Carnival Faces Public Relations Nightmare

| About: Carnival Corporation (CCL)

Carnival (NYSE:CCL) has taken a hit over the last couple months beginning with the Costa Concordia incident in January of this year. Shares dropped from $35 to $29 when it first occurred. The share price was already down from its 52 week high of $41.95.

Last month I wrote an article about Carnival and the awful way that they handled the Costa Concordia shipwreck. Most people are familiar with the unprofessional way the crew acted during the entire situation. Especially the way that passengers were treated when they got off the ship. They complained that Costa was stingy and would not help them.

Blake Miller, who was on the ship to celebrate his partner's 50th birthday, said Costa representatives rebuffed his efforts to get reimbursement so he could buy a change of clothing.

"The Costa representative at our hotel told me, 'You might want to get a lawyer when you get back to the States,'" Miller told The Associated Press from his hotel in Rome, where he was staying at his own expense.

Keep in mind most people left all of their belongings on board. They did not have their clothes, phones, cash, credit cards, passports or anything else with them. They were soaking wet and cold. Yet they were left to fend for themselves. Alone in a country where they probably did not speak the language and had to rely on the first person offering to take them in or use their phone. And yet Carnival did not offer to help for several days.

Then less than two weeks ago there was another incident involving a Carnival ship cruising from Long Beach, California. This particular route which also stops in Cabbo is very popular, and my family and I have gone on it several times. So this really hit home:

Hooded gunmen commandeered a bus and robbed 22 guests of the Carnival Splendor cruise as they traveled from a nature hike in the jungle to the Mexican port city of Puerto Vallarta.

Mexican media said the gunmen intercepted the tourists' bus as it returned from the pueblo of El Nogalito, known for its trail through the jungle, featuring a waterfall, heavy canopy and tropical wildlife such as parrots and iguanas.

The gunmen boarded the bus about 5 p.m. on Thursday and took cameras, money, watches and other valuable items, according to the newspapers El Norte and La Jornada. The gunmen then fled toward the hilly countryside. None of the guests were hurt, and all made it safely back to the cruise liner, Carnival said in a statement.

However this time Carnival said that they will work with all of those guests and replace their lost valuables and identification. This is definitely a step in the right direction. A far cry from "you are on your own unless you purchase trip insurance". They are also planning to add armed guards and police to the tours.

But then another bigger problem for Carnival. Last Monday the Costa Allegra had a fire on board which left the ship without any power drifting in Pirate infested waters in the Indian Ocean for three days:

The Costa Allegra had been at sea with and without electricity since a fire broke out in the generator room on Monday, knocking out plumbing, showers, lights and air conditioning as the huge ship went adrift in tropical heat. The cause of the fire is unknown. A French fishing vessel towed the cruise ship to the Seychelles.

The hot and tired passengers told waiting reporters their toilets were overflowing and they all had to sleep out on the outside deck due to the sweltering heat with no air conditioning. There were no cooked meals or cold drinks for three days. Can Carnival survive all of this? Many are questioning if this may be the end for the company citing that Costa reservations were already down 35% before this incident:

Now the company faces a public relations nightmare, its brand associated with two high-profile mishaps at sea.

Its official name is Costa Crociere, an Italian company based in Genoa. But Costa is wholly owned by the British-American giant Carnival Corp., the world's largest cruise ship operator.

My first thought was that is not fixable. No one will ever want to go on a cruise again. Especially on a ship owned by Carnival. But even though this is not near the disaster that the Concordia was, and there was more time to prepare for the passengers to arrive on land, the company seemed more prepared. Debarking passengers said that the crew was very helpful and professional.

When the fire erupted the alarm to leave the ship sounded immediately and the life boats were lowered instantly. The passengers had been given the safety drill and knew exactly what to do. Thankfully the fire was put out and everyone had to only endure some hardship on the ship. This would have been much worse if they had to endure the conditions on lifeboats for several days.

And when the ship arrived at the nearest port the Red Cross and over 1000 officials were there to meet it and help the people. What a big difference. And were they left to fend for themselves? This time the company really suprised me:

Stiekema, the Costa vice-president, said the company had made the passengers an "extremely fair" compensation offer: A refund of the costs of the cruise, any related flights and any spending on board, plus an additional payment equal to the cost of the cruise and associated travel expenses.

Passengers were also given the chance to remain in the Seychelles for a free one- or two-week vacation, which the company said about 70 per cent of guests had chosen to do. All passengers were to be flown home at company expense.

The 15 day Seychelles vacation is at a luxury resort surrounded with white sandy beaches. So maybe Carnival has really learned from the Concordia disaster. This does not mean that they will not be held accountable for their actions during that time, they will. And I don't feel good enough to buy Carnival stock just yet. But now I may reconsider my decision to never cruise with them again. Even though I know accidents can and do happen at sea, I feel more confident that Carnival will not leave me stranded out in the middle of nowhere.

For anyone that is interested in buying Carnival stock this may be as low as it is going to go. I mean what else can happen? Right?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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