More than £300m has been wiped off the paper fortune of the multibillionaire boss of the company that owned the stricken cruise liner Costa Concordia.
Micky Arison, the flamboyant chairman, chief executive and majority owner of Carnival, saw a large chunk of his $4.5bn (£2.9bn) holdings dissolve on Monday as the company’s shares lost almost a fifth of their value.
The shares collapsed by as much as 23% before ending the day 17% lower at £18.65 – their biggest fall for a decade. That wiped more than £1bn off the market value of the company and £300m from Arison’s 30% stake.
The fall was precipitated by fears that the shipwreck will put holidaymakers off booking cruises for this year’s summer holidays and Carnival warned that it was “not possible to determine” the full cost of the wreck, which killed at least six people. Carnival said the Costa Concordia would be out of action until at least November and put initial estimates of the cost at $95m (£62m).
However, analysts said the final amount is likely to be greater. “This tragedy will be a black mark on the cruise industry and a negative headline for Carnival,” said Tim Ramskill, an analyst at Credit Suisse. “If the industry didn’t already face enough challenges, this unfortunate event will reverberate on the group over the near-term. While these accidents are extremely rare, the extensive media coverage will likely curtail some booking activity and pressure pricing during the critical season.”
Wyn Ellis, an analyst at Numis Securities, warned that the incident will put people off booking cruises in the “key point in the booking cycle” as people begin to plan summer holidays. About a third of cruise bookings are made between January and March. “People will cancel, and others will look at alternatives,” he said. “There will, justifiably, be questions about the adequacy of management and emergency operational procedures on board which may have longer term cost implications.”
Arison, whose father Ted founded Carnival in 1972, said: “At this time, our priority is the safety of our passengers and crew. We are deeply saddened by this tragic event and our hearts go out to everyone affected by the grounding of the Costa Concordia, and especially to the families and loved ones of those who lost their lives. They will remain in our thoughts and prayers.”
Ranked the world’s 169th richest person by Forbes magazine, Arison collected $7m in pay and bonuses from Carnival in 2010. The company’s board is due to publish his pay for last year later this month. His bonus, which came in at $2.25m last time, is likely to be scaled back. The company’s annual report states that its compensation committee considers safety and security matters, among other factors, when determining executive compensation.
Last year Arison, who also owns NBA basketball team Miami Heat, was fined $500,000 for tweeting about the basketball league’s pay negotiations with star players.
The disaster is likely to become the biggest insured loss in maritime history, with analysts putting the total payout by insurers at up to $1bn.
The ship, which cost €450m (£372m), is insured for €405m by insurers including XL, RSA and Generali, according to industry sources. Joy Ferneyhough, an analyst at Espirito Santo, said injury and other liability claims could push the total cost to insurers as high as $1bn.
“Initial comments from various insurers and underwriters over the weekend suggest that the insurance loss from the Costa Concordia will likely be $500m-$1bn,” she said.
One of Carnival’s biggest institutional shareholders, who did not wish to be named, said: “The statement confirming insurance cover is reassuring. The big unknown for investors now is what happens to customer confidence in the Costa brand.
“Micky Arison is well-liked in the industry – staff and investors. Unlike many children who take over businesses founded by their fathers, he has a real grasp of detail and the numbers – and works tirelessly for the company.”
The boss of Carnival’s Italian subsidiary again blamed the Costa Concordia’s captain for the tragedy. Pier Luigi Foschi, chief executive of Costa Crociere, said at a press conference: “The company will be close to the captain and will provide him with all the necessary legal assistance, but we need to acknowledge the facts and to protect all the other 24,000 employees and we cannot, unfortunately, deny human error.”
Carnival at a glance
• The world’s biggest cruise operator. Brands include Cunard and P&O.
• Eleven brands operate 98 ships with 191,000 berths. Ten new ships scheduled to join the fleet by May 2014.
• Europe generated 38% of its $14.4bn revenues in 2010, with its Genoa-based Italian subsidiary, Costa Crociere, the continent’s largest brand.
• Carnival bought P&O Princess Cruises in 2003, three years after it was spun off from Peninsular & Oriental Steam Navigation Co. It also operates Holland America Princess Alaska Tours, the leading tour company in Alaska and the Canadian Yukon.
• The full list of Carnival brands is: Carnival Cruise Lines, Holland America Line, Princess Cruises, Seabourn, AIDA Cruises, Costa Cruises, Cunard, Ibero Cruises, P&O Cruises (UK) and P&O Cruises (Australia).
Source: The Guardian, London.