Cruise bookings have recovered, according to Carnival Corporation in a conference call on Nov. 6. "But every time there is an event, we see a direct impact on the bookings," said Howard Frank, vice chairman and COO.

Frank also said that the bookings are coming at very aggressive pricing - which may impact Carnival for Q1 for 2002 and the rest of 2002 as well, he added. While price stimulation is working, it will cause deterioration in yields going forward, Frank said. Carnival expects yields to be down in the 10 percent range in Q4 01. (Prior to Sept. 11, yields were forecasted to be down two to three percent.)

Frank expected Q1 02 to bear the brunt of the pricing action and the bookings lost in Q4 01, with yields down 15 percent in Q1.

Frank said it was too early to forecast Q2 and Q3, but said that pricing was considerably lower than a year ago. Added Micky Arison, chairman and CEO: "As of last week, our forward bookings were 90 percent of where we were last year."

Continued Arison: "The pricing right now is ridiculous." He said he could hardly remember having seen such low pricing since he entered the industry in the late 1960s. He also said that the company intended to go back to somewhat more traditional pricing in January for the so-called Wave Period. "We hope that a 15 percent reduction in yields is a worst case scenario," Arison added. "The actual number of bookings is very high, but at very low prices."

Frank added that some of Carnival's competitors seemed to be pricing below Carnival, which he found questionable inasmuch as Carnival is a low cost operator. The companies may be selling cruises below cost, according to Carnival executives.

On the cost side, Carnival is already running lean, but will continue to drive down unit costs, according to Frank, who also said that hiring freezes and salary freezes have been instituted company-wide. Gerry Cahill, senior vice president of finance and CFO, said that Carnival typically drives down unit costs by an average of two percent every year, but may drive the unit cost down as much as three percent in 02, which will partially offset higher insurance and security costs.

Carnival Corp. will only see a five percent capacity increase in 02 year-over-year, with Carnival Cruise Lines' Carnival Pride being introduced in January, the Carnival Legend in August, the Carnival Conquest in late October, and Holland America Line's Zuiderdam in November.

In an agreement between Carnival and Fincantieri, the Zuiderdam's delivery was delayed from September to November. Also, with ship deployments between the brands, Carnival Corp. will see a net capacity addition of 10 percent in the contemporary market and negative additions in the premium and luxury markets, according to Frank. Most of the deployment decisions were taken before Sept. 11, however.

Carnival is continuing discussions to delay more ships for 03 and 04, but will not know the outcome of these discussions until late Q1 02, according to Arison.

Frank said the only major immediate redeployment was Costa Crociere's decision to keep the Costa Victoria in the Mediterranean for the winter season instead of positioning her out of Fort Lauderdale as originally planned.

"What is true here is to some degree true in Europe," Frank said. "People do not like to fly." Frank also said: "We pulled a couple of ships out of Europe next year but otherwise think that Europe will be quite manageable."

Added Arison: "European bookings for next summer are running behind - just like here." He also said that the booking pattern was changing in North America with more close-in bookings.

Meanwhile, Carnival Cruise Lines has already been deploying ships out of more North American ports for the past couple of years in order to tap into local drive markets.

But, according to Carnival executives, if the price is right, people will fly. "Price seems to overcome fear," said Frank.

Added Arison: "The distribution system is very resilient. These people (travel agents) are in business for the love of travel. We may come out of this with fewer agents, but those that are with us will be stronger.

"I think a lot of vacations have been deferred," said Arison. "Once we are past Thanksgiving and Christmas, I think bookings will surge. But this depends on external events," he added.

How will Carnival Corp. use its cash reserves? "We have no current plans to use it," said Frank. "We will come out of this a stronger company and be in a position to build our company a lot faster than the competition. We will be able to expand our business a lot faster."