Cruise lines diverge on fuel costs as oil prices hit six-month high

Carnival, Royal Caribbean and Norwegian Cruise Line Holdings each reported strong earnings for their most recent quarters despite rising fuel prices, but the three operators are taking sharply different approaches to controlling fuel costs, according to CNBC.

Oil prices have risen sharply since the U.S.-Israel war with Iran began on Feb. 28, CNBC reported. Brent crude settled at a six-month high of $116.72 a barrel on Friday, and with no clear end to the Middle East conflict in sight, the pressure on cruise ships' fuel bills looks set to last through the holiday travel season and beyond.

Hedging or using less

Royal Caribbean and Norwegian use hedging — derivatives that reduce exposure to fuel price swings. Carnival has stuck with a different approach.

Carnival CEO Josh Weinstein told CNBC last month that cutting fuel consumption is the best way to soften the effect of expensive fuel. "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," he said.

Jefferies analyst David Katz told CNBC that companies that hedge are mainly managing fuel costs, but also managing Wall Street expectations and trying to avoid hectic stock trading tied to fuel prices. "When you're public, the Street will trade your stock around based on the price of fuel," Katz said, adding that volatility puts pressure on a company's valuation multiple. He said hedging is "mathematically most likely" more expensive over the long term, but that less fuel and trading volatility can help that multiple.

Carnival has kept the position it has held since 2019: cutting fuel consumption works better than hedging. Its third-quarter report last month suggested the strategy may be paying off. Carnival beat analysts' expectations on revenue and profit and reported an all-time high net income of $1.9 billion.

Weinstein told CNBC's "Squawk on the Street" that the company has been "maniacal" about cutting fuel use. He said Carnival has reduced its unit fuel consumption rate by 26% since 2019. "We estimate we've saved about $700 million in 2026 based on that consumption savings rate going down since 2019," he said.

Carnival spent $615 million on fuel in the third quarter, about 7.3% of revenue, up from $425 million, or 6.7% of revenue, in the fourth quarter of 2025 before prices spiked. It projects fourth-quarter fuel costs of $640 million.

Royal Caribbean and Norwegian

Royal Caribbean beat analyst expectations for third-quarter earnings per share but narrowly missed on revenue. CEO Jason Liberty credited hedging in part. "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. He added that high fuel prices "evaporated a good chunk" of the third-quarter earnings beat when carried into the full-year guidance, but said the company continues to hedge.

Royal Caribbean spent about $347 million on fuel in the third quarter, or 6.2% of revenue, and projects $379 million in the fourth quarter. Liberty said high fuel prices have not dampened vacation demand. Bookings were strong, with 2027 reservations up by a high-teens percentage.

Norwegian beat on both revenue and adjusted earnings per share, with $2.9 billion in revenue and $1.12 in adjusted EPS. It has hedged about 48% of its 2026 fuel consumption. Fuel spending came to about $196 million, or 6.6% of revenue, in the third quarter — a lower share than the 7.4% it spent in the fourth quarter of 2025. It expects fourth-quarter consumption to rise to 255,000 metric tons from 239,000.

CFO Mark Kempa said on an earnings call that the 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."

Source: CNBC.