Carnival Corporation Orders an Additional Excel-Class Ship for Carnival Cruise Line, the Line's 5th Excel-Class Ship and the 11th Across the Global Fleet
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Insights
The announcement of Carnival Corporation's agreement with Meyer Werft for a fifth Excel-class cruise ship represents a strategic move in the cruise industry, signaling a commitment to fleet expansion and modernization. The choice of Excel-class ships, known for their guest amenities and operational efficiencies, suggests a focus on enhancing customer experience and reducing operational costs.
With the delivery scheduled for 2028, the investment horizon is long-term. The utilization of LNG for powering the ships reflects an industry shift towards sustainable practices, potentially reducing fuel costs and aligning with environmental regulations. This could positively affect the company's public image and operational margins in the long run.
However, the capital expenditure for such a project is substantial and the financing contingency indicates a significant financial decision yet to be finalized. Investors should monitor the company's leverage and liquidity ratios post-financing to assess the impact on financial health.
The announcement by Carnival Corporation underscores a measured capacity growth strategy, which is a critical aspect for investors to consider. Adding one to two ships per year starting in 2027 indicates a steady but cautious expansion approach. This could be seen as a positive signal for the stock market, reflecting management's confidence in future demand and disciplined capital allocation.
The emphasis on a 'responsible capital approach' and the intention to utilize strong free cash flow to improve the balance sheet and reduce leverage levels provides reassurance about the company's financial prudence. This strategy could potentially lead to an improved credit rating and lower cost of capital, which would be beneficial for shareholders.
Investors should look for further details on the terms of financing and the impact of new additions on the Return on Invested Capital (ROIC). A higher ROIC is generally indicative of efficient use of capital, which could translate into increased shareholder value.
The decision to construct the new ship with LNG propulsion is a noteworthy aspect of Carnival Corporation's strategy. LNG is currently one of the cleanest fuels available for marine transportation, significantly reducing emissions compared to traditional marine fuels. This move aligns with global trends towards decarbonization and could provide Carnival with a competitive edge in a market increasingly conscious of environmental impact.
In the long term, the adoption of LNG may lead to operational savings through lower fuel costs and compliance with stringent emission regulations. However, investors should consider the potential risks associated with the adoption of new technology, such as LNG infrastructure availability and the pace of development in alternative fuels that might surpass LNG in terms of sustainability and cost-effectiveness.
Overall, the environmental strategy could enhance the company's reputation and appeal to a growing segment of eco-conscious travelers, potentially driving demand for its cruises.
World's largest cruise company finalizes agreement with Meyer Werft for new world-class cruise ship scheduled for delivery in 2028
In mid-February Carnival Corporation had announced the first newbuild order placed in five years with news that a fourth Excel-class ship would join the Carnival Cruise Line fleet in Spring 2027. This announcement confirms an 11th Excel-class ship for the corporation's fleet across four of its world-class brands, and the fifth to be sailed by Carnival Cruise Line.
"Carnival's Excel-class fleet will soon be a quintet of these very popular ships that provide outstanding guest amenities and tremendous operating efficiencies," said Christine Duffy, president of Carnival Cruise Line. "Since the introduction of Mardi Gras in 2021 and the subsequent expansion with Carnival Celebration in 2022 and Carnival Jubilee in 2023, these Excel-class ships are driving excitement, demand, and strong guest satisfaction ratings. With the arrival of Carnival Firenze in April, we are completing the addition of five ships to our fleet in less than 20 months, and then we will pivot to another phase of growth with these two Excel ships."
This fifth Excel-class ship will be built on the same platform as its sisters, with the 180,000-ton ship powered by liquefied natural gas (LNG) and designed to carry over 6,400 guests and 1,800 crew.
"This new order continues to balance our commitment to growth with our responsible capital approach to utilize strong free cash flow over the next several years to strategically improve our balance sheet, significantly reduce our leverage levels and continue to transfer value from debt holders to shareholders," said Josh Weinstein, CEO of Carnival Corporation & plc.
"Carnival Cruise Line continues to perform at an outstanding level, and we are focused on adding capacity across the company where it aligns with demand and our position in the marketplace. This measured capacity growth strategy will result in our adding one to two ships per year beginning in 2027, and we will be identifying additional fleet plans over the coming months for our cruise lines to meet capacity demand and improve execution across all aspects of our operation, with the benefit of yielding higher return on invested capital," said Weinstein.
"We are proud of the role the Excel-class from MEYER WERFT and MEYER
This order is contingent upon financing, which is expected to be completed later this year.
About Carnival Corporation & plc
Carnival Corporation & plc is the largest global cruise company, and among the largest leisure travel companies, with a portfolio of world-class cruise lines – AIDA Cruises, Carnival Cruise Line, Costa Cruises, Cunard, Holland America Line, P&O Cruises (
Additional information can be found on www.carnivalcorp.com, www.aida.de, www.carnival.com, www.costacruise.com, www.cunard.com, www.hollandamerica.com, www.pocruises.com.au, www.pocruises.com, www.princess.com, and www.seabourn.com.
For information on Carnival Corporation's industry-leading sustainability initiatives, visit www.carnivalsustainability.com.
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SOURCE Carnival Corporation & plc
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