Costa Concordia a 'total write-off', says Carnival

Costa Concordia a 'total write-off', says Carnival

Costa Concordia is being written off as a total loss by parent company Carnival Corporation.

The company is to receive $515 million in insurance for the crippled vessel which run around with 4,200 passengers and crew on board with the loss of at least 25 lives off the Italian island of Giglio in January.

This will offset the value of the six year old vessel which has been deemed to be a “constructive total loss”. It was originally thought the ship could have been salvaged.

The disaster cost Carnival Corporation $29 million in the first quarter of its financial year.

The company also faced a $34 million impairment charge related to Costa Allegra which lost power in the Indian Ocean six weeks after the Concordia incident and had to be towed to the Seychelles.

Carnival warned that its expectations for 2012 will be affected by the “direct and indirect” financial impact of the Costa Concordia incident.

Booking volumes for Costa are running “significantly behind” last year at lower prices at a time when the line curtailed virtually all of its marketing activities.

Cumulative advance bookings across the group, excluding Costa, for the remainder of 2012 are approximately 3 percentage points behind the last year’s levels with prices slightly higher.

Since the date of the Costa Concordia incident in mid-January through to February 26, fleetwide booking volumes, excluding Costa, have shown “improving trends” but are still running high single digits behind the prior year at slightly lower prices.

“There has been less impact on the company's North American brands than European brands,” the company said.

Chairman and chief executive Micky Arison said: “Our base of business for 2012 is solid and booking volumes have gradually improved, which we believe is a testament to consumer confidence in the cruise industry’s long-standing record of exceptional safety.

“Despite the slowdown in bookings, all of our North American brands are still expecting a modest yield improvement in 2012 while our European brands, excluding Costa, are expecting to have slightly lower yields due in part to the slowing European economies.

“Overall, based on current pricing trends, any consumers holding out for deeper than normal discounts may be disappointed.”

He added: "Our company is resilient and we will continue to work through this challenging period.

“We have every confidence that we will restore consumer faith in the Costa brand and the excellent reputation Costa's management team has built for the organisation which has a deep-rooted Italian heritage spanning more than 60 years.

“Carnival Corporation expects to carry nearly 10 million guests on its global fleet this year and the long-term fundamentals of our business remain strong as consumers continue to place tremendous importance on quality and value when making vacation decisions.

“Based on our solid operating cash flow, strong balance sheet and high investment grade credit ratings we are well positioned for the future and remain confident in our long-term outlook.”

He also said: “Immediately following the Costa Concordia accident we ordered a thorough review, with the help of industry-leading experts, to understand what happened as well as to conduct an extensive audit of all safety and emergency response procedures across all of our cruise lines.

“We will work tirelessly to understand what went wrong, and make sure it never happens again."

Carnival achieved a net profit of $152 million in the three months to February 29 based on revenues which were up to $3.6 billion from $3.4 billion a year earlier.

The company will take delivery of three new ships in its second quarter - Costa Cruises' 2,984-passenger Costa Fascinosa, AIDA Cruises' 2,194-passenger AIDAmar and Carnival Cruise Lines' 3,690-passenger Carnival Breeze.

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