Carnival Corp. and P&O Princess Cruises have started to
identify cost-saving areas, as the two companies march toward their
merger.
A likely place for money-saving is Alaska, where both companies
have extensive land operations.
The deal is expected to close on April 17. P&O Princess
shareholders will vote on the deal April 14 in London, and Carnival
shareholders vote April 16 in New York.
“The tougher the times, the more this deal makes sense,” said
Carnival Corp. Chairman and CEO Micky Arison.
By combining, the two cruise giants expect to achieve cost
savings through economies of scale and by eliminating redundancies.
They also hope to share each other’s best practices.
Alaska tour operations, procurement and technology are areas
ripe for savings under combined operations, Carnival Corp. Vice
Chairman Howard Frank told analysts during the company’s
first-quarter earnings call on March 21.
Frank said that synergy teams are working in 10 to 12 areas and
have identified opportunities for cost savings in 60 to 70
areas.
“We estimated $100 million in synergies and we are getting a
greater and greater degree of confidence that we’ll be able to
achieve that,” he added.
While Frank did not spell out details, it’s clear that there is
plenty of overlap in Alaska, between Holland America Tours and
Princess Tours. Both companies operate an extensive network of rail
cars, motorcoaches and lodges in the 49th state.
Procurement the purchase of food, beverages, supplies, engine
parts and other items will be a major target for cost savings,
Frank said, adding that “we have already been talking with
suppliers and we have agreements in place.”
The two companies are also looking at best practices among the
various brands, with working groups studying areas like shipboard
spas, art auctions and shore excursions.
“Technology represents a major opportunity,” Frank said. Work
was tabled on a global reservations system, for the Carnival family
of brands, during the merger process; now executives are thinking
of adopting the P&O Princess system, which Frank described as
“excellent ... Our people like it. It’s going to save us a lot of
money.”
Other areas, where the two companies might combine operations to
save cash could include insurance, credit card fees and marketing
costs, Frank said.
As the cruise industry copes with war, a sluggish economy, weak
demand and heavy discounting, Arison said that planning for the
merger “has allowed us to focus on a positive issue.”
He called the chemistry between the Carnival and P&O working
groups “fantastic ... We’re really going to work well
together.”
