Mardi Gras delays not surprising but still costly for Carnival

When Carnival Corp. announced that it was delaying this year’s
delivery of the Carnival Mardi Gras, it had a familiar ring.

The Mardi Gras, the first Carnival Cruise Line ship to be
powered by liquefied natural gas (LNG), joins ships from two other Carnival
Corp. brands that also feature LNG propulsion and weren’t delivered on time.

The shipyards involved have blamed the delays on design
complexity, troubles with coordinating subcontractors and the size of the
ships, which are each intended to carry more than 5,200 passengers.

In each case, the ships are the first in a new class of
vessel for their respective lines. All are built on a common platform
introduced by Carnival in 2015 and referred to as the Excellence class.

The platform was adapted for the individual needs of
Carnival as well as for Carnival Corp.’s two European brands, Costa Cruises and
Aida Cruises.

For North Americans, the Mardi Gras will be the first ship
to feature the LNG engines, a big technological leap that promises
environmental gains and cheaper operating costs, especially with new
restrictions on heavy sulfur fuels that start this year.

But going first has never been a formula for smooth sailing
in the cruise industry. New technologies frequently have unforeseen problems
that need to be ironed out as they move from the drawing board to actual use.

Carnival Corp. CEO Arnold Donald alluded to that legacy when
asked about the delay in a conference call in December.

“The situation is that historically we’ve had occasional
delays with prototypes,” Donald said. “But we’re working with the yard and are
in the process of negotiating what we need to do to ensure that future delivery
is on time.”

That’s not much consolation for passengers on eight Mardi
Gras sailings that were canceled because of the delay.

Those sailings included a debut cruise in Europe, a
transatlantic crossing, a New York preview cruise and the first four sailings
from the Mardi Gras’ year-round homeport, Port Canaveral in Florida.

More than 40,000 guests have been notified that their plans
have been changed. They will get a full refund and a 25% future cruise credit
for their troubles as well as assistance with nonrefundable airline and hotel
reservations already booked.

Travel agents who sold the cruises will still receive the
commissions they earned, Carnival said.

The first sailing, which had been set for Aug. 31, has now
been rescheduled for Nov. 14.

Ben Clement, Carnival’s senior vice president of newbuilds,
said that despite working closely with shipyard executives to keep the giant
ship on schedule, prudence dictated that it be delayed to get it right.

“While we deeply regret disappointing our guests, this
change in the delivery date is required to make sure all of the ship’s systems,
features and technology will be fully operational, so that we can give our
guests the vacation they expect,” Clement said.

Carnival will get some compensation from the shipyard,
Donald said, but it will be reflected in the ship’s value on the balance sheet,
not on the profit and loss statement, so the loss of the eight cruises in 2020
will likely impact earnings.

Clement didn’t go into detail about what issues are making
the ship late. But in the previous cases involving Aida and Costa, the
shipyards issued statements.

In October 2018, the Meyer Werft shipyard in Papenburg,
Germany, said that it would push back delivery of the AidaNova from Nov. 15 to
Dec. 2. It was eventually delivered to Aida on Dec. 19.

AidaNova was the first cruise ship to be powered by LNG, and
Meyer Werft said it “required more time for commissioning and testing of this
prototype.”

Another LNG ship built to the Excellence platform is the
Costa Smeralda, which was launched Dec. 20 after being delayed twice. The
shipyard, a Meyer Werft-owned facility in Turku, Finland, cited “the high
complexity and the sheer size of the ship project” and noted that it was the
first ship in the class to be built at the Turku yard.

The Carnival Mardi Gras is also being built in Turku.

Using LNG for power instead of diesel requires special
pressurized steel tanks to keep the gas in its liquid state. For safety
reasons, the tanks must be surrounded by void space, requiring about twice as
much room inside the ship as tanks for diesel fuel.

The Mardi Gras is being fitted with three steel LNG tanks
and four Caterpillar engines. Carnival officials have said that integrating the
tanks, piping and bunkering is the biggest challenge in designing LNG ships.

One reason Carnival and other lines are switching to LNG,
despite its complexities, is that natural gas is cheaper than oil. Perhaps more
importantly, burning it produces little or no sulfur dioxide and nitrous oxide,
two health-damaging gases in petroleum exhaust.

By some estimates, natural gas also generates about 15% less
carbon dioxide, the chief greenhouse gas implicated in climate change.

Of the first four LNG-powered ships ordered by Carnival,
only the PO Cruises ship Iona, due in May 2020, has not suffered a
delivery delay.

In addition to its novel powertrain, the Mardi Gras has
several other features not attempted before on Carnival ships.

The most prominent is an electric roller coaster that loops
around the funnel and most of the upper deck of the ship. Called the Bolt, it
is being built by Munich-based Maurer Rides and will require extensive testing
for issues of vibration, noise and safety, Carnival has said.

The Mardi Gras is also pioneering an atrium that looks out
to sea from the side of the ship through a glass wall that spans three stories;
a report in the Wall Street Journal noted novel structural problems for
supporting that area, which would typically be framed in steel.