Howard Frank – COO David Bernstein – Sr. VP & CFO Micky Arison – CEO Beth Roberts – VP IR

Felicia Hendrix - Lehman Brothers Robin Farley - UBS Timothy Conder – Wachovia Capital Markets Steve Kent – Goldman Sachs Assia Georgieva - Infinity Research Steve Wieczynski - Stifel Nicolaus Nick Thomas – ABM Amro Tim Ramskill – Dresdner Kleinwort Mark Reid - Land Bank David Leibowitz - Burnham Securities Unidentified Analyst

Welcome to the Carnival Corporation second quarter earnings conference call. (Operator Instructions) It is now my pleasure to turn the conference over to Mr. Howard Frank, Vice Chairman and COO at Carnival Corporation; please go ahead sir. Howard S. Frank Good morning everyone. This is Howard Frank and with me here in Miami is David Bernstein, our Senior VP and CFO and Beth Roberts, our Vice President of Investor Relations. Micky Arison is also on the call but is not in Miami right now; he is travelling but he will be available as well on the call. He is listening in right now. Let me quickly turn it over to David Bernstein, he’ll take you through some of the color in the second quarter financial results.

Thank you, Howard. I will begin the conference call by reading the forward-looking statements as I’ve done in previous calls. During this conference call we will make certain forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties or other factors which may cause the actual results, performances or achievements of Carnival to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements. For further information, please see Carnival’s earnings press release, and its filings with the Securities and Exchange Commission. For the second quarter our earnings per share were $0.49 versus $0.48 for the prior year. Our EPS in the second quarter came in above the mid point of our March guidance by $0.06 per share. This was driven by essentially three things. First higher then expected cruise ticket revenues for our North American brands which resulted from stronger last-minute bookings, but that was partially offset by lower then expected onboard spending at our contemporary brands and some of our premium brands, worth about $0.02 per share. Secondly lower then expected SG&A worth $0.250 per share as our brands buckled down and re-evaluate spending given the difficult economic environment. And lastly lower then expected fuel consumption worth about $0.01 per share. Looking more closely at our second quarter operating results, our capacity increased 8.3% for the second quarter of 2008 with a vast majority of the increase going to our European brands. The European brands grew 23% while our North American brands grew 2.7%. Overall net revenue yield in current dollars increased 7.3% in the second quarter versus the prior year. Now let’s take a look at the two components of net revenue yield; cruise passenger ticket yields and on-board and other yields. The net cruise passenger ticket yields, we saw a yield improvement of 9.3% in current dollars and 5.5% in local currency. Our North American brands were up a strong 7.6% driven by the Caribbean, Europe and other exotic itineraries. Our European brands excluding the Ibero Cruises joint venture which we began consolidating in the fourth quarter of last year, and [Swan Helenick] which ceased operations during the second quarter of last year, achieved a 0.6% increase in local currency passenger ticket yields. Given the very large increase in capacity for our European brands this year and the increasing competition from other companies in the European marketplace, we were not expecting to see yield increases this year and were very pleased with the results. P&O Cruises Australia with its reconfigured fleet adding Pacific Dawn in November, 2007 and delivering Pacific Star to [Pullman Tours] in March, 2008 achieved a healthy yield increase for the second quarter versus the prior year. I’m also glad to continue to report that Costa’s yield in China improved significantly in the second quarter as they had done in the last three quarters driven by both price and occupancy which resulted primarily from our decision to shift our sourcing strategy from Costa Asia. In onboard and other yields we saw a reported yield improvement of 1% in current dollars but a yield decline of 1.8% in local currency. However mix accounts for 1% of the decline as our European brands which have always had a lower onboard spending pattern are growing faster then our North American brands. The 0.6% of the decline results from inconsistent brands, Ibero Cruises, Windstar and Swan Helenick. Therefore the real decline in yields year-over-year is only 0.2% in local currency with declines in our contemporary brands and one of our premium brands being partially offset by increases in other brands. On the cost cruise costs per available lower berth day for the second quarter were up 10.8% while in local currency they were up 7.2% and that was driven solely by fuel prices. Fuel prices this year for the second quarter were 59% higher costing us an additional $158 million or $0.19 per share. Excluding fuel and in local currency cruise costs per available berth day were actually down 1.1%. Turning to the 2008 outlook I will skip over net revenue yields as Howard will discuss that in a few moments. Cruise costs per available lower berth day for the full year in current dollars is expected to be up 11% to 12% driven by fuel prices and currency impacts. However if you exclude these two items we expect to be down slightly. Based on current spot prices for fuel, fuel prices for the full year are projected to be $594.00 per metric ton for 2008 versus $361.00 per metric ton in 2007 costing us an additional $752 million or $0.92 per share. You may have noticed that I indicated that our fuel price is based on current spot price rather then the forward curve. Given the extreme volatility in the price of fuel we feel that the forward curve is not any better or worse predictor of future fuel prices then spot. While using spot simplifies our current calculations and it’s easier to monitor the changes for those of you who are tracking them. Therefore we have decided to use the current spot price to develop our guidance. I did want to point out that had we used the forward curve for the remainder of 2008 our estimates for the EPS would have only been approximately $0.01 per share lower. Overall for 2008 we are forecasting controllable expenses to be slightly down exceeding our long-term target of unit growth between flat to one-half the rate of inflation which is a credit to our brands given the significant inflationary pressures in food, wages, crew travel, freight and other areas. At this point I will turn the conference call over to Howard.

