III. Descriptions of Cruise Brands
Carnival Cruise Line is “The World’s Most Popular Cruise Line®” and has provided multi-generational family entertainment at exceptional value to its guests for over 50 years. Carnival Cruise Line creates an environment where guests can be their most playful selves on ships that are designed to inspire the experience of bringing people together, with limitless opportunities for guests to create their own fun.
During 2024, we announced that we will sunset the P&O Cruises (Australia) brand and fold its Australia operations into Carnival Cruise Line in March 2025. Pacific Encounter and Pacific Adventure will be transferred to Carnival Cruise Line in early 2025 and Pacific Explorer is expected to leave the fleet in February 2025.
Princess Cruises is The Love Boat®, the brand that introduced the world to the elegance and romance of modern-day cruising and has delivered dream vacations to millions of guests for nearly 60 years in the most sought-after destinations. Princess combines extraordinary large ship amenities with elite service personalization and simplicity to create meaningful connections and unforgettable moments in the most incredible settings across the globe.
Holland America Line has been exploring the world for over 150 years with expertly crafted itineraries, extraordinary service and genuine connections to destinations. Holland America Line visits over 100 countries around the world and has shared the thrill of Alaska with guests for more than 75 years with its ideal mid-sized ships. Guests enjoy extraordinary entertainment at sea and dining venues featuring exclusive dishes by world-famous chefs.
Seabourn, a leader in ultra-luxury cruising, sails to legendary cities and less-traveled ports. Intimate ships with a yacht-like atmosphere, allow guests to discover the unexpected—about the world and about themselves. Guests enjoy all ocean-front suites and world-class gourmet dining as they wish. Seabourn creates moments of surprise and delight known as “Seabourn Moments” in an environment that fosters building meaningful connections with fellow travelers, crew members and the communities they visit. Seabourn’s fleet includes two purpose-built ultra-luxury expedition ships offering amenities such as submarines, Zodiacs® and kayaks.
For over 75 years, Costa has brought wonder to guests’ lives, allowing them to discover unique destinations and experiences both onboard and onshore. Costa's warm hospitality and high-quality onboard services feature a true European touch and Italian passion, setting Costa apart from any other cruise experience.
AIDA is the most recognized brand in the German cruise market. Its ships visit many beautiful destinations around the world and bring together people of all ages. AIDA inspires guests with excellent service and a variety of extraordinary experiences. The smile on the bow of the ships represents the unique AIDA attitude on life — relaxed, friendly, colorful, cosmopolitan and uncomplicated.
P&O Cruises (UK) is Britain’s largest cruise line and its heritage can be traced back over 185 years. P&O Cruises (UK) welcomes guests to extraordinary travel experiences designed in a distinctively British way - through a blend of discovery, relaxation and exceptional service catered towards British tastes. P&O Cruises (UK)’s fleet of premium ships deliver authentic travel experiences around the globe, combining style, quality and innovation with a sense of occasion and attention to detail, to create a truly memorable holiday.
For nearly 185 years, the iconic Cunard fleet has perfected the timeless art of luxury ocean travel. Cunard’s distinct voyages are meticulously crafted to offer fine dining and bars, unique entertainment, and the famous White Star Service®, comfort and style. A pioneer in transatlantic journeys and World Voyages, its destinations also include Europe, the Caribbean and Alaska.
IV. Trademarks and Other Intellectual Property
We own, use and/or have registered or licensed numerous trademarks, patents and patent pending designs and technology, copyrights and domain names, which have considerable value and some of which are widely recognized throughout the world. These intangible assets enable us to distinguish our cruise products and services, ships and programs from those of our competitors. We own or license the trademarks for the trade names of our cruise brands, each of which we believe is a widely-recognized brand in the cruise industry, as well as our ship names and a wide variety of cruise products and services.
V. Passengers Carried by Principal Source Geographic Areas
| | | | | | | | | | | | | | | | | | | | |
| Carnival Corporation & plc
Passengers Carried | |
| (in thousands) | 2024 | | 2023 | | 2022 | Brands’ Main Source Markets |
| United States and Canada | 7,938 | | 7,410 | | 5,140 | Carnival Cruise Line, Cunard, Holland America Line, Princess Cruises and Seabourn |
| Continental Europe | 2,702 | | 2,590 | | 1,610 | AIDA and Costa |
| United Kingdom | 1,087 | | 970 | | 660 | Cunard and P&O Cruises (UK) |
| Australia and New Zealand | 1,027 | | 940 | | 230 | Carnival Cruise Line, P&O Cruises (Australia) and Princess Cruises |
| | |
| Other | 754 | | 550 | | 90 | |
| Total | 13,509 | | 12,460 | | 7,730 | |
Data for 2022 is not representative of a full year of operations.
VI. Cruise Programs
| | | | | | | | | | | | | | | | | |
| Carnival Corporation & plc
Percentage of Passenger Capacity by Itinerary |
| 2025 | | 2024 | | 2023 |
| Caribbean | 34 | % | | 34 | % | | 31 | % |
| Europe without Mediterranean | 16 | | | 17 | | | 17 | |
| Mediterranean | 14 | | | 13 | | | 15 | |
| Alaska | 6 | | | 6 | | | 7 | |
| Australia and New Zealand | 6 | | | 7 | | | 7 | |
| |
| Other | 24 | | | 23 | | | 24 | |
| 100 | % | | 100 | % | | 100 | % |
VII. Cruise Pricing and Payment Terms
Each of our cruise brands establishes pricing for the upcoming seasons which are made available primarily through the internet, although published materials and electronic communications are also used. Prices vary depending on a number of factors, including the source market, category of guest accommodation, ship, season, duration and itinerary. We offer a variety of special promotions, including early booking, past guest recognition and travel agent programs.
Our bookings are generally taken several months in advance of the cruise departure date. Typically, the longer the cruise itinerary, the further in advance the bookings are made. This lead time allows us to manage our prices in relation to guest demand and the number of available cabins through our revenue management capabilities and other initiatives.
The cruise ticket price typically includes the following:
• Accommodations
• Most meals, including snacks at numerous venues
• Access to amenities such as swimming pools, water slides, water parks, whirlpools, a health club, and sun decks
• Childcare and supervised youth programs
• Entertainment, such as theatrical and comedy shows, live music and nightclubs
• Visits to multiple destinations
We offer value added packages to induce ticket sales to guests and groups and to encourage the advance purchase of certain onboard items. These packages are bundled with cruise tickets and sold to guests for a single price rather than as a separate package and may include one or more of the following:
| | | | | |
| • Beverage packages | • Internet packages |
| • Shore excursions | • Photo packages |
| • Air packages | • Onboard spending credits |
| • Specialty restaurants | • Service charges |
Our brands’ payment terms generally require that a guest pay a deposit to confirm their reservation and then pay the balance due before the departure date.
VIII. Seasonality
Our passenger ticket revenues are seasonal. Demand for cruises has been greatest during our third quarter, which includes the Northern Hemisphere summer months. This higher demand during the third quarter results in higher ticket prices and occupancy levels and, accordingly, the largest share of our operating income is typically earned during this period. Our results are also impacted by ships being taken out-of-service for planned maintenance, which we schedule during non-peak seasons. In addition, substantially all of Holland America Princess Alaska Tours’ revenue and operating income is generated from May through September in conjunction with Alaska’s cruise season.
IX. Onboard and Other Revenues
Onboard and other activities are provided either directly by us or by independent concessionaires, from which we receive either a percentage of their revenues or a fee. Concession revenues do not have direct expenses because the costs and services incurred for concession revenues are borne by our concessionaires. In 2024, we earned 34% of our cruise revenues from onboard and other revenue goods and services including: | | | | | |
• Beverage sales | • Internet and communication services |
• Casino gaming | • Full-service spas |
• Shore excursions | • Specialty restaurants |
• Retail sales | • Art sales |
• Photo sales | • Laundry and dry-cleaning services |
X. Port Destinations and Exclusive Islands
We operate a portfolio of port destinations and exclusive islands enabling us to offer exceptional experiences to 6.5 million guests by creating a wide variety of high-quality destinations that are uniquely tailored to our guests’ preferences. In addition, to secure preferential berth access to third-party ports, we enter into berthing agreements and commitments.
We recently announced plans to enhance Half Moon Cay, our highly rated and award-winning exclusive Bahamian destination. The enhancements will lean further into this destination’s natural beauty and pristine appeal, reinforcing its new name – RelaxAway, Half Moon Cay. Featuring a newly constructed pier that is expected to open in the summer of 2026, the destination will allow two ships to dock, including Carnival Cruise Line’s largest ships that will be able to visit for the first time.
During 2024, we continued construction on our new exclusive cruise port destination, Celebration Key, which is expected to open in the summer of 2025, with an additional pier opening in the fall of 2026. Celebration Key, located on the south side of Grand Bahama Island, will welcome guests to a stunning beach and further expands our experience offerings with an abundance of features and amenities for our guests. Once the additional pier is completed, Celebration Key will be able to accommodate up to four of our cruise ships simultaneously. Additionally, our investment in Celebration Key will support our efforts to design more energy efficient itineraries based on its location and will be a strategic addition to our current portfolio of six owned or operated ports and destinations:
•Puerta Maya in Cozumel, Mexico
•Grand Turk Cruise Center in Turks & Caicos
•Mahogany Bay in Isla Roatan, Honduras
•Amber Cove in the Dominican Republic
•RelaxAway, Half Moon Cay, an exclusive island in The Bahamas
•Princess Cays, an exclusive island in The Bahamas
XI. Marketing Activities
Guest feedback and research support the development of our overall marketing and business strategies to drive demand for cruises and increase the number of first-time cruisers. Our goal has always been to increase consumer awareness for cruise vacations and further grow our share of their vacation spend. We proactively gather and evaluate guest feedback about their cruise experiences for valuable insights on key drivers of guest loyalty and satisfaction, with a focus on continuous improvement. We closely monitor our net promoter scores, which reflect the likelihood that our guests will recommend our brands’ cruise products and services to friends and family, including those new-to-cruise.
During 2024, we increased our marketing and advertising programs, driving even greater demand across our portfolio of world-class cruise lines. Each of our cruise lines is focused on creating further brand differentiation and clarity around its unique value proposition, executing on a range of carefully targeted, results-driven marketing and advertising programs to reach its optimal market segment of new and loyal guests and travel agent partners. Among these programs are increasingly effective digital performance marketing and lead generation approaches that have attracted new guests online by leveraging the reach and impact of digital marketing and social media. We have also invested in new marketing technologies to deliver more engaging and personalized communications, further enhancing their effectiveness. Collectively through these programs, we have cultivated cruising advocates creating word-of-mouth demand and preference for our brands, ships, itineraries and onboard products and services.
In addition, substantially all of our cruise brands offer guest loyalty and recognition programs that motivate future purchases from our repeat guests. Each brand strategically leverages its catalog of demand-generating rewards and incentives to bring repeat guests back time and again with finely honed offers, such as special fares, onboard activity discounts, complimentary laundry and internet services, expedited ship embarkation and disembarkation and special onboard activities.
XII. Sales Channels
We sell our cruises through travel agents, tour operators, company vacation planners, our websites and onboard future cruise consultants. Our individual cruise brands’ relationships with their travel agent partners are generally independent of each of our other brands. Our travel agents’ relationships are generally not exclusive and travel agents generally receive a base commission, plus the potential of additional commissions, including discounts or complimentary tour conductor cabins, based on the achievement of pre-defined sales terms.
Travel agent partners are an integral part of our long-term cruise distribution network and are critical to our success. We utilize local sales teams to motivate travel agents to support our products and services with competitive pricing, promotional policies
and joint marketing and advertising programs. During 2024, no group of travel agencies under common control accounted for 10% or more of our revenues. We also employ a wide variety of educational programs, including websites, seminars and videos, to train agents on our cruise brands and their products and services. In 2024, we held a variety of trainings and educational programs to continue to support and develop our travel agent partners, including ship visits to familiarize our travel agent partners with our products and services.
All of our brands have internet booking engines to allow travel agents to book our cruises. Additionally, all of our cruise brands have their own consumer websites that provide access to information about their products and services to users and enable their guests to quickly and easily book cruises and other products and services online. These sites interface with our brands’ social networks, blogs and other social media sites, which allow them to develop greater contact and interaction with their guests before, during and after their cruise. We also employ vacation planners and onboard future cruise consultants who support our sales initiatives by offering our guests one-on-one cruise planning expertise and other services.
XIII. Suppliers
To provide an exceptional cruise experience for our guests, we source significant quantities of goods and services from a global supply base. In addition, we incur significant capital expenditures for materials to support the refurbishment and enhancements of our vessels as well as to build new ships. We approach our spend strategically and look for suppliers who demonstrate the ability to help us leverage our scale in terms of cost, quality, service, innovation and sustainability. Our supply base is diverse and many of our suppliers provide goods and services across our portfolio of brands. We have continued to map our supply chains and evaluate risks, including the categories of products and services sourced and their geographic locations.
We strive to build strong relationships with our suppliers based on shared values. Our Business Partner Code of Conduct applies to all of our suppliers and other business partners. It outlines our expectation that our suppliers will respect and follow applicable laws and regulations and promote ethical decisions in all aspects of their business. We have also established a Responsible and Sustainable Sourcing Policy (“RSSP”) that builds on existing policies, such as our Business Partner Code of Conduct, and our human rights and environmental policies. RSSP establishes a framework that helps us monitor compliance with our standards and helps our business partners, including suppliers, meet our requirements for compliance and progress towards industry best practices. It is designed to ensure that our sourcing practices align with our values of social responsibility and environmental stewardship. RSSP addresses labor, environmental, business ethics, management systems and health and safety risks. It also covers sustainability priorities such as sustainable food ingredients, animal welfare and sustainable shore excursions.
In recent years, global supply markets and supply chains have been impacted by certain global events and increased inflation, impacting our operations and profitability. While we have experienced stabilization in supply markets and easing of inflation, we continue to apply a number of different strategies to mitigate the impact of these challenges on our operations, including extending our demand planning, placing purchase orders earlier to secure supply, leveraging our enterprise scale through corporate-wide agreements, utilizing short-term or long-term contracts as needed, seeking alternative sources, utilizing substitute products and leveraging our supplier relationships.
XIV. Human Capital Management and Employees
Our shipboard and shoreside employees are sourced from approximately 150 countries. In 2024, we had an average of 100,000 employees onboard our ships, excluding employees on leave. Our shoreside operations had an annual average of 12,000 full-time and 3,000 part-time/seasonal employees. Holland America Princess Alaska Tours significantly increases its work force during the late spring and summer months in connection with Alaska’s cruise season.
We have entered into agreements with unions covering certain employees on our ships and in our shoreside hotel and transportation operations. The percentages of our shipboard and shoreside employees that are represented by collective bargaining agreements are 52% and 22%, respectively. We consider our employee and union relationships to be strong.
A team of highly motivated and engaged employees is key to providing extraordinary cruise vacations. To facilitate the recruitment, development and retention of our valuable employees, we strive to make Carnival Corporation & plc a diverse, inclusive and safe workplace, with opportunities for our employees to grow and develop in their careers.
a.Talent Development
We believe in investing in our team members through the training and development of both shoreside and shipboard team members. We facilitate trainings to ensure that our teams are well-prepared to carry out their individual and collective responsibilities. For our shipboard team members, our goal is to be a leader in delivering high quality professional maritime training, as evidenced by the Arison Maritime Center. The Center is home to the Center for Simulator Maritime Training (“CSMART”). The leading-edge CSMART Academy features the most advanced bridge and engine room simulator technology and equipment available, with the capacity to provide annual professional training for all our bridge, engineering and environmental officers. CSMART participants receive a maritime training experience that fosters advanced knowledge and skills development, critical thinking and problem solving; all in a professional learning environment where our corporate culture is reinforced. CSMART also offers training related to liquefied natural gas (“LNG”) technology as well as an environmental officer training program and additional environmental courses for bridge and engineering officers to further enhance our training on environmental awareness and protection.
b.Succession Planning
Our Boards of Directors believe that planning for succession is an important function. Our multi-brand structure enhances our succession planning process. We continually strive to foster the professional development of management and team members. As a result, we have developed a very experienced and strong group of leaders, with their performance subject to ongoing monitoring and evaluation, as potential successors to our senior management, including our Chief Executive Officer (“CEO”).
