18-year-old Adrian Vasquez, 24-year-old Oropeces Betancourt, and 16-year-old Fernando Osorio went out to sea from Rio Hato, Panama in February. Their small fishing boat lost power and they drifted for around two weeks. Parched and weakened, they passed a luxury cruise ship called the Star Princess on March 10. They waved for help, even tying a shirt to a pole to get attention, and some birdwatchers on the ship's deck noticed. The passengers told a crewmember, who reported the emergency to the ship's bridge — but then the Star Princess sailed on. Osorio died within hours, and five days later so did Betancourt. Almost two weeks later a fishing boat rescued Vazquez near the Galapagos Islands, and he filed suit against Carnival on May 7 in the Miami circuit court, according to the complaint.
Carnival said in a statement May 14 that they began investigating as soon as they became aware. They suspect that the Star Princess' captain was never notified because of "unfortunate" miscommunication. "This is an upsetting and emotional issue for us all, as no employee on board a Princess ship would purposefully ignore someone in distress," Carnival said. They pointed out that the company has rescued others at sea more than 30 times over the last decade.
But messing up once is already too many times, and Carnival has had other accidents as well. On January 13, its cruiser the Costa Concordia hit a rock near the Italian island of Giglio and turned on its side. Before the more than 4,200 people aboard had finished evacuating, Captain Francesco Schettino allegedly abandoned ship; he was later arrested and accused of manslaughter. At least 30 people died in the accident. The ship remains in the water and will take up to a year to remove, according to court documentation and news reports.
After the Concordia accident Carnival planned to cut its 2012 profit by between $155 million and $175 million. Bookings for its entire fleet, excluding Costa European business, fell by a mid-teens percentage in the 12 days following, the Associated Press said January 30.
Of course headlines like these make customers nervous to board ships. What's more serious is that after suffering one tragedy, Carnival has failed to prevent another months later. This suggests the company has ongoing management issues, making it capable of who knows what other kinds of mistakes down the line.
To be fair, Carnival said in April that Pier Luigi Foschi will retire on July 1 from his role as CEO of the Costa group, which had operated the Concordia. The company said it was part of a long-term succession plan for him to leave once he reached his current age of 65.
He will keep his seat on a board that GMI has flagged for years as having dubious supervisory capacity. Carnival's chairman and CEO Micky Arison, along with his family, controls over a third of the company's voting power. Seven directors are long-tenured with over a decade of service, and five have at least two decades of service. Good old pals like these aren't as likely to ask tough questions and demand accountability for accidents such as the Concordia's.
In part due to these red flags, GMI has given Carnival a D on its corporate governance since July 2003. It's AGR score is a 71, indicating average accounting and governance risk. Investors could have paid attention to such problems before this year. Carnival's stock has sunk by 5.8% so far in 2012 to trade at nearly $31 per share intraday on Friday, underperforming its benchmark the S&P 500 index.
Hopefully the captains of Carnival's cruise ships will be more on the lookout next time.
Region: North America
Sector: Cyclical Consumer Goods / Services
Industry: Hotels / Motels / Cruise Lines
Market Cap: $ 19,235.4mm (Large Cap)
ESG Rating: D
AGR: Average (71)