Carnival Is Cruising in Troubled Waters

Carnival Corp.’s (

CCL, Financial) first-quarter 2022 results failed to meet analysts’ expectations, and the reason, it claims, is simple: the Omicron variant of Covid-19 that plagued the travel industry’s recovery after the holiday outbreak. The troubles aren’t over now that the Omicron wave has begun to subside, though. Now the world’s largest cruise line must contend with Russia’s invasion of Ukraine and skyrocketing fuel prices.

The Miami, Florida-based company reported a GAAP net loss of $1.9 billion and adjusted net loss of $1.9 billion for its first quarter of fiscal 2022, which runs through the end of February. The company ended the quarter with $7.2 billion of liquidity, including cash, short-term investments and borrowings available under the company’s revolving credit facility.

As of the close of trading on Monday, Carnival’s stock had retreated by 5.8% year-to-date, while the S&P 500 had fallen 6.4% over the same period. At the market’s close on Tuesday, shares were trading at $18.93, a dip of only 0.11% despite the bad news. Shares were down another 2.22% in early trading on Wednesday.

For the cruise segments, revenue per passenger cruise day (PCD) for the first quarter of 2022 increased approximately 7.5% compared to a strong comparable period in 2019, the company said. This increase was driven by exceptionally strong onboard and other revenue. As of March 22, 75% of the company’s capacity had resumed guest cruise operations.

The 50-year-old cruise line believes monthly adjusted Ebitda will turn positive at the beginning of its summer season. Since the middle of January, the company has seen an improving trend in weekly booking volumes for future sailings. Recent weekly booking volumes have been higher than at any point since the restart of guest cruise operations.

The cruise line, whose fleet includes 91 ships, said it expects another net loss in the second quarter before returning to profitability in the third, with a loss for the full year. The cruise operator posted a net loss of $1.9 billion, or $1.66 a share, with revenue of $1.62 billion for its fiscal first quarter, which compared unfavorably to the expectations of analysts surveyed by FactSet, who called for a loss of $1.28 per share from revenue of $2.26 billion. A year earlier, Carnival reported a loss of $1.79 a share, with revenue of $26 million.

Carnival executives said in December that they expected their entire fleet to return to duty in the spring. This was amended yesterday to the summer season, adding that advanced bookings for the second half of this year have fallen to the lower end of the historical range. Its brand portfolio includes Carnival Cruise Lines, Holland America, Princess Cruises and others.

Providing some small solace is the fact that cruise line competitors like Royal Caribbean Cruises Ltd (

RCL, Financial), Norwegian Cruise Line Holdings (NCLH, Financial) and Expedia Group Inc. (EXPE, Financial) have many of the same obstacles to contend with.

Carnival’s President, CEO and Chief Climate Officer Arnold Donald noted in a statement, “Despite the impact of Omicron, guests carried grew by nearly 20% in the first quarter compared to the prior quarter, while simultaneously increasing revenue per passenger cruise day and driving an improvement in adjusted Ebitda. We expect monthly adjusted Ebitda to turn positive by the beginning of our summer season as we build occupancy and return more ships to service.”