Carnival Corporation’s President and CEO, Josh Weinstein, has indicated that the company is open to implementing a fuel surcharge. The statement came during a recent Q3 earnings call and signaled a level of uncertainty concerning rising fuel prices.
Although Weinstein mentions that any potential surcharge would only affect future bookings, not guests who have already secured their cruise, Carnival Cruise Line’s terms and conditions indicate otherwise.
According to their policy, the surcharge could be applied even if the cruise fare has been paid in full, potentially adding hundreds of dollars to the onboard bill for guests.
Fuel Surcharges Could be Coming to Carnival
Carnival Corporation’s President and CEO, Josh Weinstein, addressed the often-sensitive subject of fuel surcharges during the 3rd quarter earnings call on September 29. This issue has become a talking point since fuel pricing increased dramatically between early 2022 and now.
If a fuel surcharge were implemented, this would come when cruise pricing has already been elevated, and guests are paying a premium. At the same time, several cruise lines have steadily removed various services onboard. Adding a fuel surcharge could affect the booking decisions of prospective cruisers.
Josh Weinstein said: “Yeah. It’s certainly not off the table. We wouldn’t take anything off of the table. It’s not something we’re planning to implement in the near term, although that could certainly change. There are certainly considerations that have to be made about what’s the norm in society with the expectations of our customers.”
Adding a fuel surcharge would be a temporary measure, primarily to counter sudden price increases, and it would not affect guests who have already booked their cruises with one of the nine cruise lines that Carnival Corporation operates, according to Weinstein:
“Obviously, you don’t go retroactively too. So, you’re talking about forward bookings. But I wouldn’t take anything off the table. I would reiterate, though, even a fuel surcharge is temporary.”
However, Carnival Cruise Line, which is by far the largest component of Carnival Corporation, has a different policy. Their terms and conditions specify a “Fuel supplement,” essentially an additional charge designed to offset a portion of the company’s fuel costs.
According to the policy, Carnival reserves the right to charge a fuel supplement of up to USD 9.00 per person per day if the price of light sweet crude oil exceeds USD 70.00 per barrel.
What’s noteworthy here is that Carnival may collect this supplement at the time of sailing, even if the guests have already paid the cruise fare in full. For a family of four on a seven-night cruise, this adds up to $252.
Will Carnival Add a Surcharge?
The prospect of adding a fuel surcharge is something Carnival Corporation would regard as a last resort, knowing it would raise eyebrows among their guests.
In response to an analyst’s question about why Carnival doesn’t hedge fuel (locking in a specific price for fuel for a set period), Weinstein indicated that hedging, like a surcharge, isn’t off the table but also noted that its impact on share price and long-term value was found to be minimal in their studies.
So, what other options does Carnival have to avoid a fuel surcharge? One method is simply to reduce consumption. Efforts to use less fuel saved the company an estimated $375 million this year.
This likely leads to Carnival’s nine cruise lines re-evaluating their routes, which could lead to more fuel-efficient cruises but with potential itinerary changes.
Since the earnings call, the stock price of Carnival has dipped around 30 cents per share. Interestingly, this appears to be more of a market reaction to the company’s projected fourth-quarter loss.
However, it could be that the market is sensitive to the unresolved question of a potential fuel surcharge and how guests would react to even higher cruise pricing.