Thank you David. Before I move into the outlook and discuss [smart] booking patterns, I wanted to congratulate our operating company executives who did a great job of managing our business through this second quarter in what I would consider to be a very, very difficult economic environment on both sides of the Atlantic. Now let me talk about bookings patterns and pricing in each of our major markets. In North America bookings although somewhat slower then the strong levels we experienced a year ago, have held up reasonably well in this soft economy. The bookings have been made a higher price points so to some degree the slower versus a year ago may also be somewhat attributable to the result of selling at these higher price levels. And pricing for late bookings has also held up quite well. But generally speaking despite the slower pattern of bookings versus the strong pattern a year ago, the absolute volume of bookings is sufficient to maintain our higher prices. So we have not changed our yield guidance for our North American brands for the second half of the year from our guidance that we gave last quarter. In fact we expect ticket prices to be slightly higher then last quarter’s guidance partially offset by forecasted lower onboards. The North American booking pattern does suggest that customers are looking for less expensive vacations and at good values and the cruise product is perfectly positioned for the value conscious consumer. Within our own brands generally speaking we are seeing continued strength in our shorter cruises and a slightly slower booking pattern for our longer voyages. Looking at specific traits for our North American brands in the third and fourth quarters, Caribbean pricing continues to be strong and we expect second half Caribbean yields to be well ahead on a year-on-year basis by the time these quarters close down. Pricing for North American brand at Europe and Alaska itineraries in the second half of the year is expected to be somewhat lower year-over-year. Lower Alaska pricing may partially be the result of the $50.00 head tax in Alaska but it’s really difficult to know precisely. European itinerary pricing for North American albeit somewhat lower then a year ago, has held up reasonably well especially considering the significant increase in Europe capacity not just for our own brands, but for competitor brands as well. Turning to our European brands where capacity is up 21% in the second half of the year, we have had to modestly reduce forecasted revenue yields for ticket and onboard revenues. In some measure this may reflect a significant capacity increase in Europe including that of our competitors and also a slowdown in certain of Europe’s economies particularly in Southern Europe. Despite this our European businesses are performing extremely well and we continue to be encouraged with their ability to expand their markets and maintain relatively high price points for their cruise products. Taking North America and Europe together we now estimate that full year revenue yields for 2008 will still be up in the 2% to 3% range but at a slightly lower level within that range. Turning to fuel, as David indicated for the full year 2008 based on the latest spot price for fuel our fuel cost is expected to increase by $752 million or $0.92 per share over 2007. Because of these higher fuel costs in North America we recently increased our fuel supplement charge to $9.00 per day for the first and second passenger in the cabin and $4.00 per day for the third and fourth passenger for cruise voyages up to 14 days. The new supplement applies to future bookings made after June 12, they’ll be only a slight benefit to the increased supplement in the third quarter, a greater a benefit in the fourth quarter and of course an increasing benefit as we get into the 2009 year. We are looking at every possible opportunity to reduce our fuel consumption from an itinerary planning standpoint to conserving energy usage on the ships. And in fact we have had some good reductions in fuel consumption as a result of these initiatives. Although fuel costs will continue to rise and we’ll be able to partly mitigate the effects of the increase with the fuel supplement there will be a lag as I indicated before until the full benefit of the supplements are realized. For the second half of the year fuel costs are forecasted to be $438 million or $0.54 per share higher then in the second half of 2007 and since our previous guidance last March, our fuel cost forecast for the second half of the year has increased by $224 million or $0.27 per share. Taking the slightly lower revenue forecast together with the higher fuel forecast for the second half of the year and a small inflationary increase in operating costs we are now guiding 2008 earnings per share in the range of $2.70 to $2.80. The mid point of our March guidance was $3.10 per share so we have lowered guidance by $0.35. Of this amount $0.27 relates to fuel, about $0.04 relates to changes in onboard revenue yields and $0.04 is forecasted increase in our operating costs. Turning to the individual quarters and looking now just at the third quarter where our capacity has increased 8%, 2% of that capacity increase comes from North America and 24% of our capacity comes from our European brands. On a fleet-wide basis for the third quarter the occupancies are running slightly behind year-over-year with pricing running nicely higher on both the current dollar and local currency basis at this point in time. Breaking that down by our two major markets, North American brands and Caribbean represent 34% of our third quarter capacity versus 40% a year ago; Alaska 29% which is about the same as a year ago; Europe is 22% which is a 4% increase from the 18% a year ago with the remaining capacity in various other itineraries. At this time our North American brands are running nicely ahead in pricing and slightly behind in occupancy which very little left to sell. The Caribbean pricing is well ahead of last year with lower occupancy however pricing for late business has been strong and we expect to close out the quarter with solid yield improvement in the Caribbean [inaudible]. As I previously mentioned Alaska pricing is slightly lower year-over-year with occupancies at about the same year-over-year levels. For Europe itineraries occupancy and pricing are slightly behind last year with a more then 20% increase in North American brand Europe itinerary capacity in the third quarter. Overall for the North American fleet this is now for the third quarter we expect revenue yields to be up nicely from a year ago. I will turn to our European brands. Our European brand fleet itineraries are virtually all in Europe for the summer quarter. Its at this time