Carnival Cruises 2008 Annual Report Download - page 31

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probably need to increase its share of the overall vacation market. The overall vacation
market is also facing increases in land-based vacation capacity, which will also impact us.
Failure to increase our share of the overall vacation market is one of a number of factors
that could have a negative impact on our net revenue yields. In some prior years, our net
revenue yields were negatively impacted as a result of a variety of factors, including
capacity increases. Should net revenue yields be negatively impacted, our results of
operations and financial condition could be adversely affected, including the impairment of
the value of our ships, goodwill and/or trademark assets. In addition, increased cruise
capacity could impact our ability to retain and attract qualified crew, including officers,
at competitive costs and, therefore, increase our shipboard employee costs. Furthermore,
some of the same factors that impact our guests' decisions to cruise with us may also impact
our ability to employ qualified crew.
• Accidents, adverse weather conditions or natural disasters and other incidents
affecting the health, safety, security and/or vacation satisfaction of guests
could have an adverse effect on our sales and profitability.
The operation of cruise ships, hotels, land tours and shore excursions involve the risk
of accidents, including those caused by the improper operation of our ships, motorcoaches
and trains, guest and crew illnesses such as the spread of contagious diseases, mechanical
failures, fires, collisions, groundings, and other incidents at sea or while in port or on
land, which may cause injury and death, or the alteration of itineraries or cancellation of
a cruise or series of cruises or tours. These types of incidents may bring into question
guest health, safety, security and/or vacation satisfaction, and thereby adversely affect
our sales and profitability.
In addition, our cruises, hotels, port facilities, shore excursions and other service
providers may be impacted by adverse weather patterns or natural disasters, such as
hurricanes and earthquakes. These events could result in, among other things, increased
port related and other costs as these third-party operators seek to charge us additional
amounts in order to recover expenses caused by adverse events. It is possible that we could
be forced to alter itineraries or cancel a cruise or a series of cruises due to these or
other factors, which would have an adverse affect on sales and profitability.
• Adverse publicity concerning the cruise industry in general, or us in particular,
could impact the demand for cruises and affect our reputation and harm our future
sales and profitability.
Maintaining a good reputation is critical to our business. Reports, whether true or
not, of ship accidents and other incidents at sea or while in port, including missing
guests, inappropriate crew or guest behavior, onboard crimes, guest or crew illnesses such
as incidents of stomach flu or other contagious diseases, security breaches, terrorist
threats and attacks and other adverse events can result in negative publicity, and the
perception that cruising is more dangerous than other vacation alternatives. Anything that
damages our reputation (whether or not justified), including adverse publicity about the
safety and guest satisfaction of cruising, or the vacation industry in general, could have
an adverse impact on demand, which could lead to price discounting and a reduction in our
sales and profitability.
• Environmental legislation and regulations could affect operations and increase
our operating costs.
Some environmental groups have lobbied for more stringent regulation of cruise ships.
Some groups have also generated negative publicity about the cruise industry and its
environmental impact. The U.S. Congress, the IMO and the U.S. Environmental Protection
Agency periodically consider new laws and regulations to manage cruise ship discharges. In
addition, various other regulatory agencies in the States of Alaska, California, Florida,
Hawaii, Maine, Washington and elsewhere, including European regulatory organizations, have
enacted or are considering new regulations or policies, such as requirements to use low
sulfur fuels and stricter emission limits to reduce greenhouse gas effects, which could
adversely impact the cruise industry. See Part I, Item 1. Business. B. - "Cruise Operations
– Governmental Regulations" for additional information.
The IMO has approved amendments to the MARPOL Annex VI regulations to reduce harmful
emissions from ships. These changes will enter into force beginning 2010, and will result in
a progressive reduction in ship sulfur oxide emissions by requiring progressive reductions
in the sulfur content in fuel. These limits will be further reduced in designated ECAs. As a
result of the new amendments, there may be less availability of low sulfur fuel because of
the increased demand and/or the pricing of such fuel may increase and may result in the use