Cruise ships to the rescue or to the bank?

[tbelian]

You might say I'm being a 'wet blanket', but found this interesting:

 

http://www.washingtonpost.com/wp-dyn/content/article/2005/09/27/AR2005092701960.html

[ahoymatey3]

To the bank… but I’ve already expressed my opinion on that, so I’ll spare everyone.

 

 

More interesting is the lack of income tax paid. $3 million tax paid on $1.9 pre-tax revenue? That works out to a effective tax rate of 1.5 %. How do I get a deal like that?

 

 

I do believe this has raised the ire of people in Washington, whose ire you probably don’t want to raise. I think we’ll be hearing more about this.

[tbelian]

I do believe this has raised the ire of people in Washington, whose ire you probably don’t want to raise. I think we’ll be hearing more about this.

 

To be sure, we certainly will.

[SharkieRools]

I've posted this elsewhere, but thought I'd post it here again :)

 

Here are my problems with that article:

 

They mention that at capacity it would cost about $1,275 a week per evacuee, although you could book a cruise for as low as $599 a week. Ok, just how many $599 spaces are available? Those are no doubt the lowest cabin category available, what about higher categories, including the suites? That would bring the average up to way more than $599 per person. They also don't take into account that Carnival is not making any money on shore excursions, photos, bingo, casino, bars, shopping, etc. right now on those ships.

 

They mention only $3M paid in taxes on $1.9B revenues, the annual report I'm looking at online at carnivalcorp.com shows $47M paid on $1.9B in revenues. A lot more than what was reported before, but probably less than many would want them to pay. This is due to many of the loopholes and other corporate benefits that many corporations take advantage of. On that note, don't forget that a lot of their profit is made on foreign registerd ship and probably isn't subject to US taxes.

 

I think the whole chartering of ships deal is lame, but it wasn't Carnival that went out looking to charter ships. Rather it was FEMA who went to Carnival asking to charter ships, Carnival gave them a price to which they agreed to.

[SharkieRools]

They paid $47M in taxes, but much of that didn't go to the US, probably most of it ended up with the countries each ship is registered in.

 

That brings up an interesting point. They, along with most of the mainstream cruiselines (not including the NCL America ships in Hawaii which is whole other story,) couldn't be US flagged ships even if they wanted. US Flagged ships must be built within the United States and 75% of onboard staff must be a US citizen or resident.

 

Not to get too far off topic, but what I did intersting is:

 

"Because of the cost of these requirements as well as tax laws outlined above for U.S. flag registry, nearly 90% of the commercial vessels calling on U.S. ports fly a non-U.S. flag. Therefore, vessels with international registries, are not unique to the cruise industry. A majority of the major U.S. controlled shipping companies engaged in international commerce have chosen to operate under flags other than that of the United States . This is because foreign crew costs are 1/3 to ½ that of American crew costs, and American ship costs are 25% to 100% more than that of foreign ships according to virtually every industry and government source. "

 

Source: US Cabotage Laws: Protective or Damaging?

[ahoymatey3]

I was off a decimal place, $3 million is only 0.15 % not 1.5%. The $47 million would be 2.4%. Sweet deal.

 

This is a bigger problem than just cruise ships. Many companies register offshore to avoid taxes.

[SharkieRools]

And even those that are registered in the US find loopholes and whatnot to avoid taxes :)

[canderson]

You might say I'm being a 'wet blanket', but found this interesting:

 

http://www.washingtonpost.com/wp-dyn/content/article/2005/09/27/AR2005092701960.html

Given that this is a Washington Post article, you do have to read it through a bit of a filter. All prior comments regarding taxes and costs are on target. Further, you have to assume that Carnival has also had to deal with the many, many passengers whose cruises have been cancelled as a result. That certainly wasn't accomplished inexpensively!

 

Further, if Carnival wants to avoid a mutiny at sea, they've also got the issue of having to pay substantially higher wages to the crew since I doubt these evacuees are in a position to dish out the customary $10 a day on tips.

 

There's a whole HOST of reasons that the higher per diem shouldn't have been any surprise to the author, who clearly didn't leave the university with a business degree... but again, this was a Washington Post article.

[Ships R Great]

"but again, this was a Washington Post article."

 

Right on, Canderson. Living in Northern Virginia we take the Post and the Times. Often the papers are diametrically opposed in thier reporting. But I don't want to turn this into a political wrangle. Just agreeing with you.

[hdawson]

I think to come to an agreed lease price, everyone involved has to look at the cancellation of about 156,000 booked or to be booked cruisers over the six month period. Lately, ships have been sailiing at 97-104% of capacity. If you use a $900 per guest fare, cancellations alone come to a staggering cost of $140,000,000.

[Gimpster]

FEMA solicited bids, and Carnival was the low bidder. Why take issue with Carnival? :confused:

[hdawson]

I was unaware of any open bidding since the leases were announced within a week, I think, of the tragedy. I believe FEMA requested MSTS to find cruiseships that could be moved in quickly, and to negotiate leases. Personally, it sounded like a great opportunity to get some badly needed housing for displaced people, though maybe the best use is for recovery workers coming in to get the infrastructure repaired and operating. Carnival accepted the risk of alleinating many of their loyal customer base.

[hdawson]

I was unaware of any open bidding since the leases were announced within a week, I think, of the tragedy. I believe FEMA requested MSTS to find cruiseships that could be moved in quickly, and to negotiate leases. Personally, it sounded like a great opportunity to get some badly needed housing for displaced people, though maybe the best use is for recovery workers coming in to get the infrastructure repaired and operating. Carnival accepted the risk of alleinating many of their loyal customer base.

[Reese1717]

I think it is both to the bank AND to the rescue. Of course w/the negative publicity Carnival is now getting it seems like the deal got worse for them. Since they gave up there cheapest priced ships the people that got bumped off of them are mostly people that cannot afford to rebook on different ships. That and the fact Carnival hiked the prices on all other sailings.

 

Other than that since I have no idea how much they make for 6 months of drinks, pics, excursions, and all other extras I can't say whether it was a good deal finacially for them. Since our shipboard account is always more expensive then the actual cost of the cruise I would say that is where there revenue mostly come from.

[newmexicoNita]

We were watching FOX news a few nights ago; they had information taken from the story, but did add, there is a possibility the contract may be cancelled. it was just a passing statement toward the end of the blurp. We can all stayed turned. NMnita

[hdawson]

MNnita. I saw that story also. When they presented the numbers they made no mention of the approximately 156,000 cruisers, over the next six months, that Carnival had to cancel and refund. Typical of the media.