Europe brand pricing on a current dollar basis is higher year-over-year and our local currency basis is slightly lower. The Europe brand occupancies are also slightly lower. By the time the third quarter closes out we expect European revenue yields on a current dollar basis to be higher and on a local currency basis to be slightly lower. We think this is an excellent result given the 24% increase in our third quarter European capacity. As I commented before European brand overall performance at the operating line has been very strong. Overall as indicated in the press release we expect that revenue yields for the third quarter will increase by 4%, 1% on a local currency basis. However given what is now a $241 million or $0.30 per share increase in fuel costs for the third quarter we are not forecasting third quarter earnings per share will be in the range of $1.56 to $1.58 versus the $1.67 of a year ago. Now I’m turning to the fourth quarter where our fleet-wide capacity is up by 8.8%, 5% for our North American brands and 18% for our European brands. On an overall fleet-wide basis occupancies are approximately even year-over-year with pricing on a current dollar and local currency basis running nicely higher. Now just looking at our North American brands at this time the Caribbean represents 42% of North American fourth quarter capacity versus 46% a year ago, the Mexican Riviera is 12% of our capacity in the fourth quarter, which is about the same as last year, Europe is 12%, up from 10%. The European itinerary is 12% versus 10% from last year and all the other itineraries are each under 10%. North American brand pricing is well ahead of last year with occupancy slightly behind similar to the third quarter, Caribbean pricing is nicely higher year-over-year with occupancy somewhat lower and Mexican Riviera pricing is higher also with lower occupancy. Pricing for Europe itinerary cruises are lower then last year with occupancy running higher on a year-over-year basis. Generally speaking all other itineraries are performing reasonably well at this time and based on current booking patterns we expect fourth quarter yields for our North American brands to be nicely up year-over-year. Now turning to our European brands in the fourth quarter 77% of the European brand capacity is in European itineraries which are down slightly from 81% the year ago with a balance in various other itineraries. European brand pricing on a current dollar basis is running well ahead of last year and our local current basis is running slightly ahead. Occupancies are also running slightly ahead. We are forecasting by the time the fourth quarter closes out revenue yield in Europe will come in higher on a current dollar basis and flattish on a local currency basis. Again an excellent forecasted result given the 18% capacity increase in our fourth quarter in Europe. We have commented in the past that given our significant capacity increase in our European businesses we would be very pleased if our European brands were able to maintain their revenue yield at the same year-over-year levels. So we are quite pleased with our European brands’ performance in 2008. Now looking at the first quarter of 2009 our capacity actually in the first quarter, our fleet-wide capacity which is still doing a little bit of work on that but we think overall its up about 2%, 1% for our North American brands and 8% for our European brands. And that excludes Ibero; we don’t have Ibero Cruises in those numbers just yet because we don’t have certain information from them. I caution that booking data for first quarter 2009 is still in its early stages and I wouldn’t read too much into the information at this point. For the first quarter of 2009 overall fleet-wide occupancies are running ahead year-over-year with pricing slightly higher on a current dollar basis and flat on a local currency basis. And I should add anecdotally and still of course even earlier in the stages, the 2009 second quarter has a generally overall similar pattern to the first quarter 2009. In the first quarter 2009 for our North American brands capacity is 61% in the Caribbean which is about the same as 2008, Mexican Riviera is 12% which is down from the 15% last year and the balance is in various other itineraries including long and exotic cruises in Canada and New England, all individually less then 10%. At the present time North American brand occupancies are presently running ahead year-over-year with pricing nicely higher. Caribbean itinerary occupancy and pricing are running nicely ahead, Mexican Riviera pricing is higher on lower occupancies and broadly speaking pricing on most other itineraries is higher year-over-year with occupancies [lower]. Looking at our European brand itineraries which break down as follows: the Caribbean represents 32% of their business in Q1 of 2009 versus 37% a year ago in 2008; Europe is 24% which is about the same as last year; The Orient Pacific 12% versus 8% a year ago; South America 11% which is about the same and world cruises 12% which is also about the same as last year. At this time Europe brand occupancy are running nicely ahead year-over-year with pricing on a local currency basis lower for most brands. Certain of the European brands however with significant capacity increases the lower pricing is part of the yield management strategy to get ahead of the booking curve in order to avoid discounts on the late sale of cabins. Again I remind you its still early in the booking patterns for the Q1 2009 quarter. Although we are only half way through the year let me put some perspective on the 2008 year at least as we see it so far. When we provided earnings guidance for 2008 last December it was the range of $3.10 to $3.30 for a mid point of $3.20 per share. Our latest guidance is now $2.75 mid point or a $0.45 reduction. Of this amount $0.43 is being caused by increases in fuel prices since the beginning of the year with the balance of $0.02 relating to a variety of all other revenue and cost issues. Apart from fuel, given all the other challenges that we’ve had to deal with including the softening global economy and inflationary pressures on costs, we are very pleased with the operating performance of our business. And if not for the dramatic increases in fuel prices, 2008 would have been a year of solid earnings growth. Our fuel costs have risen by $752 million, that’s $0.92 per share over 2007 which is a 65% increase and yet our earnings are forecasted to be lower by $0.20 a share or 7% over 2007. We think that’s a pretty good result. We also don’t believe that fuel prices will continue to rise at these levels in the future; it’s simply not sustainable. And with those comments we will turn it over for questions. Thank you.

