Carnival Cruises 2010 Annual Report Download - page 3

To Our Shareholders:
All in all, 2010 was an encouraging year with improved business trends from a gradually recovering economy.
The company achieved an almost 11 percent increase in net income, earning $2 billion. Revenues increased over 7 percent to reach $14.5 billion,
recovering almost 3 percentage points of revenue yield (constant dollar) from 2009 levels. Our North American brands experienced a significant
rebound in cruise ticket prices, increasing almost 6 percent compared to 2009. Cruise ticket prices for our European, Australian and Asian brands
declined slightly after absorbing 14 percent more capacity and cycling relatively stronger performance in the prior year.
As always, we remained focused on cost containment through both individual cruise brand efforts and cross-brand initiatives. We successfully
reduced unit operating expenses, excluding fuel, by 3 percent compared to 2009 while improving our onboard product. This cost reduction helped
offset a 35 percent increase in fuel prices. Further progress was made on our efforts to reduce fuel consumption, achieving an almost 3 percent
reduction on a unit basis. Over the past five years, we have reduced our fuel consumption on a unit basis by nearly 13 percent.
Cash from operations increased 14 percent to reach $3.8 billion which was more than enough to fund our $3.6 billion capital expansion program.
During 2010, we successfully introduced six new vessels furthering the company’s strategy to expand its global presence. In addition, the
company took advantage of attractive shipyard prices to order three more vessels during the year, bringing the company’s order book to 10 ships
to be delivered through 2014. As our order book stands today, we will deliver four ships this year, three ships in 2012, two ships in 2013 and one
ship in 2014.
Our most important accomplishment in 2010, however, was delivering memorable vacation experiences to a record nine million guests across 10
of the world’s most respected cruise brands. These cruisers now serve as important advocates for our brands, encouraging others to entrust their
vacation experiences to us. As a result of our high guest satisfaction rates, 65 percent of our guests are repeat cruisers. The remaining 35 percent
of guests, who cruised for the first time in 2010, should pay dividends in years to come given their propensity to return to cruising.
THE FOUNDATION OF OUR GLOBAL SUCCESS
The foundation of our global success is the strength of our 10 cruise brands that cater to a variety of different geographic regions and lifestyles, all
at an outstanding value unrivaled on land or sea. Our cruise brands appeal to the tastes and cultures of the vacationers in the countries in which
they operate enabling us to achieve greater demand and market penetration.
Our decentralized structure supports this foundation, operating as a collection of separately managed cruise brands. Management teams led by
locally-based entrepreneurial executives are driven to grow and optimize their brands which fosters an ownership-oriented attitude that is rare in
an organization our size.
Our corporate team is responsible for selecting the chief executive officer for each of our cruise brands, managing enterprise risk and allocating
capital among the brands. All of our capital allocation decisions are based on obtaining an attractive return on investment and building a platform
for the strategic growth of our business in new and emerging markets. We maintain a strong balance sheet and solid investment grade credit
rating, a competitive advantage in our industry given its capital intensity. We believe this to be the best insurance for events beyond our control.
ACHIEVING MILESTONES
In 2011, we will launch four new ships — AIDAsol in April (2,194 passengers), Carnival Magic in May (3,690 passengers), Seabourn Quest in
June (450 passengers) and Costa Favolosa in July (2,984 passengers). The delivery of Carnival Magic will be a significant milestone in our
company’s history as the 100th ship in our fleet. This will be a cruise industry first. Our 100 ships with capacity approaching 200,000 passengers
will be more than twice the size of our closest competitor. Having begun with just one “Fun Ship” in 1972, our company has grown exponentially.
We have expanded from our North American base, secured a strong foothold in the United Kingdom and Continental Europe and are now focused
on development in South America, Australia and Asia. In just two years, we have grown our guests sourced from new and emerging cruise
markets by 50 percent, and these new markets represent over 12 percent of our passenger base.
A NEW DECADE
In today’s high stress lifestyles, we believe vacations have become increasingly important. A recent Nielson Global Confidence Survey found that
after providing for savings and living expenses, the number one global spending priority is for vacations. As we enter this decade, cruising
remains an attractive option for those seeking greater value for their vacation dollar.
In 2011 and beyond, we expect revenue yields to recover as the economy regains its footing. We will continue to promote the company’s position
as a leader in high quality vacation experiences using advanced technology and social media channels to engage with our customers in innovative
new ways that communicate the incredible vacation products we offer.
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