Carnival to Sue Alaska Over Head Tax?

In comments today to reporters aboard the Seabourn Odyssey's maiden voyage, Carnival Corporation head Mickey Arison indicated they are anticipating a suit against the State of Alaska over the $50/person head tax which was voted on and enacted a little over 2 years ago.

Citing a recent US Supreme Court case in which a similar tax against oil tankers in Alaska was struck down, Arison indicated they've tried to work with the State, but to no avail.

I've long been an opponent of this tax. Having mostly grown up in Alaska, and worked in tourism there, I understand the importance of it to the State. However, I was not surprised by its passing, as the proponents did a good job of couching it in environmental terms (many of those provisions have been "delayed" by the Alaska Legislature as currently unenforceable due to technology issues), and also maintained that the tax wouldn't affect the visitor numbers.

While it's debatable whether or not the tax directly has had an impact on people booking, when you combine it with the economic situation and general downward pressure this past season on cruise fares, it's clear that the cruise lines cannot continue to operate in Alaska at the same levels. Several lines are pulling out ships for next season, as the actual fares for the passengers are too low to sustain operations. Fewer ships will likely increase fares and help their bottom line. Sometimes Alaska (and other locations historically) has forgotten that ships are movable assets - if the economic climate is such that they can make more in other locations, they will move the ships to where the passengers want to sail.

Passengers see the price as the total package - base fare, non-questionably fees (erroneously called Port Charges) and taxes. When taxes are too large a percentage of what the market is willing to pay to cruise in Alaska, lowering what the cruise lines themselves can make, then that's an unsustainable proposition, and the cruise lines will and have reacted.

By the way, fewer ships in Alaska was the result many of the originators of the tax bill wanted, as they had been long term, ardent anti-cruise activists, and the tax and associated regulations were one way they had to push forward that agenda. It was far less about $$$ and more about punitive measures against the industry they vehemently disliked. But they "sold" it to the voters couched in monetary terms and pro-environmental stances, many of which were outdated (the lines already had higher standards) or unreasonable (no technology exists to accommodate the requirements at this time).

It will be interesting to watch this case progress. As someone who was intimately involved in Alaska politics for many years, I know that historically Alaska has been a good partner to cruising. One US Senator's wife was a ship's godmother as I recall. I hope that relations can find an acceptable resolution, as the State of Alaska and cruising both need one another and the relationship has to be more or less in balance.

If you'd like to read the USA Today article, it can be found at CruiseLog,

Carnival Not Implementing Fuel Supplement At This Time

Don't know if you noticed, but crude oil prices (most specifically West Texas Light Sweet Crude) slipped over the infamous $70/barrel price yesterday, and is today trading around $71. Many observers in the cruise industry started mulling over whether or not that would mean the return of fuel supplements.

On all recent bookings, Princess and Holland America have had a disclaimer that if fuel exceeds $70/bbl, that they reserve the right to re-impose supplements. Other lines aren't so blatant about it, but if you go back to when they were first implemented, there were a number of "benchmark" dates where, if the price was over $70/bbl at the close of trading, the supplements would be implemented for the following quarter. We have one of those benchmarks coming up on June 17.

First out of the block to address this question is Carnival Corporation's Mickey Arison, who has stated that they have "no plans" to reinstate supplements on any of their brands at this time. It was noted that, while the price of fuel is increasing, they also have to take into consideration the overall economic climate in evaluating whether or not they should implement these fees. An official statement to this effect will be released later today.

Of course, they reserve the right to monitor the prices and review their position as factors change.

Royal Caribbean and Norwegian had actually set their benchmarks at $65/bbl, which we passed several days ago, and have not indicated any move toward re-instating supplements on their lines at this time.

So for right now, cruisers, looks like we're in the clear for the near term on fuel supplements. Stay tuned, as I'll always keep you updated.

Carnival Brands Eliminate Fuel Supplement!

In the best news yet in the ongoing saga of fuel supplements, Carnival Corporation announced today that they will be suspending (eliminating) fuel supplements for all of their North American brands (Carnival, Costa, Cunard, Holland America, Princess and Seabourn) starting with sailings departing on or after December 17, 2008. No complicated formula of watching the West Texas Intermediate Crude for 20 consecutive days beginning 25 days prior to sailing, not even the quarterly formula of the other major brands. It's just gone, vamoosed, outta here!