(Operator Instructions) Your first question comes from the line of Felicia Hendrix - Lehman Brothers Felicia Hendrix - Lehman Brothers: Your outlook actually is more optimistic then what we’re hearing from the field, I’m wondering first of all what has changed the most since you gave us your last update. I’m really trying to reconcile some of your comments, which actually seem pretty optimistic with your outlook for the low end of your prior yield guidance.

From a yield standpoint I think we’ve had—in North America and I’ve David and Beth here, we’ve increased actually we’ve increased ticket prices, not by a huge amount but by some in terms of the forecast for the rest of the year. We’ve taken down onboard revenues and in Europe we’ve taken down ticket prices which more or less offset each other between North American ticket prices maybe a minor difference. We’ve also taken down onboard revenue so the principal difference has been a reduction in onboard revenues I’d say. That’s more of a forecast then it is actual. There’s a little bit of estimation going on here on onboard revenues but that’s what it is, that’s what our operating guides give us and that’s what we go with. Felicia Hendrix - Lehman Brothers: Are you trying to do anything to stimulate higher onboard revenues in this tough environment?

Oh yes, we’re doing all kinds of things onboard the ships. All of our brands are working on this and to some degree I think they may have mitigated some of it but I think it’s an ongoing process. Felicia Hendrix - Lehman Brothers: And is the weakness still mainly coming from art auctions or is it bleeding into other areas?

There is weakness in art auctions that’s probably the biggest drop of all but there is weakness in other areas. We are seeing it as we said last quarter in bar, casino and other areas as well.

I think its clear that our guests to some degree are tightening their belt and so our people are forecasting that but fortunately they continue to cruise and they continue to book at very acceptable levels. Felicia Hendrix - Lehman Brothers: About two quarters ago you were able to give us some good metrics to think about how the fuel supplement might benefit your yields and given that you’ve been increasing them I was wondering if you could refresh us with that.

I could tell you what would happen if we got every penny of it but as you see the yields are basically under a little bit of pressure but that’s from onboards and obviously the surcharges and the ticket revenue.

We had originally had indicated that if we collected every dollar of the fuel supplement it would improve our yields for 2008 by about 1.5% and that number really hasn’t changed and the number would be just slightly higher for 2009 looking forward. Felicia Hendrix - Lehman Brothers: Okay but still under 2%?

Yes still under 2% year-over-year.

Your next question comes from the line of Robin Farley - UBS Robin Farley – UBS: I wanted to clarify one thing in the release, when you talk about four 12-month pricing on the books being ahead year-over-year is that in aggregate true in constant currency as well as current dollars?

The comment was made in constant dollars. Robin Farley – UBS: I wonder if you can talk about you’ve made some itinerary changes recently, I guess the Carnival Freedom being brought back to the Caribbean instead of Europe in 2009 and I think a Costa ship also that had been in the Mediterranean coming to the Caribbean next year, and I’m wondering if you could talk a little bit about obviously it sounds like the Caribbean pricing is doing better maybe then the European pricing is it an airlift issue? Is it that airline costs to Europe are getting so much higher or what’s driving those itinerary changes and also how much is airlift an issue for you as the airlines cut back capacity and it drives prices higher?

I think you have to be a little bit careful about overstating the Carnival move. Understand that they went from basically one and a half ships because Splendor begins service in middle of July to one next year. I don’t know what the actual reduction in capacity is for Carnival Cruise Line in the Med.

It’s down about 20% but it’s a very small number, very small base.

Yes its 20% on a small base, its not 50% two ships to one. That’s point one. Costa historically has always had two ships in South Florida and that has been their normal pattern. This year actually was an anomaly. So I wouldn’t read too much into those two announcements. Other then that there’s no question that what’s happening to the airline industry because of these high fuel prices is a concern for everybody in leisure. Fortunately we do have the ability to move; fortunately we do have a number of ships that do operate from close to home cruising whether it’s close to home in Baltimore for a Carnival ship or close to home to South Hampton for a P&O ship or close to home to Palermo for people in Sicily. So that mitigates a little bit what other people will have to go through with this issue but it is a problematic issue and its something that we’ll have to work our way through with the airlines as time goes on.

Your next question comes from the line of Timothy Conder – Wachovia Capital Markets Timothy Conder – Wachovia Capital Markets: What’s your updated guidance given that you did a little bit better in the second quarter, your updated guidance for annual fuel usage here in 2008?

For the full year we’re looking for 3,240,000 billion metric tons. Timothy Conder – Wachovia Capital Markets: And then it sounds like that the fuel surcharges so far are sticking, are you seeing any evidence, any push back or tipping point so to speak that they’re not and you’re getting any type of pricing demand destruction anywhere?

We can only anecdotally—we haven’t gotten a lot of issue on it. We have today such a great variety of getting customer feedback especially with websites and blogs and all sorts of stuff and it barely comes up so I think there is just a level of understanding because its on the news everyday that we have an issue and that we have to pass it on and I think the level of acceptance has been quite high. Timothy Conder – Wachovia Capital Markets: Could you elaborate a little bit more when you said that you’re seeing a little weakness in Southern Europe, can you elaborate on that a little bit more, are we talking Spain, or what areas and then regarding your sourcing if you may, your direct business, call center and online bookings, what’s that now trending for this year as a percent of your bookings versus through the traditional travel agent channels?

