Carnival Cruise Lines has grown
from a company with one
second-hand ship into the most
popular and most profitable cruise
line in the world.
BY RICHARD H. WAGNER
(Originally published by the Navy League of
the United States, New York Council in The
Log, Fall 2007).
When most Americans think about cruise vacations, they think about Carnival Cruise Lines.
Carnival will carry some 3.7 million passengers in 2007 - - more than any other cruise line including
its sister companies Cunard Line, Princess Cruises and Holland America Line. What makes this fact
particularly impressive is that 35 years ago, there was no Carnival Cruise Line.
While the company still focuses heavily on its original market --Caribbean cruising - - in recent years
"Fun Ships" have been deployed to a number of American cities and to ports in Europe. In 2007,
two Carnival ships sailed on a regular basis from New York. The Log went aboard these ships to
find out what Carnival is all about.
The Legend Begins
The early days of Carnival are inextricably linked to the legend of Ted Arison, a former colonel in
the Israeli Army, who, as the story opens, had had a somewhat unsuccessful business career in the
air cargo industry. One day in 1966, Arison was visiting the office of some friends in the shipping
business whose interests included leasing two car ferries for use as cruise ships in Miami when they
received a message from the person who was chartering the ferries. The message advised them that
the cruise business was not doing well and sought to re-negotiate a lower charter fee for the ferries.
Arison told the ship owners that they should reject the cruise operator's demand. He knew the
business and would be willing to go to Miami and operate the ships for them. Delighted at this
fortuitous coincidence, the ship owners agreed and Arison was off to Miami.
In fact, Arison had no experience in the cruise business. Moreover, he found that the ferries were
more utilitarian than luxurious with many of the passenger cabins not even having a porthole.
Nonetheless, the Arison Shipping Company soon achieved a modest success running the ferries
from Miami to the Bahamas, carrying a mixture of cruise passengers and cars.
The road to success, however, then took a turn. Because of reverses in some of their other
ventures, the ship owners went bankrupt. The primary holder of the mortgage on the two car
ferries was the Israeli government and it decided that the ferries might be useful for military
purposes in the event of war. Accordingly, they directed that the ferries be returned to Israeli
waters. As a result, Arison's cruise ship business no longer had any ships.
Looking through a trade publication, Arison ran across an article about a newly built combination
passenger ship and car ferry. Norwegian businessman Kurt Kloster had built the SUNWARD in
order to take cars and holiday-makers from England to Gibraltar. However, political problems in
Gibraltar had squelched the scheme. Arison immediately called Kloster and told him that
SUNWARD sounded similar to the ships that he had been operating successfully in Miami and that
the two should join forces.
Kloster was intrigued by the idea but asked to see documentation of the advanced bookings that
Arison had mentioned. There had indeed been a demand for future cruises but Arison had no
documentation. Nonetheless, he agreed and reportedly set his people to work making some
documentation. Kloster also demanded a guarantee that he would make $500,000 a year in profit.
Arison agreed even though he did not have the money. As a result, a partnership was formed
between Arison Shipping and Kloster's company that would do business under the name
"Norwegian Caribbean Lines" or "NCL."
When SUNWARD arrived in Miami, Arison found that it was a significant improvement over his
earlier ships with a sleek design that looked more like a modern cruise ship than the retired ocean
liners that most of his competitors were using to do cruises out of Miami. Besides having a catchy
appearance, SUNWARD was fully air-conditioned and her passenger cabins were located on the
outside of the hull so that passengers could have portholes. She was put to work doing three and
four-night cruises from Miami to Nassau. The operation proved successful and two more new ships
were added to the fleet.
Success, however, did not promote harmony between the partners. Conflicts arose between
Arison's Americans who were doing the sales, marketing and the other shoreside business aspects of
the partnership and Kloster's Norwegians who were sailing the ships. By 1971, Kloster announced
that he was severing the partnership and taking the three ships with him. Arison responded by
seizing the deposits passengers had paid for future cruises. Years of litigation followed that
eventually ended with an out-of-court settlement.
The end of the partnership once again left Arison with a cruise ship company that had no ships.
Arison first sought to purchase two old Cunard ships, the CARMANIA and the FRANCONIA, that
had been retired from service. (See The Log, Summer 2007, at p. 22). However, a deal could not
be worked out. Next, Arison set his sights on another laid-up vessel, the Canadian Pacific liner
EMPRESS OF CANADA. But, again he found that he did not have the capital to buy her.
Arison then turned to his friend Meshulam Riklis, whose holdings included a travel business,
American International Travel Service ("AITS"), which operated tours and suggested that he set up
a subsidiary of AITS that would provide cruises out of Miami. Arison would contribute the $1
million that he had seized from NCL and together they would buy the EMPRESS OF CANADA.
Riklis agreed and since AITS had called its various tours "Rio Carnival", "Hawaiian Carnival" etc.,
the new cruise line would be called Carnival Cruise Lines.
The EMPRESS OF CANADA had been built in 1961 for the run between Britain and Canada.
