Cruise companies are taking sharply different approaches to rising fuel costs, with Carnival focusing on reducing consumption while Royal Caribbean and Norwegian Cruise Line Holdings use hedging to limit exposure to price swings.
The strategies come as oil prices have risen sharply since the conflict involving the US, Israel and Iran began on February 28. Brent crude reached a six-month high of 116.72 US dollars a barrel on Friday, increasing pressure on operators ahead of the holiday travel season.
Royal Caribbean and Norwegian use financial derivatives to hedge part of their future fuel requirements. The approach is designed not only to manage costs but also to reduce the effect of fuel-price volatility on earnings and share prices.
Jefferies analyst David Katz said publicly listed companies also used hedging to give investors greater certainty. “When you’re public, the Street will trade your stock around based on the price of fuel,” he said.
He added that hedging could support a company’s valuation by reducing fluctuations in its financial outlook, even though it might prove more expensive over the long term.
Carnival’s fuel-saving strategy
Carnival has rejected hedging as its main answer since 2019, arguing that using less fuel is the most effective way to control the cost.
Chief executive Josh Weinstein said the company had been “maniacal” about cutting consumption and had reduced its fuel use per unit by 26% since 2019.
“At the end of the day, fuel is an input cost for us. The best thing that we can do to control that cost is to use less,” Mr Weinstein said.
He estimated that Carnival had saved about 700 million dollars in 2026 as a result of the lower consumption rate.
The company reported record net income of 1.9 billion dollars in its latest third quarter, beating analysts’ expectations for both revenue and profit. It spent 615 million dollars on fuel during the period, equivalent to about 7.3% of revenue, and expects that figure to rise to 640 million dollars in the fourth quarter.
Royal Caribbean and Norwegian continue hedging
Royal Caribbean has hedged slightly more than 60% of its expected fuel consumption for 2026. Chief executive Jason Liberty said the policy was helping to cushion the impact of higher prices, although they had still reduced part of the benefit from the company’s latest earnings performance.
“We’re a little bit over 60% hedged here for 2026, and so that’s helping insulate us from some of the impacts on the rising fuel costs,” he said.
Royal Caribbean spent about 347 million dollars on fuel in the third quarter, or 6.2% of revenue. It expects fuel costs to increase to 379 million dollars in the fourth quarter.
Mr Liberty said higher fuel prices had not weakened demand for holidays. The company reported strong third-quarter bookings and said reservations for 2027 were already up by a high-teens percentage.
Norwegian has hedged about 48% of its fuel consumption for 2026. The company reported third-quarter revenue of 2.9 billion dollars and adjusted earnings per share of 1.12 dollars.
Norwegian spent 196 million dollars on fuel in the quarter, representing 6.6% of revenue, and expects consumption to increase slightly in the fourth quarter to 255,000 metric tonnes from 239,000 tonnes in the third quarter.
Chief financial officer Mark Kempa said the results strengthened the company’s confidence as it works through a turnaround, despite the wider economic pressures.
“These results reinforce our confidence in the appeal of our products and the opportunity to translate stronger revenue performance and disciplined cost management into improved profitability,” he said.
