Carnival to spend $700 million to improve cruise line's dependability

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  Passengers stand on the upper deck of the disabled Carnival Lines cruise ship Triumph as it is towed to harbor off Mobile Bay, Ala., Thursday, Feb. 14, 2013. The ship with over 1,000 passengers aboard has been idled for nearly a week in the Gulf of Mexico following an engine room fire. (AP Photo/Gerald Herbert)2013 AP

Carnival Corp. on Wednesday announced it will implement a $700 million-plan to upgrade its fleet and avoid incidents like the the disabling of the Carnival Triumph.

The Carnival Cruise Lines overhaul --which is expect to cost $300 million--will include significant enhancements to emergency power capabilities, new fire safety technology and improved operating procedures, the company said in a release. The parent company, Carnival Corp, also will be making improvements to other ships in its line, including Princess, Holland America, Seabourn and Cunard.  Overall enhancements company-wide could be as much as $700 million, said the company.

The announcement comes amid concerns about the cruise line's safety and reliability record caused by a string of high-profile incidents. In February, an engine room fire aboard the Carnival Triumph left the ship powerless for five days in the Gulf of Mexico, forcing passengers to live amid unsanitary conditions caused by no hot water or working toilets.   In November 2010, the Carnival Splendor was also crippled by an engine-room fire off the coast of Mexico.

“We’ve had two cruises that have not been good experiences for our guests; that’s two too many,” said Carnival Cruise Lines President and CEO Gerry Cahill. “We’re making this effort because we are the biggest cruise line in the world. If we’re not going to lead the way and say we’re going to provide a great guest experience every time, I don’t know who will.”

Carnival says the plan is a result of fleet-wide comprehensive operational review, scheduled to last through 2014, following the disabling of the Triumph.  The company said it has already begun to implement some of the improvements, including the enhanced emergency generator power system.  The improvements will be completed over the next several months and should not impact scheduled cruises. A second-phase of improvements will include a permanent back-up power system and ways to maintain guest services if main power is lost.  

“Although every ship in our fleet currently has emergency back-up power which is designed to enable the continuous operation of safety equipment and some hotel services, it is our intent to significantly bolster that back-up power to support the core hotel services.  With this improvement, we will better ensure guest comfort in the rare instance of a loss of main power,” said Cahill. 

Carnival Corp. has been the target of criticism by many, including Sen. Jay Rockefeller (D-WV) who claimed the company is "bloodsucking off the American people." He called on Carnival to reimburse the federal government for costs associated with rescue operations of the Carnival Splendor and Carnival Triumph, which he claimed ran in the millions of dollars.  On Monday, Carnival said  that it is in the process of voluntarily submitting payment to the U.S. government, although did not disclose the amount.

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Carnival says it will pay US for disabled ships

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  Feb. 14, 2013: The Carnival Triumph being towed into Mobile Bay, Ala., after it was disabled in the Gulf of Mexico following an engine room fire.AP

MIAMI –  Carnival Corp. said Monday it will repay the U.S. government an unspecified amount for the costs to taxpayers of responses to disabling accidents on its Triumph and Splendor cruise ships, both of which left thousands of passengers stranded at sea for days.

The world's largest cruise line company said the payments were being made voluntarily to the U.S. Treasury Department and that no government agency had requested reimbursement for either accident.

But Carnival had come under pressure from U.S. Sen. Jay Rockefeller, D-W.Va., who was highly critical last week of Carnival's indirect responses to his inquiries about its willingness to pay.

Rockefeller, chairman of the Senate Commerce Committee, estimated the Coast Guard's costs in dealing with the crippled Triumph earlier this year at nearly $780,000. The 2010 engine fire that left the Splendor adrift off of Mexico, he said, cost the Coast Guard and Navy about $3.4 million. The Navy work in that case included delivering food from the aircraft carrier USS Ronald Reagan.

In both cases, passengers were left in uncomfortable and even squalid conditions before the ships made it back to port.

