Carnival reroutes Red Sea cruises as fighting in the region intensifies

Carnival is rerouting 12 ships across seven brands that were scheduled to cruise through the Red Sea in May, joining an expanding list of companies bypassing the key transit route as attacks by Houthi militants persist. 

Carnival said it made the decision to avoid the region after consulting with security experts and government authorities. 

"The company has not seen an impact on booking trends due to the Red Sea situation and has no other Red Sea transits until November 2024," Carnival stated. "The losses should be offset by higher-than-expected bookings, with booking volumes since November hitting an all-time high."

The Miami-based cruise operator said the decision would impact is 2024 earnings by seven to eight cents a share, with most of the financial hit coming in the second quarter.

Earlier this month, Carnival rival Royal Caribbean said it had canceled two voyages in the Red Sea because of the safety concerns due to the attacks. 

Numerous energy and shipping companies have halted traffic through the Red Sea because of missile and drone strikes on ships and oil tankers from areas controlled by the Houthis. The Iran-backed rebel group, based in Yemen, has said it is attacking ships that are supporting Israel's war effort in Gaza.

Houthi attacks in December prompted BP to suspend oil shipments through the Red Sea, pushing oil prices higher in recent weeks, and resulted in a warning of possible product shortages by Ikea. 

The group on January 26 fired a missile at a U.S. warship patrolling the Gulf of Aden, forcing it to shoot down the projectile, and also struck a British vessel as their aggressive attacks on maritime traffic continue. The attack marked a further escalation in the biggest confrontation at sea the U.S. Navy has seen in the Middle East in decades.

The U.S. military has launched airstrikes airstrikes against the Houthis since Jan. 11, after several weeks of attacks on commercial ships by the militant group. 

Although experts have warned that an escalating conflict in the Red Sea and Suez Canal could drive up energy costs, for now the situation does not substantially alter the outlook for global inflation, according to EY senior economist, Lydia Boussour. 

"However, a prolonged conflict with shipping costs staying as high through 2024 could add up to 0.7 percentage points to global inflation this year," she said in a report to investors.

Goldman Sachs analysts note that global sea freight costs have jumped because of the shipping disruptions, but they don't expect higher prices to feed through to consumers.

"[W]e see limited risk of such a resurgence because the rise in shipping costs is occurring against a relatively benign macro backdrop, reducing the scope for price increases to be amplified through the supply chain, and sea freight costs account for only a small share of the price of final consumption goods," they wrote in a research note.

In:
• Red Sea
• Houthi Movement
• Israel
• Gaza Strip

Kate Gibson

Kate Gibson is a reporter for CBS MoneyWatch in New York.

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