XV. Ethics and Compliance
We believe a strong ethics and compliance culture is imperative for the success of any company. Our compliance framework includes a Global Ethics and Compliance (“Global E&C”) department, which is led by our Chief Risk and Compliance Officer who leads the effort to promote and monitor a strong ethics and compliance culture throughout the company. The main responsibilities of the Global E&C department are to collaboratively:
•Identify, assess, monitor, prevent, detect and report on compliance risk
•Ensure compliance accountabilities and responsibilities are clear across the company
•Promote a strong culture of ethics and compliance
•Drive ethics and compliance continuous improvements
To further heighten the focus on ethics and compliance, our Boards of Directors have Compliance Committees, which oversee the Global E&C department and maintain regular communications with our Chief Risk and Compliance Officer.
XVI. Insurance
a.General
We maintain insurance to cover a number of risks associated with owning and operating our vessels and other non-ship related risks. All such insurance policies are subject to coverage limits, exclusions and deductible levels. Insurance premiums are dependent on our own loss experience and the general premium requirements of our insurers. We maintain certain levels of deductibles for substantially all the below-mentioned coverages. We may increase our deductibles to mitigate future premium increases. We do not carry coverage related to loss of earnings or revenues from our ships or other operations.
b.Protection and Indemnity (“P&I”) Coverages
Liabilities, costs and expenses for illness and injury to crew, guest injury, pollution and other third-party claims in connection with our cruise activities are covered by our P&I clubs, which are mutual indemnity associations owned by ship owners.
We are members of three P&I clubs, Gard, Steamship Mutual and UK Club, which are part of a worldwide group of 12 P&I clubs, known as the International Group of P&I Clubs (the “IG”). The IG insures directly, and through broad and established reinsurance markets, a large portion of the world’s shipping fleets. Coverage is subject to the P&I clubs’ rules and the limits of coverage are determined by the IG.
c.Hull and Machinery Insurance
We maintain insurance on the hull and machinery of each of our ships for reasonable amounts as determined by management. The coverage for hull and machinery is provided by large and well-established international marine insurers. Insurers make it a condition for insurance coverage that a ship be certified as “in class” by a classification society that is a member of the International Association of Classification Societies (“IACS”). All of our ships are routinely inspected and certified to be in class by an IACS member.
d.War Risk Insurance
We use a combination of insurance and self-insurance to cover war risk for legal liability to crew, guests and other third parties as well as loss or damage to our vessels arising from war or war-like actions. Our primary war risk insurance coverage is provided by international marine insurers and our excess war risk insurance is provided by our three P&I clubs. Under the terms of our war risk insurance coverage, which are typical for war risk policies in the marine industry, insurers can give us no less than three days’ notice that the insurance policies will be canceled. However, the policies may be reinstated at different premium rates.
e.Other Insurance
We maintain property insurance covering our shoreside assets and casualty insurance covering liabilities to third parties arising from our hotel and transportation business, shore excursion operations and shoreside operations, including our port and related commercial facilities. We also maintain workers’ compensation, director’s and officer’s liability and other insurance coverages.
XVII. Taxation
A summary of our principal taxes and exemptions in the jurisdictions where our significant operations are located is as follows:
a.U.S. Income Tax
We are primarily foreign corporations engaged in the business of operating cruise ships in international transportation. We also own and operate, among other businesses, the U.S. hotel and transportation business of Holland America Princess Alaska Tours through U.S. corporations.
Our North American cruise ship businesses and certain ship-owning subsidiaries are engaged in a trade or business within the U.S. Depending on its itinerary, any particular ship may generate income from sources within the U.S. We believe that our U.S. source income and the income of our ship-owning subsidiaries, to the extent derived from, or incidental to, the international operation of a ship or ships, is exempt from U.S. federal income and branch profit taxes.
Our domestic U.S. operations, principally the hotel and transportation business of Holland America Princess Alaska Tours, are subject to federal and state income taxation in the U.S.
1.Application of Section 883 of the Internal Revenue Code
In general, under Section 883 of the Internal Revenue Code, certain non-U.S. corporations (such as our North American cruise ship businesses) are not subject to U.S. federal income tax or branch profits tax on U.S. source income derived from, or incidental to, the international operation of a ship or ships. Applicable U.S. Treasury regulations provide in general that a foreign corporation will qualify for the benefits of Section 883 if, in relevant part, (i) the foreign country in which the foreign corporation is organized grants an equivalent exemption to corporations organized in the U.S. in respect of each category of shipping income for which an exemption is being claimed under Section 883 (an “equivalent exemption jurisdiction”) and (ii) the foreign corporation meets a defined publicly-traded corporation stock ownership test (the “publicly-traded test”). Subsidiaries of foreign corporations that are organized in an equivalent exemption jurisdiction and meet the publicly-traded test also benefit from Section 883. We believe that Panama is an equivalent exemption jurisdiction and that Carnival Corporation currently satisfies the publicly-traded test under the regulations. Accordingly, substantially all of Carnival Corporation’s income is exempt from U.S. federal income and branch profit taxes.
Regulations under Section 883 list certain activities that the Internal Revenue Service (“IRS”) does not consider to be incidental to the international operation of ships and, therefore, the income attributable to such activities, to the extent such income is U.S. source, does not qualify for the Section 883 exemption. Among the activities identified as not incidental are income from the
sale of air transportation, transfers, shore excursions and pre- and post-cruise land packages to the extent earned from sources within the U.S.
2.Exemption Under Applicable Income Tax Treaties
We believe that the U.S. source transportation income earned by Carnival plc and its subsidiaries qualifies for exemption from U.S. federal income tax under applicable bilateral U.S. income tax treaties.
3.U.S. State Income Tax
Carnival Corporation, Carnival plc and certain subsidiaries are subject to various U.S. state income taxes generally imposed on each state’s portion of the U.S. source income subject to U.S. federal income taxes. However, the state of Alaska imposes an income tax on its allocated portion of the total income of our companies doing business in Alaska and certain of their subsidiaries.
b.UK and Australian Income Tax
Cunard, P&O Cruises (UK) and P&O Cruises (Australia) are divisions of Carnival plc and have elected to enter the UK tonnage tax regime under a rolling ten-year term and, accordingly, reapply every year. Companies to which the tonnage tax regime applies pay corporation taxes on profits calculated by reference to the net tonnage of qualifying ships. UK corporation tax is not chargeable under the normal UK tax rules on these brands’ relevant shipping income. Relevant shipping income includes income from the operation of qualifying ships and from shipping related activities.
For a company to be eligible for the regime, it must be subject to UK corporation tax and, among other matters, operate qualifying ships that are strategically and commercially managed in the UK. Companies within the UK tonnage tax regime are also subject to a seafarer training requirement.
Our UK non-shipping activities that do not qualify under the UK tonnage tax regime remain subject to normal UK corporation tax.
P&O Cruises (Australia) and all of the other cruise ships operated internationally by Carnival plc for the cruise segment of the Australian vacation region are exempt from Australian corporation tax by virtue of the UK/Australian income tax treaty.
c.Italian and German Income Tax
In December 2024, the European Commission formally approved the Italian tonnage tax rules for 10 years. In 2025, Costa and AIDA will elect to remain in the Italian tonnage tax regime through 2034. Companies to which the tonnage tax regime applies pay corporation taxes on shipping profits calculated by reference to the net tonnage of qualifying ships.
Our non-shipping activities that do not qualify under the Italian tonnage tax regime remain subject to normal Italian corporation tax.
Substantially all of AIDA’s earnings are exempt from German income taxes by virtue of the Germany/Italy income tax treaty.
d. Global Minimum Tax
The Organization for Economic Co-operation and Development (“OECD”) issued Model Rules for implementation of a 15% minimum tax for multinational enterprises as part of its initiative intended to address the tax challenges arising from globalization. Subject to certain requirements, the OECD Model Rules provide an exclusion for international shipping income.
The implementation of these rules will affect Carnival plc and its subsidiaries beginning in fiscal 2025 and Carnival Corporation and certain of its subsidiaries beginning in fiscal 2026. We expect Carnival plc and its subsidiaries will be eligible for the international shipping income exclusion based on their current structure. Carnival Corporation and certain of its subsidiaries intend to align into a single tax jurisdiction where the international shipping income for its North American brands is also expected to qualify for this exemption. As a result, we do not believe the application of these rules will have a material impact on our consolidated financial statements.
e. Other
In addition to or in place of income taxes, virtually all jurisdictions where our ships call impose taxes, fees and other charges based on guest counts, ship tonnage, passenger capacity or some other measure.
XVIII. Governmental Regulations
a. Maritime Regulations
1. General
Our ships are regulated by numerous international, national, state and local laws, regulations, treaties and other legal requirements, as well as voluntary agreements, which govern health, environmental, safety and security matters in relation to our guests, crew and ships. These requirements change frequently, depending on the itineraries of our ships and the ports and countries visited. If we violate or fail to comply with any of these laws, regulations, treaties and other requirements, we could be fined or otherwise sanctioned by regulators. We are committed to complying with, or exceeding, all relevant requirements.
The primary regulatory bodies that establish maritime laws and requirements applicable to our ships include:
The International Maritime Organization (“IMO”): All of our ships, and the maritime industry as a whole, are subject to the maritime safety, security and environmental regulations established by the IMO, a specialized agency of the United Nations. The IMO’s principal sets of requirements are mandated through its International Convention for the Safety of Life at Sea (“SOLAS”), its International Convention for the Prevention of Pollution from Ships (“MARPOL”) and its International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (“STCW”).
Flag States: Our ships are registered, or flagged, in The Bahamas, Bermuda, Italy, the Netherlands, Panama and the UK, which are also referred to as Flag States. Our ships are regulated by these Flag States through international conventions that govern, among other things, health, environmental, safety and security matters in relation to our guests, crew and ships. Representatives of each Flag State conduct periodic inspections, surveys and audits to verify compliance with these requirements.
Ship classification societies: Class certification is one of the necessary documents required for our ships to be flagged in a specific country, obtain liability insurance and legally operate as passenger cruise ships. Our ships are subject to periodic class surveys, including dry-dock inspections, by ship classification societies to verify that our ships have been maintained in accordance with the rules of the classification societies and that recommended repairs have been satisfactorily completed. Dry-dock frequency is a statutory requirement mandated by SOLAS.
National, regional, and other authorities: We are subject to the decrees, directives, regulations, and requirements of the European Union (“EU”), the UK, the U.S., other countries, and many other authorities, including ports that our ships visit.
Port regulatory authorities (Port State Control): Our ships are also subject to inspection by the port regulatory authorities, which are also referred to as Port State Control, in the various countries that they visit. Such inspections include verification of compliance with the maritime safety, security, environmental, customs, immigration, health and labor requirements applicable to each port, as well as with regional, national and international requirements. Many countries have joined together to form regional Port State Control authorities.
Our Boards of Directors have Health, Environment, Safety and Security (“HESS”) Committees, which were comprised of six independent directors as of November 30, 2024. The principal function of the HESS Committees is to assist the boards in fulfilling their responsibility to supervise and monitor our health, environmental, safety, security and sustainability policies, programs and initiatives at sea and ashore and compliance with related legal and regulatory requirements. The HESS Committees and our management team review significant HESS relevant risks or exposures and associated mitigating actions.
We are committed to implementing appropriate measures to manage identified risks effectively. We have a Chief Maritime Officer to oversee our global maritime operations, including maritime policy, maritime affairs, maritime standards, training, shipbuilding, asset management, health operations, and research and development. In addition, we have a Chief Risk and Compliance Officer who leads the effort to promote and monitor a strong ethics and compliance culture throughout the company, including all areas of HESS.
To help ensure that we are compliant with legal and regulatory requirements and that these areas of our business operate in an efficient and effective manner, we have taken certain actions including, but not limited to:
•Providing regular health, environmental, safety and security support, training, guidance and information to guests, team members and others working on our behalf
•Performing regular shoreside and shipboard audits and taking appropriate action when deficiencies are identified
•Developing, reviewing, and working to improve policies and procedures designed to prevent, detect, respond and correct various regulatory and other violations
•Supporting a comprehensive HESS incident investigation program that is designed to prevent re-occurrence, promote learning, and support continuous improvement
2. Maritime Safety Regulations
The IMO has safety standards as part of SOLAS. To help ensure guest and crew safety, SOLAS establishes requirements for the following: | | | | | |
• Vessel design and structural features | • Life-saving and other equipment |
• Construction and materials | • Fire protection and detection |
• Refurbishment standards | • Safe management and operation |
• Radio communications | • Musters |
All of our crew undergo regular safety training that meets or exceeds all international maritime regulations, including SOLAS requirements, which are periodically revised. Additionally, we have implemented and continue to develop policies and procedures that we believe enhance our commitment to the safety of our guests and crew.
SOLAS requires implementation of the International Safety Management Code (“ISM Code”), which provides an international standard for the safe management and operation of ships and for pollution prevention. The ISM Code is mandatory for passenger vessel operators. Under the ISM Code, vessel operators are required to:
•Develop and implement a Safety Management System (“SMS”) that includes, among other things, the adoption of safety and environmental protection policies setting forth instructions and procedures for operating vessels safely and describing procedures for responding to emergencies and protecting the environment. In addition, our SMS includes health and security procedures
•Obtain a Document of Compliance (“DOC”) for the vessel operator, as well as a Safety Management Certificate (“SMC”) for each vessel they operate. These documents are issued by the vessel’s Flag State and evidence compliance with the ISM Code and the SMS
•Verify or renew DOCs and SMCs periodically in accordance with the ISM Code
All our ships are regularly audited by our various national authorities, and we are required to maintain the relevant certificates of compliance with the ISM Code.
3. Maritime Security Regulations
Our ships are subject to numerous security requirements. These requirements include the International Ship and Port Facility Security Code, which is part of SOLAS, the U.S. Maritime Transportation Security Act of 2002, which addresses U.S. port and waterway security and the U.S. Cruise Vessel Security and Safety Act of 2010, which applies to all of our ships that embark or disembark passengers in the U.S. These regulations include requirements as to the following:
•Implementation of specific security measures, including onboard installation of a ship security alert system
•Assessment of vessel security
•Efforts to identify and deter security threats
•Training, drills and exercises
•Security plans that may include guest, vehicle and baggage screening procedures, security patrols, establishment of restricted areas, personnel identification procedures, access control measures and installation of surveillance equipment
•Establishment of procedures and policies for reporting and managing allegations of crimes
4. Maritime Environmental Regulations
We are subject to numerous international, multi-national, national, state and local environmental laws, regulations and treaties that govern air emissions, waste management, and the storage, handling, use and disposal of hazardous substances such as chemicals, solvents and paints.
As a means of managing and improving our environmental performance and compliance, we adhere to standards set by the International Organization for Standardization (“ISO”), an international standard-setting body, which produces worldwide industrial and commercial standards. The environmental management system of our company and ships is certified in accordance with ISO 14001, the environmental management standard that was developed to help organizations manage the environmental impacts of their processes, products and services.
i. International Regulations
The principal international convention governing marine pollution prevention and response is MARPOL.
a. Preventing and Minimizing Pollution
MARPOL includes six annexes, four of which are applicable to our cruise ships, containing requirements designed to prevent and minimize both accidental and operational pollution by oil, sewage, garbage and air emissions and the provision of facilities at ports and terminals for the reception of sewage and sets forth specific requirements related to vessel operations, equipment, recordkeeping and reporting that are designed to prevent and minimize pollution. All our ships must carry an International Oil Pollution Prevention Certificate, an International Sewage Pollution Prevention Certificate, an International Air Pollution Prevention Certificate and a Garbage Management Plan. Administrative, civil and criminal penalties may be assessed for violations. The ship’s Flag State issues these certificates, which evidence their compliance with the MARPOL regulations regarding prevention of pollution by oil, sewage, garbage and air emissions. Certain jurisdictions have not adopted all of these MARPOL annexes but have established various national, regional or local laws and regulations that apply to these areas.
