Carnival Case Issues

Topics: Carnival Cruise Lines, Holland America Line, Carnival Corporation & plc Pages: 29 (9957 words) Published: March 20, 2013
MAN4720009_2013S_11202: , Schwartz: Tuesday and Thursday 9:30 to 10:50 AM – LA 331

MAN4720009_2013S_11202 Spring, 2013
Prepared for Professor Harry Schwartz, March 14, 2013 by the following students:

Robert OndercikZ8384Finance
Ron AbrahamZ4458Accounting
Jenna FranzoneZ3483Business Management
Tabitha Palmisano Z0857Marketing
Jeffrey VonZ7035Accounting
Aaron SchneiderZ0653Business Management
Sabine BorgesZ7510Accounting

1. Current Situation: CRITICAL CASE ISSUES
Human Relations
(CI #1) Employee and Labor Lawsuits
Employees of Carnival are claiming unfair working conditions with poor compensation. (CI #2) Succession
Mr. Arison stepping down in the future, who will run company, third generation Arison or someone else.
(CI #3) The Costa Concordia Cruise Ship lawsuit
Cruise ship laying on side, environmental risk, and lawsuits from crash. (CI #4) The Carnival Triumph dead at Gulf of Mexico
Pending lawsuits from this event, leading to more negative publicity (CI #5) US Corporate Tax
Congress continues to try to charge Corporate taxes on Carnival, but has failed recently. This could change soon. Marketing
(CI #6) Serving on 20 % of Americans
It becomes expensive for customers to get to ports to cruise, discouraging some customers from cruising.

Carnival Corporation & plc is currently the largest cruise company in the world and is among the most profitable and financially strong leisure travel companies in the world. Carnival Corporation & PLC’s portfolio of cruise brands in North America, Europe, Australia and Asia are comprised of Carnival Cruise Lines, Holland America Line, Princess Cruises, Seabourn, AIDA Cruises, Costa Cruises, Cunard, Ibero Cruises, P&O Cruises (Australia) and P&O Cruises (UK). Collected, these brands operate 100 ships totaling 203,000 lower berths with nine new ships scheduled to be delivered between March 2013 and March 2016. Carnival Corporation & PLC is the only group in the world to be included in both the S&P 500 and the FTSE 100 indices. A. CURRENT PERFORMANCE

Carnival reported net income for the year 2012 decreased to $1.3 billion compared to $1.9 billion for the prior year due primarily to a combination of lower revenues and higher fuel prices.

Revenues declined $410 million primarily as a result of the Costa Concordia incident. Net revenue yields declined 2.5 percent due primarily to lower cruise ticket prices and occupancies for the Costa brand. Excluding Costa, Carnival was able to maintain year 2012 net revenue yields in line with the prior year. Even with the many challenges faced in 2012, Carnival generated $3 billion of cash from operations, more than enough to fund our net capital investments of $1.8 billion. All of the subsequent free cash flow was then returned to shareholders. Carnivals regular quarterly dividend of $0.25 per share, combined with a special year-end dividend of $0.50 per share, resulted in $1.2 billion of distributions to their shareholders. Carnival also purchased 2.6 million of the company’s shares in the open market at a cost of $90 million during 2012. B. STRATEGIC POSTURE

* Carnival remains dedicated to profitably growing our cruise business and driving returns on capital higher. * Carnival will continue to increase their fleet through a measured pace of two to three new ship introductions each year. Some of these vessels are expected to replace existing capacity from the possible sales of older, less-efficient ships * Currently, Carnival has nine cruise ships scheduled for delivery through March 2016. * In addition, Carnival is focused on the growth of developing cruise regions. During the previous five years, Carnival has doubled their guest sourcing from up-and-coming markets, a trend Carnival expects will continue in the future....
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