Rising oil prices increase fuel-cost pressure on cruise operators

Oil prices have climbed about 40% since early August, creating a potential earnings risk for airlines and cruise companies as crude futures approach $110 per barrel, according to the report. Fuel-sensitive stocks have also moved lower.

Carnival appears to have the clearest exposure among the cruise operators examined because it reportedly purchases much of its fuel at spot-market prices rather than relying on hedges. An industry study estimates that each 10% rise in Carnival’s fuel cost per metric ton could reduce its annual net income by as much as $140 million.

Royal Caribbean is considered less exposed because it has reportedly hedged up to 60% of its fuel requirements at prices below current market levels. The estimated annual reduction in its net income from a 10% fuel-price increase is approximately $50 million.

Viking is described as having still lower fuel exposure, reflecting its smaller fleet and greater ability to increase itinerary prices without materially weakening demand.