Carnival Lowers Its Bunker Costs by 14%

CEO Micky Arison said the company expects to achieve a 23% drop in fuel use from its 2005 level by the end of the year

Carnival Corporation & plc [NYSE/LSE: CCL; NYSE: CUK] (Carnival) says that in the three months ended May 31, 2013 it reduced its bunker bill by 14 percent year-over-year, which dropped to $555 million from $645 million in the period for 2012, after seeing a decrease in both the price it paid for fuel, and the amount of fuel it used during operations.

In its report for the second quarter of 2013, the cruise company said the price it paid for bunkers dropped 9.7 percent from the $756 per metric tonne (pmt) in paid 2Q 2012, to $683 pmt for 2Q 2013.

Fuel consumption for its revenue-producing ship operating days - fuel consumption per available lower berth day (ALBD) - decreased 5.7 percent year-over-over, and Carnival CEO Micky Arison said the company was looking to reduce its fuel use even further.

"We remain focused on reducing our fuel dependence," said Arison.

"By year end, we will achieve a 23 percent cumulative reduction in fuel consumption since 2005 and expect our research and development efforts in fuel saving technologies to continue to bear fruit."

Noting that its earnings were "slightly better" than May guidance, Carnival reported a net income of $41 million for the quarter, which included a $31 million net unrealised loss from its fuel hedging activities.

Revenues for the quarter of $3,479 million were down slightly from $3,538 million in the period last year.

Looking ahead, the company projects a fuel consumption of 810,000 metric tonnes (mt) in Q3 and 3.27 million mt for the full year.

In May, Carnival UK Chief Executive David Dingle said cruise ships will need to be bigger and visit fewer ports to reduce fuel use in response to rising bunker costs, calling economies of scale "paramount" in the industry.

Carnival also announced today it is to split the roles of Chairman and CEO, with Arison stepping down as CEO after 34 years.