MARPOL requires that discharges of machinery space bilge water pass through pollution prevention equipment that separates oil from the water and monitors the discharged water to ensure that the effluent does not exceed 15 parts per million oil content. Our ships have oily water separators with oil content monitors installed and maintain a record of certain engine room operations in an Oil Record Book. In addition, we have voluntarily installed redundant systems on all our ships that monitor processed bilge water a second time prior to discharge to help ensure that it contains no more than 15 parts per million oil content. This system also provides additional controls to prevent improper bilge water discharges. MARPOL also requires that our ships have Shipboard Oil Pollution Emergency Plans.
Furthermore, MARPOL addresses air emissions from vessels, establishes requirements for the prevention of air pollution from ships to reduce emissions of sulfur oxides (“SOx”), nitrogen oxides (“NOx”), particulate matter and greenhouse gases (“GHG”) emissions. It also contains restrictions on the use of ozone depleting substances (“ODS”) and requires the recording of ODS use, equipment containing ODS and the emission of ODS.
b. Sulfur Emissions
The IMO adopted a global 0.5% sulfur cap for marine fuel which began in January 2020. The EU Parliament and Council also adopted 0.5% sulfur content fuel requirement (the “EU Sulfur Directive”). The options to comply with both the global 0.5% sulfur cap and the EU Sulfur Directive include the installation and use of Advanced Air Quality Systems, or the use of low sulfur or alternative fuels.
MARPOL addresses air emissions from both auxiliary and main propulsion diesel engines on ships and further specifies requirements for Emission Control Areas (“ECAs”) with stricter limitations on sulfur emissions content in these areas, requiring ships to use fuel with a sulfur content of no more than 0.1%, or to use alternative emission reduction methods, such as Advanced Air Quality Systems.
We have Advanced Air Quality Systems on most of our ships, which are aiding in partially mitigating the financial impact from the ECAs and global sulfur requirements. We use Advanced Air Quality Systems wherever possible subject to local laws and regulations. Additionally, Advanced Air Quality Systems used with heavy fuel oil (“HFO”) result in as good or better SOx, NOx and particulate emissions compared to marine gasoil (“MGO”).
c. Greenhouse Gas Emissions
The IMO has established technical and operational measures for all ships that are intended to improve energy efficiency and reduce GHG emissions from international shipping. The technical measures apply to the design of new vessels and the operational measures apply to all vessels.
The IMO mandates a data collection system (“DCS”) for reporting fuel oil consumption. The DCS requires ships of 5,000 gross tons and above to provide fuel consumption data to their respective Flag State at the end of each calendar year. Flag States validate the data and transfer it to a database and the IMO produces a summary annual report. In January 2023, MARPOL changes in support of the IMO’s GHG emission reduction goals went into effect and include an operational measure called the Carbon Intensity Indicator (“CII”), an annual ship-level CO2 intensity emissions performance measure, and a technical measure called the Energy Efficiency Existing Ship Index (“EEXI”), a one-off measure similar to the Energy Efficiency Design Index (“EEDI”) for newbuilds, that confirms for a specific condition that a ship meets a target CO2 emission intensity. The EEXI has not had a material impact and the impact for CII is uncertain as it remains under review and the enforcement mechanism of the regulation is still to be defined. The IMO’s 2023 Strategy on Reduction of GHG Emissions from Ships (“IMO Strategy”) strives to peak GHG emissions from international shipping as soon as possible and to reach net zero GHG emissions on a well-to-wake basis by or around 2050. The IMO Strategy includes checkpoints in 2030 and 2040 that seek reductions in the absolute GHG emissions from international shipping by at least 20% and 70%, respectively, compared to 2008. It also includes a target of a 40% reduction in CO2 emissions intensity by 2030 compared to 2008. The IMO Strategy includes a range of measures planned for implementation in 2027, including fuel standards and market-based measures that could result in changes to itineraries or increased compliance related costs for which the impact is uncertain and may individually and collectively have a material impact on our profitability.
d. Ballast Water
Ballast water is water used to stabilize ships at sea and maintain safe operating conditions throughout a voyage. Ballast water can carry a multitude of marine species. The IMO’s Ballast Water Management Convention governs the discharge of ballast water from ships and requires the installation of ballast water management systems for existing ships. The convention also sets forth requirements for ballast water exchange, record keeping, and maintaining an approved Ballast Water Management Plan. The Convention is designed to regulate the treatment of ballast water prior to discharging overboard in order to avoid the transfer of marine species to new environments, as well as establishing other ballast water management practices for monitoring and environmental protection.
ii. U.S. Federal and State Regulations
The Oil Pollution Act of 1990 (“OPA 90”) established a comprehensive federal liability regime, as well as prevention and response requirements, relating to discharges of oil in U.S. waters. The major requirements include demonstrating financial responsibility up to the liability limits set by OPA 90 and having oil spill response plans in place. We have Certificates of Financial Responsibility (“COFR”) that demonstrate our ability to meet the liability limits of OPA 90 and covers releases of hazardous materials. It is possible, however, for our liability limits to be broken, which could expose us to unlimited liability. As OPA 90 expressly allows coastal states to impose liabilities and requirements beyond those imposed under federal law, many U.S. states have enacted laws more stringent than OPA 90. Some of these state laws impose unlimited liability for oil spills and contain more stringent financial responsibility and contingency planning requirements. Most coastal states have also enacted environmental regulations that impose strict liability for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance, similar to OPA 90.
The Clean Water Act (“CWA”) provides the U.S. Environmental Protection Agency (“EPA”) with the authority to regulate incidental discharges from commercial vessels, including discharges of ballast water, bilge water, gray water, anti-fouling paints and other substances during normal operations within the U.S. three-mile territorial sea and inland waters. Pursuant to the CWA authority, the U.S. National Pollutant Discharge Elimination System was designed to minimize pollution within U.S. territorial waters. For our affected ships, the incidental discharge requirements are set forth in EPA’s Vessel General Permit (“VGP”) for discharges incidental to the normal operations of vessels. The VGP establishes effluent limits for specific discharges incidental to the normal operation of a vessel, many of which apply to our cruise ships. In addition to the requirements associated with these discharges and more stringent vessel-specific requirements, the VGP includes requirements for inspections, monitoring, reporting and record-keeping.
The National Invasive Species Act (“NISA”) gives the U.S. Coast Guard (“USCG”) the authority to establish U.S. ballast water management requirements to prevent the spread of invasive species. Pursuant to NISA, the USCG issued ballast water
regulations which include requirements for ballast water management (including type-approved ballast water management systems), monitoring, record-keeping and reporting.
In 2018, the Vessel Incidental Discharge Act (“VIDA”) was signed into law and was intended to clarify and streamline discharge requirements for the incidental discharges covered by the VGP and USCG ballast water regulations. In October 2024, the EPA published the final rule on the VIDA National Standards of Performance. The VIDA requires the USCG to develop corresponding implementation, compliance and enforcement regulations within two years. Until the USCG regulations are final, effective and enforceable, vessels continue to be subject to the existing discharge requirements established in the VGP and the USCG’s ballast water regulations, as well as any other applicable state and local government requirements.
The National Marine Sanctuaries Act provides the National Oceanic and Atmospheric Association with the authority to identify, designate and protect marine areas with special national significance. There are currently 17 National Marine Sanctuaries and two Marine National Monuments in force, some of which are transited through by our ships. Each area is governed by site-specific requirements that prohibit most discharges from ships.
The state of Alaska requires permitting for certain discharges from cruise ships in designated Alaskan waters. Further, the state of Alaska requires that certain discharges be reported and monitored to verify compliance with standards and repeat violators of the regulations could be prohibited from operating in Alaskan waters. Environmental regimes in Alaska are more stringent than the U.S. federal requirements with regard to discharges from vessels. The state of California also has environmental requirements significantly more stringent than federal requirements for water discharges and air emissions.
iii. EU and EU Member State Regulations
The EU has adopted a broad range of substantial environmental measures aimed at improving the quality of the environment. To support the implementation and enforcement of European environmental legislation, the EU has adopted directives on environmental liability and enforcement and a recommendation providing for minimum criteria for environmental inspections.
The European Commission’s (“EC”) strategy is to reduce emissions from ships. The EC strategy seeks to implement SOx Emission Control Areas set out in MARPOL, as discussed above via their own Sulfur Directive.
The EC has also implemented regulations aimed at reducing GHG emissions from maritime shipping through a Monitoring, Reporting and Verification regulation, which involves collecting emissions data from ships over 5,000 gross tons to monitor and report GHG emissions on all voyages to, from and between European Union ports.
The EU adopted a series of significant reforms as a part of its Fit for 55 package to meet its 2030 emissions reduction goal. The main instruments for reducing emissions are the Emissions Trading System (“ETS”), FuelEU Maritime regulation and the Energy Taxation Directive (“ETD”) as well as amendments to the alternative fuels infrastructure and renewable energy directives.
The ETS regulates emissions through a “cap and trade” principle, where a cap is set on the total amount of certain emissions that can be emitted. The maritime shipping sector is included in the scope of ETS effective January 2024 and requires ships to procure emission allowances covering 40% of their 2024 emissions inside EU waters to be surrendered in 2025, 70% of 2025 emissions to be surrendered in 2026 and 100% of annual emissions thereafter, to be surrendered in the following year. The 2024 cost of the ETS regulations was $46 million.
The FuelEU Maritime regulation, which became effective in January 2025, is a long-term framework designed to reduce maritime emissions by increasing the use of sustainable alternative fuels and, for container and passenger ships (including cruise ships), the use of shore power. The regulation requires compliance with the maximum limits of GHG intensity of energy used on board. The stringency of these limits increases over time, and there are financial penalties for non-compliance. The regulation also includes requirements for ships to connect to shore power when at EU ports. We estimate the 2025 impact of complying with the FuelEU Maritime regulation to be approximately $10 to $15 million.
The ETD is a framework for the taxation of energy products and sets minimum rates of excise duty to encourage a low carbon economy. Proposed amendments to the ETD will introduce new tax rates based on the energy content and environmental impact rather than volume. If adopted, these amendments will also widen the directive to include maritime fuels, which were previously exempt. To date, there is no timeline for adoption of these amendments.
Norway has and is considering additional regulations that supersede IMO requirements for certain air emissions from vessels. For example, all ships operating in the Norwegian World Heritage Fjords (“WHF”) must meet IMO Tier III NOx requirements
by January 1, 2025. Additionally, Norway has proposed that large ships operating in the WHF may not emit any GHG starting in 2032. Norway is also currently considering a carbon tax on fuel bunkered by international shipping in Norway.
The exact impact of the Fit for 55 and the Norwegian WHF regulations are uncertain as elements of the proposals have not yet been finalized and enacted and will depend on future deployments.
5. Maritime Health Regulations
We are committed to providing a healthy environment for all of our guests and crew. We collaborate with public health inspection programs throughout the world, such as the Centers for Disease Control and Prevention (“CDC”) in the U.S. and the SHIPSAN Project in the EU, to ensure that development of these programs leads to enhanced health and hygiene onboard our ships. Through our collaborative efforts, we work with the authorities to develop and revise guidelines, review plans and conduct on-site inspections for all newbuilds and significant ship renovations. We work closely with governments and health authorities around the world to ensure that our health and safety protocols comply with the requirements of each location. In addition, we continue to maintain our ships by meeting, and often exceeding, applicable public health guidelines and requirements, complying with inspections, reporting communicable illnesses and conducting regular crew training and guest education programs.
6. Maritime Labor Regulations
The International Labor Organization develops and oversees international labor standards and includes a broad range of requirements, such as the definition of a seafarer, minimum age of seafarers, medical certificates, recruitment practices, training, repatriation, food, recreational facilities, health and welfare, hours of work and rest, accommodations, wages and entitlements.
The STCW, as amended, establishes additional minimum standards relating to training, including security training, certification and watchkeeping for our seafarers.
b. Other Governmental Regulations
Compliance with GHG regulations and the associated potential cost is complicated by the fact that various countries and regions are following different approaches to climate-related regulations.
In most countries where we source the majority of our guests, we are required to establish financial responsibility, such as obtaining a guarantee from stable financial institutions and insurance companies, to satisfy liability in cases of our non-performance of obligations to our guests. The amount of financial responsibility varies by jurisdiction based on the amount mandated by the applicable local legislation, regulatory agency or association.
In Australia and most of Europe, we may be obligated to honor our guests’ cruise payments made by them to their travel agents and tour operators regardless of whether we receive these payments.
In addition, the UK plans to include domestic shipping under its national ETS beginning in January 2026. To date, they have proposed that the domestic legs and port calls of ships engaged in international voyages will be included, consultations with stakeholders is ongoing.
We are, or may in the future become, subject to other laws and regulations which require our compliance, including those addressing antitrust, anti-money laundering, bribery, corruption, data privacy, human rights, securities and sanctions, reporting on sustainability matters, as well as human resources related matters.
XIX. Sustainability
We strive to be a desirable workplace and a model global corporate citizen. Our efforts to ensure the safety and well-being of our guests and crew, protect the environment, create opportunities for our workforce, build strong stakeholder relationships and support the communities we operate in and visit, reflect our core values and are key to our success.
In 2021, we established goals for 2030 which incorporate six focus areas listed below that align with elements of the United Nation’s Sustainable Development Goals and build on the momentum of our successful achievement of our 2020 sustainability goals. Since then, we have achieved several goals ahead of schedule, accelerated the timeline of others and established intermediate goals. During 2024, we conducted a comprehensive review of our 2030 sustainability goals to align with our ongoing vision and progress. This review included revising existing goals, setting new targets, and retiring goals that have already been achieved. The enhancement of our sustainability road map reflects our adaptive approach to addressing evolving environmental and social challenges, both globally and within the cruise industry.
•Climate Action
•Circular Economy
•Good Health and Well-Being
•Sustainable Tourism
•Biodiversity and Conservation
•Inclusion and Belonging
We voluntarily publish Sustainability Reports that address governance, stakeholder engagement, environmental, labor, human rights, society, product responsibility, economic and other sustainability-related issues and performance indicators. These reports are not incorporated in this document and can be viewed at www.carnivalcorp.com, www.carnivalplc.com and www.carnivalsustainability.com. For further information on our 2030 sustainability goals, refer to our Sustainability Report.
We have developed a four-part strategy to help us achieve our climate action goals as follows:
•Fleet optimization: delivering larger, more efficient ships as part of our ongoing newbuild program, some of which may replace existing ships in our fleet
•Energy efficiency: continuing to improve our existing fleet’s energy efficiency through investment in projects such as service power packages (or power saver packs), air lubrication systems and expanding shore power capabilities to leverage renewable energy sources while in port, where available
•Itinerary efficiency: designing more energy-efficient itineraries, focusing on operational execution and investing in port and destination projects in strategic locations
•New technologies and alternative fuels: investing in a first-of-its-kind lithium-ion battery storage system and assessing carbon capture and storage. We also support alternative fuels including biofuels such as bio-methane and bio-methanol, as well as synthetic or e-fuels such as e-methane and e-methanol, which we are assessing as future low GHG emission fuel options for our ships
We are working to further reduce our absolute GHG emissions. We reduced our absolute GHG emissions from ship fuel by approximately 11% as compared to our peak year of 2011 despite capacity growth of nearly 37% over the same period. Additionally, we are pursuing our aspiration of net zero emissions by 2050, aligned with the revised IMO Strategy. Achieving this goal will require energy sources and technologies that do not yet exist at scale. While fossil fuels are currently the only scalable and commercially viable option for our industry, we are closely monitoring technology developments and pioneering important sustainability initiatives in the cruise industry. We have leveraged third party studies and partnered with companies and other organizations to help identify and scale new technologies. For example, we implemented maritime scale battery technology and are working with classification societies and other stakeholders to assess lower GHG emission fuel options for cruise ships and assessing carbon capture and storage technologies. We have successfully used biofuel as a replacement for fossil fuel on 6 ships. The certified biofuels used offer environmental benefits compared to using fossil fuels alone through their lifecycle GHG reductions. These biofuels can be used in existing ship engines without modifications to the engine or fuel infrastructure, including on ships already in service. To provide a path to net zero emissions, alternative low GHG emission fuels will be necessary for the maritime industry; however, there are significant supply and cost challenges that must be resolved before viability is reached. Without clarity on low and zero carbon fuel availability, we are not currently able to make absolute emissions reduction commitments along a prescribed timeline. In our view, a commitment to achieve an absolute greenhouse gas emission reduction pathway without a clear understanding of how this will be achieved is not aligned with our approach to goal setting. While we continue to pursue our aspiration of net zero emissions, our defined goals and targets are set based on feasible, achievable, and available pathways.