I was going to say, [inaudible] to some degree is under performing our expectation and I would say that of the European economies, Spain seems to have been the one most impacted by the housing issue and the economic situation so it does appear that Spain, Italy somewhat as well, but Spain has been hit the worst thus far by the housing crisis and other things and we have felt it in business in Spain. Because the capacity levels are so—increases have been so high, every other country is up significantly in booking levels but as Howard said, they’re performing very well but the yields are not what we had anticipated a quarter ago but we had never anticipated yield growth when we strategically started growing at these kinds of levels.

And while we’ve taken down yields in Europe its really by a small amount, these are not significant swings in yield. It’s really on the margin.

We’re really getting fine here because last quarter we estimated 2% to 3% and this quarter we’re estimating 2% to 3%. So we’re really talking rounding errors in overall yield adjustment.

Most of the yield change has been in onboards. Timothy Conder – Wachovia Capital Markets: And nothing—housing in Ireland, and the rest of the UK kind of the issues there also but you’re not seeing anything out of those markets?

I would say that there’s a general sense that the European economies are weakening but we’re feeling it more in Spain then anywhere else. As far as direct business what I can say is that since Bob Dickinson retired two of Carnival’s senior sales and marketing executives who were clearly the most aggressive in growing Carnival Cruise Lines [pvp] and direct business left the company as I’m sure you know. One went to Royal Caribbean and one went to [NCO]. Since that time Jerry and his team, Ben and Lynn have really reevaluated that program and the fact is that they have significantly reduced the business from that program. The result is and will be at least for the time being, less direct business. So far it appears that the result of that change in strategy has improved yields and at the same time reduced G&A costs so we’re very pleased with that kind of mid course correction. I think it’s very important to state that the travel agency distribution system has been an effective and efficient distribution system for this company for 35 years and it got us to where we are. We clearly believe that we need to continue to support them, they have shown this year that they can give us the yield improvements we need to overcome at least partially these higher fuel costs so despite the fact that I would expect that we would have a little bit less direct business next year, particularly at Carnival Cruise Lines that the effect of that will be higher yield. Timothy Conder – Wachovia Capital Markets: Any type of percentage shift year-over-year Mickey?

No we’ve never given out those percentages.

Your next question comes from the line of Steve Kent – Goldman Sachs Steve Kent – Goldman Sachs: Have you changed your marketing programs to target that value orientation or are you turning that up a little bit more and could we see more of that over the next six to 12 months? And then also any change in cancellation rates? I know they are remarkably low but I just was wondering if you’re seeing any pick-up given the economic environment.

Each of the brands of course is—when it comes to the value they’re all out there tactically with their own mailings and so on so there is a lot of that going on in the marketplace. I don’t know that it’s a whole lot different but I do think there’s been a little bit of a step-up in some of the marketing to get the value equation out there for the consumer and I think it’s been successful and it varies brand by brand depending on how much demand they’re feeling and whether they need to stimulate demand and so on.

As far as the cancellation rates are concerned we have taken a good hard look at that since its been a question that everybody has been asking and they’re really just up ever so slightly so there’s really no significant change there either.

Your next question comes from the line of Assia Georgieva - Infinity Research Assia Georgieva - Infinity Research: My question goes to your assumptions on onboard spend, should we think that for the second half that number could actually come down a little bit? It seems that coupled with the good ticket yields that would be the only assumption to make at this point.

We did take it down actually in the second half of the year in terms of our forecast and of course it varies brand by brand. When we talk about onboard some brands seem to be performing okay and so it’s really hard to read from our perspective to read the tea leaves. So in large measures we rely on the operating company executives to give us their best sense of what’s going to happen to onboards in the third and fourth quarter. We believe—and they did take them down and we believe they’re very comfortable with that.

Overall if you looked at our actual results in the first quarter—the first half of the year our forecast for onboards are down ever so slightly more in the back half then they were actually down in the first half so we are trying to take all of the various factors into consideration. Assia Georgieva - Infinity Research: I think that you mentioned one of the premium brands showed a bigger increase in onboard spend, could that have been temporary or should we expect that trend to continue?

I don’t recall saying that but I think--

One of them had a decrease and really a lot of that decrease had to do with art auctions.

One of them is holding up quite well, one had a bit of a decrease, yes. Assia Georgieva - Infinity Research: It seems that given the current guidance you expect some of the inflationary pressure on I would assume food and payroll particularly to decrease as we get into the fourth quarter, what is that expectation based on since that in Q2 and especially for Q3 we’ll continue to see some increases in those areas?

We’re not necessarily expecting the inflation to decrease; it’s just that our brands have found ways to offset inflationary pressures. In some cases the subsidy is the mother of invention. Our brands have looked at their menus. Now when one particular brand, now when on lobster night instead of getting two lobster tails you get one and shrimp. There’s lots of different ways and easy—and we also have easy comps versus the prior year fourth quarter as well.

A lot of the cost increases are in fact coming from payroll and food and travel, particularly airline travel. Our people travel, our crews travel and so that’s the major, major piece of it.

