Carnival enjoys 1.2 percent rise in profits

By Jeannine DeFoe
Bloomberg News Service

MIAMI — Carnival Corp. shares had their biggest gain in 15 months after the largest cruise-line operator said third-quarter profit rose 1.2 percent as it cut costs and benefited from a $34 million tax credit.

While revenue fell 3.5 percent to $1.44 billion, the average price Carnival charged for trips had its smallest decline since last year's terrorist attacks, falling 1 percent. This so-called average yield figure may rise as much as 3 percent in the fourth quarter, Chief Financial Officer Gerald Cahill said.

Carnival rose $1.88, or 8.1 percent, to $25.18 in New York Stock Exchange composite trading.

With cruise occupancy back to normal levels, operators are still struggling to raise prices, according to the Cruise Line Industry Association.

Pricing for the owner of the Holland America, Cunard and Carnival lines was better than the 3 percent to 5 percent drop the company had predicted.

"People are putting a high importance on getting a break and going away," said analyst Peter McMullin of Ryan Beck & Co.

Net income for the quarter ended Aug. 31 was $500.8 million, or 85 cents a share, compared with $495 million, or 84 cents, a year earlier, Cahill said.

Operating expenses fell 5.1 percent to $682.2 million on a salary and hiring freeze and a merger of back office operations that Carnival has put in place in the 12 months since the terrorist attacks. The tax credit related to a new Italian investment tax law.

With travelers' fears of terrorist attacks diminishing, some cruise line operators are adding trips to Europe and the Mediterranean, according to Lehman Brothers. The European Travel Commission estimates 11 million Americans will travel to Europe this year, making it the fourth best year on record, Lehman said.