For those who have already paid their final payment and are sailing on or after December 17, the fuel supplement will be refunded in the form of onboard credit on your cruise (do be sure to check your account to verify it shows up). For those who have not yet paid final payment, the amount will be removed from your booking.

From the Carnival press release:

“As the price of oil has dropped to $46 per barrel, it has now reached a level where we are able to suspend the fuel supplement,” said Bill Harber, director of marketing for Carnival Corporation & plc. Harber cautioned that the fuel supplement could be re-instated if oil prices increase
significantly.

The company reserves the right to re-instate the fuel supplement for all guests at up to $9
per person per day (except Seabourn, which would be up to $15 per person per day) should the price of light sweet crude oil according to the NYMEX (New York Mercantile Exchange Index) increase above $70 per barrel.

“It is our hope that fuel prices have stabilized and will remain at a more rational level. The complete suspension of the fuel supplement makes the inherent value of a cruise even greater and that is increasingly important in the selection of a vacation in the current economic climate,” Harber added.

The next logical question is if other brands will follow suit Of course, Disney has already suspended their fuel supplements, which may have precipitated this announcement by Carnival. I think it's possible other brands will make similar announcements, though their quarterly assessment of fuel prices is a much more sensible formula than what the Carnival brands had set up, and I'm not sure that the Royal Caribbean International brands, at least, will do so.

At least we have this for now, and it's great news!

Carnival Reveals Fuel Supplement Reduction/Removal Plan

Carnival has revealed their plans for removing and/or incorporating fuel supplements in the future, setting out specific guidelines for refunding of existing supplements, and incorporating future supplements into fares. Because the plan is pretty complicated, I'm going to put the release to the industry here in its entirety for your reading pleasure:

Over the past few months as fuel prices have declined, we have had many questions about our fuel supplement. While fuel prices today remain very volatile, we have given this careful consideration and I am pleased to update you on some new and important information regarding the fuel supplement for Carnival Corporation & plc brands.

Six of our brands, Carnival Cruise Lines, Costa Cruises, Cunard Line, Holland America Line, Princess Cruises and The Yachts of Seabourn have announced that effective October 31, 2008, the existing fuel supplement will be eliminated for all new bookings on 2010 departures. At the same time, a price increase on 2010 sailings will become effective.

Additionally, the company has established specific guidelines under which the current fuel supplement may be reimbursed to consumers for 2008 and 2009 voyages. For 2008 and 2009 departures, if the price of light sweet crude oil according to the NYMEX (New York Mercantile Exchange Index) is $70 per barrel or less at the 2:30 p.m. close of business as reported by Reuters on each of the 25 consecutive trading days ending five trading days prior to the guest’s
cruise departure date, the fuel supplement will be refunded in the form of a shipboard credit.
Guests who book a 2010 cruise prior to Oct. 31, 2008, will still be charged the current fuel supplement but will also be eligible for a refund of the fuel supplement in accordance with the same fuel price conditions that are being implemented for current 2008 and 2009 departures.

We are implementing these initiatives due to recent trends in declining fuel prices in an effort to migrate away from charging a separate fuel supplement. If fuel prices stabilize below $70 a barrel, we will be able to effectively eliminate the fuel supplement. However, there is still a risk that fuel prices could move higher which would require us to maintain or reinstate a fuel supplement but we are hopeful that the goal of eliminating the fuel supplement can be achieved.

What does this really mean? Don't even think of looking for a rebate on cruises already booked unless, just before your sailing, crude pricing is below $70/barrel for the month prior to your cruise. And if that happens, be pro-active on your cruise to ensure you get the promised onboard credit. So if fuel drops to $70 a barrel or less for 25 days in December, 2008, but your cruise isn't until May, 2009, your fuel supplement will remain on your booking. However, if the fuel supplement is $70 or less for 25 consecutive days in April, start paying close attention for your May sailing - you may be eligible for an onboard credit refund.

Second, for new 2010 bookings starting October 31, fuel supplements will be incorporated into the price of your booking not a separate line item. This means likely they will not be taken out, even if fuel price is reduced in the future.

Thinking about booking one of the Carnival brands for a 2010 sailing? Do it prior to October 31! Otherwise, no chance of getting any type of fuel supplement refund, and you will see a price increase across the board on November 1.

Finally, watch for other lines to come out with plans of their own to incorporate fuel supplements into their pricing and/or how they would remove or refund them in the future.

Confusing? You bet. If you have questions, let me know. I'll be keeping on top of these to be sure