We continue to implement Service Power Packages (or Power Saver Packs), a comprehensive set of technology upgrades, which will be completed over the next several years across a portion of the fleet. These upgrades include the following elements designed to reduce both fuel usage and GHG emissions while also contributing to cost savings:
•Comprehensive upgrades to each ship’s hotel HVAC (heating, ventilation, and air conditioning) systems
•LED lighting systems
•Remote monitoring and optimization of energy usage and performance
Service Power Package (or Power Saver Packs) upgrades are the main part of our ongoing energy efficiency investment program and are expected to further improve energy savings and reduce fuel consumption. Upon completion, these upgrades are expected to deliver approximately 5% fuel savings per ship.
We have ten Air Lubrication Systems (“ALS”) operating in our fleet as of November 30, 2024 and have additional installations in progress and planned for the future. ALS cushions the flat bottom of a ship’s hull with air bubbles, which reduces the ship’s frictional resistance and the propulsive power required to drive the ship through the water and generate approximately 5% savings in fuel consumption for propulsion and reductions in GHG emissions on ALS equipped ships when operating in a specific speed range.
We have ten LNG powered cruise ships in operation as of November 30, 2024, which represent nearly 20% of our fleet capacity and six more that are expected to join the fleet through 2033.
While LNG is a fossil fuel and generates GHG emissions, its direct CO2 emissions are lower than those of conventional fuels. It emits virtually zero sulfur oxides (only the sulfur in the pilot fuel is present), reduces nitrogen oxides by 85% and cuts particulate matter by 95%-100%. The types of engines that we use experience small amounts of methane slip (un-combusted methane passing through the engine). There are varying views on measuring LNG’s environmental impact and our disclosures report our emissions, including methane slip, as part of our total GHG emissions (reported as CO2e) using the scientifically accepted 100-year global warming potential (“GWP”) time frame and are measured on a tank-to-wake basis.
We are part of the Methane Abatement in Maritime Innovation Initiative, partnering with other major maritime players to find solutions for this challenge, including evaluating options to remove unburnt methane from exhaust streams. The latest generation of LNG-fueled engines show significantly reduced methane slip and we are working with the engine manufacturers to update our existing engines to improve their methane slip performance. As a result of these efforts, LNG’s advantage over conventional fuels in terms of reduced GHG emissions is expected to grow.
A new ship capable of running on LNG also provides flexibility and future optionality. LNG engines are dual-fuel engines, capable of operating on MGO and LNG, including fossil, biofuel and, when available, synthetic versions of those fuels. The type of tank and system arrangements that we have on our LNG-fueled ships also allows for future conversion to other low GHG fuels such as green methanol. LNG ships are also built with larger fuel tanks, with the space necessary to retrofit for other fuels. Given the expected life of a cruise ship, this provides us with more options to continue to fuel our ships regardless of how the alternative fuel markets develop in the future.
The combined impact of the factors above makes LNG the best readily available fuel to reduce GHG emissions in the absence of market-ready zero-emission or near-zero-emission fuels.
We pioneered the use of Advanced Air Quality Systems on board our ships to aid in the reduction of sulfur and are promoting the use of shore power. Shore power enables our ships to use shoreside electric power, where available, while in port rather than running their engines to power their onboard services, resulting in reduced engine emissions and noise in port. We also pioneered the use of shore power in 2001. More than two-thirds of our ships are equipped with this capability, and that number will increase over time as more ports provide shore power. We have continued our work with several local port authorities to utilize cruise ship shore power connections.
We have considered our sustainability goals and efforts, as described above, in connection with the preparation of our consolidated financial statements and any estimates used in the preparation of our consolidated financial statements.
We have voluntarily reported our GHG footprint via the CDP each year since 2006. The CDP rates companies on the depth and scope of their disclosures and the quality of their reporting. Our submission includes details of our most recently compiled emissions data and reduction efforts, along with the results of an independent, third-party verification of our GHG emissions. We also disclose our holistic water stewardship to use less, reuse more and clean as well as purify used water to return to nature through the CDP water program.
Carnival Corporation & plc’s GHG emissions inventory management plan follows the guidance in The Greenhouse Gas Protocol and ISO 14064-1:2018 and our environmental management system is certified in accordance with the ISO 14001:2015 Environmental Management System standard.
D. Website Access to Carnival Corporation & plc SEC Reports
We use our websites as channels of distribution of company information. Our Form 10-K, joint Quarterly Reports on Form 10-Q, joint Current Reports on Form 8-K, joint Proxy Statement related to our annual shareholders meeting, Section 16 filings and all amendments to those reports are available free of charge at www.carnivalcorp.com and www.carnivalplc.com and on the SEC’s website at www.sec.gov as soon as reasonably practicable after we have electronically filed or furnished these reports with the SEC. In addition, you may automatically receive email alerts and other information when you enroll your email address by visiting the Investor Services section of our websites. The content of any website referred to in this document is not incorporated by reference into this document.
E. Industry and Market Data
This document includes market share and industry data and forecasts that we obtained from industry publications, other third-party information and internal company surveys. Industry publications, including those from Cruise Industry News, and surveys and forecasts, generally state that the information contained therein has been obtained from sources believed to be reliable. Cruise Industry News is a for profit magazine company that covers all aspects of cruise operations. Their magazines and annual report cover all cruise lines and shipyards and report on all aspects of cruise operations including relevant issues, financial results, ship building, ship reviews, etc. All other references to third party information are publicly available at nominal or no cost. We use the most currently available industry and market data to support statements as to our market positions. Although we believe that the industry publications and third-party sources are reliable, we have not independently verified any of the data. Similarly, while we believe our internal estimates with respect to our industry are reliable, they have not been verified by any independent sources. While we are not aware of any misstatements regarding any industry data presented herein, our estimates, in particular as they relate to market share and our general expectations, involve risks and uncertainties and are subject to change based on various factors, including those discussed under Part I, Item 1A. Risk Factors and Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in this Form 10-K.
Item 1A. Risk Factors.
You should carefully consider the following discussion of material factors, events and uncertainties that make an investment in the company’s securities risky and provide important information for the understanding of the “forward-looking” statements discussed in this Form 10-K and elsewhere. These risk factors should be read in conjunction with other information in this Form 10-K.
The events and consequences discussed in these risk factors could have a material adverse effect on the company’s business, financial condition, operating results and stock price. These risk factors do not identify all risks that the company faces; operations could also be affected by factors, events, or uncertainties that are not presently known to the company or that the company currently does not consider to present material risks to its operations. In addition to the risk factors below, additional or unforeseen effects from our substantial debt balance incurred during the pause of our guest cruise operations could give rise to additional risks or amplify many of the risks discussed below. Some of the statements in this item and elsewhere in this document are “forward-looking statements.” For a discussion of those statements and of other factors to consider see the “Cautionary Note Concerning Factors That May Affect Future Results” section.
The ordering and lettering of the risk factors set forth below is not intended to reflect any company indication of priority or likelihood.
Operational Risk Factors
a.Events and conditions around the world, including geopolitical uncertainty, war and other military actions, pandemics, inflation, higher fuel prices, higher interest rates and other general concerns impacting the ability or desire of people to travel could lead to a decline in demand for cruises as well as have significant negative impacts on our financial condition and operations.
We have been, and may continue to be, impacted by the public’s concerns regarding the health, safety and security of travel, including pandemics, government travel advisories and travel restrictions, political instability and civil unrest, terrorist attacks, war and military action and other general concerns. The resulting impacts of these events, including a pause of our guest cruise
operations, supply chain disruptions, increased fuel prices, impact on demand for cruises to neighboring regions and international sanctions and other measures that have been imposed, have significantly adversely affected, and may in the future significantly adversely affect, our business. These factors may also have the effect of heightening many other risks to our business, any of which could materially and adversely affect our business and results of operations. Additionally, we have been, and may continue to be, impacted by heightened regulations around customs and border control, travel bans to and from certain geographical areas, voluntary changes to our itineraries in light of geopolitical events, government policies increasing the difficulty of travel and limitations on issuing international travel visas. We may be impacted by adverse changes in the perceived or actual economic climate, such as inflation, global or regional recessions, higher unemployment and underemployment rates and declines in income levels.
b. Incidents concerning our ships, guests or the cruise industry may negatively impact the satisfaction of our guests and crew and lead to reputational damage.
Our operations involve the risk of incidents and media coverage thereof. Such incidents include, but are not limited to, the improper operation or maintenance of ships, motorcoaches and trains; guest and crew illnesses; mechanical failures, fires and collisions; repair delays, groundings and navigational errors; oil spills and other maritime and environmental issues as well as other incidents at sea, while in port or on land, which have in the past and may in the future generate negative publicity or cause voyage disruptions or changes in itineraries, guest and crew discomfort, injury, or death. Although our commitment to the safety and comfort of our guests and crew is paramount to the success of our business, our ships have been involved in outbreaks, accidents and other incidents in the past and we may experience similar or other incidents in the future. Our ability to attract and retain the loyalty of our guests, our ability to hire and the amounts we must pay our crew depend, in part, upon the perception and reputation of our company and our brands and the public’s concerns regarding the health and safety of travel generally, as well as the cruising industry and our ships specifically. In addition, these and any other events which impact the travel industry more generally may negatively impact our guests’ and/or crew’s ability or desire to travel to or from our ships and/or interrupt the supply of critical goods and services.
c. Changes in and non-compliance with laws and regulations under which we operate, such as those relating to health, environment, safety and security, data privacy and protection, anti-money laundering, anti-corruption, economic sanctions, trade protection, labor and employment, and tax may be costly and lead to litigation, enforcement actions, fines, penalties and reputational damage.
We are subject to numerous international, national, state and local laws, regulations, treaties and other legal requirements that govern health, environmental, safety and security matters in relation to our guests, crew and ships. These requirements change regularly, depending on the itineraries of our ships and the ports and countries visited. Implementing these and any subsequent requirements have been, and may in the future continue to be costly and take time to implement across our global cruise operations. In addition, the accelerating pace of regulatory changes may affect our ability to comply in the future. If we violate or fail to comply with any of these laws, regulations, treaties and other requirements we could be, and have previously been, fined, placed on probation or otherwise sanctioned by regulators. In addition, there is increased global focus on climate change, which may lead to additional regulatory requirements. Refer to Operational Risk Factor “d.” below for additional discussion on climate change regulation risks.
In the course of doing business, we collect guest, team member, company and other third-party data, including personal and other sensitive data. We are subject to laws and requirements related to the treatment and protection of personal, sensitive and/or other regulated data in the jurisdictions where we operate. Various governments, agencies and regulatory organizations have enacted or are considering new rules and regulations and we expect to continue to incur costs to comply with these rules and regulations.
Our operations subject us to potential liability under anti-money laundering and anti-corruption laws and regulations. We may also be affected by economic sanctions, trade protection laws, policies and other regulatory requirements affecting trade and investment.
We are subject to compliance with tax laws, regulations and treaties in the jurisdictions in which we are incorporated or operate. These tax laws, regulations and treaties are subject to change at any time, which may result in substantially higher tax expense. For example, the implementation of the OECD’s rules will affect Carnival plc and its subsidiaries beginning in fiscal 2025 and Carnival Corporation and certain of its subsidiaries beginning in fiscal 2026. The application of these rules continues to evolve, and its outcome may alter our tax obligations in certain countries in which we operate. Refer to XVII. Taxation for additional discussion on the OECD’s rules. Other changes in domestic and international tax rules and regulations and their application could also alter our tax obligations.
d. Factors associated with climate change, including evolving and increasing regulations, increasing global concern about climate change and the shift in climate conscious consumerism and stakeholder scrutiny, and increasing frequency and/or severity of adverse weather conditions could have a material impact on our business.
Growing concerns regarding climate change have resulted in increased global regulatory focus on GHG and other emissions which have impacted us and may in the future have material impacts on our business. Refer to XVIII. Governmental Regulations for additional discussion of recent developments related to Maritime Regulations, Greenhouse Gas Emissions and EU Regulations. Fossil fuels are currently the only viable option for our industry and it is not clear when alternative fuels or other technologies will be commercially viable at scale. To provide a path to net zero emissions, alternative low GHG emission fuels will be necessary for the maritime industry; however, there are significant supply challenges that must be resolved before viability is reached. Climate change-related regulatory activity and developments that require us to reduce our emissions, which includes both the EU regulations and IMO Strategy (refer to XVIII. Governmental Regulations), have impacted us and may in the future have a material impact on our business and financial results by requiring us to make capital investments in new equipment or technologies, pay for emission allowances, purchase carbon offset credits, or otherwise incur additional costs or take additional actions related to our emissions. Such activity has impacted and may continue to impact us indirectly by increasing our operating costs, including fuel costs. Regulatory developments may also result in the inability to operate ships that do not meet certain standards, the acceleration of the removal of less fuel-efficient ships from our fleet and impact the resale value of our ships in the future. In addition, regulatory developments may restrict or limit our access to certain destinations and/or countries or impact our freedom to operate. Regulatory efforts, both internationally and in the U.S., are evolving, including the international alignment of such efforts, and we cannot determine what final regulations will be enacted, modified, or reversed or what their ultimate impact on our business will be.
Growing recognition among consumers globally of the negative effects of climate change and the impact of GHG and other emissions may lead to material changes in consumer preferences. For instance, our guests may choose a vacation option that they perceive as operating in a manner that is more sustainable for the climate, seek alternative methods of travel, or reduce the amount and frequency of their travel. In addition, some environmental focused groups have and may continue to generate negative publicity regarding the environmental impact of the cruise industry and are advocating for more stringent oversight and regulation of our industry, including of ship emissions while the ship is docked and at sea. At the same time, we may also face negative impacts from consumers who do not support climate-related initiatives or concerns. Environmental scrutiny of our operations and the industry from the investment community, other stakeholders, and the media (including social media) have impacted and may continue to impact how we are perceived, which may have a material impact on our operations and financial results. Certain climate-related actions and investments we make today may not lead us to our intended future emissions related goals or may not be favorably perceived in future years based on continuing evolving regulations and perceptions around effective emissions mitigation strategies and technologies.
Our cruise ships, hotels, land tours, port and related commercial facilities and shore excursions have been and may continue to be impacted by adverse weather patterns or other natural disasters, such as hurricanes, earthquakes, floods, fires, tornadoes, tsunamis, typhoons and volcanic eruptions. Climate change is expected to increase the frequency and intensity of certain adverse weather patterns, possibly making certain destinations less desirable or impacting our business in other ways. We have been forced to, and in the future may be forced to, alter itineraries or cancel a cruise or a series of cruises or tours due to these or other types of disruptions. The physical climate-related risks to our business include increased hurricane/typhoon intensity and frequency, increases in global temperatures and rising sea levels which may adversely impact our shoreside facilities, our investments in ports or the availability or desirability of ports and destinations in which we operate. These effects may also disrupt the supply of critical goods and services to our facilities and ships. Any of these events could have a material impact on our business and profitability.
e. Inability to meet or achieve our targets, goals, aspirations, initiatives, and our public statements and disclosures regarding them, including those related to sustainability matters, may expose us to risks that may adversely impact our business.
We have developed and will continue to establish targets, goals, aspirations, and other objectives, including those related to sustainability matters (“sustainability objectives”). These statements reflect our current plans and do not constitute a guarantee that they will be achieved. Our efforts to research, establish, accomplish, and accurately report on our sustainability objectives expose us to numerous operational, reputational, financial, legal, and other risks, any of which could have a negative impact on our business. Our ability to achieve any of our stated sustainability objectives, particularly with respect to our environmental emissions aspirations, is subject to numerous factors and conditions, many of which are outside of our control. Examples of such factors include the availability and costs of low- or non-GHG emission energy sources and technology that do not yet exist at scale for our industry, evolving regulatory requirements affecting sustainability standards or disclosures, the availability of future financing and the availability of suppliers that can meet our sustainability standards.