Your next question comes from the line of Steve Wieczynski - Stifel Nicolaus Steve Wieczynski - Stifel Nicolaus: Can you kind of comment on, your largest competitor basically went through and changed their commission structure about a week, week and a half ago, doesn’t sound like you’ll do the same. So do you think this somewhat presents an opportunity for you to take some of their business from certain agents?

No, the problem with the comparison is the way we—our business model and their business model is just different and sometimes everybody wants to put them together but reality what they announced was a commission program that was on the corporate level. And all our pricing and commission programs are done on the brand level. And so when you start comparing to some degree you’re comparing apples and oranges. That doesn’t mean that our brands won’t take a very strong look at what was done and see if there is opportunities or not and what is appropriate for their particular brand. Our philosophy has been that the needs of each brand are different and you can’t do these things from our perspective on a corporate basis. You’ve got to do it brand by brand. And so are there opportunities? Probably. Will it differ by brand? Definitely. But its very hard to tell because again you’re comparing what a brand like Holland America may decide versus Celebrity which is tied in with [Azamara] and tied in with Royal Caribbean at one package. So its apples and oranges but its something our brands are studying and they will over time react. Also our programs have tended to be adjusted year-on-year. While it appears based on the quotes that I saw coming out of there they hadn’t made any adjustments for many, many years. So there was kind of a catch-up going on. Steve Wieczynski - Stifel Nicolaus: In terms of the overall booking window have you seen that basically started to—has that started to shrink a little bit or has it kind of held up?

Its hard to say, it doesn’t appear to be because as Howard said anecdotally our first and second quarter occupancies are ahead year-over-year and remember they’re ahead against a very, very strong booking pattern this time last year for the first half of the following year. So while we’re watching it carefully and obviously we’re all reading the same newspapers and hearing the same things, to some degree it’s even surprising to us how well it’s held up.

I think its people are still taking their vacations. Everybody you talk to regardless of what part of the economy they’re at, are still taking their vacations and I think you have to remember that a large segment of our consumer of our guests, are not effected by the changes in the economy. It comes from the people, the wealthier section of the economy, the retirees or people well set in their positions, their jobs and so on and so I think in part is the reasons why I think we are performing as well as we are.

Your next question comes from the line of Nick Thomas – ABN Amro Nick Thomas – ABN Amro: I wonder whether you can just expand a little bit on one of the comments in the statement, you talked about how you’re finding consumers showing a great degree of price sensitivity and the statement certainly focused on that being a benefit for the cruise industry, I wonder in terms of compared to other holiday options, I wonder whether you can just talk a little bit more about how its altering the mix of demand within your business in terms of different brands, shorter cruises, longer cruisers, different customer types, etc. and then on the fuel side of the business could you just expand a little bit on the magnitude of the efficiency opportunities that you might have in 2009 versus 2008 and just to confirm would it be right given this $670 that you’re talking about for the third quarter is effectively now a spot price rather then based on the forward curve for people that just want to make a basic assumption about price remains unchanged going forward. Should we basically assume $670 for each future quarter or are there some geographic differences between each quarter to [inaudible] maybe a misleading assumption?

The $670 is a fairly good assumption across all future quarters. There are minor geographic differences but they round and get you real close back to $670 as you go forward.

On the issue of the mix of business and the demand in various different cruise products that we have and whether they’re short duration or long duration cruises, some of what I’m going to say is information you can readily see but some of it is anecdotal in just in talking to our operating executives in terms of what they’re saying about the business and most of what I’m referring to is really later on in the late fall early winter up through the end of winter in terms of what they’re seeing in the pattern. And what I said was that and you can just see it in terms of when I talk about pricing, that pricing for Caribbean overall has been quite good and it looks like its sustaining itself through the first quarter. And that’s mostly seven day and shorter cruises for the Caribbean. So that’s holding up quite well and we think we’re going to have a—assuming nothing changes between now and then it should perform quite well from a yield improvement standpoint. As you look at longer voyages especially world voyages and 50 day voyages and so on, there is a little bit of a challenge there and so that we may have to bring at some point in time in terms of yield managing that business, there may be some more tactical things we’re doing. I did talk about increased mailing, direct mail business to our existing customer bases for those types of cruises. It will all get done but clearly I think people it appears, that people are maybe foregoing a more expensive vacation and trading down to a less expensive vacation. Nonetheless they’re taking their vacation which is good news. There’s just so much in there that I can talk about but generally speaking it’d all be anecdotal but that’s generally the trend that we seem to be seeing right now. Nick Thomas – ABN Amro: On the fuel efficiencies? The magnitude of the fuel efficiencies in 2009 versus 2008.

To some degree it looks like we’ve got—this year if we can get 1% or 2% fuel efficiency year-over-year in terms of consumption, that that’s a pretty good result for us because if our fuel bill this year is range is about $1.9 billion in total, so if we can get somewhere between $20 million and $40 million—and next year, if these spot prices are sustained through all of next year the fuel bill will probably go up another $250 million to may $21 billion, $22 billion. So if you talk $20 million, $40 million in fuel efficiencies that’s a large number for us. We don’t target it, we do it operating company by operating company but they’re all looking at ways to improve their efficiencies whether its on board the ships, whether its their itineraries, but a variety of different things that they’re doing whether they’re repainting the ships with silicon-based paints that they come into dry dock. All of those things though seem to be paying off but it’s always difficult to tell because each year your mix of itineraries are so different. So you’ve got to weigh that in terms of the revenue you can get from the itinerary versus your fuel usage and sometimes you may not get a fuel benefit but you’re getting a revenue benefit, it’s a balance between the two.

