Good morning, everyone and welcome to our first quarter 2019 earnings conference call. I'm Arnold Donald, President and CEO of Carnival Corporation and PLC. Today, I'm joined by our Chairman, Micky Arison, as well as David Bernstein, our Chief Financial Officer, and Beth Roberts, Senior Vice President, Investor Relations. Thank you all for joining us this morning. 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 statements in today's press release. We delivered first quarter adjusted earnings per share of $0.49. That's higher than the midpoint of December guidance by $0.07 per share and $0.03 per share lower than last year, which includes the $0.03 drag from fuel and currency. For the full year, we're updating our adjusted earnings guidance range previously $4.50 to $4.80, now $4.35 to $4.55 to reflect the significant drag from fueling currency moving against us, impacting our full year by $155 million or $0.22 per share since the time of our December guidance. Our guidance reflects continued improvement in operating performance. And we are maintaining the operational guidance we gave for the year with an update for changes in fuel prices and currency. Included in the midpoint of our guidance is $0.25 per share earnings growth from operations over the prior year, which is a reflection of our 120,000 plus employees who go above and beyond every day, as well as hundreds of thousands of travel professionals who support our world leading cruise brands. It is their combined efforts that are helping us to once again withstand multiple headwinds, including cyclones in Australia, Brexit uncertainty in the UK, heightened political uncertainty in Germany and France as well as ongoing economic believes in much of Europe, including Italy. Despite those headwinds, wave season was consistent with the strength of demand we experienced going into the year, building further confidence in our full year revenue expectations. For our North America and Australia brands, NAA, our book position is ahead of the prior year at higher prices, while our EA brands are well ahead of the prior year at lower prices. Our brands are strong and growing, including Continental Europe, where we continue to expect revenue growth driven by double digit capacity increases. We remain confident, we are on a path that includes delivering over time, double digit earnings growth and elevated sustained double digit return on invested capital through a consistent strategy of creating demand in excess of measured capacity growth, while leveraging our industry leading scale. While our strategy is consistent, over time, the relative contribution from the components of our earnings models, as we updated previously, may change a bit. Going forward, our earnings growth will include a higher contribution from capacity growth. That increase in capacity will lend itself to more predictable revenue growth and enable us to better contain costs, in essence, enhancing the reliability of future earnings growth. There are multiple factors that we put in place over the years to ensure sustained earnings growth and improvement in return on invested capital. For example, reducing our fuel exposure. This year, our unit fuel consumption will be down nearly 4%, bringing the cumulative unit fuel reduction to 33% compared to our 2007 baseline. Our ongoing efforts to leverage our scale through global sourcing has taken over $350 million of non-fuel costs out of the business so far. A higher weighting of fixed rate debt, historically low rates reduces interest rate exposure. Our consistently strong balance sheet and credit ratings ensures through our access to $11 billion of committed export credit facilities that we will be able to comfortably meet future capital needs, while further heightening our relentless focus on driving continuous improvements in health, environment, safety and security. Of course, our ongoing new build program is integral to the growth in earnings and return on invested capital over time. Not only are our new builds on average roughly 15% to 25% more cost efficient and approximately 25% to 30% more fuel efficient, they also help to create further demand for cruising. And we're introducing several exciting new ships this year, we just took delivery of cost of Costa Venezia, purposely designed to offer our Chinese guests the best of Italy. The ship introduces Italian culture and lifestyle with interiors inspired by the City of Venice, including authentic envelopes, retail shop featuring iconic Italian brands and of course battalion cuisine, while at the same time offering mini conference at home like Chinese style karaoke and food options that are popular in China. This ship is currently on its maiden voyage along the Silk Route before beginning services in Shanghai from mid May onward. Half of Venezia is just another step in the growth of a strong and sustainable cruise industry in china. Late this year, we will welcome three more investments to our portfolio of leading brands. Throughout the year, we're ramping up ahead of these deliveries and expect to reap the benefits in 2020. In October, Sky Princess, the first new build activated with MedallionClass, lending many processed hallmarks with new guest experience features like Sky Suites, the largest Balconies SC as well as the brand new jazz experience. Sky Princess is