How Carnival, Royal Caribbean and Norwegian keep fuel costs down

Carnival, Royal Caribbean and Norwegian Cruise Line Holdings generated strong earnings for the latest quarter despite rising fuel prices. How major shipping companies navigate fuel costs is a very different strategy.

Oil prices have skyrocketed since the US-Israel war with Iran began on February 28. Brent crude reached a six-month high on Friday, settling at $116.72 per barrel. With no clear end in sight to the conflict in the Middle East, the pressures affecting the lives of cruise ships look set to last through the holiday season and beyond.

Both Royal Caribbean and Norwegian practice “hedging,” or the strategy of using derivatives to reduce exposure to fluctuations in fuel prices, to account for sharp increases.

Carnival CEO Josh Weinstein, on the other hand, told CNBC in an interview last month that reducing fuel consumption is the best way to avoid the effects 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 told CNBC in an interview that hedging companies do it primarily to manage fuel costs, but also to manage Wall Street’s expectations and prevent busy stock trading based on fuel price fluctuations.

“When you go public, the Street will trade your stock based on the price of fuel,” Katz said. “The Street’s argument is that volatility puts pressure on many of you.”

“Although the math is most likely correct in the long run it is more expensive,” he explained. “It is beneficial to have low fuel volatility in the model and low trading volatility [it’s] good for many of you.”

Despite the positive potential of the strategy, Carnival maintains the attitude it has held since 2019: Reducing fuel consumption is better than hedging.

And Carnival’s third-quarter earnings report last month showed that strategy may be paying off.

Carnival beat analysts’ expectations on both the top and bottom lines for the most recent quarter and reported a record net income of $1.9 billion.

Weinstein told CNBC in an interview on “Squawk on the Street” after the launch that the company is “maniacal” about reducing fuel consumption, saying it has reduced unit fuel consumption by 26% since 2019.

“We estimate that we have saved about $700 million by 2026 based on the level of consumption savings that has decreased since 2019,” he said.

Carnival spent $615 million, or about 7.3% of revenue, on fuel in the third quarter, according to its latest earnings release. This is an increase from the $425 million, or 6.7% of revenue, that the company spent on fuel in the fourth quarter of 2025, before the increase in fuel prices.

Carnival projects fuel costs will rise to $640 million in the fourth quarter, according to an earnings release.

Royal Caribbean also beat analysts’ expectations for earnings per share for the third quarter, it reported Tuesday. However, it narrowly missed out on revenue.

CEO Jason Liberty attributed the company’s share defeat to his hedging strategy during an interview on CNBC’s “Squawk on the Street” Tuesday morning.

“We are a little over 60% hedged here for 2026, and so it helps insulate us from some of the impact on raising fuel costs,” he said.

“It obviously still affects us,” Liberty said. “[High fuel prices] a good chunk of our Q3 earnings beat into the full year guide. But we continue to hedge, and we watch.”

Royal Caribbean spent about $347 million on fuel in the third quarter, or about 6.2% of revenue, according to its earnings release. That compares with $293 million, or 6.8% of revenue, spent on fuel in the fourth quarter of 2025, which ended on December 31.

The company projects fuel costs will continue to rise to $379 million in the fourth quarter.

Liberty points out that high fuel prices have not dampened consumer demand for vacations.

“It’s not that we don’t see challenging points, but really what we’ve seen is that even at challenging points, consumers come roaring back,” he said.

Royal Caribbean reported strong bookings for the third quarter and said reservations for 2027 were up with a high percentage of teenagers.

Norwegian Cruise Line Holdings beat the top and bottom lines for third quarter earnings, reported on Friday, with revenue of $2.9 billion and adjusted earnings per share of $1.12.

The company has curbed about 48% of its fuel consumption for 2026, according to its earnings release.

Norwegian spent about $196 million on fuel in the third quarter, or about 6.6% of revenue, according to its latest earnings release. This is part of the lower revenue of 7.4% – a total of $ 167 million – spent on fuel in the fourth quarter of 2025, which ended on December 31.

The company projected fuel consumption to increase slightly in the fourth quarter, to 255,000 metric tons from the 239,000 metric tons consumed in the third quarter.

The company is in the midst of a turnaround effort. And despite facing additional challenges from the macro environment, Chief Financial Officer Mark Kempa said he was confident in this quarter’s results on Thursday’s earnings call.

“This result reinforces our confidence in the attractiveness of our product and the opportunity to translate our stronger revenue performance and disciplined cost management into better profits,” Kempa said.