Our business may face increased scrutiny from our guests, our team members, the investment community, governments, regulators, destinations and other stakeholders that we serve related to our sustainability activities, including the sustainability objectives that we adopt, our methodologies and timelines for pursuing them and our ability to document and support the
achievement of those objectives, as their expectations for such matters continue to evolve. If our sustainability practices do not meet, are adverse to, or are perceived to fall short of, the expectations of our guests, team members, investors or other stakeholders, demand for cruising, our reputation, our ability to attract or retain team members, and our attractiveness as an investment could be negatively impacted. In addition, governments may restrict or limit our access to ports and destinations for which there is high guest demand. Similarly, our pursuit, or our failure or perceived failure to pursue, meet or fulfill our targets, goals, aspirations, and other objectives (including sustainability objectives) within the timelines we announce, or at all, could have the same negative impacts as well as expose us to government enforcement actions and private litigation.
f. Cybersecurity incidents and data privacy breaches, as well as disruptions and other damages to our principal offices, information technology operations and system networks and failure to keep pace with developments in technology have adversely impacted and may in the future materially adversely impact our business operations, the satisfaction of our guests and crew and may lead to fines, penalties and reputational damage.
We have been and may continue to be impacted by cybersecurity incidents and data privacy breaches, which occur from time to time. These malicious attacks can vary in scope and aim to disrupt or compromise our shoreside and shipboard operations by targeting our key operating systems or those of our third-party service providers. Breach or circumvention of our systems or the systems of third parties, including by ransomware or malware, through vulnerabilities in licensed software or hardware, generative artificial intelligence (“AI”) impersonation, targeted and coordinated attacks of our systems or as a result of other attacks, have led to and may continue to lead to disruptions in our business operations; unauthorized access to (or the loss of company access to) competitively sensitive, confidential or other critical data (including sensitive financial, medical or other personal or business information) or systems; loss of customers; financial losses; regulatory investigations, enforcement actions, fines and penalties; litigation; reputational damage; and misuse or corruption of critical data and proprietary information, any of which could be material. Additionally, integrating AI into our operations may increase our cybersecurity and data privacy risks. We also have and may continue to rely on third parties in helping us manage our cybersecurity risk management processes. Any measures that we take and such third parties take to avoid, detect, mitigate or recover from material cybersecurity threats or incidents can be expensive, and may be insufficient, circumvented, or may become ineffective.
Our physical work locations, including those that house our information technology operations, system networks and various other remote locations may be impacted by actual or threatened natural disasters (for example, hurricanes, earthquakes, floods, fires, tornadoes, tsunamis and typhoons) or other disruptive events. Our maritime and/or shoreside operations, including our ability to manage our inventory of cabins held for sale and set pricing, control costs and serve our guests, depends on the reliability of our information technology operations and system networks, as well as our ability to refine and update to more advanced systems and technologies. In addition, we may be unable to obtain appropriate technology in a timely manner or at all or we may incur significant costs in doing so. A failure to adopt the appropriate technology, or a failure, disruption or obsolescence in the technology that we do adopt, could have adverse effects on our business.
g. The loss of key team members, our inability to recruit or retain qualified shoreside and shipboard team members and increased labor costs could have an adverse effect on our business and results of operations.
Our success depends, in large part, on the skills and contributions of our team members, and on our ability to recruit, develop and retain high quality, diverse team members. We may not be successful in recruiting, developing or retaining key or other highly qualified team members. In addition, high-GHG emission industries may become a less attractive employment opportunity. At times we have, and may in the future continue to, experience difficulty in hiring sufficient qualified team members, due to general macroeconomic factors and/or increasingly competitive labor markets.
In addition, we hire a significant number of qualified shipboard team members each year and, thus, our ability to adequately recruit, develop and retain these individuals is important to our success. Incidents involving cruise ships, including disease outbreaks on our ships and increasing demand as a result of the industry’s projected growth could negatively impact our ability to recruit, develop and retain sufficient qualified shipboard team members.
h. Increases in fuel prices, changes in the types of fuel consumed and availability of fuel supply may adversely impact our scheduled itineraries and costs.
We have been and may continue to be impacted by economic, market and political conditions around the world, regulatory requirements including climate-induced regulations, supply disruptions and related infrastructure needs, which make it difficult to predict the future price and availability of fuel. The supply and availability of different fuel types in various markets in which we operate have experienced increased volatility and have led to increased fuel prices and reduced profitability. Future increases in the global price of fuel would increase the cost of our cruise ship operations as well as some of our other expenses, such as crew travel, freight and commodity prices. Increases in airfares, such as those resulting from increases in the price of fuel, have in the past and may in the future increase our guests’ overall vacation costs and reduce demand for cruises, as many of our guests depend on airlines to transport them to or from the airports near the ports where our cruises embark and
disembark. Refer to Operational Risk Factor “d.” for additional discussion on the impact of climate change and regulation changes on fuel costs.
i. We rely on suppliers who are integral to the operations of our businesses. These suppliers and service providers may be unable to deliver on their commitments, which could negatively impact our business.
We rely on suppliers to deliver key products and services to the operations of our businesses around the world. Any event impacting a supplier’s ability to deliver quality goods and services at the location and time needed could negatively impact our ability to operate our business. Events impacting our supply chain could be caused by factors beyond the control of our suppliers or us, including labor actions, increased demand, problems in production or distribution and/or disruptions in third-party logistics, information technology or transportation systems. In addition, global events in recent years have resulted in widespread global supply chain disruptions to suppliers including critical supply chain shortages, labor shortages, significant material cost inflation and extended lead times for items that are required for our operations. Any such interruptions to our supply chain could increase our costs and could limit the availability of products critical to our operations.
j. Fluctuations in foreign currency exchange rates may adversely impact our financial results.
We earn revenues, pay expenses, purchase and own assets and incur liabilities in currencies other than the U.S. dollar. Additionally, our shipbuilding contracts are typically denominated in euros. Movements in foreign currency exchange rates, which at times have been more volatile, will affect our financial results.
k. Overcapacity and competition in the cruise and land-based vacation industry may negatively impact our cruise sales, pricing and destination options.
We have been and may in the future be impacted by increases in capacity in the cruise and land-based vacation industry, which may result in capacity growth beyond demand, either globally or for a region, or for a particular itinerary. We face competition from other cruise brands on the basis of overall experience, destinations, types and sizes of ships and cabins, travel agent partner preferences and value. In addition, we may fail to sufficiently invest in or upgrade our existing cruise ships and other assets to meet the expectations of current and potential guests. We also compete with land-based vacation alternatives throughout the world on the basis of overall experience, destinations and value. In addition, certain ports and destinations have faced a surge of both cruise and non-cruise tourism and in certain destinations, countermeasures to limit the number of tourists have been proposed or contemplated and/or put into effect, including limits on cruise ships and cruise guests. Potential restrictions in ports and destinations could limit the itinerary and destination options we can offer our guests going forward.
l. Inability to implement our shipbuilding programs and ship repairs, maintenance and refurbishments may adversely impact our business operations and the satisfaction of our guests.
There are a limited number of shipyards with the capability and capacity to build, repair, maintain and/or upgrade our ships, which may limit our ability to meet our capacity growth or ship refurbishment objectives. In addition, we have in the past and may in the future be impacted by unforeseen events, such as work stoppages, supply chain issues, insolvencies, “force majeure” events or other financial difficulties experienced by shipyards, their subcontractors and our suppliers. This may result in less shipyard availability resulting in delays or preventing the delivery of our ships under construction and/or the completion of the repair, maintenance or refurbishment of our existing ships. This may lead to potential delays or cancellations of cruises. Additionally, the prices of various commodities that are used in the construction of ships and for repair, maintenance and refurbishment of existing ships, such as steel, are subject to volatility which may increase our costs.
Financial Risk Factors
a. We require a significant amount of cash to service our debt and sustain our operations. Our ability to generate cash depends on many factors, including those beyond our control, and we may not be able to generate cash required to service our debt and sustain our operations.
Our ability to meet our debt service obligations, refinance our debt or sustain our business needs and operations depends on our future operating and financial performance and our ability to generate cash. This will be affected by our ability to successfully continue to execute on our business strategy, which if unsuccessful, would negatively impact the occupancy levels and pricing of our cruises. Our future performance is also impacted by general macroeconomic, financial, geopolitical, competitive, regulatory and other factors beyond our control such as inflation, higher fuel prices, higher taxes and higher interest rates. If we cannot generate sufficient cash to meet our debt service obligations or fund our other business needs, we may, among other things, need to refinance our debt, obtain additional financing, delay planned capital expenditures or sell assets. We cannot make assurances that we will be able to generate sufficient cash through any of the foregoing. If we are not able to refinance our
debt, obtain additional financing or sell assets on commercially reasonable terms or at all, we may not be able to satisfy our obligations with respect to our debt. Refer to Liquidity, Financial Condition and Capital Resources.
b. Our substantial debt could adversely affect our financial health and operating flexibility.
We have a substantial amount of debt, significant debt service obligations and related covenant restrictions. Despite our leverage, we may incur more debt, subject to certain restrictions, in the future. Our substantial debt has had and could continue to have important negative consequences for us. Our substantial debt could, among other things:
•require us to dedicate a large portion of our cash flow from operations to servicing debt and funding repayments on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;
•increase our vulnerability to adverse general economic or industry conditions;
•limit our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate;
•limit our ability to pay dividends or distributions on or redeem or repurchase stock and make other restricted payments;
•place us at a disadvantage compared to others that have less debt;
•make us more vulnerable to downturns in our business, the economy or the industry in which we operate;
•limit our ability to raise additional debt or equity capital in the future to satisfy our requirements relating to working capital, capital expenditures, development projects, strategic initiatives or other purposes;
•restrict us from introducing new technologies or exploiting business opportunities;
•make it difficult for us to satisfy our obligations with respect to our debt; and
•expose us to the risk of increased interest rates as certain of our borrowings are (and may be in the future) at a variable rate of interest.
Certain of our indebtedness accrues interest at variable rates, which subjects us to interest rate volatility with respect to such instruments and could cause our debt service obligations to increase significantly. If we breach the covenants or restrictions in our debt instruments, we could trigger a default under the terms of certain of our debt instruments. If that occurs, we may be required to seek covenant amendments or the relevant creditors could elect to declare the debt, together with accrued and unpaid interest and other fees, if any, immediately due and payable (or cancel any unfunded commitments, if applicable) and proceed against the collateral, if any, securing that debt. Borrowings under our other debt instruments that contain cross-default provisions may also be accelerated or become payable on demand, and our assets may not be sufficient to repay such indebtedness in full.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
With an increasingly technology-driven business landscape, cybersecurity is critical to safeguarding our company's shipboard and shoreside assets and maintaining our operational integrity. We have implemented cybersecurity measures that are designed to protect the confidentiality, integrity and availability of our information technology and operational technology systems against the constantly evolving cyber threats.
It leverages industry-leading cybersecurity frameworks and standards, such as the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework and the ISO/IEC 27001 standard. We conduct regular risk assessments to evaluate the security posture of our systems and processes, including vulnerability assessments, penetration testing, external attack surface mitigations and monitor our network for suspicious activity and potential breaches. We continue to invest in our information technology, operational technology and cybersecurity programs to layer in the right mix of risk-based controls to protect against evolving threats.
We maintain an incident response plan and related policies and protocols which outline procedures for identifying, reporting and responding to cybersecurity incidents. Our incident response plan is regularly updated to address new threats and tested through crisis simulation exercises involving our shipboard and shoreside employees. We also have an incident response team who is trained to handle a wide range of security events and collaborates with external cybersecurity experts when necessary.
For additional information on the risks from cybersecurity threats and the potential related impacts on the company, refer to Operational Risk Factor f.
Governance
leads our worldwide efforts in cybersecurity risk reduction and regulatory compliance. Our CISO oversees risk management across information technology operations, cybersecurity and data privacy. This expertise is further supported by an array of certifications (C-CISO, CISSP, CISM, CRISC, CISA, and CIPT), as well as academic credentials, including a Master’s in Information Systems from Harvard University and a Bachelor’s in Business Administration from Florida International University.
Our CISO chairs our Cybersecurity Advisory Council (“CAC”), a cross-functional management committee that drives awareness, ownership and alignment across broad governance and risk stakeholder groups for effective cybersecurity risk management. The CAC is sponsored by our Chief Financial Officer and is composed of senior leaders from our brand information security, data privacy, legal, internal audit and information technology teams. The CAC meets at least quarterly and has responsibility for oversight of our cybersecurity strategic direction, risks and threats, priorities, resource allocation, capabilities and planning. The CISO and her team are informed about and monitor the prevention, detection, mitigation and remediation of cybersecurity incidents in accordance with our cyber incident response plan. Additionally, the CISO informs our Disclosure Committee on a quarterly basis, or more frequently if needed, of any cybersecurity risks or incidents or other information system matters that may affect our business strategy, results of operations or financial condition.
receive updates from the CISO on an annual basis.
Item 2. Properties.
As of November 30, 2024, the Carnival Corporation and Carnival plc headquarters and our larger shoreside locations are as follows:
| | | | | | | | | | | | | | | | | | | | |
| Location | | Square Footage (in thousands) | | Own/Lease | | Principal Operations |
| Miami, FL, U.S.A. | | 463/18 | | Own/Lease | | Carnival Corporation & plc and Carnival Cruise Line |
| Almere, Netherlands | | 253 | | Own | | Arison Maritime Center |
| Rostock, Germany | | 224 | | Own | | AIDA |
| Genoa, Italy | | 204/46 | | Own/Lease | | Costa |
| Southampton, England | | 150 | | Lease | | Carnival plc, Cunard and P&O Cruises (UK) |
| Santa Clarita, CA, U.S.A. | | 113 | | Lease | | Princess Cruises |
| Hamburg, Germany | | 87 | | Lease | | AIDA |
| Seattle, WA, U.S.A. | | 78 | | Lease | | Holland America Line and Seabourn |
| Fort Lauderdale, FL, U.S.A. | | 76 | | Lease | | Princess Cruises |
| Sydney, NSW, Australia | | 26 | | Lease | | P&O Cruises (Australia) |
Information about our cruise ships, including the number each of our cruise brands operate, as well as information regarding our cruise ships under construction may be found under Part I, Item 1. Business. C. “Our Global Cruise Business.” In addition, we own, lease or have controlling interests in port destinations, exclusive islands, hotels, and lodges.
Item 3. Legal Proceedings.
The legal proceedings described in Note 6 – “Contingencies”, are shown in Part II, Item 8. Financial Statements and Supplementary Data, in this Form 10-K. Additionally, SEC rules require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that we believe will exceed $1 million for such proceedings.
On June 20, 2022, Princess Cruises notified the Australian Maritime Safety Authorization (“AMSA”) and the flag state, Bermuda, regarding approximately six cubic meters of comminuted food waste (liquid biodigester effluent) inadvertently released by Coral Princess inside the Great Barrier Reef Marine Park. On June 23, 2022, the UK P&I Club N.V. provided a letter of undertaking for approximately $1.9 million (being the estimated maximum combined penalty). On May 31, 2023, we received a summons from the Australia Federal Prosecution Service indicating that formal charges are being pursued against Princess Cruises and the Captain of the vessel. We believe the ultimate outcome will not have a material impact on our consolidated financial statements.
On February 5, 2024, P&O Cruises (Australia) notified the AMSA and the UK Marine Accident Investigation Branch that a small amount of oil may have inadvertently contaminated grey water which was discharged by Pacific Adventure in the Great Barrier Reef Marine Park, Queensland. We intend to cooperate with any inquiries from governmental authorities. We believe the ultimate outcome will not have a material impact on our consolidated financial statements.
Item 4. Mine Safety Disclosures.
None.
PART II
Item 5. Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
A. Market Information
Carnival Corporation common stock, together with paired trust shares of beneficial interest in the P&O Princess Special Voting Trust, which holds a Special Voting Share of Carnival plc, is traded on the NYSE under the symbol “CCL.” Carnival plc ordinary shares trade on the London Stock Exchange under the symbol “CCL.” Carnival plc American Depositary Shares (“ADSs”), each one of which represents one Carnival plc ordinary share, are traded on the NYSE under the symbol “CUK.” The depositary for the ADSs is JPMorgan Chase Bank, N.A.
