Carnival Corporation's recent numbers demonstrate the importance of economies of scale and low capital costs. (Carnival released fourth quarter and yeaar-end results towards the end of December which missed our last issue.)

Driven by increased capacity, more passengers, and lower costs, Carnival reported that net income for the fourth quarter, ended Nov. 30, 1995, was $84.2 million or $0.30 per share on revenues of $452.9 million, compared to net income of $70.1 million or $0.25 per share on revenues of $410.6 million for the same quarter in 1994.

For the fiscal year ended Nov. 30, 1995, Carnival reported net income of $451.1 million or $1.59 per share on revenues of $2 billion, compared to net income of $381.8 million or $1.35 per share on revenues of $1.8 billion for the previous year.

Carnival Cruise Lines introduced the Fascination and Imagination in July of 1994 and July of 1995, respectively, and Holland America Line introduced the Ryndam in October 1994.

For the fourth quarter ended Nov. 30, 1995, the Camival fleet achieved an average occupancy level of 104.6 percent, up from 100.9 percent in the fourth quarter of 1994. The passenger count was 404,000 this past quarter, compared to 327,000 a year ago.

For the fiscal year 1995, Carnival reported an average occupancy level of 105 percent carrying 1,543,000 passengers, compared to an average occupancy level of 104 percent carrying 1,354,000 passengers during fiscal 1994.

In 1995, Carnival also boosted its North American market share to 34 percent from 30 percent in 1994.


In 1996, Carnival will introduce two more ships, the 2,040-passenger Inspiration and the 2,600-passenger Destiny, while HAL will introduce the 1,266-passenger Veendam.

Allowing for the announced withdrawal of the Festivale, the ships will boost the company's capacity by more than 200,000 passengers to an annual capacity of more than 1.7 million, compared to 1,543,000 passengers carried in 1995.

In a prepared statement, Carnival Corp. Chairman Micky Arison said that be is optimistic about the long term prospects of the cruise industry and expects that Carnival will continue to grow its earnings during 1996.

Arison noted that Carnival bookings for 1996 were "quite strong," particularly for Holland America Line. He cautioned, however, that pricing will continue to be a challenge, especially during the first half of the year when a large number of ships converges in the Caribbean.

The pressure on pricing is also demonstrated in Carnival's numbers that show that revenue per passenger day actually dropped in 1995 over 1994 as did operating income per passenger day.

But because of its fiscal strength and ability to control costs, at the end of the day, Carnival still boosted net income per passenger day.

97, 98, 99...

Carnival will continue to introduce new ships with two more 2,040-passenger ships to enter service for CCL in 1997, followed by a sister ship to the 2,600- passenger Destiny in 1999 (this was previously announced to enter service in 1998), and a new 1,320- passenger ship for HAL in 1997.

Consequently, Carnival will continue to increase capacity (to carry more passengers), and drive down costs by sheer volume of operations and the efficiency of new ships. Allowing for the further withdrawal of older tonnage, Carnival's economic efficiencies can increase even more.

Bottom Line

Barring (A) any unforeseen circumstances or (B) product misinterpretation, Carnival will continue to grow its revenues and earnings.

For the rest of the industry, Carnival's economic efficiencies will make life increasingly miserable for these who do not benefit from economies of scale or enjoy unique market niches.

Carnival's continued growth in North America will also come at the expense of other weaker operators (as Carnival increases its market share), unless the North American market resumes its previous growth pattern.

In addition, Carnival is also looking at Europe and the Far East.

To stay in the good graces of Wall Street Carnival has to continue to grow earnings, which means it has to continue to build more ships, at least until or unless passengers are willing to pay more.

Thus, it can also be expected that Carnival will continue to explore new opportunities.


Carnival Corp. also announced that it has exercised its option to acquire another 25 percent of Seabourn Cruise Line and now holds a 50 percent interest in the two-ship luxury-cruise company.