Exactly. Sometimes its very hard to tell because at $80 fuel you may not sail an hour earlier from a port so you can pick up a tour that will give you better revenue then the savings by sailing an hour early. But at $130 fuel you may not pick up enough, so it becomes a moving target and as fuel prices increase our itinerary people have to re-evaluate all their itinerary decisions based on the current price. The savings theoretically of consumption will become greater as the price becomes higher because the trade-off makes more sense.

Your next question comes from the line of Tim Ramskill – Dresdner Kleinwort Tim Ramskill – Dresdner Kleinwort: With regards to the fuel surcharge given we generate a net yield of approximately $180 and the surcharge starts at five and is now at nine, can you explain to me why its sort of still one and a half percentage points of--

It’s an incremental change so you’re thinking of it on a cumulative basis so we picked up half of the fuel supplement in 2008 and the other half we’ll pick up in 2009.

None of it is retroactive so we’re getting just small bits of it going forward into this year.

If we implement it today, or on June 12, whatever the date, we don’t really see the full impact of that until really the second half almost into 2009. We get some of it but we’ve already booked a lot of business through the first quarter of 2009.

If you compared 2009 back to 2007 where you had no fuel supplement you’d be looking at a total of double the 1.5 or 3% 2009 versus 2007. Tim Ramskill – Dresdner Kleinwort: Just regarding the dividend, how we should think about that going forward if you continue paying a $0.40 quarterly dividend and then your dividend [cover] will be out 1.7x for this year. Are you comfortable with that and at that level going forwards and should we expect any change?

Well at this point in time the dividend is not an issue for us but of course we look at it carefully and we are—our A minus credit rating is very important to us and so we’ll always keep the dividend in mind in context of the credit rating but at this point it’s not a concern.

Right now we don’t see it as a concern in the near future.

Your next question comes from the line of Mark Reid - Land Bank Mark Reid - Land Bank: Q3 guidance is for net yield at constant dollars of plus 1% which compares with the last two quarters of over 3% is that really reflecting the fact that the comps get harder from Q3 and should we view a 1% going forward as the decent indicator for a future run rate?

I think there are a couple of things at work here, I think the first comment you made that its tougher comps, I think that’s true. We started to see some good demand beginning in the third quarter of 2007 so the comps in the third quarter, and I said this in my previous guidance would be tougher for us then they were in the first and second quarter. The other thing I think that’s working here is that price points in the seasonally strong third quarter are much higher so it stands to reason that it would be more and more difficult to get the yield improvement in the Q3 then we had in the first and second quarter. If that’s sufficient to explain what’s happening. I don’t know and I wouldn’t comment I think about yield guidance but I think it will be higher. Our thinking right now is it will be higher in Q4 but I don’t know that I would take that beyond Q4 in 2008; that’s all I’m prepared to say right now. Mark Reid - Land Bank: We seem to spend our lives hoping that the recent fuel up—uptick is a temporary spike and that it’s going to reverse, and does becoming a ticking point like there was with surcharges where we actually revisit the idea of hedging to some degree fuel and if so are we there or thereabouts?

We constantly look at the hedging scenario and whether it’s a program that we should do. It is—essentially we view it as a temporary fix not a permanent fix for any—and that whether we should do it or not do it and at these levels its kind of difficult to kind of justify a hedge because with our fingers crossed, we’re hoping that maybe we’ve hit the top of it and it won’t go a whole lot higher. However we’ve said that before and it has gone higher. From a management standpoint we constantly look at it but we just haven’t made a decision to go ahead and hedge.

If you have a real rolling hedging program you’re just delaying. If you have very tight margins like in the airline industry, that’s one thing. When you have our kind of margins, if we have hedges in place and we made $0.10 or $0.15 more this year and have to pay the piper in 2009 would it really make that much difference? And it would have cost of tens of millions of dollars to do it. You’re just postponing it; you’re pushing it out a year. So yes, maybe we would have made $0.10 or $0.15 or $0.20 more in 2008 but we would have paid that in spades in 2009 as the rolling hedges went on to higher prices. So it just—obviously we continue to make the decision not to hedge. Mark Reid - Land Bank: On cruise ship returns, with the fuel price as it stands at the moment, could you give us a bit of an indication some of your older ships, does it make them uneconomic in terms of returns at the tail and equally could you give any indication on what the returns are on top of the newer ships at current levels of fuel price?

Actually in many cases the older ships have higher returns because the capital cost is so low. So it’s a mixed bag. But there’s no question at today’s new building costs and at today’s operating and fuel costs returns are tough on new buildings and that’s why you haven’t heard about a new building deal from us recently and while we continue to talk to yards all the time, we think that our conservative approach and disciplined approach to new buildings, our disciplined approach to our cost structure and our wide margin and our disciplined approach to our balance sheet really pays dividends in times like this. And so we will continue to work on that basis.

I looked at a couple of the ships that we took delivery of this year and their forecast for their first full year, particularly like the Ventura and we redid the models and the ships still achieve returns that are above our hurdle rates even at today’s fuel prices. So we’re very pleased by that although I will point out that the ships were ordered a number of years ago and do benefit from the lower costs per berth.

And two of the ships we take delivery of—the one we just took, the Eurodam and Ruby were dollar contracted ships at very, very, very attractive prices. Mark Reid - Land Bank: Are there new ships in the portfolio at the moment that aren’t hitting the return target which you may look at exiting?

Very often the reason for a particular ship return being low is very often more itinerary-driven and so you have to tweak those but no, there is, right now we have no plans of selling ships.

When you’re developing new markets you may put a ship in the market, it doesn’t get the returns you want but you’re developing a new market, [so] you do that.

The perfect example was the two smaller Carnival ships, the Celebration was just transferred to Ibero [Kuseros] now unfortunately Spain is having a tough year but long-term strategically I think that ship will give us better returns long-term in Spain then they were giving us as a smaller ship in the Carnival Cruise Line fleet.

Your next question comes from the line of David Leibowitz - Burnham Securities David Leibowitz - Burnham Securities: What price should a one-week cruise in the Caribbean be for you to be satisfied saying we are earning or the industry rather then just limiting it to your brands, that the industry is now back in control of pricing and we’re getting the type of return we are entitled to?

That’s a tough question. It’s never enough. Clearly we think we’re—the value equation continues to be very strong here. We’re under selling our product and but in a tough economy like this it’s a challenge to move pricing up beyond to levels that we think are justified but our pricing today is probably no different then our pricing was 10 or 15 years for a lot of our Caribbean product a lot of our Caribbean cruises so we think there’s a huge opportunity. We’re probably 30% 40% below comparable land-based vacations so that’s the range from where we are today though I think that’s where the opportunity lies. If that’s what you’re driving at. David Leibowitz - Burnham Securities: No actually I’m trying to figure out, we keep seeing specials, we keep seeing blended rates whatever, but if one were to say in this imperfect world of ours what should a one-week Caribbean cruise out of Florida cost should that price be $1500, $1200, blended rate again and industry-wide?

It’s clearly different by brand. A Seaborn seven day cruise in the Caribbean should be four or five times more then a Princess cruise in the Caribbean or a Carnival cruise in the Caribbean. There’s no real answer to your question but one thing I can assure you is that the promotional fares you often see more often then not are very few number of passengers on the ship.

Very tactical business. David Leibowitz - Burnham Securities: In terms of the difficulties in filling the ships, I forget your exact terminology, are you saying to us then that instead of lets say 105% capacity as you report on your 10-K, it might be 102% capacity?

I don’t think I said we’re having difficulty filling the ships and if this is what you’re referring to, this is what I said, is that occupancies in some markets are running marginally behind occupancies a year ago but that doesn’t mean we won’t fill the ships and what I went on to say is that the demand last year we had very strong demand, this year from a comparable standpoint its not as strong but the price points are higher because we’re trying to achieve higher prices, demand will slow a little bit. But we think there’s enough demand to fill up the ships.

The end result will be the same or similar occupancy level when we report. David Leibowitz - Burnham Securities: Now what I had said was 102% down from 105%--

No it might be 104.5% versus 105% but it’s not going to be 102% versus 105%.

I think our occupancies actually in the second quarter were higher then they were a year ago so I don’t think that that number is relevant really.

We operate full, the question is how many third and fourths are on the ships that play that little one or two points. But we operate full.

And most of the variation in occupancy results from the mix of different brands as we add more ships to the fleet. Some ships will sail—they all sail at close to 100% cabin occupancy, some will sail at 110%, 115%, 120% of total occupancy, others will only sail at 102% depending on the brand. David Leibowitz - Burnham Securities: From Carnival perspective you’ve made several deals to create or establish joint ventures rather then plowing into a market on your own or what have you, is that a trend we should expect to continue or have the current economics changed to the virtue of a joint venture versus going it on your own.

In every case we bought out the joint venture partner with the exception of the one we just did with Ibero [Kuseros] where we have learned that you need to have a fully controlling interest; we have 75% to make a joint venture work. We’re not comfortable with 50-50 joint ventures where that has been a little tenuous but the net result was that we’ve made it work and we bought out the joint venture partners and moved on. Who knows what will happen in the future but right now there’s no joint ventures or acquisitions in the pipeline.

Each opportunity is unique and the circumstances are unique and that will dictate what structure we have for a transaction but having said that, Mickey is right, there is nothing being discussed right now.

Your final question comes from the line of Unidentified Analyst

Can you give us more detail in terms of how you achieved the savings in SG&A you were talking about and whether we can expect this to be sustainable perhaps into next year so that your cost guidance of half the inflation rate could perhaps be a bit lower next year?

The achieving comes in the form of cutting back on headcount increases, travel restrictions, special projects and other things. It does flow through the year and of course it is included in whatever guidance that we gave for the year. We haven’t given guidance or really looked in detail for 2009 yet so overall I don’t want to make any comments or projections on 2009.

But for 2009 presumably then your guidance of half the inflation rate still remains?

I said flat to half of the rate of inflation is our target.

That has been a target that we’ve kind of used for years. We’ve fortunately been able to beat that target in many, many years but you never know. Obviously there’s more inflation pressure now then there has been in a long time.

I will now turn it back to you to continue and for your concluding remarks.

Thank you everyone and questions were good and we thank you for listening in and we wish everybody a great day. Thank you. Bye.