A cruise ship docks and arrives in Cozumel, Mexico.
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carnival, royal caribbean and Norwegian Cruise Line Holdings reported strong earnings in its most recent quarter despite rising fuel prices. How major cruise lines navigate fuel costs boils down to entirely different strategies.
Oil prices have soared since the war between the United States, Israel, and Iran began on February 28th. Brent crude oil hit a six-month high on Friday, settling at $116.72 per barrel. With no clear end in sight to the Middle East conflict, pressures on cruise ships’ lifeblood are expected to continue beyond the holiday travel season.
Royal Caribbean and Norwegian are both using “hedging,” a strategy that uses derivatives to reduce the impact of fuel price fluctuations, in case fuel prices spike.
Meanwhile, Carnival CEO Josh Weinstein said in an interview with CNBC last month that reducing fuel consumption is the best way to avoid the impact of expensive fuel.
“At the end of the day, fuel is an input cost for us. The best thing we can do to control that cost is to use less,” Weinstein said at the time.
Jefferies analyst David Katz said in an interview with CNBC that companies hedging primarily do so to manage fuel costs, but also to manage Wall Street expectations and prevent hectic stock trading based on fluctuations in fuel prices.
“When you go public, the Street will trade your stock based on fuel prices,” Katz said. “The Street’s argument is that volatility puts pressure on multiples.”
“Mathematically it’s probably true, but it’s more expensive in the long run,” he explained. “The benefits of lower fuel volatility and lower trading volatility in the model are good for multiples.”
Despite the potential positives of this strategy, Carnival maintains the stance it has maintained since 2019. In other words, reducing fuel consumption is more effective than hedging.
And Carnival’s third-quarter earnings report last month suggests the strategy may be working.
Carnival’s “maniac” cut
Carnival reported record net income of $1.9 billion in its most recent quarter, beating analysts’ expectations for both sales and bottom line.
In an interview on “Squawk on the Street” after the announcement, Weinstein told CNBC that the company is “enthusiastic” about reducing fuel consumption, saying it has reduced its fuel intensity by 26% since 2019.
“Based on consumer savings rates that have been down since 2019, we estimate that we could save about $700 million in 2026,” he said.
Carnival spent $615 million on fuel in the third quarter, or about 7.3% of its revenue, according to its latest financial results. This is an increase from the $425 million (6.7% of revenue) the company spent on fuel in the fourth quarter of 2025, before fuel prices spiked.
Carnival expects fuel costs to rise to $640 million in the fourth quarter, according to its earnings release.
prudent hedge
Royal Caribbean similarly reported on Tuesday that its third-quarter earnings per share beat analysts’ expectations. However, it fell short in terms of revenue.
CEO Jason Liberty said in an interview on CNBC’s “Squawk on the Street” Tuesday morning that part of the company’s performance was due to its hedging strategy.
“We’ve hedged over 60% into 2026, so we’ve been able to insulate ourselves from some of the impact of rising fuel prices,” he said.
“It obviously still affects us,” Liberty said. “(Due to high fuel prices) a significant portion of our third-quarter profit is no longer reflected in our full-year guidance. However, we continue to hedge and are watching closely.”
Royal Caribbean spent about $347 million, or about 6.2% of sales, on fuel in the third quarter, according to its financial results. By comparison, in the fourth quarter of 2025, which ended Dec. 31, it spent $293 million on fuel, or 6.8% of its revenue.
The company expects fuel costs to continue rising to $379 million in the fourth quarter.
Liberty noted that rising fuel prices have not dampened consumer demand for vacations.
“It’s not that we don’t see challenges, but what we’ve seen is that even with those challenges, consumers cheer and come back,” he said.
Royal Caribbean reported strong third-quarter bookings and said bookings for 2027 are already growing at a rate in the low teens.
Norwegian’s bet continues
Norwegian Cruise Line Holdings The company’s third-quarter earnings announced Thursday were higher on both top and bottom lines, with revenue of $2.9 billion and adjusted earnings per share of $1.12.
The company has hedged about 48% of its 2026 fuel consumption, according to the company’s financial results.
Norwegian spent about $196 million on fuel in the third quarter, or about 6.6% of its revenue, according to its latest financial results. This is a lower percentage of revenue than the 7.4% (total of $167 million) spent on fuel in the fourth quarter of 2025, which ended Dec. 31.
The company expects fuel consumption to increase slightly in the fourth quarter, up to 255,000 tonnes from 239,000 tonnes in the third quarter.
The company is in the midst of a restructuring effort. And despite facing additional challenges from the macro environment, Chief Financial Officer Mark Kempa said on Thursday’s earnings call that he was reassured by the company’s results for the quarter.
“These results strengthen our confidence in the attractiveness of our products and the opportunity to combine stronger revenue performance and disciplined cost management with improved profitability,” Kempa said.
