Carnival (NYSE:CCL) issued a cautionary statement on Tuesday, forecasting a negative impact on its annual earnings due to the rerouting of its ships scheduled to traverse the Red Sea, a critical transit route connecting Asia and Europe. The decision to reroute comes in response to increased attacks by the Houthi militant group in Yemen on Israeli ships and vessels heading towards Israel, as an expression of solidarity with the Palestinians.
The adjusted earnings per share for the full year 2024 are expected to be affected by 7 to 8 cents, with the majority of the impact anticipated in the second quarter. In December, Carnival had initially projected an adjusted profit per share of 93 cents for the entire year.
Carnival provided details in a statement about its decision to reroute itineraries for 12 ships across seven brands. This adjustment comes in response to recent developments and after close consultations with global security experts and government authorities. The affected ships were initially scheduled to transit the Red Sea through May 2024.
Notably, Carnival is one of many cruise operators facing such challenges, as a growing number of companies are redirecting their vessels due to heightened attacks on Israeli and Israel-bound ships by the Houthi group. In January, Royal Caribbean Group (NYSE:RCL) announced the cancellation of two voyages to the region in response to these attacks. MSC Cruises, a Swiss Italian operator, also canceled three trips scheduled for April, originating from South Africa and the United Arab Emirates and bound for Europe.
Despite these disruptions, Carnival reported an “early and robust” start to the wave season, with booking volumes reaching an all-time high since November. The cruise operator, which owns Cunard and Holland America Line cruise lines, stated that the first half of 2024 is almost fully booked, expressing confidence that strong bookings throughout the year will offset the impact of the Red Sea rerouting.
In volatile morning trade, shares of Carnival remained largely flat as the company navigated these challenges in the cruise industry.
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