Carnival Corporation (CCL), the largest cruise operator in the world, recently entered into an agreement with Italian shipbuilder Fincantieri to build the largest cruise ship for the British market at an all-in cost of €560 million ($804 million) i.e. €155,000/berth.
Per the deal, the shipbuilder Fincantieri will construct a 141,000-ton cruise ship for its P&O Cruises brand. The new ship will have a passenger capacity of 3,611. P&O Cruise is the #1 cruise operator in Britain. The new ship is expected to enter service in March 2015. The new ship design will provide a rich cruise experience to Britain travelers.
The Italian shipbuilder Fincantieri is also constructing two ships for the Princess Cruises brand. Both the 3,600-passenger ships will hit the market in spring 2013 and spring 2014, respectively.
The new ship construction order marks the first 2015 delivery scheduled for the European market and is in line with Carnival’s plan to construct two to three ships per year. Presently, the company has seven ships in the pipeline for delivery, out of which one ship is scheduled for the remaining of 2011, three for 2012, two for 2013 and one for 2014.
Carnival continues to increase its capacity in the European market and views U.K as a key growth market for expansion, as British people are fond of traveling. During the second quarter of 2011 two new ships will debut in Europe, AIDA Cruises' 2,194-passenger and Carnival Cruise Lines' 3,690-passenger.
Previously, in August 2010, Carnival ordered a 2,192- berth ship for the AIDA Cruises brand, scheduled for spring 2013 delivery. This new ship will cater to the German market.
Management expects its capacity growth to be 5.2% in fiscal 2011 and 5% in 2012 compared with 7.1% in 2010. Thus, the company’s total capacity growth is expected to slow down and be consistent with the industry levels, but it should be able to retain its position as the world leader. Carnival will continue to order for ships even at the time of economic slowdown.
One of the major competitors of Carnival, Royal Caribbean Cruises Ltd (RCL) is making efforts to grow the cruise economy in China and will introduce Voyager of the Seas in China in 2012.
Carnival currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
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