Best Cruise Lines Camouflaging a Price Increase

The Carnival Corporation & PLC, on November 7, announced a fuel supplement on all their cruise lines for all sailings after February 1, 2008. Most of the best cruise lines followed Carnival’s bandwagon within a week.

The Carnival Corporation & PLC includes in its roster Cunard, Holland America, Princess Cruises, the Yachts of Seabourn and of course, Carnival Cruises. In addition to Carnival’s lines, Regent Seven Seas, Silversea, Norwegian Cruise Lines (NCL), Orient Cruise Lines, Royal Caribbean, Celebrity, Azamara, Oceania, Majestic America, Windstar, Viking River Cruises and Cruise West now have “fuel” surcharges in place. Crystal Cruises instituted a fuel surcharge in 2006 and increased its fee for 2008 sailings. A complete breakdown of each line’s fees is listed on our website.

Jack Anderson, executive director of the “World’s Leading Cruise Lines” announced that the decision to pass their increased fuel costs on to their passengers was due to “today’s challenging economic environment.”

I tend to view this as a clever way for the best cruise lines to camouflage an across the board price increase – the facts are not supporting the surcharge. Carnival’s net income for the second quarter 2007 was reported as $390 million, compared to $380 million for the second quarter 2006. Without delving deeply into Carnival’s financial statement, the impact of rising fuel costs in the beginning of 2007 appear to have had minimal impact on Carnival’s ability to make a substantial profit.

On October 22, Royal Caribbean Cruises Ltd posted a “better-than-expected” 14% rise in quarterly profit and “shrugged off” concerns about rising fuel prices to its investors according to Reuters. I’ll delve more deeply into RCCL’s contradictions next time.

NCL, with the newest and presumably the most energy efficient ships in the industry, has assessed the highest costs in the industry on cabins with more than two passengers. Families of four can expect to pay $140 more for their 7-night cruise. NCL did show a net loss of $24.6 million for the 2nd quarter 2007, but their loss decreased by $10.5 million from the 2nd quarter of 2006. They, too, seem to have been able to cope with rising fuel costs and increase profitability.

Are we to believe that the cruise lines have forgotten to place options on 2008-9 fuel contracts to minimize the effect of escalating fuel costs? Like many people, we signed a contract for our home heating fuel to insure a fixed cost for the 2008 season. It is inconceivable that the cruise lines, with their massive buying power, did not do the same.

Let us look at the cruise contracts – the agreement between the cruise line and you, their client. Few people read all the fine print – be sure to have a magnifying glass ready if you do. From comments on various insider travel sites, it seems the contracts hold the key to allowing the cruise lines to add whatever increased costs they can quasi-justify – in some cases, even after payment in full has been made.

Could the cruise lines retroactively raise the price on cabin space already sold – no. But can they camouflage an increase under the veil of rising fuel prices to increase their bottom line profitability, yes! And they have camouflaged it well. In communications from the cruise lines, travel agents have been cautioned that it is important to list the fuel surcharges as a separate line item on all invoices.

As of this writing, MSC Cruises, the Italian cruise line subsidiary of shipping giant Mediterranean Shipping Company (MSC), the world’s largest privately-owned shipping line (we know they must have future fuel contracts in place!), and Disney Cruise Lines have not assessed a fuel surcharge. Here’s hoping they stand firm against the impulse to boost their bottom lines at our expense as the other best cruise lines have done.