Carnival Corporation CCL inked two strategic memorandums of agreement, with Italian shipbuilder Fincantieri S.p.A and German shipbuilder Meyer Werft to add nine ships to its fleet. The addition will come over a period of four years from 2019 to 2022.
The ships will be designed in accordance with Carnival’s latest designs and be some of the most efficient vessels in its history. These ships will be launched in the company’s existing markets in North America and Europe, as well as the newer ones, including China.
Fincantieri, the world's largest cruise ship builder, will develop and construct five ships at its shipyards in Monfalcone and Marghera in Italy. Meyer Werft, a German global shipbuilder, will build the other four at its shipyards in Papenburg, Germany, and Turku, Finland.
The cruise company is betting on its fleet enhancement strategy to gain a competitive advantage and reduce costs in the near term. In this regard, the company will add two ships to its fleet while removing four in 2015. Earlier this month, P&O Cruises UK – one of carnival’s brands – officially launched Britannia and later this year, another brand – the AIDA Cruises, will introduce AIDAprima, which is expected to be one of the most technically advanced and sustainable cruise ships.
Carnival appears to be following in the footsteps of major cruise operators like Royal Caribbean Cruises Ltd. RCL and Norwegian Cruise Line Holdings Ltd. NCLH that have been investing in new ships to lower fuel costs, carry more passengers and add onboard amenities like faster Wi-Fi service and upgraded theaters. While passenger volume has grown more rapidly than capacity in the recent years, and price wars have among these cruise operators have intensified because of competition.
With the addition of these ships, Carnival is expected to help lower operating costs, as older and less-energy efficient ships are retired and more streamlined vessels take their place. Further, these ships will increase Carnival’s fleet capacity.
Carnival currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is Vail Resorts Inc. MTN sporting a Zacks Rank #1 (Strong Buy).
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