Carnival's statement did not say if it would pay those amounts or something else. But the company insisted that it never flatly rejected the idea of reimbursement.

"It should be clearly noted that at no point in time has Carnival stated that it would refuse to reimburse federal agencies if they sought remuneration," the company statement said.

Last week, in response to written questions from Rockefeller about repaying the costs, Carnival released letters responding to the senator stating that its policy in such situations is to "honor maritime tradition" requiring assistance to those in need at sea from all maritime interests. Carnival also said in those letters that it frequently participates in rescues at Coast Guard request and strongly defended its safety record.

Rockefeller had labeled that initial response as "shameful" and indicated then that he might hold hearings or propose legislation.

He didn't immediately return messages from The Associated Press seeking comment on Carnival's decision.

The 900-foot Triumph was disabled during a February cruise by an engine room fire in the Gulf of Mexico, leaving thousands of passengers to endure cold food, unsanitary conditions and power outages while the ship was towed to Mobile, Ala. It is still undergoing repairs there.

The 952-foot Splendor was also hobbled by an engine fire in January 2010, leaving its thousands of passengers to endure similar difficult conditions for three days in the Pacific Ocean while it was towed to San Diego. The Splendor is now back in service and cruises out of New York, according to Carnival's web site.

In both cases, Carnival gave passengers refunds, free cruise vouchers and other forms of reimbursement.

Carnival is also dealing with last year's grounding and capsizing of the Costa Concordia off the coast of Italy, which killed 32 people and spawned both criminal investigations and lawsuits. Costa is one of Carnival's six cruise brands.

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Carnival tells senator that company will unlikely help pay for recent rescue operations

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  Feb. 14, 2013: The Carnival Triumph being towed into Mobile Bay, Ala., after it was disabled in the Gulf of Mexico following an engine room fire.AP

Carnival Corp. has defended its safety record and indicated that it will not likely chip in to help pay for costs incurred in rescue operations associated with the recent incidents of the company's disabled cruise ships. 

In a letter dated March 29, but made public Wednesday, James Hunn, senior vice president of corporate maritime policy for Carnival, wrote:

"Carnival has an excellent safety record throughout its 41-year history," noting that the company is undergoing a safety review of its entire fleet following the fire aboard the Carnival Triumph in February, where some 3,100 passengers were stranded for days after an engine room fire left the cruise ship stranded at sea.

Hunn's letter was in response to questions from Sen. Jay Rockefeller (D-WV), the chairman of the U.S. Senate Committee on Commerce, Science and Transportation who sent a letter last month to Carnival CEO Micky Arison claiming that the U.S. Coast Guard responded to 90 “serious events” involving Carnival ships over five years.  Rockefeller says the Coast Guard and Navy had paid up $4.2 million in rescue costs for the Triumph and the Splendor, disabled in 2010 by another engine room fire.

The senator pointed out that Carnival, although headquartered in Miami, is incorporated in Panama and is not subject to U.S. labor wage laws.  Rockefeller asked whether Carnival, since it pays “little or nothing in federal taxes,” will reimburse the Coast Guard and Navy.

Carnival didn't give a clear yes or no answer, but Hunn replied:

“Carnival’s policy is to honor maritime tradition that holds that the duty to render assistance at sea to those in need is a universal obligation of the entire maritime community.”

Under U.S. law, cruise lines are not obligated to pay the Coast Guard or other U.S. federal agencies for rescue services for a foreign flagged ship back to an American port.

Hunn also disputed Rockefeller's claim of 90 serious Carnival events at sea, saying 83 of the 90 events did not meet the definition of a serious marine incident as defined by the Code of Federal Regulations and did not require U.S. Coast Guard intervention.  Of the serious incidents Hunn noted were the Triumph and Splendor fires and the capsizing of the Costa Concordia in 2012.