B. Holders
As of January 13, 2025, there were 2,315 holders of record of Carnival Corporation common stock and 28,223 holders of record of Carnival plc ordinary shares and 400 holders of record of Carnival plc ADSs.
C. Dividends
We do not expect to pay dividends on Carnival Corporation common stock and Carnival plc ordinary shares for at least the next couple of years.
D. Securities Authorized for Issuance under Equity Compensation Plans
The information required by Item 201(d) of Regulation S-K is shown in Part III, Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, in this Form 10-K.
E. Performance Graph
Carnival Corporation
The following graph compares the Price Performance of $100 if invested in Carnival Corporation common stock with the Price Performance of $100 if invested in each of the Dow Jones U.S. Recreational Services Index (the “Dow Jones Recreational Index”), the FTSE 100 Index and the S&P 500 Index. The Price Performance, as used in the Performance Graph, is calculated by assuming $100 is invested at the beginning of the period in Carnival Corporation common stock at a price equal to the market value. At the end of each year, the total value of the investment is computed by taking the number of shares owned, assuming Carnival Corporation dividends are reinvested, multiplied by the market price of the shares.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Assumes $100 Invested on November 30, 2019
Assumes Dividends Reinvested
Years Ended November 30, |
| | 2019 | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 |
| Carnival Corporation Common Stock | | $ | 100 | | | $ | 45 | | | $ | 40 | | | $ | 22 | | | $ | 34 | | | $ | 57 | |
| Dow Jones Recreational Index | | $ | 100 | | | $ | 64 | | | $ | 65 | | | $ | 51 | | | $ | 66 | | | $ | 118 | |
| FTSE 100 Index | | $ | 100 | | | $ | 88 | | | $ | 103 | | | $ | 114 | | | $ | 117 | | | $ | 135 | |
| S&P 500 Index | | $ | 100 | | | $ | 117 | | | $ | 150 | | | $ | 136 | | | $ | 155 | | | $ | 208 | |
Carnival plc
The following graph compares the Price Performance of $100 invested in Carnival plc ADSs, each representing one ordinary share of Carnival plc, with the Price Performance of $100 invested in each of the indexes noted below. The Price Performance is calculated in the same manner as previously discussed.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Assumes $100 Invested on November 30, 2019
Assumes Dividends Reinvested
Years Ended November 30, |
| 2019 | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 |
| Carnival plc ADS | $ | 100 | | | $ | 42 | | | $ | 39 | | | $ | 21 | | | $ | 32 | | | $ | 55 | |
| Dow Jones Recreational Index | $ | 100 | | | $ | 64 | | | $ | 65 | | | $ | 51 | | | $ | 66 | | | $ | 118 | |
| FTSE 100 Index | $ | 100 | | | $ | 88 | | | $ | 103 | | | $ | 114 | | | $ | 117 | | | $ | 135 | |
| S&P 500 Index | $ | 100 | | | $ | 117 | | | $ | 150 | | | $ | 136 | | | $ | 155 | | | $ | 208 | |
F. Issuer Purchases of Equity Securities; Use of Proceeds from Registered Securities
I. Carnival plc Shareholder Approvals
Annual shareholder approval is required for Carnival plc to buy back its ordinary shares. The existing shareholder approval is limited to a maximum of 18.7 million ordinary shares of Carnival plc and expires at the conclusion of the Carnival plc 2025 Annual General Meeting or July 4, 2025, whichever is earlier.
Item 6. Reserved.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
2024 Executive Overview
We had a strong year, setting records and achieving milestones, including:
•Full year revenues hit an all-time high of $25 billion, over 15 percent higher than the prior year
•Seven consecutive quarters of record revenues
•Record full year operating income of $3.6 billion, over 80 percent higher than the prior year
•All-time high cash from operations of almost $6 billion
•Higher ticket prices for 2024 versus 2023 for all of our major cruise lines and onboard spending levels that accelerated sequentially each quarter throughout the year
•Record booking trends and record year-end customer deposits, indicating a continuation of the strong momentum we’ve been experiencing for the last two years
We remain laser focused on further reducing interest expense and rebuilding our investment-grade balance sheet. During 2024, we made debt prepayments of over $3 billion, bringing our total prepayments to over $7 billion since the beginning of 2023. Additionally, we have reduced our debt balance by over $8 billion from the peak in January 2023, ending the year with $27.5 billion of debt.
We are delivering long-term value for our shareholders through improved operational execution across our cruise lines. We ended 2024 with adjusted return on invested capital (“ROIC”) comfortably above our cost of capital.
We welcomed three new ships during 2024: Carnival Jubilee, the third of five Excel class vessels for Carnival Cruise Line; Sun Princess, Princess Cruises’ next generation flagship which was just awarded Conde Nast Traveler’s 2024 Mega Ship of the year in the U.S.; and Queen Anne, Cunard’s first new ship in 14 years.
We have also been focusing on each of our cruise lines’ unique target markets, launching new marketing campaigns across all our brands. In 2024, both new-to-cruise and repeat guests were each up double-digit percentages and we continue to attract new cruise guests as we work to increase awareness and consideration for cruise travel globally.
We continue to advance our enhanced destination strategy to provide guests with yet another reason to take a cruise vacation with us. Celebration Key, our new exclusive cruise port destination on Grand Bahama Island, is scheduled to open in the summer of 2025, with an additional pier opening in the fall of 2026. Its five portals built for fun will further expand our experience offerings with an abundance of features and amenities for our guests. Celebration Key will be our largest and closest destination in our portfolio, saving fuel costs and reducing greenhouse gas emissions. In addition, we recently announced plans to enhance Half Moon Cay, our highly rated and award-winning exclusive Bahamian destination. The enhancements will lean further into this destination’s natural beauty and pristine appeal, reinforcing its new name – RelaxAway, Half Moon Cay. Featuring a newly constructed pier that is expected to be ready in the summer of 2026, the destination will allow two ships to dock, including Carnival Cruise Line’s largest ships that will be able to visit for the first time. We believe developing and promoting these unique assets will help us cast the net wider and capture even more new-to-cruise demand.
During 2024, we also continued making progress towards our sustainability goals. We reduced our greenhouse gas emission intensity by approximately 17.5 percent compared to 2019, on track to achieve our targeted reduction of 20 percent by the end of 2026, a goal that was previously pulled forward by four years. We have also lowered our absolute greenhouse gas emissions by almost 10 percent since 2019, despite capacity growth of over nine percent over the same period.
We are grateful for the efforts of our hard working and dedicated team who delivered a step change improvement in 2024 and set us up very well for 2025 and beyond, while consistently delivering unforgettable happiness to over 13 and a half million people in 2024, by providing them with extraordinary cruise vacations while honoring the integrity of every ocean we sail, place we visit and life we touch.
New Accounting Pronouncements
Refer to our consolidated financial statements for further information on Accounting Pronouncements.
Critical Accounting Estimates
Our critical accounting estimates are those we believe require our most significant judgments about the effect of matters that are inherently uncertain. A discussion of our critical accounting estimates, the underlying judgments and uncertainties used to make them and the likelihood that materially different estimates would be reported under different conditions or using different assumptions is as follows:
Ship Accounting
We make several critical accounting estimates with respect to our ship accounting including ship improvement costs, estimated useful lives and residual values.
We account for ship improvement costs, including replacements of certain significant components and parts, by capitalizing those costs that we believe add value to our ships and have a useful life greater than one year and depreciating those improvements over their estimated remaining useful life. The costs of repairs and maintenance, including those incurred when a ship is taken out-of-service for scheduled maintenance, and minor improvement costs and expenses, are charged to expense as incurred. If we change our assumptions in making our determinations as to whether improvements to a ship add value, the amounts we expense each year as repair and maintenance expense could increase, which would be partially offset by a decrease in depreciation expense, resulting from a reduction in capitalized costs.
In addition, the specifically identified or estimated cost and accumulated depreciation of previously capitalized ship components are written-off upon retirement, which may result in a loss on disposal that is also included in other operating expenses. We do not have cost segregation studies performed to specifically componentize our ships. In addition, since we do not separately componentize our ships, we do not identify and track depreciation of original ship components. Therefore, we typically have to estimate the net book value of components that are retired, based primarily upon their replacement cost, their age and their original estimated useful lives. Given the large size and complexity of our ships, ship accounting estimates require considerable judgment and are inherently uncertain.
In order to compute our ships’ depreciation expense, we apply judgment to determine their useful lives as well as their residual values. We have estimated our ships’ useful lives at 30 years and residual values at 15% of our original ship cost. Our ships’ useful life and residual value estimates take into consideration the estimated weighted-average useful lives of the ships’ major component systems, such as hull, superstructure, main electric, engines and cabins. We also take into consideration the impact of technological changes, historical useful lives of similarly-built ships, long-term cruise and vacation market conditions and regulatory changes, including those related to the environment and climate change. We determine the residual value of our ships based on our long-term estimates of their resale value at the end of their useful lives to us but before the end of their physical and economic lives to others, historical resale values of our and other cruise ships as well as our expectations of the long-term viability of the secondary cruise ship market. We review estimated useful lives and residual values for reasonableness whenever events or circumstances significantly change. During the pause of our guest cruise operations, we disposed of ships for amounts significantly below their book values. Management estimates that this trend will continue to normalize in the coming years.
The IMO’s 2023 Strategy on Reduction of GHG Emissions from Ships (“IMO Strategy”) strives to peak GHG emissions from international shipping as soon as possible and to reach net zero GHG emissions on a well-to-wake basis by or around 2050. The IMO Strategy includes checkpoints in 2030 and 2040 that seek reductions in the absolute GHG emissions from international shipping by at least 20% and 70%, respectively, compared to 2008. It also includes a target of a 40% reduction in CO2 emissions intensity by 2030 compared to 2008. The EU has also proposed several regulations that will likely impact the cost of fossil fuels and has recently adopted the inclusion of maritime shipping in the EU’s Emissions Trading System. We have established Climate Action Goals, which include a GHG intensity reduction goal of 20% by 2030 from the 2019 baseline and we are pursuing our aspiration of net zero emissions by 2050. Given a 30-year estimated useful life for our ships, our most recently delivered vessels’ lives will extend beyond this 2050 date. To provide a path to net zero emissions, alternative low GHG emission fuels will be necessary for the maritime industry; however, there are significant supply challenges that must be resolved before viability is reached. We are closely monitoring technology developments and partnering with organizations on research and development to support our sustainability goals and aspirations. Our fleet’s engines are capable of being modified for use with certain alternative fuels and we have completed tests on the use of marine biofuel blends on certain ships in our fleet. In addition, and in support of our Climate Action Goals, we invest in technologies, including the use of LNG powered cruise ships, the installation of Advanced Air Quality Systems on board our ships to aid in the reduction of sulfur emissions, the use of shore power, enabling ships to use shoreside electric power where available while in port and various other efficiency related upgrades intended to reduce our emissions. It is uncertain how proposed and possible future regulatory changes related to the environment and climate change and our aspiration of net zero emissions by 2050, may impact our ships’ useful lives and residual values and the impact is dependent on future regulatory actions and technological advances. As of November 30, 2024, management concluded that there were no changes in our ship useful lives and residual value estimates.
If materially different conditions existed, or if we materially changed our assumptions of ship useful lives and residual values, then our depreciation expense, loss on retirement of ship components and net book value of our ships would be materially different. Our 2024 ship depreciation expense would have increased by approximately:
•$51 million assuming we had reduced our estimated 30-year ship useful life estimate by one year at the time we took delivery or acquired each of our ships
•$260 million assuming we had estimated our ships to have no residual value
We believe that the estimates we made for ship accounting purposes are reasonable and our methods are consistently applied in all material respects and result in depreciation expense that is based on a rational and systematic method to equitably allocate the costs of our ships to the periods during which we use them.
Valuation of Ships
We review our ships for impairment whenever events or changes in circumstances indicate that the carrying value of a ship may not be recoverable. When an impairment review is appropriate, such as an expected sale of a ship before the end of its useful life, impairment reviews of our ships require us to make significant estimates. We evaluate ship asset impairments at the individual ship level which is the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If estimated future cash flows are less than the carrying value of a ship, an impairment charge is recognized to the extent its carrying value exceeds its estimated fair value.
The estimation of a ship’s fair value includes numerous assumptions that are subject to various risks and uncertainties. The principal assumption used in determining the fair value of our ships tested for impairment in 2022 was the estimated sales proceeds.
We determined the fair value of these ships based on their respective estimated selling values, for those ships expected to be disposed of, or estimated discounted future cash flows and comparable market transactions. Where estimated future cash flows are used to estimate the recoverable value of a ship, the cash flows include estimated regulatory costs, including those related to proposed regulations, which are likely to impact costs and capital expenditures, including those expected to meet our 2030 Climate Action Goals.
Refer to our consolidated financial statements for additional discussion of our property and equipment policy and ship impairment reviews.
We believe that we have made reasonable estimates.
Contingencies
We periodically assess the potential liabilities related to any lawsuits or claims brought against us, as well as for other known unasserted claims, including environmental, legal, regulatory and guest and crew matters. While it is typically very difficult to determine the timing and ultimate outcome of these matters, we use our best judgment to determine the appropriate amounts to record in our consolidated financial statements.
We accrue a liability and establish a reserve when we believe a loss is probable and the amount of the loss can be reasonably estimated. In assessing probable losses, we make estimates of the amount of probable insurance recoveries, if any, which are recorded as assets where appropriate. Such accruals and reserves are typically based on developments to date, management’s estimates of the outcomes of these matters, our experience in contesting, litigating and settling other similar matters, historical claims experience, actuarially determined estimates of liabilities and any related insurance coverage.
Given the inherent uncertainty related to the eventual outcome of these matters and potential insurance recoveries, it is possible that all or some of these matters may be resolved for amounts materially different from any provisions or disclosures that we may have made. In addition, as new information becomes available, we may need to reassess amounts accrued related to our contingencies. All such changes in our estimates could materially impact our results of operations and financial position.
Refer to our consolidated financial statements for additional discussion of contingencies.
Known Trends and Uncertainties
•We believe the volatility in the cost of fuel is reasonably likely to continue to impact our profitability in both the short and long-term.
•We believe the increasing global focus on climate change, including the reduction of GHG emissions and new and evolving regulatory requirements, is reasonably likely to have a material negative impact on our future financial results. We became subject to the EU Emissions Trading System (“ETS”) on January 1, 2024, which includes a three-year phase-in period. Refer to XVIII. Governmental Regulations.
Results of Operations
We have historically earned substantially all of our cruise revenues from the following:
•Sales of passenger cruise tickets and, in some cases, the sale of air and other transportation to and from airports near our ships’ home ports and cancellation fees. The cruise ticket price typically includes the following:
•Accommodations
•Most meals, including snacks at numerous venues
•Access to amenities such as swimming pools, water slides, water parks, whirlpools, a health club and sun decks
•Child care and supervised youth programs
•Entertainment, such as theatrical and comedy shows, live music and nightclubs
•Visits to multiple destinations
•Sales of onboard goods and services not included in the cruise ticket price. This generally includes the following: | | | | | |
| • Beverage sales | • Internet and communication services |
| • Casino gaming | • Full service spas |
| • Shore excursions | • Specialty restaurants |
| • Retail sales | • Art sales |
| • Photo sales | • Laundry and dry cleaning services |
These goods and services are provided either directly by us or by independent concessionaires, from which we receive either a percentage of their revenues or a fee. Concession revenues do not have direct expenses because the costs and services incurred for concession revenues are borne by our concessionaires. In 2024, we earned 34% of our cruise revenues from onboard and other revenue goods and services.
We earn our tour and other revenues from our hotel and transportation operations and other revenues.
