With assistance from Marco Bertacche in Milan and Kevin Crowley in London.
BY BETH JINKS
BLOOMBERG NEWS
The timing of Carnival Corp.’s Costa Concordia cruise ship’s grounding off the coast of Italy, at the start of the peak booking season, may exacerbate the company’s losses.
About one-third of all cruise vacations are arranged during the so-called wave season from January to March, said Sharon Zackfia, an analyst with William Blair & Co. in Chicago.
“They’re the most profitable bookings,” Zackfia said in an interview. “Presumably most people now are booking for the key summer season, which is when the cruise lines make the bulk of their money.”
Europe accounted for about 38 percent of Carnival’s revenue in fiscal 2010, the last full year for which geographic results are available. Its Genoa-based Costa Crociere unit is the continent’s largest cruise line based on passengers and ship capacity, according to Miami-based Carnival, the world’s biggest cruise operator with brands that include Cunard and Princess Cruises.
Carnival will lose business from customers who were booked on future Concordia voyages, Zackfia said. There will be additional costs that are hard to estimate, she said. The company doesn’t have insurance that covers lost revenue or earnings from its ships or other operations, according to its most recent 10-K, filed in January 2011.
“They will obviously have customers who were booked on upcoming Concordia journeys that aren’t going to happen,” Zackfia said.
Five people were confirmed dead and about 15 remain missing from the Costa Concordia, which ran aground the night of Jan. 13 near the island of Giglio in the Tyrrhenian Sea. Three people were found alive in the capsized cruise liner. The ship’s captain has been arrested and accused of manslaughter, abandoning the vessel and causing the shipwreck.
Rescue workers evacuated more than 4,000 of the 4,229 passengers and crew aboard, Italy’s Civil Protection agency said on its website. Costa passengers come primarily from Italy, France and Germany, according to Carnival.
Search and rescue operations will continue through the night, according to a statement Sunday by the regional government in the province of Grosseto. Costa Crociere has been ordered to remove the ship, according to the statement.
“I want to express our deep sorrow for this terrible tragedy,” Gianni Onorato, president of Costa Crociere, said in a statement. “I am only now able to speak on behalf of Costa because, as you will understand, I have been at Isola del Giglio to be close to the rescue operations.”
The ship had embarked from Rome on a trip that was to include stops at ports in France and Spain. The liner hit rocks and Captain Francesco Schettino, after assessing the damage, decided to secure the ship and gave the evacuation order, Onorato said.
Costa has 15 ships and sails globally. The company agreed in 2007 to pay ¤510 million ($647 million) each for two Concordia-class ships. The Costa Favulosa, added to the fleet last year, and the Costa Fascinosa, scheduled to enter service in May, was to increase Costa’s capacity by 20.4 percent, according to company filings.
Carnival carries insurance that covers a number of risks within certain limitations, according to the January 2011 filing. The coverage includes hull and machine insurance, as well as protection and indemnity policy that includes crew and passenger injuries, shipwrecks, damage to third parties and pollution.
Bookings had been “strong” heading into the wave season, Chairman and Chief Executive Officer Micky Arison said in a Dec. 20 statement, with “slightly higher prices with slightly lower occupancies.”
The company’s last major incident happened in November 2010, when an engine fire aboard Carnival Splendor stranded the cruise ship off the California and Mexican coasts for days, with more than 4,400 passengers aboard. Splendor, which has since been repaired, was used for Mexican Riviera voyages from Long Beach, Calif.
“Historically, they’ve had a very good safety track record,” Zackfia said. “This is definitely a tragic event. I’m sure the company is taking this seriously.”
With assistance from Marco Bertacche in Milan and Kevin Crowley in London.