How Carnival Cut Fuel Consumption by 5.6% to Fight Soaring Oil Prices

In today’s earnings call, Carnival Corporation announced that they actually cut fuel consumption by 5.6% to help combat rising fuel costs.

Even though the cruise line’s stock is down along with the overall market today, the numbers on the top and bottom line were surprisingly good.

High gas prices are bad news for cruise operators.  And with the price of a barrel of oil spiking in the last couple months due to the conflict in Iran, cruise lines have had to get creative in order to maintain profit margins.

Combating Higher Oil Prices

Let’s look at Carnival’s (CCL) actual net income, keeping in mind that Carnival Corp is the parent company of cruise lines like Princess Cruises, Holland America Line, Costa Cruises, AIDA Cruises, Cunard Line, P&O Cruises, and of course Carnival Cruise Line.

On the company’s earnings call today, Chief Financial Officer David Bernstein gave some insight into the brand’s ability to keep profits growing despite the major energy headwinds, saying:

“Net income of $569 million was more than 20% higher than the prior year, despite a nearly 30% increase in our fuel price.”

Walking away with a 20% profit jump when your fuel bill spikes by almost a third is a pretty impressive feat. It shows that the company is finding ways to run smarter and save money where it counts.

The Battle for Efficiency

A major part of that savings came directly from the engine rooms and navigation bridges.

Carnival did not just luck into these numbers. They actively cut back on how much fuel their ships burn.

CEO Josh Weinstein emphasized this focus on efficiency during the call, pointing out that this quarter’s success builds on previous conservation efforts:

“Fuel efficiency improved by more than 5%, building on last year’s over 6% efficiency gain and further supporting our cost performance. What stands out most is that we achieved these results despite operating through a period of extreme geopolitical volatility, consumer sentiment at historically low levels, and unusually high fuel prices.”

David Bernstein later clarified exactly how much this specific green initiative padded the bottom line, adding that part of their financial outperformance “came from improvements in depreciation expense and fuel consumption, where we delivered an over 5% year-over-year reduction.”

Back in 2022, Carnival signed a major fleet-wide deal to aggressively roll out air lubrication systems.  This is a tech that basically pumps a continuous layer of tiny bubbles under the ship’s hull so it glides through the water with way less friction.  This means better fuel efficiency.

On top of that, they are using automated “Power Saver Packs” across the fleet. These are upgrades that overhaul the ship’s heating and air conditioning systems to run much more efficiently.

Even small changes, when rolled out across more than 90 ships across all brands, can make a big difference.

Guidance

While Carnival did move their full-year earnings expectations up by a tiny penny, they also had to admit that ongoing global tensions are forcing itinerary changes in Europe. And this is putting pressure on their upcoming revenue.

David Bernstein noted that “Cruise costs without fuel per ALBD are now expected to be up approximately 1.3% on a normalized basis…” for the full year.

When investors see upcoming costs creeping up while future growth is being trimmed, they get a little nervous.

What This Means for Your Next Cruise

For the average cruiser, this is exactly what you want to hear. When a cruise line figures out how to absorb a 30% spike in oil prices through pure efficiency and smart cost control, it protects the consumer from higher fare prices, or at least it should.

It means they don’t have to slap high fuel surcharges onto your booking or hike up other prices to keep their heads above water.

Just a couple months ago StarDream Cruises announced they were adding a $19 to $26 per person fuel surcharge for their Asian itineraries. The big 3 cruise lines (Carnival, Royal Caribbean, and Norwegian) have stated they have no plans to add a fuel surcharge.

So far, it looks like Carnival is filling ships (at 104% occupancy from this earnings report), passengers are spending money, and the fleet is fairly lean.