October 21, 2005
In a letter to Homeland Security Secretary Michael Chertoff, Rep. Henry Waxman (D., Calif.) said he had uncovered new information that appeared to undercut the Carnival Corp. unit’s main defense of its $236 million contract to provide the government with emergency housing for 7,100 people aboard three of its cruise ships.
Carnival has consistently said the price of the contract was justified by the comp-any’s need to recoup revenue lost when it had to cancel passenger reservations.
But the internal Carnival “financial review” obtained by Mr. Waxman appears to paint a different picture. In the January 2002 document, Carnival pegs its revenue for the three ships now effectively leased by the government at about $25 million a month. That means Carnival’s normal monthly revenue from the three ships would be about $150 million over the six-month life of its federal contract, far lower than the $236 million it stands to receive from the government.
The company’s potential profit from the deal could be even higher because the documents show that the ships normally carry 800 more employees than are onboard during their use as massive floating hotels, lowering its costs considerably, Mr. Waxman said.
Carnival says the deal was “priced to be profit neutral.”
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