We incur cruise operating expenses for the following:
•The costs of passenger cruise bookings, which include travel agent commissions, cost of air and other transportation, port fees, taxes, and charges that directly vary with guest head counts and credit and debit card fees
•Onboard and other cruise costs, which include the costs of beverage sales, costs of shore excursions, costs of retail sales, internet and communication costs, credit and debit card fees, other onboard costs, costs of cruise vacation protection programs and pre- and post-cruise land packages
•Payroll and related costs, which include the costs of officers and crew in bridge, engineering and hotel operations. Substantially all costs associated with our shoreside personnel are included in selling and administrative expenses
•Fuel costs, which include fuel delivery costs and European Union Allowance costs
•Food costs, which include both our guest and crew food costs
•Other ship operating expenses, which include port costs that do not vary with guest head counts; repairs and maintenance, including minor improvements and dry-dock expenses; hotel costs; entertainment; gains and losses on ship sales; ship impairments; freight and logistics; insurance premiums and all other ship operating expenses
We incur tour and other costs and expenses for our hotel and transportation operations and other expenses.
Statistical Information | | | | | | | | | | | | | | | | | |
| Years Ended November 30, |
| 2024 | | 2023 | | 2022 |
Passenger Cruise Days (“PCDs”) (in millions) (a) | 100.5 | | | 91.4 | | | 54.6 | |
Available Lower Berth Days (“ALBDs”) (in millions) (b) (c) | 95.6 | | | 91.3 | | | 72.5 | |
| Occupancy percentage (d) | 105 | % | | 100 | % | | 75 | % |
Passengers carried (in millions) | 13.5 | | | 12.5 | | | 7.7 | |
| | | | | |
Fuel consumption in metric tons (in millions) | 2.9 | | | 2.9 | | | 2.6 | |
| Fuel consumption in metric tons per thousand ALBDs | 30.9 | | | 32.1 | | | 36.1 | |
| Fuel cost per metric ton consumed (excluding European Union Allowance) | $ | 665 | | | $ | 701 | | | $ | 830 | |
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| Currencies (USD to 1) | | | | | |
| AUD | $ | 0.66 | | | $ | 0.66 | | | $ | 0.70 | |
| CAD | $ | 0.73 | | | $ | 0.74 | | | $ | 0.77 | |
| EUR | $ | 1.09 | | | $ | 1.08 | | | $ | 1.06 | |
| GBP | $ | 1.28 | | | $ | 1.24 | | | $ | 1.25 | |
Notes to Statistical Information
(a)PCD represents the number of cruise passengers on a voyage multiplied by the number of revenue-producing ship operating days for that voyage.
(b)ALBD is a standard measure of passenger capacity for the period that we use to approximate rate and capacity variances, based on consistently applied formulas that we use to perform analyses to determine the main non-capacity driven factors that cause our cruise revenues and expenses to vary. ALBDs assume that each cabin we offer for sale accommodates two passengers and is computed by multiplying passenger capacity by revenue-producing ship operating days in the period.
(c)In 2024 compared to 2023, we had a 4.7% capacity increase in ALBDs comprised of a 7.9% capacity increase in our NAA segment and a 0.5% capacity decrease in our Europe segment.
Our NAA segment’s capacity increase was caused by the following:
•Carnival Cruise Line 4,090-passenger capacity ship that transferred from Costa Cruises and entered into service in May 2023
•Seabourn 260-passenger capacity ship that entered into service in July 2023
•Carnival Cruise Line 5,360-passenger capacity ship that entered into service in December 2023
•Princess Cruises 4,310-passenger capacity ship that entered into service in February 2024
•Carnival Cruise Line 4,130-passenger capacity ship that transferred from Costa Cruises and entered into service in April 2024
The increase in our NAA segment’s capacity was partially offset by a Seabourn 460-passenger capacity ship that was removed from service in September 2024.
Our Europe segment’s capacity decrease was caused by the following:
•Costa Cruises 4,090-passenger capacity ship that transferred to Carnival Cruise Line in March 2023
•AIDA Cruises 1,270-passenger capacity ship that was removed from service in November 2023
•Costa Cruises 4,240-passenger capacity ship that transferred to Carnival Cruise Line and was removed from Costa Cruises’ fleet in February 2024
•The Red Sea rerouting as certain ships repositioned without guests
The decrease in our Europe segment’s capacity was partially offset by the following:
•The return to service of two ships as part of the completion of our return to guest cruise operations
•P&O Cruises (UK) 5,280-passenger capacity ship that entered into service in December 2022
•Cunard 2,960-passenger capacity ship that entered into service in May 2024
(d)Occupancy, in accordance with cruise industry practice, is calculated using a numerator of PCDs and a denominator of ALBDs, which assumes two passengers per cabin even though some cabins can accommodate three or more passengers. Percentages in excess of 100% indicate that on average more than two passengers occupied some cabins.
2024 Compared to 2023
The discussion below compares the results of operations for the year ended November 30, 2024 to the year ended November 30, 2023. This discussion should be read in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this annual report. For a comparison of the Company’s results of operations for the year ended November 30, 2023 to the year ended November 30, 2022, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended November 30, 2023, which was filed with the U.S. Securities and Exchange Commission on January 26, 2024.
Revenues
Consolidated
Passenger ticket revenues made up 66% of our 2024 total revenues. Passenger ticket revenues increased by $2.4 billion, or 17%, to $16.5 billion in 2024 from $14.1 billion in 2023.
This increase was caused by:
•$988 million - higher ticket prices driven by continued strength in demand
•$705 million - 5.1 percentage point increase in occupancy
•$691 million - 4.7% capacity increase in ALBDs
•$86 million - net favorable foreign currency translational impact
These increases were partially offset by a decrease of $60 million in other passenger revenue.
The remaining 34% of 2024 total revenues was comprised of onboard and other revenues, which increased by $1.0 billion, or 14%, to $8.6 billion in 2024 from $7.5 billion in 2023.
This increase was driven by:
•$422 million - 4.7% capacity increase in ALBDs
•$286 million - 5.1 percentage point increase in occupancy
•$264 million - higher onboard spending by our guests
NAA Segment
Passenger ticket revenues made up 63% of our NAA segment’s 2024 total revenues. Passenger ticket revenues increased by $1.5 billion, or 16%, to $10.6 billion in 2024 from $9.1 billion in 2023.
This increase was caused by:
•$717 million - 7.9% capacity increase in ALBDs
•$609 million - higher ticket prices driven by continued strength in demand
•$241 million - 2.7 percentage point increase in occupancy
These increases were partially offset by a decrease of $64 million in other passenger revenue.
The remaining 37% of our NAA segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $753 million, or 14%, to $6.2 billion in 2024 from $5.5 billion in 2023.
This increase was caused by:
•$430 million - 7.9% capacity increase in ALBDs
•$191 million - higher onboard spending by our guests
•$145 million - 2.7 percentage point increase in occupancy
Europe Segment
Passenger ticket revenues made up 77% of our Europe segment’s 2024 total revenues. Passenger ticket revenues increased by $945 million, or 19%, to $5.9 billion in 2024 from $5.0 billion in 2023.
This increase was driven by:
•$463 million - 8.8 percentage point increase in occupancy
•$379 million - higher ticket prices driven by continued strength in demand
•$87 million - net favorable foreign currency translational impact
These increases were partially offset by a 0.5% capacity decrease in ALBDs, representing $26 million.
The remaining 23% of our Europe segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $231 million, or 15%, to $1.8 billion in 2024 from $1.5 billion in 2023.
This increase was driven by:
•$142 million - 8.8 percentage point increase in occupancy
•$72 million - higher onboard spending by our guests
Costs and Expenses
Consolidated
Operating expenses increased by $1.3 billion, or 9.2%, to $15.6 billion in 2024 from $14.3 billion in 2023.
This increase was caused by:
•$731 million - 4.7% capacity increase in ALBDs
•$333 million - higher commissions, transportation costs, and other expenses driven by higher commission on increased ticket pricing and an increase in the number of guests
•$144 million - higher onboard and other cost of sales driven by higher onboard revenues
•$139 million - 5.1 percentage point increase in occupancy
•$63 million - higher repair and maintenance expenses (including dry-dock expenses)
•$59 million - net unfavorable foreign currency translational impact
•$47 million - decreases in gains on ship sales realized in 2024 compared to 2023
•$36 million - higher port expenses
These increases were partially offset by:
•$89 million - lower fuel consumption per ALBD
•$58 million - lower fuel prices
•$23 million - change in pension valuation
Selling and administrative expenses increased by $302 million, or 10%, to $3.3 billion in 2024 from $2.9 billion in 2023. This increase was driven by higher compensation expense, increased investment in advertising and higher information technology expense.
Depreciation and amortization expenses increased by $187 million, or 7.9%, to $2.6 billion in 2024 from $2.4 billion in 2023. This increase was driven by capacity increases, fleet enhancements and investments in shoreside assets for our NAA segment.
NAA Segment
Operating expenses increased by $968 million, or 10%, to $10.6 billion in 2024 from $9.6 billion in 2023.
This increase was caused by:
•$753 million - 7.9% capacity increase in ALBDs
•$160 million - higher commissions, transportation costs, and other expenses driven by higher commission on increased ticket pricing and an increase in the number of guests
•$81 million - higher onboard and other cost of sales driven by higher onboard revenues
•$76 million - higher repair and maintenance expenses (including dry-dock expenses)
•$46 million - 2.7 percentage point increase in occupancy
These increases were partially offset by:
•$86 million - lower fuel consumption per ALBD
•$50 million - lower fuel prices
Selling and administrative expenses increased by $199 million, or 11%, to $2.0 billion in 2024 from $1.8 billion in 2023. This increase was driven by higher compensation expense, increased investment in advertising and higher information technology expense.
Depreciation and amortization expenses increased by $168 million, or 11%, to $1.7 billion in 2024 from $1.5 billion in 2023.
This increase was caused by:
•$117 million - 7.9% capacity increase in ALBDs
•$51 million - fleet enhancements and investments in shoreside assets
Europe Segment
Operating expenses increased by $336 million, or 7.6%, to $4.7 billion in 2024 from $4.4 billion in 2023.
This increase was caused by:
•$174 million - higher commissions, transportation costs, and other expenses driven by an increase in the number of guests
•$92 million - 8.8 percentage point increase in occupancy
•$63 million - higher onboard and other cost of sales driven by higher onboard revenues
•$62 million - net unfavorable foreign currency translational impact
•$47 million - nonrecurrence of gains on sale of three Europe segment ships in 2023
These increases were partially offset by a $23 million change in pension valuation.
Selling and administrative expenses increased by $85 million, or 9.7%, to $961 million in 2024 from $876 million in 2023.
Depreciation and amortization expenses increased by $8 million, or 1.2%, to $676 million in 2024 from $668 million in 2023.
Operating Income
Our consolidated operating income increased by $1.6 billion to $3.6 billion in 2024 from $2.0 billion in 2023. Our NAA segment’s operating income increased by $879 million to $2.6 billion in 2024 from $1.8 billion in 2023, and our Europe segment’s operating income increased by $747 million to $1.3 billion in 2024 from $593 million in 2023. These changes were primarily due to the reasons discussed above.
Nonoperating Income (Expense)
Interest expense, net of capitalized interest, decreased by $311 million, or 15%, to $1.8 billion in 2024 from $2.1 billion in 2023. The decrease was substantially all due to a decrease in total debt and lower average interest rates.
Debt extinguishment and modification costs decreased by $32 million, or 28%, to $79 million in 2024 from $111 million in 2023 as a result of debt transactions occurring during the respective periods.
Other income (expense), net increased by $157 million to $83 million in 2024 from ($75) million in 2023. The increase primarily relates to a non-recurring favorable result related to litigation.
Liquidity, Financial Condition and Capital Resources
As of November 30, 2024, we had $4.2 billion of liquidity including $1.2 billion of cash and cash equivalents and $2.9 billion of borrowings available under our multi-currency revolving credit facility (“Revolving Facility”). In addition, we had $7.8 billion of undrawn export credit facilities to fund ship deliveries planned through 2033. We will continue to pursue various opportunities to repay portions of our existing indebtedness and refinance future debt maturities to extend maturity dates and
reduce interest expense. Refer to Note 5 - “Debt” of the consolidated financial statements and Funding Sources below for additional details.
We had a working capital deficit of $8.2 billion as of November 30, 2024 compared to a working capital deficit of $6.2 billion as of November 30, 2023. The increase in working capital deficit was caused by increases in customer deposits and accrued liabilities and other and decreases in the current portion of long-term debt, cash and cash equivalents and prepaid expenses and other. We operate with a substantial working capital deficit. This deficit is mainly attributable to the fact that, under our business model, substantially all of our passenger ticket receipts are collected in advance of the applicable sailing date. These advance passenger receipts generally remain a current liability on our balance sheet until the sailing date. The cash generated from these advance receipts is used interchangeably with cash on hand from other sources, such as our borrowings and other cash from operations. The cash received as advanced receipts can be used to fund operating expenses, pay down our debt, make long-term investments or any other use of cash. Included within our working capital are $6.4 billion and $6.1 billion of customer deposits as of November 30, 2024 and 2023. We have agreements with a number of credit card processors that transact customer deposits related to our cruise vacations. Certain of these agreements allow the credit card processors to request, under certain circumstances, that we provide a capped reserve fund in cash. As of November 30, 2024, we were not required to maintain any reserve funds. In addition, we have a relatively low level of accounts receivable and limited investment in inventories.
Sources and Uses of Cash
Operating Activities
Our business provided $5.9 billion of net cash flows from operating activities during 2024, an increase of $1.6 billion, compared to $4.3 billion provided in 2023. This was caused by cash provided by the release of $0.8 billion credit card reserve funds (included in the change in prepaid expenses and other assets) and our net income position of $1.9 billion in 2024 compared to our net loss position of $74 million in 2023, partially offset by a decrease in other working capital changes.
Investing Activities
During 2024, net cash used in investing activities was $4.5 billion. This was caused by:
•Capital expenditures of $4.6 billion primarily attributable to the delivery of two NAA segment ships, one Europe segment ship and developments in our port destinations and exclusive islands
•Proceeds of $58 million primarily from the sale of an NAA segment ship
During 2023, net cash used in investing activities was $2.8 billion. This was driven by:
•Capital expenditures of $3.3 billion with the majority attributable to the delivery of one Europe segment ship and one NAA segment ship
•Proceeds from sales of three Europe segment ships, one NAA segment ship and other totaling $340 million
Financing Activities
During 2024, net cash used in financing activities of $2.6 billion was caused by:
•Repayments of $5.4 billion of long-term debt
•Debt issuance costs of $203 million
•Debt extinguishment costs of $41 million
•Issuances of $3.1 billion of long-term debt
During 2023, net cash used in financing activities of $5.1 billion was driven by:
•Repayments of $200 million of short-term borrowings
•Repayments of $5.9 billion of long-term debt and refinancing of $1.8 billion of long-term debt to extend maturities
•Issuances of $3.0 billion of long-term debt
•Debt issuance costs of $131 million
•Debt extinguishment costs of $79 million
•Proceeds from issuance of $22 million of Carnival Corporation common stock and purchases of $20 million of Carnival plc ordinary shares under our Stock Swap Program
For our cash flow activities for the fiscal year ended November 30, 2022, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended November 30, 2023, which was filed with the U.S. Securities and Exchange Commission on January 26, 2024.
Material Cash Requirements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payments Due by | | |
| (in millions) | 2025 | | 2026 | | 2027 | | 2028 | | 2029 | | Thereafter | | Total |
| Debt (a) | $ | 2,969 | | | $ | 3,991 | | | $ | 6,016 | | | $ | 9,534 | | | $ | 4,706 | | | $ | 6,495 | | | $ | 33,712 | |
| Newbuild capital expenditures (b) | 893 | | | 423 | | | 1,302 | | | 1,263 | | | 1,502 | | | 3,182 | | | 8,565 | |
| Total | $ | 3,862 | | | $ | 4,414 | | | $ | 7,318 | | | $ | 10,797 | | | $ | 6,208 | | | $ | 9,677 | | | $ | 42,277 | |
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(a)Includes principal as well as estimated interest payments and does not include the impact of any future possible refinancings. Excludes undrawn export credits.
(b)As of November 30, 2024, we have undrawn export credit facilities of $7.8 billion which fund a portion of our newbuild contractual commitments.
