1. Carnival Cruise Lines Fire Aboard a Stranded Cruise Ship

2. Agenda Carnival Cruise Lines Story Cruise Line Industry Trouble at Sea
Carnival Splendor
Fire and Circus Onboard
Media Response
Recommendations

3. Carnival Cruise Lines Story

4. History Founded in 1972 by Ted Arison
Has become largest cruise line in world
Rated most popular cruise line in 1987
More passengers than any other cruise line
1,400 voyages per year
22 ships
4 million passengers per year
Carnival

5. Popular Cruise Destinations
Bahamas
Caribbean
Mexican Riviera
Alaska
Hawaii
Europe
Bermuda
Mazatlan, Mexico
Carnival

6. Carnival Corporation & Plc
Dual headquarters in Miami, FL and London, England
Parent company for Carnival Cruise Lines, Princess, Holland America, P & O
Publicly traded as CCL on New York Stock Exchange and CUK on London Stock Exchange
Only corporation in the world included in both S&P 500 and the FTSE 100 indices
Carnival

7. Carnival Corporation & Plc
Total passenger capacity of 191,464 and serves about 8.5 Million guests annually
Carnival Cruise Lines is the flagship brand and accounts for 19% of Carnival Corporation capacity, serving 4 million guests annually
Total revenue of 14.5 billion in 2010
EPS of $2.47 as of November 30, 2010
Sam – to verify EPS and figure out how to discuss
Carnival

8. Cruise Line Industry
Industry

9. Cruise Line Industry
Growing industry but still small in comparison to wider global vacation market
Industry competes for discretionary dollars with other vacation types
For consumers, vacation spending is third priority after savings and living expenses
Sam – look into 10K to define further
Industry

10. Industry Capacity Customers have increased 5.7% from 2005 to 2010
In 2010, the global cruise industry marketed capacity of 423,000 passenger cabins
Carnival Corporation & Plc accounts for 44% of this capacity
Industry

11. Growth Dynamics Industry identifies following growth factors:
Exceptional value proposition
Wide appeal
Low market penetration
Positive guest demographics
High guest satisfaction rates
These factors demonstrate high industry growth potential
Industry

12. Trouble at Sea
Trouble

13. Titanic All Over Again…
Sinking of Oceanos in 1991
Trouble

14. Common Cruise Issues Tilting due to rough seas or sharp turns
Carnival Ecstasy (Carnival Cruise Lines)
Norovirus outbreaks
ms Oosterdam (Holland America Line)
Pirates
Seabourn Spirit (Seabourn)
Fires
Star Princess (Princess Cruises)
Trouble

15. Cruising Regulations
Cruise ships must develop and practice contingency plans to meet IMO and the U.S. Coast Guard standards
International Maritime Organization (IMO) establishes international cruising standards
U.S. Coast Guard examines all new cruise vessels and thereafter inspects each ship quarterly
Trouble

16. Carnival Splendor
Splendor

17. Ship Details One of the largest vessels owned by Carnival Cruise Lines
113,300 ton, 952 foot long ship, 13 passenger decks
1,503 guest staterooms can accommodate over 3,000 guests per voyage
Registered in Panama
Six diesel engines, three in the aft engine room and the other three in the forward engine room
Splendor

18. Carnival Splendor Sets Sail
Departed Long Beach, California on Sunday, November 7, 2010
Weeklong cruise of the Mexican Riviera
Stops in Puerto Vallarta, Mazatlan, and Cabo San Lucas, Mexico.
Scheduled to arrive back in Long Beach with its 3,299 guests and 1,167 crew on Saturday, November 13
Splendor

19. Fire!
Fire

20. Fire!
On Monday, November 8 around 6:00 a.m. a fire started in the aft engine room
Cruise Director instructed passengers over public address system to proceed to upper decks and called it a “smoke fire”
200 miles south of San Diego
Fire

21. “Smoke Fire” Announcement
Cruise Director John Heald's Announcement to Passengers
Fire

22. Fire Results
Blaze extinguished by crew members and fire suppression system
Fire damaged electrical switchboard
Prevented electrical transmission to propulsion, communication, and other operations systems
Power could not be restored but auxiliary generators were used for vital systems
Russ – know what crankcase is
Fire

23. Response to the Fire Crew communicated with U.S. Coast Guard
By Monday afternoon, three cutters and a helicopter were dispatched
Mexican navy also responded with aircraft and tugboats
Cruise Director, John Heald, delivered frequent updates to passengers about the situation
Fire

