Slightly higher ticket pricing and onboard spend helped Carnival Corporation’s 2016 second quarter earnings inch up, but also driving the uptick in net income is fuel expense going from $370 million in 2015 to $193 million in 2016.

Arnold Donald, president and CEO, said it was a record second quarter in the history of Carnival Corporation.

Regions

Donald said China was destined to be the largest cruise market, and earnings growth continues in the market proportionally to the company’s capacity increase.

“We are very pleased with China,” said Donald. “It’s a volume and return story.”

Later in the call, Donald said China occupancy was comparable to prior years.

Donald said the company would re-balance capacity to drive yield in 2017, including a five percent capacity reduction in Europe, and five and three percent increases in Caribbean and Alaska, respectively.

David Bernstein, CFO, noted strong pricing on close-in bookings, and on the onboard revenue side, strong performance at the bar and in the casino. Bernstein said bookings for the remainder of the year were at higher pricing with less inventory available.

Bernstein said: “The fact we are well ahead on the booked positioned with less inventory to sell … even with our capacity increase, bodes well to pricing.”

Bernstein pointed to strong performance in Alaska and the Caribbean, but some softness in Europe due to geopolitical issues. 

As far as Europe, Donald said North American brands in the market were seeing challenges.

Numbers

Aided by cheaper fuel pricing and on-going marine optimization efforts, Carnival’s fuel expenses for the second quarter of 2016 dropped by $137 million.

Ticket revenue increased from $2,628,000,000 in 2015 to $2,696,000,000, while onboard revenue also edged up to $978,000,000 in 2016 from $927,000,000 in 2015’s second quarter. Tour revenue, however, was slightly down. Payroll and food expenses were also up year-over-year.

“Work in our procurement area continues,” Donald said, adding he expected $75 million cost savings from procurement efforts.

Media buying has also come together across brands, generating significant savings, he noted.

At the same time, Carnival Corp. has announced its third $1 billion stock buy-back program.