Carnival CEO Arnold Donald Steps Down as Cruise Industry Seeks Renewal

Carnival’s Tuesday announcement that Arnold Donald will step down as CEO of the world’s largest cruise line came after some investors backed out at a shareholder meeting earlier this month on metrics tied to the 67-year-old’s 2021 compensation package. in the amount of $15 million, sources familiar with the situation told CNBC.

“The end of an era,” said one investor, who asked not to be named. The company was unable to respond to a request for comment.

Donald, who will become vice chairman effective August 1, became chief executive nine years ago, two years spent keeping Carnival afloat during the Covid-19 pandemic by raising billions of dollars in debt and stock.

While Donald has undoubtedly played a leading role in resurrecting the cruise industry from the depths of the pandemic, Carnival stock has struggled to keep up with rivals like Royal Caribbean, where industry veteran Richard Fein stepped down as CEO about four months ago. after more than 33 years. The 72-year-old remains chairman.

Carnival shares are down nearly 13% in 2022, slightly more than the S&P 500’s 11.5% decline in the same year-to-date period, and they’re down more than 35% in the last 12 months. By contrast, Royal Caribbean shares are up nearly 3% on the year and down only about 9% over the past 12 months.

A change in leadership at both Carnival and Royal Caribbean will see a new guard on board to help the cruise giants through the next stages of recovery. At Carnival, current COO Josh Weinstein, 48, has been chosen as the new CEO. At Royal Caribbean, former CFO Jason Liberty, 46, took over the top job at the start of the year.

“The changes could be beneficial,” Stifel analyst Steven Weczynski wrote in a recent note to clients.

In the coming weeks, shareholders will want to hear from Weinstein, who has been with Carnival for 20 years, about his game plan for the cruise line and how it might differ from Donald’s approach.

“He’s younger, he has to bring new energy,” Weczynski told CNBC.

As head of the world’s largest cruise operator, Donald quickly became the face of the industry at the height of the pandemic, with numerous ships carrying Covid-infected guests and crew staying on board for days at a time.

As the Centers for Disease Control and Prevention struggled to keep the swimming ban in place, Donald played a leading role in discussions with lawmakers, industry leaders and the White House in an attempt to change the course of the order.

As the economy began to recover in 2021, the outlook for cruises remained bleak. But Donald, one of the few black CEOs on Wall Street, remained defiantly optimistic about the industry.

At the CNBC Evolve Global Summit last summer, Donald was asked if he ever doubted whether Carnival could weather the storm. At the time, he said, “I never doubted that we could make it, but… it was painful.”

During the annual Seatrade conference in the fall of 2021, Carnival ships were slowly returning to the sea after a 15-month suspension. “We know where the road leads and the road leads to a very bright future,” Donald said during panel discussion at the event. Fane, then CEO of Royal Caribbean, was also in the group and expressed the same optimism.

The pandemic was not Donald’s first crisis. He joined Carnival in 2013 when a fire disabled Carnival Triumph’s sanitation system, leaving more than 4,200 passengers and crew stranded at sea in appalling conditions for several days. Last year, one of Carnival’s ships, the Costa Concordia, capsized off the coast of Italy, killing 32 people.

In Donald’s five years as CEO, Carnival’s share price nearly doubled, reaching an all-time high of $72.70 per share in January 2018. Close.

However, demand for cruises is recovering: three weeks ago, Carnival reported a record week of bookings in the company’s history.

“Demand for cruises is very strong in the second half of this year and in 2023. Those who have not flown on cruises for two years are ready to hit the road, ”said Vechinski.

New data from the trade group Cruise Lines International Association also shows that the desire to travel is now above pre-pandemic levels.

As orders recover, Carnival has returned nearly 75% of its ships, as well as ditching older, less fuel-efficient ships.

Analysts and investors are waiting for cruise lines to have positive cash flow. Carnival and Royal Caribbean executives have said this will happen in the next few months.