Funding Sources
As of November 30, 2024, we had $4.2 billion of liquidity including $1.2 billion of cash and cash equivalents and $2.9 billion of borrowings available under our Revolving Facility. In addition, we had $7.8 billion of undrawn export credit facilities to fund ship deliveries planned through 2033. We plan to use existing liquidity and future cash flows from operations to fund our cash requirements including capital expenditures not funded by our export credit facilities. We seek to manage our credit risk exposures, including counterparty nonperformance associated with our cash and cash equivalents, and future financing facilities by conducting business with well-established financial institutions, and export credit agencies and diversifying our counterparties.
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| (in billions) | | 2025 | | 2026 | | 2027 | | 2028 | | 2029 | | Thereafter | | |
Future export credit facilities at November 30, 2024 | | $ | 0.7 | | | $ | — | | | $ | 1.2 | | | $ | 1.2 | | | $ | 1.6 | | | $ | 3.1 | | | |
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CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in millions, except per share data)
| | | | | | | | | | | | | | | | | |
| | Years Ended November 30, |
| | 2024 | | 2023 | | 2022 |
| Revenues | | | | | |
| Passenger ticket | $ | | | | $ | | | | $ | | |
| Onboard and other | | | | | | | | |
| | | | | | | | |
| Operating Expenses | | | | | |
| Commissions, transportation and other | | | | | | | | |
| Onboard and other | | | | | | | | |
| Payroll and related | | | | | | | | |
| Fuel | | | | | | | | |
| Food | | | | | | | | |
| Ship and other impairments | | | | | | | | |
| Other operating | | | | | | | | |
| Cruise and tour operating expenses | | | | | | | | |
| Selling and administrative | | | | | | | | |
| Depreciation and amortization | | | | | | | | |
| |
| | | | | | | | |
| Operating Income (Loss) | | | | | | | () | |
| Nonoperating Income (Expense) | | | | | |
| Interest income | | | | | | | | |
| Interest expense, net of capitalized interest | () | | | () | | | () | |
| Debt extinguishment and modification costs | () | | | () | | | () | |
| Other income (expense), net | | | | () | | | () | |
| () | | | () | | | () | |
| Income (Loss) Before Income Taxes | | | | () | | | () | |
| Income Tax Benefit (Expense), Net | | | | () | | | () | |
| Net Income (Loss) | $ | | | | $ | () | | | $ | () | |
| Earnings Per Share | | | | | |
| Basic | $ | | | | $ | () | | | $ | () | |
| Diluted | $ | | | | $ | () | | | $ | () | |
The accompanying notes are an integral part of these consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
| | | | | | | | | | | | | | | | | |
| | Years Ended November 30, |
| | 2024 | | 2023 | | 2022 |
| Net Income (Loss) | $ | | | | $ | () | | | $ | () | |
| Items Included in Other Comprehensive Income (Loss) | | | | | |
| Change in foreign currency translation adjustment | () | | | | | | () | |
| Other | () | | | () | | | | |
| Other Comprehensive Income (Loss) | () | | | | | | () | |
| Total Comprehensive Income (Loss) | $ | | | | $ | () | | | $ | () | |
The accompanying notes are an integral part of these consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(in millions, except par values)
| | | | | | | | | | | |
| | November 30, |
| | 2024 | | 2023 |
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | | | | $ | | |
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| Trade and other receivables, net | | | | | |
| Inventories | | | | | |
| Prepaid expenses and other | | | | | |
| Total current assets | | | | | |
| Property and Equipment, Net | | | | | |
| Operating Lease Right-of-Use Assets, Net | | | | | |
| Goodwill | | | | | |
| Other Intangibles | | | | | |
| Other Assets | | | | | |
| $ | | | | $ | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
| Current Liabilities | | | |
|
| Current portion of long-term debt | $ | | | | $ | | |
| Current portion of operating lease liabilities | | | | | |
| Accounts payable | | | | | |
| Accrued liabilities and other | | | | | |
| Customer deposits | | | | | |
| Total current liabilities | | | | | |
| Long-Term Debt | | | | | |
| Long-Term Operating Lease Liabilities | | | | | |
| Other Long-Term Liabilities | | | | | |
| Contingencies and Commitments | | | |
| Shareholders’ Equity | | | |
Carnival Corporation common stock, $ par value; shares authorized; shares issued at 2024 and shares issued at 2023 | | | | | |
Carnival plc ordinary shares, $ par value; shares issued at 2024 and 2023 | | | | | |
| Additional paid-in capital | | | | | |
| Retained earnings | | | | | |
| Accumulated other comprehensive income (loss) (“AOCI”) | () | | | () | |
Treasury stock, shares at 2024 and 2023 of Carnival Corporation and shares at 2024 and 2023 of Carnival plc, at cost | () | | | () | |
| Total shareholders’ equity | | | | | |
| $ | | | | $ | | |
The accompanying notes are an integral part of these consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
| | | | | | | | | | | | | | | | | |
| | Years Ended November 30, |
| | 2024 | | 2023 | | 2022 |
| OPERATING ACTIVITIES | | | | | |
| Net income (loss) | $ | | | | $ | () | | | $ | () | |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities | | | | | |
| Depreciation and amortization | | | | | | | | |
| Impairments | | | | | | | | |
| (Gain) loss on debt extinguishment | | | | | | | | |
| (Income) loss from equity-method investments | () | | | | | | | |
| Share-based compensation | | | | | | | | |
| Amortization of discounts and debt issue costs | | | | | | | | |
| Non-cash lease expense | | | | | | | | |
| Gain on sales of ships | () | | | () | | | () | |
| Greenhouse gas regulatory expense | | | | | | | | |
| Other | | | | | | | | |
| | | | | | | () | |
| Changes in operating assets and liabilities | | | | | |
| Receivables | () | | | () | | | () | |
| Inventories | | | | () | | | () | |
| |
| Prepaid expenses and other assets | | | | | | | () | |
| Accounts payable | () | | | | | | | |
| Accrued liabilities and other | | | | | | | | |
| Customer deposits | | | | | | | | |
| Net cash provided by (used in) operating activities | | | | | | | () | |
| INVESTING ACTIVITIES | | | | | |
| Purchases of property and equipment | () | | | () | | | () | |
| Proceeds from sales of ships and other property and equipment | | | | | | | | |
| |
| Purchase of short-term investments | | | | | | | () | |
| Proceeds from maturity of short-term investments | | | | | | | | |
| Other | | | | | | | () | |
| Net cash provided by (used in) investing activities | () | | | () | | | () | |
| FINANCING ACTIVITIES | | | | | |
| Repayments of short-term borrowings | | | | () | | | () | |
| Principal repayments of long-term debt | () | | | () | | | () | |
| Debt issuance costs | () | | | () | | | () | |
| Debt extinguishment costs | () | | | () | | | () | |
| Proceeds from issuance of long-term debt | | | | | | | | |
| |
| |
| Proceeds from issuance of common stock | | | | | | | | |
| Proceeds from issuance of common stock under the Stock Swap Program | | | | | | | | |
| Purchase of treasury stock under the Stock Swap Program | | | | () | | | () | |
| Other | | | | | | | () | |
| Net cash provided by (used in) financing activities | () | | | () | | | | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | () | | | | | | () | |
| Net increase (decrease) in cash, cash equivalents and restricted cash | () | | | () | | | () | |
| Cash, cash equivalents and restricted cash at beginning of year | | | | | | | | |
| Cash, cash equivalents and restricted cash at end of year | $ | | | | $ | | | | $ | | |
The accompanying notes are an integral part of these consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common
stock | | Ordinary
shares | | Additional
paid-in
capital | | Retained
earnings | | AOCI | | Treasury
stock | | Total
shareholders’
equity |
| At November 30, 2021 | $ | | | | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | |
| | | | | | | | | |
| Net income (loss) | — | | | — | | | — | | | () | | | — | | | — | | | () | |
| Other comprehensive income (loss) | — | | | — | | | — | | | — | | | () | | | — | | | () | |
| Issuances of common stock, net | | | | — | | | | | | — | | | — | | | — | | | | |
| Issuance of Convertible Notes | — | | | — | | | | | | — | | | — | | | — | | | | |
| Purchases and issuances under the Stock Swap Program, net | — | | | — | | | | | | — | | | — | | | () | | | | |
| Issuance of treasury shares for vested share-based awards | — | | | — | | | — | | | () | | | — | | | | | | | |
| Share-based compensation and other | — | | | — | | | | | | () | | | — | | | — | | | | |
| At November 30, 2022 | | | | | | | | | | | | | () | | | () | | | | |
| Change in accounting principle (a) | — | | | — | | | () | | | () | | | — | | | — | | | () | |
| Net income (loss) | — | | | — | | | — | | | () | | | — | | | — | | | () | |
| Other comprehensive income (loss) | — | | | — | | | — | | | — | | | | | | — | | | | |
| | | | | | | | | |
| Issuances of common stock, net | — | | | — | | | | | | — | | | — | | | — | | | | |
| Conversion of Convertible Notes | — | | | — | | | | | | — | | | — | | | — | | | | |
| Purchases and issuances under the Stock Swap Program, net | — | | | — | | | | | | — | | | — | | | () | | | | |
| Issuance of treasury shares for vested share-based awards | — | | | — | | | () | | | — | | | — | | | | | | | |
| Share-based compensation and other | — | | | — | | | | | | — | | | — | | | () | | | | |
| At November 30, 2023 | | | | | | | | | | | | | () | | | () | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Net income (loss) | — | | | — | | | — | | | | | | — | | | — | | | | |
| Other comprehensive income (loss) | — | | | — | | | — | | | — | | | () | | | — | | | () | |
| | | | | | | | | |
| Conversion of Convertible Notes | — | | | — | | | | | | — | | | — | | | — | | | | |
| | | | | | | | | |
| Issuance of treasury shares for vested share-based awards | — | | | — | | | () | | | — | | | — | | | | | | | |
| Share-based compensation and other | — | | | — | | | | | | — | | | — | | | () | | | | |
| At November 30, 2024 | $ | | | | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | |
(a)
The accompanying notes are an integral part of these consolidated financial statements.
CARNIVAL CORPORATION & PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 –
companies operate as a single economic enterprise with a single senior management team and identical Boards of Directors, but each has retained its separate legal identity. Carnival Corporation’s shares of common stock are publicly traded on the New York Stock Exchange (“NYSE”) and Carnival plc’s ordinary shares are publicly traded on the London Stock Exchange. The Carnival plc American Depositary Shares are traded on the NYSE.
The constitutional documents of each company provide that, on most matters, the holders of the common equity of both companies effectively vote as a single body. The Equalization and Governance Agreement between Carnival Corporation and Carnival plc provides for the equalization of dividends and liquidation distributions based on an equalization ratio and contains provisions relating to the governance of the DLC arrangement. Because the equalization ratio is 1 to 1, share of Carnival Corporation common stock and Carnival plc ordinary share are generally entitled to the same distributions.
Under deeds of guarantee executed in connection with the DLC arrangement, as well as stand-alone guarantees executed since that time, each of Carnival Corporation and Carnival plc have effectively cross guaranteed all indebtedness and certain other monetary obligations of each other. Once the written demand is made, the holders of indebtedness or other obligations may immediately commence an action against the relevant guarantor.
Under the terms of the DLC arrangement, Carnival Corporation and Carnival plc are permitted to transfer assets between the companies, make loans to or investments in each other and otherwise enter into intercompany transactions. In addition, the cash flows and assets of one company are required to be used to pay the obligations of the other company, if necessary.
NOTE 2 –
million from restricted cash to prepaid expenses and other in the Consolidated Balance Sheets to conform to the current year presentation.
| % |
| Ship improvements | - | | % |
| Buildings and improvements | - | | % |
| Computer hardware and software | - | | % |
| Transportation equipment and other | - | | % |
| Leasehold improvements, including port facilities | Shorter of the remaining lease term or related asset life (-) | | % |
The cost of ships under construction includes progress payments for the construction of new ships, as well as design and engineering fees, capitalized interest, construction oversight costs and various owner supplied items. Any liquidated damages received from shipyards are recorded as reductions to the cost basis of the ship.
We have a capital program for the improvement of our ships and for asset replacements to enhance the effectiveness and efficiency of our operations; to comply with, or exceed, all relevant legal and statutory requirements related to health, environment, safety, security and sustainability; and to gain strategic benefits or provide improved product innovations to our guests. We account for ship improvement costs, including replacements of certain significant components and parts, by capitalizing those costs we believe add value to our ships and have a useful life greater than one year and depreciating those improvements over their estimated remaining useful life. The costs of repairs and maintenance, including those incurred when a
years and residual values at % of our original ship cost. Our ships’ useful life and residual value estimates take into consideration the estimated weighted-average useful lives of the ships’ major component systems, such as hull, superstructure, main electric, engines and cabins. We also take into consideration the impact of technological changes, historical useful lives of similarly-built ships, long-term cruise and vacation market conditions and regulatory changes, including those related to the environment and climate change. We determine the residual value of our ships based on our long-term estimates of their resale value at the end of their useful lives to us but before the end of their physical and economic lives to others, historical resale values of our and other cruise ships as well as our expectations of the long-term viability of the secondary cruise ship market. We review estimated useful lives and residual values for reasonableness whenever events or circumstances significantly change.
or less and do not include an option to purchase the underlying asset that we are reasonably certain to exercise. For some of our port facilities and real estate lease agreements, we have the option to extend our current lease term by to years. Generally, we do not include renewal options as a component of our present value calculation as we are not reasonably certain that we will exercise the options.
As our leases do not have a readily determinable implicit rate, we estimate the incremental borrowing rate (“IBR”) to determine the present value of lease payments. We apply judgment in determining the IBR including considering the term of the lease, the currency in which the lease is denominated, and the impact of collateral and our credit risk on the rate.
We recognize lease expense for our operating leases on a straight-line basis over the lease term.
phase-in period. The ETS regulates emissions through a “cap and trade” principle, where a cap is set on the total amount of certain emissions that can be emitted and requires us to procure emission allowances for certain emissions inside EU waters (as defined in the ETS). Emission allowances are recorded at cost and are included in prepaid expenses and other or other assets. Purchases of emission allowances are classified as operating activities in our Consolidated Statements of Cash Flows. Emission obligations are recorded when generated and are included in accrued liabilities and other and other long-term liabilities. The funded portion of the emission obligations are measured at the carrying value of the emission allowances and the unfunded portion of emission obligations is measured at the fair value of emission allowances necessary to settle. We record expense for emissions in EU waters in fuel expense in the period incurred. Emission allowances and obligations are derecognized when surrendered based on the first-in, first-out method, and are non-cash activities.
million. The proceeds that we collect from the sales of third-party shore excursions are included in onboard and other revenues and the related costs are included in onboard and other costs. The amounts collected on behalf of our onboard concessionaires, net of the amounts remitted to them, are included in onboard and other revenues as concession revenues. All of these amounts are recognized on a completed voyage or pro rata basis as discussed above.
Fees, taxes and charges that vary with guest head counts are expensed in commissions, transportation and other costs when the corresponding revenues are recognized. The remaining portion of fees, taxes and charges are expensed in other operating expenses when the corresponding revenues are recognized.
Revenues and expenses from our hotel and transportation operations, which are included in our Tour and Other segment, are recognized at the time the services are performed.
Customer Deposits
Our payment terms generally require an initial deposit to confirm a reservation, with the balance due prior to the voyage. Cash received from guests in advance of the cruise is recorded in customer deposits and in other long-term liabilities on our
billion and $ billion as of November 30, 2024 and 2023, which includes approximately $ million of unredeemed Future Cruise Credits (“FCCs”) as of November 30, 2024. At November 30, 2023, we had approximately $ million of unredeemed FCCs, of which $ million were refundable. During 2024 and 2023, we recognized revenues of $ billion and $ billion related to our customer deposits as of November 30, 2023 and 2022. Our customer deposits balance changes due to the seasonal nature of cash collections, which typically results from higher ticket prices and occupancy levels during the third quarter, the recognition of revenue, refunds of customer deposits and foreign currency changes.
Contract Costs
We had incremental costs of obtaining contracts with customers recognized as assets of $ million and $ million as of November 30, 2024 and 2023.
million in 2024, $ million in 2023 and $ million in 2022. Administrative expenses represent the costs of our shoreside support, reservations and other administrative functions, and include salaries and related benefits, professional fees and building occupancy costs, which are typically expensed as incurred.
NOTE 3 –
| | $ | | |
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