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Ratings agency raises concerns over cruise bookings

Cruise booking trends for 2012 could weaken in the wake of the Costa Concordia accident, according to credit ratings agency Standard & Poor’s


In a report published by the London Stock Exchange, the agency said its ratings on Costa parent Carnival Corporation and rivals Royal Caribbean Cruises and Norwegian Cruise Line are unaffected.


But S&P said: “The timing of this event could weaken 2012 booking trends given the fact that it occurred early in the wave season, the two-to-three month period in which a substantial portion of cruise business is booked.


”Prior to this event, our outlook for the cruise sector in 2012 was for minimal growth in net revenue yields and a slight decline in operating costs, including fuel.


“This outlook reflects our economists’ expectations for modest economic growth in the US and the UK, and for a mild recession in the first half of 2012 in the eurozone.


“We have now also considered a scenario where there is some level of price discounting across the sector in response to weaker than anticipated wave season demand stemming from this event.


“Specifically, we have considered a scenario where net revenue yields are negatively impacted by 3% in 2012 compared to our current expectation for low single-digit growth for each cruise operator.


“Under this scenario, lease and port commitment adjusted debt to EBITDA for Carnival, Royal Caribbean, and NCL, would increase to near our maximum thresholds but remain in line with our current ratings on each company.


“We will continue to closely monitor booking trends following this event, and consider incorporating a more conservative set of assumptions in our ratings, if necessary.”


S&P added that Carnival Corporation’s operating performance in 2012 will be “negatively impacted” by the loss of Costa Concordia from its fleet.


Other associated costs could include investigation into the cause, amending or refunding future itineraries scheduled on Costa Concordia, and any investment associated with restoring the reputation of the Costa brand, which is one of Carnival’s largest and most well known.


“In addition, while it is difficult to assess the degree that a tragic event such as this could have on the overall cruise sector, we believe there is the potential that this event could weigh on booking trends across other cruise brands,” S&P warned.

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