Case Study of Carnival Corporation

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The history of the Carnival Corporation begins in 1972, when Ted Arison set up Carnival Cruise Lines as a subsidiary of the American International Travel Service. The first ship ran aground, but Arison remained steadfast in achieving his vision of a cruise line offering affordable vacation packages to middle-income consumers. By 1977, Carnival had three ships, and ten years later, as the industry leader, the company went public. In the early 1990s, Carnival began to diversify into land-based entertainment, thus changing its name to Carnival Corp. The company is the world's #1 cruise operator with about a third of the market.

Carnival Corporation is comprised of Carnival Cruise Lines; the world's largest cruise line based on
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The company took a $135 million write-off for that year. When Carnival acquired Holland America Lines, it borrowed $375 million. In order to finance the borrowing, it issued Convertible Subordinated Notes (4 1/2 percent) to raise $113 million to repay various bank loans and issued more than 5.6 million shares Class A Common stock to increase capital. And when Carnival acquired a 29.5% equity interest in Airtours for approximately $307 million, the company entered into an unsecured five-year $200million multi-currency revolving credit facility and funded about $163 million of the acquisition cost through this facility.


In general, the cruise industry will continue to search for innovative ways to increase passenger volumes, on-board expenditures and ancillary revenue streams. The keys to the cruise experience appeal include the predictability of travel cost and the ease of the vacation decision. A telephone call to a single entity - and one check - will reserve a vacation, which at a minimum typically includes on-board dining, entertainment, children's programming, accommodations, and airfare to and from points of embarkment. In addition, cruise ships have greatly improved the quality of on-board experiences with more diverse food and beverage venues, entertainment and deck activities, meeting and conference
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