travolution Carnival's numbers are promising for the company and the cruise sector - but it isn't all plain sailing...bit of bad news: fuel prices. According to Frank, fuel prices this quarter were a staggering 64% higher than last year, "costing us $162 million or $0.20 per share".
Think about that number for a moment. A large part of the entire earnings flow from operating a cruise line can be destroyed by a big increase in oil prices. Oil as a percentage of total costs in the quarter moved up from just 9.3% of the total mix to 16%, a massive move that opens up a number of questions.
... if Carnival and its peers can't pass all of that volatility on to customers, it must come up with a cunning plan to either reduce oil's impact on the bottom line by increasing overall prices, engage in some massive and risky hedging or think about new technologies and energy sources.
I don't subscribe to the idea that oil prices will continue to rocket as we approach peak oil, but I do think oil will continue to trade in a $50 to $110 range. If the big airline guys are seriously considering the idea of an all biofuel plane, surely we must be only years away from the first cruise ship powered entirely by biowaste.
