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September 23, 2009

Carnival Corporation May Pull More Cruise Ships From Alaska

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Micky Arison, the CEO and chairman for Carnival Corporation told Wall Street analysts today that the company is likely to pull more cruise ship our of Alaska over the coming year due to the rising cost of doing business in the state.

The parent company of Carnival Cruises, Princess Cruises and Holland America Line. Princess Cruises and Holland America Line are cruise lines that have been traveling to Alaska for over 50 years and offer lodges and trains by have built and own. All three cruise lines already announced plans to reduce capacity in Alaska significantly for 2010, as Royal Caribbean and Norwegian Cruise Line. But Arison says further reductions to begin in 2011 now are under discussion.

Arison stated "It is likely we are going to do more of (the capacity cutting) in '11," during a conference call to discuss third quarter earnings. "The amount of cost that they've put on to the industry during this short season is astronomical, and it will continue to negatively affect Alaska."

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Arison and other Carnival executives said destination like Europe hold more appeal for their ships as its becoming increasingly difficult to make money in Alaska due to growing fees, taxes and regulations imposed on cruise lines by the state.

"The brand will decide to put this ship where there is the best return and the most profitable returns," Arison told analysts. "They have to put it in the context that they already have seven ships in Europe or they already have two ships in Australia, but they will model it out, and if it pays to pull a ship from Alaska and put it in Europe or . . . the Far East they will do that."

Arison also noted that Alaska is a summer destination, and there are plenty of alternatives during the summer. "You're talking the peak July and August period where we can make a lot of money on a lot of different itineraries, and (because of rising fees and taxes) we can't make a lot of money in Alaska."

These comments come just a few days after an association that represents 9 major cruise lines sailing to Alaska filed a lawsuit challenging the state's recently added $50 tax on vacationers arriving on cruise ships.

A few days ago Disney Cruise Line announced in 2011 they will put one of their ships in Alaska. Arison said this decision by Disney Cruise Line was an outlier event, and he didn't expect Disney to stick anound for long. Arison stated "Disney has historically cherry-picked markets. It may do this one year and not come back for three, four or five years. The basic Alaska business will be declining. You may get Disney, Crystal or maybe even a Seabourn" for a season, he said, but on the whole ships will be pulling out due to the rising cost of doing business and the falling return.

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Written by Denise Blackmore, MCC

Posted by Denise at September 23, 2009 09:08 AM
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