How Seaworthiness of Cruise Ships Has Impacted Carnival Cruise Lines

After highly publicized maritime disasters like the Costa Concordia sinking off the coast of Italy and the Carnival Triumph losing power while sailing in the Gulf of Mexico, vacationers all over the world became understandably leery of cruise ships. Though cruise ship vacations are often safe and fun for everyone involved, it can be a shocking experience for passengers when things don’t turn out as expected.

The Concordia disaster was particularly hard to overcome, since the last thing passengers expect is to die or get injured during their dream vacation. Fortunately, Italy is doing its part to properly investigate the incident – which helped assuage public anger and assure victims and their families that justice would be meted out.

Just as the Concordia incident started to fade from the public’s memory, misfortune struck the Carnival Triumph in the Gulf of Mexico. A fire in the engine room disabled the ship’s power; with no viable backup generator, the ship was left drifting without power and plumbing for days before being towed to Alabama on Valentine’s Day earlier this year. The experience has traumatized many vacationers, triggering a spate of lawsuits that are still wending their way in the U.S. Court system.

The images of makeshift tents and human waste flooding the rooms left an indelible image of just how bad things can get on a cruise ship with inadequate backup and fire safety systems. In response to these disasters, Carnival Corp will spend $300 million to upgrade and retrofit all their ships to prevent such incidents from happening again. In addition, the company announced that it will reimburse the U.S. Government for a portion of the rescue costs for the Triumph incident – which should help blunt some of the negative publicity.

Despite the highly public nature of these cruise ship incidents, the long term impact on the cruise industry’s profitability and viability is likely to be negligible. The biggest factor behind this is the fact that cruise ship disasters are quite rare – which is why it’s so shocking when something bad does happen. Overall, even the vast majority of the public understand that the Concordia and Triumph incidents are exceptions rather than the rule.

According to S&P Capital IQ stock analyst William Mack, the outlook for Carnival Corp is still profitable, though not as much as he previously predicted. He considers the stock a “strong buy” and that the latest incident will have a “one year impact” at worst.

Still, Carnival Corp is leaving nothing to chance when it comes to winning back public opinion. The cruise company announced that Kate Middleton, British princess and Duchess of Cambridge, will help launch the brand new “Royal Princess” ship before it sails off for luxury Mediterranean excursions. The princess is one of the most photographed women in the world and is well loved by the public, which should be a public relations coup for the company as long as no new incidents make its way into the 24 hour TV news cycle.

But most importantly, Carnival’s response to the Concordia and Triumph disasters is proof that the cruise industry needs to act fast to remedy public concerns. By showing its willingness to acknowledge responsibility and spend what it takes to upgrade the safety of their cruise fleet, Carnival should be able to regain the public’s trust in no time at all.

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