving ships from struggling brands to brands that are doing better.  

But with $35.1 Billion dollars worth of debt that is costing you $120 Million dollars every month in interest payments alone how does Carnival Corporation get that debt down? Demand here in the US is strong but Carnival Cruise Lines can't do all the heavy lifting for the Carnival Corporation.  What has gone wrong for Carnival Corporation this year in Europe but hasn't gone wrong for MSC?  Was Carnival Corporation perhaps late in their response to move ships and shift itineraries in response to the war in Ukraine? I'm just trying to understand why Europe has all of a sudden become a challenge for Carnival Corporation while other cruise lines which are facing the same challenges in Europe are doing a better job navigating these challenges?

[Matt]

1 hour ago, smokeybandit said:

Except scrap yards

Right. Which is a terrible ROI for the cruise line

37 minutes ago, JasonOasis said:

But with $35.1 Billion dollars worth of debt that is costing you $120 Million dollars every month in interest payments alone how does Carnival Corporation get that debt down?

I'm no CFO but I suspect with 100% capacity and laying off capital spending for a while.

All I'm saying regarding that article is Carnival said they'd sell ships/lines if the right offer came, but I highly doubt the right offer will come anytime soon given the buyer's market for cruise ships at the moment.

More to the point, I really think the article is making a mountain out of a mole hill. Carnival didn't say they were actively shopping or really considering it. They simply didn't say they wouldn't sell, which I think any company would say. 

[Plumlee2028]

1 hour ago, JasonOasis said:

I know no one is buying cruise ships let alone an entire brand which is partly why Carnival is moving ships from struggling brands to brands that are doing better.  

But with $35.1 Billion dollars worth of debt that is costing you $120 Million dollars every month in interest payments alone how does Carnival Corporation get that debt down? Demand here in the US is strong but Carnival Cruise Lines can't do all the heavy lifting for the Carnival Corporation.  What has gone wrong for Carnival Corporation this year in Europe but hasn't gone wrong for MSC?  Was Carnival Corporation perhaps late in their response to move ships and shift itineraries in response to the war in Ukraine? I'm just trying to understand why Europe has all of a sudden become a challenge for Carnival Corporation while other cruise lines which are facing the same challenges in Europe are doing a better job navigating these challenges?

A big thing to remember for carnival corp is they are very regionally specific.  When you talk Europe, they have Costa, P&O, Aida, and sort of Cunard.  Carnival also has two of their North America brand (Princess and Holland America) operate massive Europe summer seasons.  MSC just has MSC.  

Since 2019, Aida added 2 ships each over 5000 passengers. Costa added 4 (Venezia, Firenze, Smeralda, Toscana).  So it makes sense to rationalize somewhere. Since the pandemic, they said they sold 23 ships, but added 9.  The capacity available is about the same.  That's a huge efficiency/revenue enhancement.  Similar to Royal Caribbean offloading Majesty and Empress, but taking delivery of Odyssey.  

Carnival didn't say Europe was doing "bad" for them, just not as well as North America. That has generally been their history, so no surprise.  Venezia and Firenze were always built for china originally, so when you have to relocate capacity, you may as well do it to where it will have the best benefit.  MSC doesn't have that choice, North America is not as strong for them as Europe, so they bulked up Europe.  As they are a private company, we dont know how well that is doing for them, they could be losing money on it.  But where else do they put that capacity?

 

Royal Caribbean does the same thing (Wonder of the Seas is a great example), but it is often less obvious because they use a global brand strategy, like MSC, rather than Carnival's regional brand strategy.