Stinking ship saga won't hurt cruise industry

A small boat from the U.S. Coast Guard Cutter Vigorous patrols near the cruise ship Carnival...

A small boat from the U.S. Coast Guard Cutter Vigorous patrols near the cruise ship Carnival Triumph in the Gulf of Mexico, in this February 11, 2013 handout photo. REUTERS/U.S. Coast Guard/Lt. Cmdr. Paul McConnell/Handout

TOM BROWN, Reuters

, Last Updated: 10:43 AM ET

Global cruise giant Carnival Corp found itself in deep doo-doo this week, due to alarming reports about an engine room fire that left one of its jam-packed U.S. passenger ships adrift and awash in raw sewage in the Gulf of Mexico.

The saga involving the ill-fated Carnival Triumph cruise ship, which received extensive coverage on U.S. cable news stations, was a second public relations nightmare for Carnival in as many years .

It came as the Miami-based company was recovering from last year's disaster, when its Costa Concordia luxury liner ran aground off the coast of Italy, killing 32 people.

But the lure of inexpensive vacations at sea is likely to keep the booming worldwide cruise industry on course toward strong profits this year, despite the befouled five-day ordeal endured by more than 4,200 passengers and crew aboard the Triumph, industry analysts said on Friday.

"They have done a much better job communicating this time than they did with the Costa Concordia," said Evan Nierman, a South Florida-based public relations crisis management expert.

But he would have liked to see Carnivals' billionaire Chairman and Chief Executive Micky Arison take a more prominent role in the company's response.

Arison finally offered up his first public apology for the troubles aboard the Triumph in two postings on Twitter on Friday. "We are very sorry for the difficult conditions experienced by our guests on #Carnival Triumph," Arison wrote.

"But glad that all guests are off safe & sound. I want to thank all the @CarnivalCruise team members for their tireless efforts," he wrote in a second Tweet.

The accident could add to concerns about safety in the industry, where towering ships the size of floating cities have become the norm. But maritime attorney Michael Winkleman said calls for higher safety standards, more oversight and other regulatory changes that might affect cruise lines have fallen on deaf ears in Washington for decades.

"The cruise lines as a whole are spending a tremendous amount of money on lobbyists and doing a very effective job of it," Winkleman said.

'BULLET PROOF'

"I don't lose sleep over this," said David Crooks, a Boston-based executive with World Travel Holdings, which owns huge travel cruise agencies including CruisesOnly, Cruise Inc and CheapCruises.com.

When asked about the possible impact on consumer demand after the problems of the Triumph drew media scrutiny, he said: "If the price is right, people will travel."

The worldwide cruise industry took a hit last year, due to the Costa Concordia and European debt crisis. But Crooks said the industry was essentially "bullet-proof" to something as relatively minor as the Triumph, which late-night comic Jon Steward described on Thursday as the "Ship of Stools."

Stewart was referring to a virtual feeding-frenzy in the U.S. media after it was first reported that Triumph passengers had been told to use red "biohazard" bags as toilets when backed up toilets and plumbing overflowed.

"Those clients that actually cruise quite often can recognize the value in situations like this," Crooks added, referring to likely discounting and consumer incentives to counter any short-term drop in demand.

Carnival, which operates 100 ships worldwide in a stable of brands that includes flagship Carnival Cruise Lines and Holland America Lines, Britain's Cunard Line and Italy's Costa Cruises, declined to comment on the possible impact on bookings due to all the unsavoury publicity it received over the Triumph.

The company has said passengers will receive full credit for the cruise plus transportation expenses, a future cruise credit equal to the amount paid for the ruined voyage, plus a payment of $500 per person.

It warned earlier this week, before the Triumph was towed into port in Mobile, Alabama late on Thursday, that voyage disruptions and repair costs due to the engine room fire could cut up to $0.10 per share off its first-half earnings.

Carnival closed at $36.92 on the New York Stock Exchange on Friday, well off its 52-week high of $39.95 after a 4% drop on Wednesday.

ABSORBED BY INSURERS?

But Linda Kornfeld, an insurance recovery lawyer representing policy holders with Jenner & Block in Los Angeles, said most other costs could be absorbed by Carnival's insurers, depending on the policies it holds.

Insurance could cover everything from the cost of the sewage clean-up to compensation packages offered to passengers, Kornfeld said. "There certainly are arguments that have been made in the past that might be helpful to Carnival here in a mitigation-type approach," she said.

Jaime Katz, an analyst at Morningstar, said the Triumph's troubles were disconcerting because they came at the height of the "wave season," the busiest time of year for the cruise industry.

The Costa Concordia disaster unleashed a flood of lawsuits against Carnival and its Italian subsidiary. And the first of many expected suits over the Triumph breakdown at sea was filed in federal court in Miami on Friday .

But Jim Perry, a Miami-based maritime lawyer, said his law firm had no plans to get involved in litigation over the Triumph mess. "No one suffered enough individual damage that would make it worth hiring a lawyer to sue the cruise line," Perry said.

"You know, shit happens. It's not worth the trouble. Most people are going to say 'I had a really crappy vacation and I'm really upset, but I'm not hiring a lawyer to sue Carnival.' The individual claims will be too small," he said.


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