nearly sold out for this fall fault and booked 40 percentage points ahead for the one at Caribbean in 2020, all at consistently higher rates. Costa Esmeralda also expected to enter service late this year was designed to celebrate the Sardinian culture, serving Continental Europe, including Italy, France and Spain. Booking trends for Costa Esmeralda are also reflecting strong demand and capturing a double digit price premium. And last but not least, in December, Carnival Cruise Line will launch its new flagship, Carnival Panorama, their first new ship home port on the West Coast. Bookings are ahead, more than double digits in both rate and occupancy in 2020 compared to the same itinerary in 2019. Our marketing efforts on the West Coast and including the Carnival AirShip and the Rose Parade have generated over 1 billion media impressions and are attracting a broad audience, particularly those new to cruise. Bookings for Mardi Gras to be delivered in August 2020 in the first and the new generation of ships of the Carnival brand were opened this past quarter. Mardi Gras generated record looking for new ship launch by the Carnival brand, with almost 10 times the number of bookings as the very strong Carnival Vista launched back in 2016. And with more than 65,000 guests pre-registering in advance of the inventory event opening, overall, Carnival continues to outperform in the Caribbean with bookings ahead in both occupancy and rate across all future quarters. In April, we will welcome the totally transformed Carnival Sunrise, after undergoing nearly a $200 million dry dock, adding all the culinary and entertainment experiences, Fun Ship 2.0 is non-core, such as [indiscernible] barbecue smokehouse and outdoor fun with SportSquare, Water Works and serenity adult only retreat. All of these new features are resonating well with the brand's guests, with bookings for Carnival Sunrise up double digits in both occupancy and price. Roll out continues on OceanMedallion. The Medallion class experience is now a full ship active on two vessels with a third ready to go, but it's still early. There are many features available through Ocean that guests have not yet become familiar with to take full advantage. While we continue to garner innovation accolades, including IoT wearables, innovation of the year and finalists for the prestigious Edison awards, clearly, the most important impact is on our guests and on our bottom line. And while still early to determine the impact on earnings, guest satisfaction scores for Medallion class are consistently among the highest in the Princess fleet. Since the announcement of full activation on the two Princess ships late last year, we believe medallion class has garnered increased demand, which we expect will drive yield. Additional ships are expected to come online later this year as medallion class expands across the Princess fleet. So while early, indicators are very, very positive. But there were many marketing and public relations efforts that kicked off during wave season that generate demand and excess measured capacity growth and continue our momentum. In the US, Holland America captured over 4 billion media impressions around get away cruise and the naming ceremony for new [indiscernible]. For Carnival Cruise Lines, the new roller coaster experience of Mardi Gras alone generate over 1 billion media impressions. Our award winning proprietary television programs have now reached more than 525 million views cumulatively. One of the programs, Ocean Treks with Jeff Corwin, has just been nominated for the two MEs. In Europe, Costa launched a new marketing program with Penelope Cruz, which has been well received and is outperforming all previous brand campaigns. All told, our brands captured 75% of the positive coverage for our industry so far this year, five times that of our closest peer. We also made meaningful progress this past quarter, putting on industry leading scale to work. As you know, yielded our revenue management to deploy on six of our brands, we believe we will continue to drive incremental revenue, particularly in the second half of 2019 and beyond. On the cost side, we remain committed to deliver nearly a point of cost savings this year, helping to mitigate inflation and contributing to our cost guidance above just 50 basis points for the year. Our fleet replenishment efforts are purposely designed to achieve greater economies. We will welcome 17 larger, more efficient ships and continue to divest our less efficient ships, representing net capacity growth of approximately 5% compounded annually through 2022. We've been consistent with our execution around measured capacity growth. Overall, we operate an industry that is both under penetrated and capacity constrained, which bodes well for creating new demand in excess of capacity increases. That should allow us to continue to fill our ship at increasingly attractive rates while still providing a better value relative to the equivalent land based alternatives. During the quarter, we also completed additional share repurchases of $266 million, bringing the cumulative total to nearly $5 billion since 2015. This share repurchase of course is in addition to our recurring dividend distributions. We remain on track to deliver our full year guidance as we continue with sustained double digit return on