Although she had been used for cruising in the winter months, she was configured as a two-class
liner and substantial renovation work would have to be done before she was ready for the
Caribbean. (In fact, the ship sailed with a cadre of workmen for two years into her Carnival
career). She was renamed MARDI GRAS to be consistent with the festive, carnival-like spirit her
new owners were trying to engender.
Captain Claudio Cupisti, now master of CARNIVAL MIRACLE, started with the company aboard
MARDI GRAS. “The MARDI GRAS was the first love of this company because it was a ship with
a lot of character. Lots of wood, lots of brass, lots of what you think of as an old ship that you see
in a movie. Small portholes, small lounges, more geared to crossing oceans than doing cruises. It is
like the old lady that you have seen around working but with lots of class.”
On 7 March 1972, MARDI GRAS set sail from Miami on the maiden voyage of the new Carnival
Cruise Lines. She immediately ran aground. For a full day, the ship sat at the tip of Miami Beach
in plain sight of thousands of tourists and close enough to land for the newspapers and wire services
to get plenty of pictures. On board, however, the passengers continued to party.
Once off the sandbar, MARDI GRAS continued on with the maiden cruise. In San Juan, the fuel
suppliers had no past history with this fledgling operation and demanded cash to refuel the ship so
that it could return to Miami. Arison wined and dined them in the hopes of obtaining credit. Still,
they demanded cash. Consequently, he had the Carnival office in Miami wire him the deposits that
had been paid on future cruises and then went around the ship emptying the cash registers in the
bars to obtain the needed funds.
MARDI GRAS struggled back to Miami and for some two years Carnival Cruise Lines continued to
struggle. Part of the problem was that AITS was doing the sales for the line. Inasmuch as it was a
travel business, it preferred to deal directly with the public rather than through independent travel
agents who were (and still are) responsible for selling a high proportion of cruises. As the losses
mounted, AITS became increasingly concerned about its investment. In addition, one of AITS
other holdings was a Las Vegas casino and the Nevada Gaming Commission was becoming
concerned about ATIS' money-losing cruise line investment. Accordingly, in 1974, for the sum of
one dollar, AITS sold Carnival Cruise Lines, complete with its assets (primarily the MARDI GRAS)
and its liabilities ($5 million in debt), to Arison and two other investors.
Arison brought in a new marketing team and, as will be discussed later, implemented a new
marketing philosophy. He also made amends with the travel agents. Soon, Carnival was making
money, which he invested in expanding the Carnival fleet. In 1976, he purchased another Canadian
Pacific liner, EMPRESS OF BRITAIN and converted her into the CARNIVALE. In 1978, the
Union Castle Line's TRANSVAAL CASTLE became the FESTIVALE.
With the three converted liners making money, in 1981, Carnival began to build its own cruise ships
with the TROPICALE (35,190 g.r.t.). This was a major turning point because it allowed Carnival
to design its ships to meet its ideas about cruising rather than adapt its ideas to the limitations of
existing designs. Since then Carnival has built 23 more ships for its fleet and will add another, the
113,000 ton CARNIVAL SPLENDOR, in 2008. By 1987, Carnival had passed all the other cruise
lines in the number of passengers carried.
An indication of the complete turnaround of Carnival's fortunes occurred in 1988, when Finland's
Wartsila shipyard went bankrupt. The yard was in the process of building a ship for Carnival. To
be sure that work on the ship was not delayed, Carnival stepped in and helped finance a
reorganization of the yard. The ship was finished on schedule and the yard (now Kvaerner-Masa)
remains today as one of the major builders of cruise ships in the world, although Carnival no longer
has an interest. Carnival had come a long way from having to shake the cash registers to pay for
Prior to the stock market crash of 1987, Arison took Carnival public, which gave the money-
generating line $400 million more in capital to fuel expansion. The publicly traded company,
Carnival Corporation, would act as a holding company for Carnival Cruise Lines and for any
company it might acquire.
Three years later, Ted Arison retired and his son, Micky Arison took over as chief executive officer
of Carnival Corporation. Micky Arison continued the acquisition program begun during his father's
tenure when Carnival acquired Holland America Line and Windstar Cruises in 1989. Subsequently,
Carnival Corporation has acquired Cunard Line, Princess Cruises, Seabourn Cruise Line, Costa
Cruises, P&O Cruises, P&O Cruises Australia and Swan Hellenic. It also owns Ocean Village
Cruises and Aida. In all, 82 ships now sail under the various Carnival brands.
Micky Arison's philosophy has been to allow these acquired lines to operate with their own identities
rather than make them clones of Carnival Cruise Lines. (See The Log, Winter 2006 at p. 30).
Thus, they are intended to appeal to different market segments. By no means, however, is
management attempting to abandon its original success formula. Carnival Cruise Lines is the most
popular and profitable cruise line in the world. It operates 22 ships sailing to destinations in the
Caribbean, Canada, the Bahamas, Mexico, New England, and now Europe.