Cruise Lines Take Different Routes to Tame Fuel Costs
Carnival, Royal Caribbean and Norwegian Cruise Line Holdings all posted strong results for their latest quarter even as fuel prices climbed. How the three biggest cruise companies handle that expense comes down to sharply different approaches.
Royal Caribbean and Norwegian both use hedging — derivatives meant to soften the blow of future fuel-price swings. Carnival has stuck with the position it has held since 2019: burning less fuel beats hedging. CEO Josh Weinstein has said the best way to control fuel costs is simply to use less.
Analyst David Katz noted that hedging mainly manages fuel costs, but it also steadies Wall Street expectations, since public companies can see their shares traded around fuel prices.
Carnival's latest quarterly report suggests its approach may be working. The company beat analyst expectations on revenue and profit and reported record net income of $1.9 billion. Weinstein said Carnival has cut its unit fuel consumption rate by 26% since 2019 and estimates about $700 million in savings this year. Fuel spending still rose to $615 million, or 7.3% of revenue, from $425 million, or 6.7%, in the prior quarter, and Carnival expects $640 million in the current quarter.
Royal Caribbean beat earnings-per-share expectations but narrowly missed on revenue. CEO Jason Liberty credited hedging, saying the company is a little over 60% hedged for next year, which helps insulate it from rising costs — though he acknowledged high prices still ate into its full-year guidance. Fuel spending rose to about $347 million, or 6.2% of revenue, from $293 million, or 6.8%, and is projected at $379 million this quarter. Liberty said demand remains strong, with bookings for 2027 already up by a high-teens percentage.
Norwegian beat on both lines, with $2.9 billion in revenue and adjusted earnings per share of $1.12. It has hedged roughly 48% of its fuel consumption for next year. Fuel spending came to about $196 million, or 6.6% of revenue, down from 7.4% — $167 million — in the prior quarter. Consumption is expected to rise slightly this quarter, to 255,000 metric tons from 239,000. CFO Mark Kempa said the results reinforce confidence in the company's products and its ability to turn stronger revenue and disciplined cost management into improved profitability.