‘Regulation and high costs in Australia closed P&O Australia after 90 years’

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It isn’t every day you get a phone call from the President of the world’s biggest cruise line. So it was a true measure of the seriousness Carnival Cruise Lines attached to closing P&O Australia that she took time out to talk to Cruisepassenger.com.au.

She had flown into Australia from the company’s Miami headquarters on Friday and spent the weekend with the P&O Australia and Carnival teams. It would not have been pleasant.

Of course, the PR machine had already gone ahead of her. P&O Australia wasn’t being shut down, said the press release. The company was “sunsetting” the brand and folding the Australia operations into Carnival Cruise Line, “the most popular cruise line in the world”. 

Duffy was a lot more forthright. Australia is the most expensive place in the world to operate cruise. There is so much regulation. Even New Zealand’s biosecurity laws got a hit out. That’s why she had to take action.

“We’ve seen some other cruise lines that were in the market leave completely and we’ve seen other global brands that operate in the market bringing in smaller ships.

“But of course, this is the most expensive market for us in the world. And part of that cost is also related to regulation that just adds cost and risk to the business model.

“As an example, you know, the the requirements we have when we’re sailing into New Zealand with bio. That, that creates a lot of risk. There’s also a lot of concern about operationally how to make that happen under the current regulatory environment.

“We also have further distances that we have to sail in this region for our cruises and fuel prices are high and the currency in Australia is is not where it used to be.

“So those are all factors and pretty much costs across the whole entire supply chain coming out of the the the pause in operation. Our operational costs are up across the board.”

What happens to P&O Australia fleet

There was some good news. Carnival will continue to operate year round using rebranded Pacific Encounter and Pacific Adventure. they will join Carnival Splendor and Carnival Luminosa, which sails out of Brisbane.

Current itineraries will operate business as usual, and guests will be notified in the coming days of any changes to future bookings as a result of this announccement.

“You can understand, we have a lot of stakeholders including shareholders and you know, we hope that we will see the operating cost stabilise or potentially come down in the future. But right now, that’s not what we see.

“And so this is the best way for us to be able to maintain 3.5 ships sailing year round in this market, and we are committed to being able to continue to do that and we are committed to deliver to the P & O Cruises Australia guests the experience that they need.”

Were there any regrets?

“Australia is a storied brand 90 years in the market. We have an amazing team and we’re very proud of everything that the team has accomplished here in Australia.

“But the strategic reality of a smaller population with significantly higher operating and regular regulatory costs, particularly coming out of the restart, we just had no choice but to adjust the approach in the operating model so that we can gain the efficiencies that we need to continue to be able to operate with 3.5 ships year round here in Australia.”

“The ships will be converted over to Carnival Cruise Line in 2025 in in March specifically.

Duffy denied Carnival was pulling back from the region, as other brands have – Virgin Voyages and Cunard have curtained their operations here.

“We’ll continue as the market leader with seven of our corporate brands, 19 ships that will be operating in the region. We’re really not pulling back.

“But the dilemma was not really between Carnival Cruise Line and P & O Australia. Carnival cruise line as you know, has been in the market since 2013.

“For P & O Cruises Australia, the dilemma is with such a small fleet, it is very difficult. You don’t have scale and they really don’t have the ability as many of the other brands do to move ships, you know, in and out of the region.

“I think we don’t want to take anything away from the, from the great team that has operated here for, for decades. But given the external factors that impact the business and the ability and desire for us to continue operating year-round ships here, we really did have to leverage the scale of Carnival Cruise Line.

Is there an upside?

“Well, at this point, we’ve got to make sure we can deliver the performance that we need with the 3.5 ships that we will have here year round, ” Duffy said. “But I would say for the P & O guests, the main message for me is we are not changing the experience that people have come to love on the P & O cruises, Australia ships.

“They’re going to see the same crew members going to still have the fun theme cruises that we do.

“We’re still going to operate the ships the way that we do today, the opportunity for the P & O guest is that with carnival, we will be able to unlock a number of features and functions that P & O Australia doesn’t have including our hub app, which enables guests to use, have chat functionality on the ship, make online dining and excursion reservations, make a lot of these arrangements.

“Even before they ever get on the ship, you can order a beer and food from the hub app while you’re on the ship and someone will deliver it to you where you sit.

“They’ll also benefit from carnival cruise lines loyalty program as well as a number of promotional offerings that are specific to carnival ships who are sailing in the region.

“So the opportunity is much more on that side of the coin and not because we’re going to change the P & O Cruises Australia experience.”

Theme cruises – and Luke Mangan’s food outlets – will become part of Carnival’s offering.

Will prices go up?

“Well, at this point, there’s no plan on doing anything different than we’re doing today in terms of the way that we manage pricing and you know, based on demand and frankly, through the end of 2024 I mean, we’re sitting here on the third of June, there is no change because P & O cruises Australia will continue to operate exactly as they are until the conversion happens.

“We will be sending out a communication to all of the booked guests so that they we have a message from us ensuring them of the experience that we plan to continue delivery as well as an incentive offer for those that are booked after the conversion.”

They will have the opportunity to cancel and get their money back if they want to. But of course Duffy is keen that they don’t.

“To again reinforce we understand the sadness that’s associated with the decision for us to sunset this storied brand. But we will also take time between now and that day to celebrate the legacy of P and O cruises Australia including some events. We are saying it is, it is a beautiful sunset.

“We, we promise that we will continue to deliver for the people in the market that love this brand.”