24. Rescue Aid
The U.S. Navy supplied the ship on Tuesday with 70,000 pounds of bread, canned milk, crab meat, and Spam
Supplies were flow from North Island Naval Station in Coronado and ferried by helicopter from the USS Ronald Reagan, an aircraft carrier diverted from nearby maneuvers
Fire

25. “Circus” Aboard the Splendor
No electrical power
No refrigerated or hot food
No functioning toilets for about 16 hours (restored Monday evening)
No air conditioning
No hot water
Smells of rotting food and sewage
Fire

26. New Guest Accommodations
Casinos closed
Swimming pools closed due to lack of filtration
Passenger cabins pitch black and stuffy
Passengers ate sandwiches, salads, and crab meat
How passengers overcame boredom:
Live music
Scavenger hunts
Trivia contests
Card games
Free alcohol
Fire

27. Corporate Decisions
"We've been in business for 35 years," said CEO Gerry Cahill. "We've never had anything like this happen before.“
Objective: Get passengers safely to port
Initial plan was to tow the Splendor to the Mexican port of Ensenada
Carnival changed the destination to San Diego
Fire

28. Media Response
Usage?
Media

29. Contact with Land
The events on Monday and Tuesday occurred outside of cellular phone service range
Passengers were unable to personally update friends and family of their safety
Ship entered cell phone range on Wednesday, November 10, 2010
Passengers made personal cell phone calls and sent pictures and text messages
News outlets interviewed passengers aboard the ship via cell phones
Media

30. Phone Call with Passenger Aboard the Ship
Passenger Interview
Phone Call with Passenger Aboard the Ship
Media

31. Carnival & Social Media
Carnival used Twitter and Facebook primarily as push mechanisms to provide factual updates about the cruise
Cruise Director, John Heald, updated his blog from the ship on Wednesday, November 10
“The guests have been magnificent and have risen to the obvious challenges and difficult conditions onboard.” (johnhealdsblog.com)
Media

32. Passengers & Social Media
Passengers uploaded pictures and videos to YouTube of their experiences
The volume of social media about the Splendor created significant buzz on the Internet
Media

33. “Spamcation”
Media outlets used “Spam cruise” and “Spamcation” as taglines
Carnival tweeted, “Despite media reports to the contrary, Carnival Splendor guests were never served Spam!”
Opportunistic individual sold commemorative “Spamcation” t-shirts upon ship’s arrival
Media

34. Recommendations
Recommendations

35. The Business Problem
A loss of customer trust and brand reputation may lead to far-reaching future effects for the entire business:
Immediate threat to future business aboard the Splendor
Potential future decline in sales on other Carnival Cruise Line Ships
The gaps in emergency plans could be repeated in the future at higher costs
Recommendations

36. Critical Issues Damage to brand reputation
Considerable negative traditional and social media exposure
Lost revenue/Lost future customers
Deficiencies in preparation and communication during crisis with key stakeholders
Voyage disruptions and repair of Splendor
Reduced company earnings by approximately $0.07 per share
Recommendations

37. Key Stakeholders Passengers, crew, captain, cruise director
Families of passengers and crew aboard
Future customers
Carnival Cruise Line employees and crew
Carnival Corporation & other subsidiaries
Travel agencies
U.S. Coast Guard
International Maritime Organization (IMO)
Panamanian government
Recommendations

38. Recommendations: Policies
Improve emergency response plan
Create partnerships in areas of cruising
Better supplies (more nonperishable food on ship)
Better guidelines for communication on ship
Improve social media strategy to focus on engagement rather than one-sided communication
Stay in contact with passengers after disembarking the Splendor
Recommendations

39. Recommendations: Performance
Ship performance:
Perform full investigation into cause of the fire
Inspect engine design and identify changes
Crew performance:
Train crew and practice drills in new policies for fire situations and communication on ship
Corporate performance:
Continue operations on all other cruise ships
Focus public relations efforts on better communication with media
Recommendations

40. Recommendations: Communications
Set up centralized crisis management center to communicate directly with:
Passengers (show concern for their issues and fulfill reimbursement promises)
Future customers scheduled for a trip on the Splendor for the next 3 months (reimburse cruise and provide discount for a future cruise)
Publish video on Carnival Cruise Lines blog “Funville” of the CEO apologizing for the incident, explaining the circumstances, and thanking the passengers and other stakeholders
Recommendations