Carnival’s cruising despite $500m write-off

Carnival Corporation has been forced to write off nearly $US400 million ($509m) on its Australian fleet.

The Pacific Jewel.

The nation’s cruise industry is booming, but American behemoth Carnival Corporation has been forced to write off nearly $US400 million ($509m) in non-cash impairment charges over part of its Australian fleet.

Carnival Corporation’s Miami-based headquarters has just reported global net income of $US1.3 billion for the third quarter, down slightly on the $US1.4bn reported the previous year, amid a 12.4 per cent increase in international gross cruise-ship operating costs including fuel.

Carnival Australia represents seven of its nine international brands, including P&O, Holland America, Seabourn and Princess Cruises, in the local market.

P&O Cruises (Australia) brands include Pacific Jewel, which is presently home-ported in Auckland, while Pacific Aria and Pacific Dawn are presently operating out of Brisbane. Pacific Explorer operates out of Sydney, while Pacific Eden is home-ported from Cairns. Princess Cruises’s Sun Princess is based between Sydney and Brisbane while Carnival Cruise Lines’ Carnival Spirit is based in Sydney. Their ages date from 1990 to 1997.

Carnival Australia attracts more than 70 per cent of local cruise market passengers, while Carnival Cruise Lines recently revealed plans to double its Australian fleet, with an announcement expected within the next 12 months. Carnival Corporation recently reported non-cash impairment charges for its Australian ships, trademark and goodwill of $US392m, driven by the company’s decision to strategically realign its business in Australia, as part of its third-quarter global accounts.

In a statement to The Australian yesterday a Carnival spokesman added: “The impairment is an accounting term which is an adjustment to reflect the expected cash flows of our ships. In essence, the Corporation has written down the value of some ships, goodwill and trademark in Australia.

“P&O Cruises Australia currently has a disproportionate amount of smaller, less efficient vessels with higher operating costs. The plan is to replace the Australian fleet with more efficient ships over time, and writing off the asset value clears the way for doing so.

“It represents less than 1 per cent of Carnival Corporation’s assets.”

Australia’s cruise market attracted 1.28 million local passengers in 2016, up 21 per cent on the previous year, with business spread between Carnival Corporation and rival American cruise ship brands such as Royal Caribbean and Norwegian Cruise Lines.

Carnival Australia recently announced a strategic realignment to ensure its brands continue to be well positioned in this market.

It has just added the Golden Princess to the P&O brand, while Princess Cruises plan to bring Ruby Princess to Australia with an announcement expected early next year.

Latest figures from the Cruise Lines International Association 2016 report show Australian ocean cruise passengers numbers jumped by 222,378 — the largest rise in passenger numbers on record — to 1.281 million for the year. It compared with 1.058 million in 2015.

“Australia maintains its position as the cruise market with the highest population penetration, with the equivalent of 5.3 per cent of the Australian population taking a cruise,” CLIA said.

Carnival Corporation executive chairman, Ann Sherry, who is travelling overseas, could not be reached for comment yesterday.