Carnival to Revamp Entire Fleet

| Thursday, 18 Apr. 2013

Carnival Splendor

Carnival Cruise Lines is launching a $300 million program to upgrade emergency power capabilities and fire safety technology on all 24 ships in the Carnival Cruise Line fleet. The goal is to increase the number "operating redundancies" to maintain vital "hotel services" such as lights and toilets in case a ship loses its main power.

This $300-million is just the start of what will be an ongoing safety review for all Carnival Corp. brands; Holland America, Cunard, Costa, Princess, Seabourn and more. The latest engine technologies will be implemented on the remainder of the 101-ship fleet where they are not already present. The overall program of enhancements is expected to cost between $600 and $700 million.

The first step will be an increase in emergency generator power fleetwide, to be completed by the end of year. An additional emergency generator able to provide for 100 percent of stateroom and public toilets, fresh water and elevators if the main power is lost will be installed on each vessel.

Upon completion of the first phase, the line will install a second permanent back-up power system on each ship to provide even more power to guest services if main power is lost, including expanded cooking facilities and cold food storage, as well as Internet and telephone communications.

All Carnival ships already have two separate, redundant engine rooms - but the company's operational review has identified needed modifications such as a reconfiguration of certain engine-related electrical components. On ships where these enhancements will be made, the design and fabrication of specialized components will require longer lead times for completion.

Carnival already receives oversight and input from outside regulatory authorities and industry experts, but has now also formed a new, five-person, Safety & Reliability Review Board comprised of outside experts in marine and occupational safety, reliability and maintenance, marine regulatory compliance and quality control/assurance to provide an independent third-party perspective. A search is underway for candidates with previous experience in organizations such as the U.S. Navy, U.S. Coast Guard, and National Transportation Safety Board, as well as leading airlines and equipment manufacturers.

Carnival Corp. has also confirmed that, based on the results of the ongoing review, the latest versions of technologies and enhancements will also be implemented on the remainder of the fleet of all 10 of its brands where they are not already present. The overall program of enhancements across the 101-ship fleet is expected to cost between $600 and $700 million.

Carnival to Reimburse Government Costs

In a statement, Micky Arison, the CEO of Carnival Corp., said that while no federal agencies had specifically requested the money, "the company has made the decision to voluntarily provide reimbursement to the federal government" for costs incurred during the fires aboard the Carnival Triumph in February and Carnival Splendor in 2010.

A spokeswoman said the exact amount of payment is still being determined, though a U.S. senator J. Rockefeller has said the U.S. Coast Guard and U.S. Navy combined had estimated costs of about $4.2 million for the two incidents.

Carnival was also specific in the statement to say that "at no point in time has Carnival stated it would refuse to reimburse federal agencies if they sought remuneration." A previous statement issued by Carnival only pointed out that such repayments have never been the tradition or the law.

In both cases, fire in or near the engine rooms knocked out power to the ships, which were slowly towed to land. The U.S. Coast Guard escorted the Triumph and Splendor; the U.S. Navy delivered tons of food and supplies to the Splendor. But in both cases independent towing companies here hired and paid for by Carnival, so a commonly heard statement that the coast guard "towed the ships back home" is not technically correct.

A month after the Triumph returned to land, Sen. Jay Rockefeller, D-W. Va. and chairman of the Senate Committee on Commerce, Science and Transportation, wrote Carnival a strongly worded letter. He said the Splendor incident cost the U.S. Coast Guard more than $1.5 million and the Navy nearly $1.9 million. For the Triumph, he wrote, the Coast Guard tally was about $780,000.

The letter also said "These costs ultimately must be borne by federal taxpayers. Given that you reportedly pay little or nothing in federal taxes, do you intend to reimburse the Coast Guard and the Navy for the cost of responding to either?"

Carnival, which is incorporated in Panama, has said it earns the majority of its income outside the U.S. and pays other types of taxes than income tax in jurisdictions globally. Chairman and CEO Micky Arison has put the figure at about $400 million in fees and taxes worldwide. However, Carnival is not even in the "top ten" of U.S. corporations that pay no taxes. Other companies, like GE, for example, earned more than the entire cruise industry all together, and did pay a penny in 2011.

Carnival's reply to Rockefeller, penned by the line's senior vice president of corporate maritime policy Capt. James Hunn, did not explicitly refuse nor offer to reimburse the costs. It only said "Carnival's policy is to honor maritime tradition that holds that the duty to render assistance at sea to those in need is a universal obligation of the entire maritime community."

That response prompted multiple news stories that said Carnival refused to reimburse the agencies for the aid.

When told about the company's announcement Monday, U.S. Coast Guard deputy chief of media relations Carlos A. Díaz said he had not heard about the reimbursement offer.

"We're budgeted to do our mission," he said. "The American people expect us to go and help them out when they're in need."

Rockefeller, in a statement released Monday afternoon, seemed barely appeased by Carnival's announcement.

"I'm glad to see that Carnival owned up to the bare minimum of corporate responsibility by reimbursing federal taxpayers for these two incidents," he said. "I am still committed to making sure the cruise industry as a whole pays its fair share in taxes, complies with strict safety standards, and holds the safety of its passengers above profits."

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