Carnival Keeping Eye on Costa Disaster From a Distance

Hires Burson-Marsteller for PR; Advertising Won't Be Affected During Crucial Booking Season

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Carnival Corp.'s Micky Arison, who built the cruise company to almost $16 billion in annual revenue, is overseeing the response to its worst accident from Miami, more than 5,000 miles from the site.

The chairman and chief executive officer has let regional Costa Crociere SpA cruise managers face the press since the Costa Concordia ran aground off the coast of Italy on Jan. 13, leaving at least six dead and 29 missing. Mr. Arison, whose father founded Carnival in 1972, and Chief Operating Officer Howard Frank are helping coordinate actions with authorities in Italy, the Miami-based cruise operator said. PRWeek reports that Carnival has hired communication consultants Burson-Marsteller.

Micky Arison, Carnival CEO
Micky Arison, Carnival CEO Credit: Richard Sheinwald/ Bloomberg News

Public appearances by CEOs are generally important in helping companies regain consumer confidence after accidents, said Peter Hirsch, director of reputation risk at Ogilvy Public Relations Worldwide. For Mr. Arison, 62, the need to soothe concerns could be urgent, as this is the peak season for cruise bookings.

"Whenever there are fatalities and serious injuries, it's important for the most senior leadership to be visible," Mr. Hirsch said, without specifically commenting on Carnival. "Some visibility is certainly a good thing."

The Costa Concordia, owned and operated by Carnival's Costa Crociere unit, was carrying more than 4,000 passengers and crew when it struck rocks and ripped a hole through its hull. Company officials have joined local authorities in blaming the captain for getting too close to the island of Giglio in the Tyrrhenian Sea.

Pier Luigi Foschi, CEO of the Costa unit, has held two press conferences in Genoa, Italy, to address questions about the crash. Top group executives may still come to the scene to help, he said.

"Carnival's management has already offered to come here if we believe it's appropriate for them to come," Mr. Foschi said. "We'll decide together."

Carnival fell 14%, to $29.44, at 9:30 a.m. in New York, the biggest intraday drop since April 2009. Royal Caribbean Cruises, the second-biggest cruise line, fell 6.3%, to $26.94. Shares of the cruise companies tumbled in London and Oslo during trading yesterday, while U.S. markets were closed for the Martin Luther King Jr. holiday.

Boats vs. Planes
"Airplanes sometimes fall out of the sky, but people still fly," said Petter Narvestad, an Oslo-based analyst at Fondsfinans ASA, who recommends buying Royal Caribbean shares and doesn't rate Carnival. "The effects of Concordia are short-term. There's no threat to the cruise liners or the cruise industry."

"Our priority is the safety of our passengers and crew," Mr. Arison said in a statement. "We are deeply saddened by this tragic event and our hearts go out to everyone affected by the grounding of the Costa Concordia and especially to the families and loved ones of those who lost their lives."

"We can't deny that there was a human error," Mr. Foschi said. "The route had been properly programmed in Civitavecchia. The fact that the ship strayed from that course can only be due to a maneuver that was not approved, not authorized, nor communicated to Costa Crociere by the captain of the ship."

Captain Francesco Schettino, who is in custody amid a criminal probe, may have steered the boat closer to Giglio to give passengers a better view of the Tuscan island, Mr. Foschi said. Carnival called the accident the worst in its history.

Residents on Giglio said they fear an oil spill may worsen the disaster.

"Inside it there are 2,500 tons of fuel, not 10 liters," said Michele Cavero, 67, a pensioner and a former head of oil-tank operations. "That would be an environmental disaster; we have among the cleanest waters in the Mediterranean Sea."

Carnival's maritime policy and compliance team are helping to coordinate the environmental-protection effort surrounding the offloading of the ship's fuel and the preparation for salvage, Mr. Frank, the COO, said in his email.

Carnival's losses may be exacerbated by the disaster, which is deterring people from booking cruises. About one-third of all cruise vacations are arranged during the so-called wave season from January to March, which is also the most profitable booking period, said Sharon Zackfia, an analyst with William Blair & Co. in Chicago.

While Carnival has continued to advertise its cruises, it won't comment on whether the level of ad spending has changed. Its other cruise lines, including Seabourn, Princess and Cunard, are operating their regular schedules, the company said.

Already, there have been instances of other cruise operations' contextual advertising turning up in news stories about the accident, according to BuzzFeed.

--Bloomberg News

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