Rockefeller, in response to Hunn's written response, expressed his anger. “Carnival’s response to my detailed inquiry is shameful," in a letter obtained by Skift. "It is indisputable that Carnival passengers deserve better emergency response measures than they experienced on the Triumph. I am considering all options to hold the industry to higher passenger safety standards.”

This is the latest in a string of efforts by Rockefeller and Sen. Charles Schumer (D-NY) to turn up the heat on Carnival and the cruise industry as a whole.  The senators have been pushing the Cruise Lines International Association to voluntary accept a cruise passengers bill of rights to guarantee passengers certain protections while aboard cruise ships.

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Carnival cancels trips as Triumph taken out of service

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  Feb. 14, 2013: The Carnival Triumph being towed into Mobile Bay, Ala., after it was disabled in the Gulf of Mexico following an engine room fire.AP

The Carnival Triumph, which was crippled by an engine fire in the Gulf of Mexico last month leaving 4,200 people stranded for five days, will be out of service longer than initially expected, Carnival Cruise Lines announced Tuesday.

The ship is now set to return to service June 3, meaning an additional 10 cruises will be canceled. Guests on the affected voyages will receive a full refund, reimbursement for non-refundable transportation costs and a 25 percent discount on a future four- to five-day cruise.

Also, the Carnival Sunshine, which is undergoing a scheduled full-ship makeover, will return to service May 5, following the cancellation of two European cruises.

The cruise line is making significant investments to enhance its backup systems and the scope of hotel services that can run on emergency power, and further improve each ship's fire prevention, detection and suppression systems.

"We sincerely regret canceling these cruises and disrupting our guests' vacation plans," Carnival president and CEO Gerry Cahill said in a release. "We are fully committed to applying the recommendations stemming from our fleet-wide review and to make whatever investments are needed despite the difficult decision to impact people's vacations."

Mike Driscoll, editor of Cruise Week, said Carnival is smart to take the extra time and make the necessary improvements, because it shows the company is taking the recent shipboard problems seriously.

"The cancellations are painful in the short-term, both to Carnival customers and Carnival Corp.'s bottom line, but a very shrewd maneuver in the long-term," Driscoll said. "Carnival is facing increasing scrutiny, not just from media, but from Congress, so they're acting quickly to forestall legislative maneuvers that might require them to make such moves anyway down the line. The view is that it's better to do it on your own, as opposed to having politicians require you to make changes."

Stewart Chiron, an industry expert known as "The Cruise Guy," said the fact that Carnival is making the additional redundancy and fire prevention upgrades to the Sunshine, which was already in dry-dock receiving a $150 million refit, demonstrates that Carnival means to make the improvements fleet-wide.

"This isn't going to take years of discussion and committee," Chiron said. "These changes are going to be implemented immediately, and these are the first two ships to get it. It's actually very encouraging."

In its earnings release last week, the Miami-based company said advance bookings for 2013 are behind the same point from a year ago. The company blamed Europe's economic problems for its inability to raise prices. North American prices are up slightly but those in Europe and Asia are lagging. Passengers in Europe are booking vacations much closer to the date of departure, Carnival said.

But vacationers have been wary about booking cruises ever since the Costa Concordia - also owned by Carnival - sank off the coast of Italy in January 2012. Passengers have returned to the seas, but many needed to be coaxed by deep discounts.

And the Triumph wasn't the only Carnival ship to experience problems this year. The company ended the voyage of the Carnival Dream last week after the ship's backup emergency diesel generator failed, causing problems with elevators and toilets. Instead of allowing the cruise ship to return to Florida, Carnival was forced to charter airplanes to fly home the ship's 4,300 passengers. The Dream's next trip, which was supposed to start Sunday, was canceled.

The company also said that another ship - the Legend - was having mechanical problems and skipped its stop at the Cayman Islands, heading straight to its final port in Tampa instead.

Carnival runs cruises under 10 brands including Holland America, Princess, Cunard and its namesake line.

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