invested capital and continued growth in both earnings and returns over time. And we actually don't need things to be very different in order to deliver sustained double digit earnings growth. Even with minimal yield increases, the capacity we have coming online and the inherent efficiencies and scale advantages we gained from that capacity will help to contain costs and enable us to achieve double digit earnings growth and elevated return on invested capital. Having said that, of course, we will continue to work to create excess demand, over our measured capacity growth to produce even stronger results. With that, I'd like to turn the call 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 2019 first quarter results. Then I'll provide an update on current booking trends for the remaining three quarters of 2019 and finish up with some additional color on our 2019 March guidance. As Arnold indicated, our adjusted EPS for the first quarter was $0.49. This was $0.07 above the midpoint of our December guidance. The improvement was driven by two things, $0.02 of favorability in net cruise revenue, and $0.06 of favorability in net cruise costs without fuel and other expense items, mainly due to timing between the quarters. Both favorable items were partially offset by a $0.01 unfavorable net impact from fuel pricing currency. Now, let's look at our first quarter operating results versus the prior year. Our capacity increased 4.1%. Our North America and Australia segment or commonly known as our NAA brands was up 5%, while our Europe and Asia segment more commonly known as our EA brand was up 2.5%. Our total net revenue yields were up 0.5%. Now, let's break apart the two components of net revenue yield. Net ticket yields were down 0.4%. Our NAA brands were flat, while our EA brands were down 0.7%. Both segments had tough prior year comparison. However, I did want to note that Caribbean yields turned positive in the first quarter on an 8% capacity increase, also against tough prior year comparisons. Net on board and other yields increased 3.1% with similar increases on both sides of the Atlantic. In summary, our first quarter adjusted EPS was $0.03 lower than last year, as a result of the net impact of fuel pricing currency costing $0.03, with small operational pluses and minuses offsetting each other. Turning to 2019 booking trends, as Arnold indicated, wave season was consistent with the strength in demand we experienced going into the year. Booking volumes for the remaining three quarters of 2019 have been running ahead of the prior year at prices that are in line with last year. Let's not forget that this wave season activity is on top of two consecutive years of record wave season. While prices on overall bookings during wave season are in line with the prior year, prices for our NAA brands were higher, but were offset by our EA brands, driven by their sourcing in Continental Europe. At this point in time, cumulative advanced bookings for the remaining three quarters of 2019 are ahead of the prior year at prices that are in line with last year. Now, let's drill down into the cumulative book position for 2019. Cumulative advanced bookings for our NAA brands are ahead of the prior year on both occupancy and price, driven by nicely higher prices in the Caribbean and the seasonal European program, while prices in Alaska are lower than last year's record levels. Cumulative advanced bookings for our EA brands are well ahead of the prior year at lower prices, again, driven by our EA brand sourcing in Continental Europe. During the last year, we have made revenue management decisions, which we believe will optimize our net revenue yield growth for 2019. In fact, even with an overall 4.6% capacity increase, we have less inventory remaining for sale than we had at this time last year. Finally, I want to provide you with some additional color on 2019. Our adjusted EPS guidance for 2019 is $4.35 to $4.55 versus $4.26 for 2018. The midpoint of our March guidance is $0.20 less than the midpoint of our December guidance, driven by the net impact of fuel pricing currency costing $0.22. We expect higher fuel prices will cost us an additional $0.28, while we are forecasting to benefit from currency movement by $0.06. In addition, we flow through the $0.02 revenue beat from the first quarter. All other operational changes were small and netted out. One final note for those of you who are trying to forecast the remaining quarters of 2019, we expect most of the 2019 adjusted EPS improvement versus 2018 to occur in the third quarter, which has the easiest prior year yield comparison. And now, I'll turn the call back over to Arnold.

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

[Operator Instructions] Our first question comes from the line of Robin Farley with UBS.

Great, thank you. And just had a question on the guidance. I think you had previously said that you expected Q2 yield growth would have been higher than Q1 yield growth. And I know Q1 came in higher than flat, but Q2 guidance seems to not be ahead of the prior guidance, either for Q1? I wondered if you could talk a little bit about, because it sounded like the trends in wave season have been like consistent and how you expected, but maybe it sounds like Q2 wasn't as strong as what you had thought three months ago.

Hey, good morning, