Arnold Donald - President and Chief Executive Officer David Bernstein - Chief Financial Officer Micky Arison - Chairman Beth Roberts - SVP, Investor Relations

Steve Wieczynski - Stifel Robin Farley - UBS Jaime Katz - Morningstar David Beckel - AB Bernstein Harry Curtis - Nomura Securities Tim Conder - Wells Fargo Jared Shojaian - Wolfe Research Brian Egger - Bloomberg Intelligence Peter McMillan - Tiger Management Dan McKenzie - Buckingham Research Peter McMullen - Peter McMullen Consulting

Good morning, everyone, and welcome to our Second Quarter 2017 Earnings Conference Call. I’m Arnold Donald, President and CEO of Carnival Corporation & plc. Thank you all for joining us this morning. Today, I’m joined by our Chairman, Micky Arison; David Bernstein, our Chief Financial Officer; and Beth Roberts, Senior Vice President, Investor Relations. Before I begin, please note that some of our remarks on this call will be forward-looking. Therefore, I must refer you to the cautionary statement in today’s press release. We achieved record second quarter adjusted earnings of $0.52 per share, that’s on top of last year’s previous record-setting second quarter and we exceeded the midpoint of our guidance by $0.07. Our second quarter results combined with our strong book position enabled us to again increase the midpoint of our previous full-year guidance range and raise our full-year earnings expectations to a range between $3.60 and $3.70. Year-over-year for the second quarter despite a $0.12 drag from fuel and currency both moving against us, strong operational improvement contributed $0.13 per share to the bottom line, which when combined with $0.02 of accretion from our share repurchase program enabled us to exceed the prior year’s second quarter and the high-end of our March guidance range. The efforts of our more than 120,000 employees around the world who deliver exceptional guest experiences every day, combined with the support of our valued travel agent partners propelled our strong financial performance. Constant currency revenue yield growth this quarter exceeded 5% on top of the 3.6% improvement achieved in the second quarter last year. Our consistently strong revenue improvement continues to be driven by increasing demand in excess of our measured capacity growth through our ongoing guest experience, marketing and public relations efforts. And as previously indicated, we have many efforts underway to keep the momentum going throughout 2017 and beyond. Our new ship deliveries continue to receive worldwide media attention and create more demand for cruising. We had two major ship deliveries this quarter, the luxurious Majestic Princess, or known by the Mandarin name of Sheng Shì Gong Zhu Hao, the first international ship in the premium category tailored for the China market. Majestic features the largest shopping experience at sea, high-end and unrivalled, again, an experience tailored for Chinese preferences and many other distinct pleasures for our Chinese and our international guests. She began her inaugural season in Europe before embarking on a momentous voyage along the Silk Road sea route in support of the One Belt One Road initiative to her new home port in Shanghai. On July 9, we will inaugurate her first season in China with a celebration that is sure to attract a lot of attention in mainland China. Creating further awareness for cruising in Asia, we also delivered in Nagasaki AIDAperla to our AIDA brand for Mitsubishi Heavy Industries in a traditional Japanese ceremony. The ship will be in Palma de Mallorca, where she will be christened by German model and presenter, Lena Gercke, next weekend. AIDAperla is the sister ship of the very successful Adiaprima, which recently celebrated her first birthday in a tremendous fireworks display in a brilliant light show in the port of Hamburg witnessed in person by over 1 million people. AIDAperla and Adiaprima bring many innovations to our industry as the first two cruise ships to be powered in port by liquefied natural gas, as well as many experiences tailored to AIDA’s exclusively German guests, including a microbrewery, a lazy river, climbing wall and an expansive German spa. During the quarter, progress continued on our fleet enhancement program with the sale of the Pacific Pearl in April. We’re in conversation for additional ship sales and expect to remain on track with our historical pace of removing an average of one to two ships per year from our fleet. Another great vehicle to drive demand for cruising is new destinations. Following our historic maiden voyage to Cuba by Fathom under the 12 approved forms of travelguideline Carnival Cruise Line will embark its first voyages to Havana in just a few weeks also under the same guidelines. Carnival Paradise sailing from Tampa is receiving attractive premiums for this in demand destination. Our premium experience Holland America Line also recently received approval to sail to Cuba with Veendam calling at both Havana and Cienfuegos beginning in December this year. Over time, we expect more of our brands to join Carnival and Holland America with sailings to Cuba. We continue to make progress on destination development to further enhance our guest experiences and are exploring new port developments, such as our recently proposed development on brand Bahama Island. Port development is another way in which we use our industry-leading scales to create meaningfully distinct greater guest experiences. We have and we’ll continue to create carefully engineered high-quality destination experiences that are uniquely tailored to our guest preferences from our private islands like Princess Cays and Half Moon Key to the planned expansion of our cruise terminal in Barcelona to our most recently completed port destination Amber Cove, in the Dominican Republic. We’re providing exceptional guest experiences that enable our brands to capture a price premium. We have many more innovations planned in port development that we expect to roll out in the coming years. Of course, we have additional efforts underway to drive demand for our existing fleet by elevating our already high guest experience. Our recently announced Ocean Platform featuring Ocean Medallion continues to go on a tremendous media interest with well over 16 billion media impressions year-to-date. We remain on track to launch our first ship with the Ocean Platform, Regal Princess in November, ushering in a new era in highly personalized travel at scale. Focusing on the U.S. market for a moment, our Ocean original media content portfolio is now featuring four proprietary award winning shows and is already aired over 70 hours of programming our major networks including ABC, NBC, A&E and the CW, combined with our original content distribution on many more digital video on demand platforms, including Hulu, XFINITY U-verse, DirecTV, and Armed ForcesNetwork just to name a few. These programs have now reached over 115 million viewers to-date. Importantly, market research indicates, these shows have notably increased consideration for cruising overall and favorability for our brands. In fact, a recent study on U.S. travel trends indicated visits to cruise websites are now at a historical high of 32% year-over-year and nearly double that of 2014. In addition, the reputation institute just ranked Princess, Holland America and Seabourn as the top three brands in the cruise industry, with Seabourn leading the entire hospitality sector for brand reputation. At the same time, Carnival Cruise Line was for the third year in a row named the most trusted cruise line in America by Reader’s Digest. I would also like to acknowledge Carnival Corporations’ recent ranking in the top quartile of the 100 Best Corporate Citizens by Corporate Responsibility Magazine, as well as the recent recognition our sustainability report received being ranked number one globally. Both of these are manifestation of the hard work our teams all around the world have put forth to achieve our sustainability results. In addition to our relentless efforts to increase demand for cruising, we expect to benefit from structural long-term tailwinds, including growing populations, increasing wealth in developing countries, and importantly, in a number of markets increased spending by consumers on experience versus products all of which are contributing to the 4% annual growth expected in travel globally. Our well known brands, our phenomenal guest experiences and our great vacation value proposition, all position us well to capitalize on these trends in every market. In fact, a recent study by ASTA indicates that the millennial generation not only spends more on travel than the baby boomer generation, but it’s also more likely to cruise. Recent polls acknowledge both Holland America and Princess as top brands with the millennial generation. During the quarter, progress continued on our many efforts to leverage our industry leading scale, including our powerful new revenue management system, which has been rolled out across six of our brands to approximately a third of those brands’ inventory. The system development is encouraging collaboration among our 70 plus revenue scientists and experts across our brands as they take advantage of the dynamic and insightful pricing inquiry that the two generates. While we have already enjoyed some benefit from the sharing of best practices during the design phase of the new tool and are seeing yield uplift in this ramp up period we expect even greater benefit in 2018 and beyond if the system is fully rolled out. But at the same time work continues on our efforts to contain cost. We remain on track to achieve an additional $75 million this year for a cumulative savings of over $265 million today. We have increased our full year cost guidance slightly to reflect additional investments to be made later this year as our brands have identified further revenue generating opportunities. As we have indicated before, we will continue to invest in opportunities we see that drives revenue and return on invested capital over time. All told, the success of our various efforts is evidenced by the improved second quarter results, combined with continuous strength in booking trend which has accelerated progress on our path to our double-digit return on invested capital and enabled a step-up in shareholder distributions. During the last quarter we increased our regular quarterly dividend from $0.35 to $0.40 per share, now distributing nearly $1.2 billion of the recurring dividends annually. At the same time, our Board increased our ongoing share repurchase authorization back to $1 billion having been depleted through our $2.7 billion of cumulative repurchases since October of 2015. We plan to continue to increase returns to shareholders with our cash flow reaching Oracle record levels and growth as we approach the same double-digit return on invested capital. Again, there are underpenetrated cruise markets all over the world. Our new ships including Majestic Princess and AIDAperla are ongoing innovative guest experience efforts including Ocean Platform. Our aggressive efforts to increase consideration for cruising, including our proprietary ocean original content programming, our new destination opportunities in Cuba and the Bahamas and in China, and our recently launched yield management tools are all multi-year opportunities that are intended to continue the momentum and to build further confidence towards our sustained delivery of double-digit return on invested capital. With that, I’d like to turn the call over to David.

Thank you Arnold. Before I begin, please note all of my references to revenue, ticket prices and cost metrics will be in constant currency unless otherwise stated. I’ll start today with a summary of our 2017 second quarter results, then I’ll provide some insights on booking trends and finish up with an update on our full year 2017 guidance. Our adjusted EPS for the second quarter was a record $0.52. As Arnold indicated, this was $0.07 above the midpoint of our March guidance. The improvement was revenue driven as increase in net ticket yield benefited from stronger pricing on closing bookings on both sides of the Atlantic, while on-boarding other yields continue to benefit from a variety of our ongoing initiatives. Now let’s turn to the second quarter operating results versus the prior year. Our capacity increased almost 4%, the North American brands were up almost 6%, while the European, Australian and Asian brands, also known as our EAA brands, were up slightly. Our total net revenue yields were up 5.1%. Now let’s break apart the two components of net revenue yield. Net ticket yield were up 5.7%. This increase was driven by our North American brands deployment in the Caribbean, Europe and Alaska, as well as our EAA brands deployment in both Europe and the Caribbean. These increases were partially offset by decreases in our China deployment, as previously indicated. Net onboard and other yields increased 3.5%, with increases on both sides of the Atlantic. In summary, as Arnold indicated, our record second quarter adjusted EPS was better than last year’s previous record setting second quarter, with strong operational improvements of $0.13 and the $0.02 accretive impact of the stock purchase program, both being partially offset by the impact of higher fuel prices costing $0.11 and the unfavorable impact of currency worth a $0.01. Now, let’s turn to booking trends. Since the end of February, booking volumes for the next three quarters have been running in line with the prior year at nicely higher prices. At this point in time, cumulative bookings for the next three quarters are ahead of the prior year, again, at nicely higher prices. Let’s drill down into the cumulative book position. First, for our North American brands. The Caribbean and the seasonal European program are both well ahead of the prior year on both price and occupancy. While for Alaska, occupancy is in line at nicely higher prices. Secondly, for our EAA brands, our European deployment and the seasonal Caribbean program, occupancy is ahead at nicely higher prices. Finally, I want to provide you with an update on our full-year 2017 guidance. As Arnold indicated, our second order results combined with our strong book position enabled us to again increase in the midpoint of our guidance and raised our full-year earnings expectations to a range between $3.60 and $3.70 versus $3.45 for 2016. The improvement was driven by an increase in our net revenue yield guidance to approximately 3.5%, a half point increase, reflecting the impact of stronger pricing on closing bookings during the second quarter and slightly higher onboard and other yields. This was partially offset by a slight increase in our costs. For example, we planned increased investments in our four proprietary television programs, as well as advertising efforts to continue to optimize booking momentum for 2018 and beyond. As a result, net cruise cost without fuel for ALBD is now expected to be up approximately 1.5% for 2017. And now, I’ll turn the call back over to Arnold.

Thank you, David. Operator, please open the call for questions.

Thank you, sir. [Operator Instructions] And our first question comes from the line of Steve Wieczynski with Stifel. Please go ahead.

Hey, good morning, guys. Hope you’re doing well, a great quarter. I want to ask about the embedded fourth quarter yield guidance, which looks like you’re expecting yields to be up, at this point only slightly. I know last year, I think, you had a pretty strong fourth quarter with yields up about 4%, and I think there was about a 100 basis point benefit from that accounting change last year. So, I guess, the question is, can you help us understand your thought process around your key markets for the fourth quarter? I guess, I would have expected a number a little bit higher than that.

Hey, good morning, Steve. Thank you for your comments. Look, obviously, as you just say, we had a tougher comparison versus last year in the fourth quarter. But our guidance is always our best projection of future. There we – nearly always is unexpected challenges and we thought - anticipate that and are able to adjust to the change in circumstances. But fundamentally, our guidance has remained the same. We added into, as we raised the midpoint of the full-year guidance, we added [the gains] [ph] to-date and let the guidance going forward the same, it’s not anymore complicated than that.

Okay, gotcha. And then second question, I guess, in your prepared remarks, you didn’t really give a lot of color around the Chinese market. Can you just maybe give us an update there in terms of what you’re seeing, and how the changes with Korea and stuff like that have impacted your ability for – to take price? And then maybe also just comment on Majestic Princess, I know that’s a ship that was built specifically for China, but it seems like you’ve decided to remove it for a couple of weeks. And, again, I know that’s their slower winter months. But is there anything else that drove your decision to move that already?

Overall, again, thanks again for your question. So China, overall, as you know, is a relatively small percent of our current capacity. As we said in the past, it’s an embryonic market, it’s the B2B business. So the fact that the Chinese are not currently traveling to Korea we believe aggravated a situation there in terms of yield and bookings and what have you. But honestly, at this point, because it is the B2B market, there are still always negotiations between the trade and the cruise companies like ourselves. So we believe it had an impact, indications would suggest that. But at this point, we can’t concretely say Korea produced any effect, but we suspect it did. In terms of overall, look, China is still going to be probably the largest cruise market in the world over time. It’s an embryonic market, is very small today. Concerning your question about Majestic Princess, we’re very excited about Majestic Princess. She is the first purpose built ship for China. We’re excited about the naming ceremony coming up in Shanghai in July, where we’re looking forward to that. And in terms of her itinerary planning, we always optimize deployments, and we see the opportunity for Majestic Princess to not only be home ported in China, but also to take travelers from China on fly cruise to other destinations, as we do with national [lead delegated] [ph] ships in many of our other brands. And so we just see that as a way to optimize the first year deployment and opportunity to build the appetite for cruising in China, both fly cruise as well as home porting and local destination embarkation. So, I hope I answered to your question, you can pull if I missed a point.

Yes, the only thing I will add that is, we talked about the challenges in China. But the recent sailings have been at very high occupancy levels, and so we were very pleased with that.

Okay. Thanks, guys. I appreciate it. Good quarter.

Thank you. Appreciate it, Steve.

Our next question comes from the line of Robin Farley with UBS. Please go ahead.

Great, thanks. I wanted to focus a little bit on the comment about volumes during the second quarter that they were in line with last year prices well ahead, because I know that investors are always aware of that, would that be due to demand not being higher than last year, or maybe you can clarify, is that just because you’d rather get higher price and then you don’t want to be any further booked ahead than you were at this time last year? In other words, can you comment on how we should be interpreting that like, is that a function of your yield management strategy that that’s actually what you were striving for, or are you just sort of saying [Multiple Speakers]

I’m sorry, go ahead, Robin, continue please? Yes.

I think also just with a couple of security incidents in Europe that investor concern might be like if that’s impacting demand. So maybe you can clarify if it’s that, or if it’s, in fact, that you’d rather get the higher price and didn’t want to be further ahead in volume?

Got it. So first of all, yes, absolutely, we haven’t been able to measure any kind of impact from the various geopolitical issues and events in Europe and that sort of thing. So we haven’t seen any lost momentum. We see strong momentum in the business all the way through, it’s very early to be talking about first-half of next year. But through the first-half of next year, we’re up on occupancy, up on pricing, against a very tough comparison, because obviously a strong year this year, strong year last year, so lot’s of momentum in the business for certain. Your comment about optimization of the booking curve looking at price versus volume at different points in time and booking curve is absolutely true. We have a new revenue management tool for a number of other brands and we are constantly always optimizing across – brands across multiple source markets and itineraries. And so that is a fair comment. But with regards momentum in the business, now the momentum is very strong.

Okay, now that’s great. Thanks. And then just to clarify a little further on your – so your guidance for Q3 is higher than what Street expectations were and I think there were concerns about Europe. So the Q3 guidance is great. And I know you tend to be conservative here looking at Q4 and you said that’s kind of your best guess as of now. But just trying to think about, I mean, you guys have nicely beat your guidance every quarter lately. And so when we look at your guidance for Q4, I’m getting something like 1% to 1.5% yield range. I’m just trying to think what we should think about that as you’re conservative to your guidance and we should look at it through the same lens that we’ve looked at your guidance the last couple of quarters, which has – you’ve managed to come in better than. I’m wondering is there anything, in particular, dry-docks or something in the comp that is more concrete that that would make the number in that range?

Look I think, the reality is that we have beat the number of quarters in a row, one quarter that won’t happen. And hopefully, it’s not any quarter soon, but it’s bound to happen eventually. We always give our best guesstimate. There are always things that happen in the market, as you know. I mean, we’ve gone through a lot of stuff, fuel, currency – fuel and currency moving together at the same time. We have all kinds of other issues with, you can’t go to Istanbul, you can’t go here, typhoons, hurricane, cyclones all that stuff. So we always give our best estimate, but we don’t think, we’re being ultraconservative. But obviously, we do factor in that things can go wrong. And we want to still perform and we will deliver towards the double-digit return of invested capital which is our commitment. We’re marching hard and fast towards that, and we do have tougher comparisons as Steve pointed out in his question in the fourth quarter as well than we had in these other quarters where we’ve done about a 4%, et cetera, versus prior year.

Okay, great. That’s very helpful. Thank you.

Thank you.

Our next question comes from the line of Jaime Katz with Morningstar. Please go ahead.

Hi, good morning. Thanks for taking my questions. I’m curious, you guys had mentioned some additional investments you’re going to be making in the fourth quarter, if you would be willing to elaborate on any of them and how you might think they might add to the economics of the business longer-term?

Absolutely. So the brands are all reviewing their forward plans. They want to maintain the momentum, they’re enjoying and we’re getting smarter and smarter about how to invest dollars. So while there is a plan to increase spend versus where we were previously planning, because they have recognized opportunities in media and some socials, but also some of our proprietary TV programs that David mentioned. Those are some areas we’ve looked at. There are other areas too as well and we’re ramping up an investment with some onboard efforts on the number of ships and so on. So that’s kind of what’s driving it, but they’re all revenue related, they’re all double-digit return on invested capital related. We’re seeing almost smart investments and that’s why we’re taking a look at increasing.

Okay. And then can you talk about the cruising to Cuba? How you guys are thinking about investing in infrastructure over the long-term now that it seems like, at least, over the near-term the cruise industry won’t be disrupted by any government policies that are coming about?

It would be disruptive. It is disruptive in terms of making investments in ports and what not. I’m not sure we have the freedom to do that under the current regulations. But as you look at it long-term, of course, we – as things evolve, when we are able to invest, we would look forward to co-investment. With Cuba or investing directly, if they allow that to develop ports. Cuba is going to really refresh the Caribbean. Obviously, today is a teeny tiny portion of our capacity. You won’t be able to even find the numbers in our overall reporting. But we’re excited about Carnival with Paradise sailing out of Tampa starting soon and this month still we are in June yet. And Holland America starting up in November, December. So we’re very excited about those two brands going falling on top of the historic year we have with Fathom and Adonia, and obviously, we were applying for the other brands to go. But it will be a while before we can actually financially invest in developing port infrastructure, that doesn’t mean that Cubans won’t do it themselves though.

Okay. And then lastly, can you just comment on capital allocation? I know you noted that there was a new share buyback or an increase to the repurchase authorization, but with prices at really high levels, at least, for share prices how they run up. How do you think about balancing dividend increases versus share repurchases? Thanks.

Yes, you bet. First of all, the share price are at historical highs, but obviously, we don’t think they’re high enough. But having said that, we’re always opportunistically looking at the repurchase and we’ll continue to buyback shares. The balance is the Board decision. But I’d say, our pattern historically has been established with the dollar amounts that we’ve done of over $2.7 billion, I guess, since 2015 in buybacks. Obviously, we were up to about $1.2 billion in dividend distributions on an annual basis now. So when you look at that, I would say, until the Board says otherwise that’s been our historical pattern.

Yes. And the only thing I’ll add to that is, we have traditionally said that, we’re targeting a dividend payout ratio of 40% to 50%. And as Arnold indicated, we recently increased the quarterly dividend in April, well, the Board did.

Thank you so much.

Thank you.

Our next question comes from the line of David Beckel with Bernstein. Please proceed with your question.

Thank you so much. Based on our estimates, it looks as if your China capacity will be declining in 2018 somewhere in the high single-digit range, some of your peers are also in a similar situation. Kind of following on one of the first questions asked, under the assumption you’re optimizing yield and fly cruise makes sense and all that. But what is it about the China market that you feel needs to change in order for meaningful amounts of capacity to be redeployed into that market?

Hey, thank you. First of all, my expectation is that there will be additional capacity deployed in the coming years. In any given year for any specific balance of ships and brands for us, our decisions are very specific to our brands and the balancing of itineraries around the world and the balancing of optimizing yield. So we will be down next year in China a little bit on capacity. And again, that’s not only about China, it’s much about opportunities around the world, because our philosophy is, we always want to optimize and what we generate from our ships. So – but I don’t – China long-term it’s going to be a huge market. We’re extremely excited about our partnership with CSFC that has moved along very nicely. We still have lots of work to do with the trade there in China with distribution system. But again, just please keep in mind, the industry is tiny there. I mean, we’re very, very, very small, and these little moves hopefully. Hopefully the fact that there is less capacity next year. We’ll create the opportunity for yield improvement in China hopefully. But you can’t evenguarantee that, because there’s still a B2B business. This isn’t actually selling to consumers where consumers are saying, oh, if you drop the price, I would cruise more. It’s really a business to business transaction still at this stage.

Got it. It’s very helpful, thanks.

And just on the revenue management system, is there any color you can give us as to how much, I know, this is probably a rough math, but how much yields have improved thus far because of specific actions you’ve implemented on the revenue management side?

To be honest with you, we obviously have internal estimates and stuff on that, which we wouldn’t disclose. But the reality – the fact of the reality is, there are so many variables moving at once. What we do know is that the roll out is progressing very nicely. As we shared with you before about a third of the inventory of the brands, the six brands that happen to use in the tool, that’s – there the inventory is impacted and going to be close on a percentage of those brands. In 2018, the brands are tremendously excited about it, is definitely contributing to positive results, there’s no question about that. And we will continue to contribute positive results for the rest of this year and beyond across multiple brands with it. But I won’t segment how much is yield or versus how much is other dynamics in the business demand creation and so on is the cumulative effect of all of it. But I have lots of anecdotal things I can share with you on specific itineraries, where yield would mean a difference, but the cumulative effect is definitely positive.

Would it – if I could ask about one specific anecdote, to maybe highlight your point?

Absolutely, so our UK team was working on a particular itinerary and the two suggested certain pricing, the team thought that didn’t make any trends. They went back and to take a hard look at the two itself to see what was wrong with it, why was it suggesting this. They couldn’t find anything wrong with it, so they decided to travel on that particular itinerary and they ended up generating consumer more yield because they ended up instead of dropping price, you know taking the place up and when they further analyzed that the two gives you a lot more granularity, when they further analyzed it, they could see by meta, what was going on and why the two recommended an increase in certain metas and leaving the meta where they were being challenged flat as opposed to reducing the price. And so in the end, it produced significantly more yield in that particular itinerary than what have been achieved otherwise. So there’s lots of those kinds of examples. But overall, it’s allowing our people to – on a much more granular level, look at itineraries at different points in time. The two provides great inquiry and in the end it requires yield management by our yield experts and revenue scientists, but it allows just much, much more granular inquiry and execution in terms of smaller and more frequent price moves.

Meta is a Cabin category.

Yes, meta is a Cabin category, just wanted to make sure you understood what that was, yes, okay.

Very well, thanks so much.

Thank you, all right.

Our next question comes from the line of Harry Curtis with Nomura Securities. Please go ahead.

Hey good morning everybody.

Good morning.

Just a follow-up – good morning, on your comments about the fourth quarter, sorry to beat the dead horse, but can you – are there any specifics that you are really worried about any, because the tone of the business in your key markets changed in the fourth quarter to lead you to have a bit more conservative outlook?

There is nothing in terms of the business that we are particularly concerned about, just the normal stuff that happens every year. But as I mentioned before, you know part of the yield difference is the fact of a tougher comparison, you know fourth quarter last year with fourth quarter this year versus the other quarters to the previous quarter. But other than that one specific dynamic that would drive something that looks differently, there is nothing in particular that we’re concerned about, looking ahead, that’s different than we would be every year at this time of the year.

Okay. And then a quick question on supply growth. It looks to me like your supply growth in 2018 should be up just under 2% and I’m curious how you see just the overall supply growth shaping up in 2018 for your core markets in Europe and the Caribbean?

Sure, you know we can give you that detail. You know…

Caribbean for 2018 versus 2017 for us is up 4% to 5%, and Europe market is up 3% globally, Alaska is up 7% to 8%, in total we’re up 2.5%, so we are seeing capacity reductions in Australia and certainly in China.

And for the industry?

The industry capacity which is up 5 – in 2018, it’s 5.9%.

Yes, 5% or so, almost 6% at this point.

Okay and last question, could you mentioned…

And – go ahead, go ahead.

Well, I just wanted to shift gears, you had commented that you had an outlook including the next three quarters and David if you could talk about what percentage you’re roughly booked for the first quarter of next years, typically it should be around 35% to 40% at this point? And kind of how is tone looking at least at the early part of next year in terms of occupancy and pricing?

Okay, yes, you know I can give you, so Harry, you know we have traditionally said that like for the next few quarters, for the current quarter we are 80% to 90% booked, is the historical range. For the next quarter out, which would be fourth quarter 50% to 70%, is the historical range. First quarter would be 30% to 50% and second quarter would be 15% to 25%. And we are approaching the high-end of all of the historical ranges as with the current booking curve.

And at prices that are nicely ahead or well ahead or blowing the doors off ahead?

As we said for – as Arnold said for next year, when the prizes are ahead, I’d rather not give some particular additive to describe them at this point only because it’s early and we are not ready to give guidance for next year.

Okay, very good thanks

Hey, thank you.

Our next question comes from the line of Tim Conder with Wells Fargo. Please go ahead.

Thank you. Circling back to Arnold to the demand creation comments in the fourth quarter to drive teen, is that – would you say skewed to any one region in particular, more so than the other, I mean it looks like Europe and North America are performing the best, whether they skewed anyway to Australia, New Zealand and Asia or is that fairly well balanced across regions?

You know I would say most of the – that’s where increases are in the core markets, it’s in U.S. and Europe, very strong markets where people see opportunities to have to lead stronger and that’s where the requests are today and what we’ve factored into the guidance.

Okay and if you would, David or Beth, just maybe repeat your commentary on Australia and China as far as your capacity in those markets? And then, to follow-on to that question, you said the industry is going to be up 5.9%, any color on the industry level by those regions that you gave for Carnival Corp?

Yes, we want – we’ll – Tim, we’ll have the industry data at the third quarter call, today we’ve got our data in total for 2018.

You know just another comment on that. Obviously we had some significant capacity increase for example in the Caribbean this year and I remember a number of the analysts were expressing consternation last year about that, and obviously we’ve done very, very well. I think the reality is that as long as we’re creating the demand to observe the capacity, then the industry can continue to do very well, we certainly plan to do well because we are going to create the demand, we are going to do magic capacity growth for our brands. And we are doing the things necessary through enhanced revenue management techniques using yield in our existing platforms that we already have or Carnival and Costa.

And as for as China and Australia concerned, we are talking about mid-single digit capacity declines in each of those deployment markets.

Okay...

And then just to pile on a little bit, because we’re getting a lot of questions on the fourth quarter, I just want to emphasize you all that fourth quarter is ahead of a record fourth quarter last year and there is absolutely no loss of momentum.

One last question. As you rightly said that before Arnold, you know in China you get SARS, one year typhoons, you get South Korea whatever, I mean there is always something going on. So the normal, I guess that is a normal, but have you seen just in general over the last 12 months for yourself, the industry, however you want to comment on this, has the cost structures, profitability structures changed in any way material either up or down over the last 12 months?

Over the last 12 months, not so much. I would say the biggest change over the last 12 months, if you look at our earnings call today and compare it to earnings last year, is the double whammy of fuel and currency. Historically, it never moved together and for the past year or so. They have been moving together and often in a negative way. And so that’s a big thing to overcome – we overcome it operationally with performance. But that would be the one fundamental thing that I would say changed.

Okay.

And despite all the stuff going on we have had four quarters of 4% yield improvement.

Okay. Thank you.

Thanks.

Our next question comes from the line of Jared Shojaian with Wolfe Research. Please go ahead.

Hi, good morning. Thanks for taking my question. Just a quick clarification, the 5.9% global industry supply growth that you referenced, is that net or gross? And then can you give us the comparable number in 2017?

Sure, it is a gross number. The only thing we do is anything that we know of, we would take out. But obviously, at this point, there could very well be some unplanned retirements.

And 2017 was 5.3%.

Okay, that’s really helpful. Thank you. And then you talked about some tougher comparisons in fourth quarter. But you’re also going to have tougher comparisons once we get into 2018. So how should we think about that 1% implied yield in the fourth quarter in relation to 2018? I guess, what I’m asking is a 1% exit rate going into 2018 would imply that demand has to get better in order for you to do better than a 1% yield in 2018? Is that the right way to think about it, or is there anything else I’m missing, I know there’s geographical differences in the fourth quarter versus 2Q. and 3Q next year. But can you help me think about that a little bit better?

Yes, we’re not ready obviously to give guidance for 2018 yet. We were just given you guys early preliminary tone, which you shouldn’t read too much into, because it’s such a small percent of the business at this point that we have line of sight on. So we’re not ready to give any guidance, but all the things that you just mentioned are true, there’s a mix difference. We have to see what we actually do. We’re giving you a guidance for the fourth quarter. We have to see what we actually perform before we can begin to have line of sight on how we’re going to perform before we give some. But it is ahead at higher prices and that’s what we can see, but we’re not ready to give guidance in terms of percent.

And the booking currency are at the high end of historical range, and we’ve got good booking momentum and we feel very good about the business.

That’s great. Thank you. And then just one last one, you called out some incremental costs for this here. Are those 50 basis points of incremental cost unique to this year, or will you expect them to be recurring again in 2018?

We’ve been able to maintain the momentum that I had shared with you guys previously of targeting $75 million a year in cost savings. And as I’ve told you, some of that will go to bottom line and some we might reinvest to drive yield. And so right now, the brands have put forth some pretty convincing argument of additional revenue improvement by making investments, so we’re doing it. But we’ll be revealing that as we go. I wouldn’t consider it a pattern or projection for what we’re going to always do anything like that. But in this particular case with a specific proposals they presented with the evidence they put with it, it seems like a smart investment to make.

And keep in mind, we do round everything to the nearest half a point. So it’s not necessarily a full 50 basis points.

Got it. That’s helpful. Thank you very much.

The next question comes from the line of Brian Egger with Bloomberg Intelligence. Please go ahead.

Yes. Just a follow up question regarding the proceeding cost question, I think you kind of covered this. But to understand it to the extent that you’ve seen increases in investments in proprietary TV program here, advertising costs, is the change albeit small in cost, unit cost guidance for the full-year a function of the timing of things like marketing advertising or the absolute level, or if any color you can add there would be helpful?

No, it would be absolute level. We were actually looking at investing more than we would have at the beginning of the year.

Okay.

So we see the opportunity and we’re taking advantage of it.

Okay, that’s helpful. Thank you.

Thank you.

Next question comes from the line of Peter McMillan with Tiger Management. Please go ahead.

Good morning.

Good morning.

Several of us were impressed with the…

Peter?

Peter, can you hear us?

Are you guys there? Hello? I can hear somebody.

Mr. McMillan, your line is still open. Please go ahead.

Can you hear me?

Now, we can hear you Peter. Okay, go ahead.

Oh, he just disconnected.

Okay. Next question.

Our next question comes from the line of Dan McKenzie with Buckingham Research. Please proceed with your question.

Hey, thanks. Good morning, guys.

Good morning, Dan.

Arnold, following up on your commentary about under-penetrated cruise markets all over the world, I believe there are a number of ports in China that are developed, but not yet home ports for the industry. And wondering what the plans are today to expand the number of points there? And at what point would that make sense?

As you mentioned, there are several new cruise being added in China, where being constructed in Berlin, Shanghai, Sanya, Hainan Island. There are several others moving forward toward construction on the approval process. So there are quite a few ports being developed, which again reinforces the point we’ve been taking that over time, we expect China to be the largest cruise market in the world. We’ll obviously take advantage of those. We have to build the distribution. But as you know, China often builds in anticipation of demand coming. But we are obviously in discussion with all those ports about existing tonnage that we have in the country and possible new tonnage that we will bring in future years.

Understood. And then just a second question here, just given that kind of the revenue management system. I’m wondering what the opportunity is just to source elsewhere in the region for the China cruises, so in Hong Kong, Singapore, Taiwan, even Malaysia, I’m wondering what you’re doing today, if anything? And is there revenue opportunity from optimizing these various sourcing markets?

I think that’s a great point. There’s considerable opportunity not only in China, but throughout Southeast Asia, both as a source markets and clearly obviously, as destinations now that Chinese travelers are already traveling to and could choose to take advantage of a cruise option in those travels. So both from a sourcing standpoint, Malaysia, Vietnam, Thailand, but clearly, as destination opportunities for Chinese travelers. And so we have an overall strategic footprint in place and have strategic plans in place to take advantage of both, the fly cruise opportunity as well as sourcing more from those regions.

Thanks so much. I appreciate it.

Thank you.

We have a follow-up question from the line of Peter McMullen with Peter McMullen Consulting. Please go ahead.

Again, just some of us were wowed by the potential of the Medallion. And I’m just wondering if you could review what benefits you see for the company long-term?

As you know, we’re excited about it. It’s going to launch in November. The first ship experience for the public will be then. Progress has been very exciting with it. Our – one of fun things for me to see is how excited our crew is because the technology for us, as you know, Peter, is about enhancing the hospitality experience and it’s about enhancing our crew’s ability to deliver to the guest what they want, when they want, how they want it and exactly when they want it. And so, we’re very excited about that. In terms of the impact for us, we’ll have to see. We think there’s all kinds of opportunities, onboard revenue opportunities, ticket pricing opportunities. There is lot of excitement. But it’s brand-new, it’s brand-new technology and systems and we have to leave it out, but we’re very excited.

In the early days, it will be a competitive advantage to Carnival?

Well, the reality is, as you know, we consider our competition land-based vacations, and not the other cruise coming back because we think we’re so much better than them or anything. It’s just because if you add up all the cruise companies to get all the cabins, it’s less than 2% of the hotel rooms, and that’s why we feel, we’re underpenetrated at every market in the world. And so there’s great opportunity for cruise for ourselves as well as the other cruise. So land-based vacation is really the challenge. We think we already have a great value and experience offering compared to land-based vacations and we think Ocean will just take that up on a whole another level, but we’ll see.

Thank you.

Thank you.

We have no further questions in the phone line.

Excellent. Thank you all very much. We greatly appreciate your interest. We look forward to meeting with you on the earnings call in the next time and seeing you in between. So everybody, be safe and good luck on draft day. Hopefully, your team will get the player you want. Have fun. Take care.

Bye-bye, everybody.

Ladies and gentlemen, that concludes today’s call. We thank you for your participation and ask you to please disconnect your lines.