A tragedy tied to Carnival Corp’s ill-fated cruiseship, the Costa Concordia, may take a $175m bite out of the US owner’s bottom line in 2012.
New York-listed Carnival used an annual report filed with securities regulators to issue a profit warning that assumes an $85m to $95m hit from loss of use, $40m in insurance deductibles and $30m to $40m in other costs including lawsuits.
(click HERE to read the filing in full)
The estimates do not account for the impact of reduced bookings and negative press at its Costa Cruises subsidiary, which operated the Costa Concordia when it capsized after running aground off the Italian island of Giglio on 13 January.
“Costa’s booking activity is difficult to interpret because of the significant re-booking activity stemming from the loss of the ship’s use and related re-deployments, however we believe it to be down significantly,” it told shareholders.
Despite the catastrophic series of events, which are still unfolding amid weather-related salvage delays, management reiterated its belief that the incident will not have “a significant long-term impact” on business.
“A damage assessment review of the ship is being undertaken to determine whether the ship can be repaired and what the total cost would be,” the company added. “If the ship is repairable, it is expected to be out-of-service for the remainder of fiscal 2012 if not longer.”
At the end of December, Carnival said the net carrying value of the Costa Concordia stood at $490m with insurance coverage of around $510m and a deductible of $30m, which covers damage to the ship, in addition to a $10m deductible for injuries to third parties.
According to today’s securities filing, the Miami, Florida-based operator of more than 100 cruiseships self-insures for loss of use. In the first quarter of this year, costs tied to the Concordia disaster are expected to top $117m.
