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Carnival pounds state head tax

By SCOTT BOWLEN

Daily News Staff Writer

Carnival Corp. executives continued to pound on Alaska’s 2006 Cruise Ship Initiative on Wednesday during the company’s third-quarter earnings conference call with investors.

Micky Arison, the CEO of the company that operates Carnival Cruises, Holland-America Line and Princess Cruises in Alaska, targeted every facet of the voter-approved ballot initiative during his final comments of the hour-long conference call .

"All the parts of the initiative – the gaming tax; (the environmental rules); the (Ocean) Rangers – the amount of costs that they’ve put on the industry during this short season is astronomical," Arison said. "And it will continue to negatively impact Alaska."

The cruise industry especially dislikes the initiative’s $46-per-passenger fee. On Friday, the nine-member Alaska Cruise Association industry group filed a federal lawsuit challenging the implementation of the passenger fee as illegal.

Alaska Attorney General Dan Sullivan has said the state will "vigorously" defend the state in the lawsuit.

Howard Frank, Carnival’s chief operating officer, told investors Wednesday the industry had delayed filing the lawsuit in order to allow Alaska’s governor to "reconsider the imposition of the Alaska head tax."

In past conference calls, Arison had complained that cruise lines hadn’t been able to interest state politicians in taking steps to change the passenger tax.

Frank continued that theme on Wednesday.

"It appears that the … original proponents of the head tax have been able to convince the political leaders in Alaska that the global economic crisis is the reason for declining passenger numbers in 2009," Frank said. "This is obviously an incorrect conclusion."

Frank said passenger numbers declined in 2009 because the cost of operating a cruise ship in Alaska has risen "dramatically," and that passengers are paying higher prices because of the initiative’s passenger fee.

Holland-America and Princess have reduced their Alaska sailings for 2010, as have Celebrity Cruises, Royal Caribbean Cruise Lines, and small-ship operator Cruise West.

Most of the reduced itineraries involved the one-way, northbound or southbound voyages that require passengers to travel to or from the Anchorage area before or after their cruises, adding to the overall cost of the trip.

Overall, Alaska will see about 140,000 fewer cruise ship passengers during 2010 compared to 2009, according to the Alaska Cruise Association.

Other cruise regions won’t see declines, according to Frank.

"Despite the global economic crisis, virtually all cruising areas – the Caribbean, Europe, Asia, Australia and South America – will see increases in passenger volumes in 2010," Frank said.

He added that the early booking trends for Alaska’s 2010 cruise season are "still not positive," despite the reduced capacity.

As a result, "our brands are now studying further decreases beyond 2010," Frank said.

The bottom-line issue is relative profitability, according to Arison.

"If a ship is in Alaska, how much money is she going to make?" Arison said. "If she’s in Europe during that peak summer, how much money is she going to make? If she’s in the Caribbean, or if she’s in Australia, etc."

Cruise lines will pull a ship from Alaska and put it in Europe or the Far East if it pays to do so, according to Arison.

"That’s exactly what they did in (2010)," he said, emphasizing that the Carnival brands are looking at their options for the 2011 summer season.

"Because you’re talking the peak July and August period where we can make a lot of money in a lot of different itineraries and we can’t make a lot of money in Alaska because of this initiative."

Earlier, a financial analyst asked Arison whether he was concerned that Disney Cruise Line’s arrival in Alaska for the 2011 season would make it difficult for Carnival brands to return to any of the slots that they cut for 2010.

"No," Arison replied. "Not at all."

He said Disney and Crystal Cruises (Crystal will bring a ship to Alaska in 2011 for the line’s first full season here in six years) appear to have made one-year scheduling commitments.

Both cruise lines have big base of passengers who have sailed with the companies in the past and likely would sail with them again on fresh itineraries, according to Arison.

"If you have a large past passenger base, when you do a new itinerary, it’s relatively easy to sell for a year," Arison said. "And that’s
what Crystal is doing. That’s what Disney is doing.

"The basic companies that are the backbone of Alaska cruises – Holland America, Princess Cruises … and then
Royal Caribbean, Celebrity and NCL – all of those companies are reducing capacity," he said.

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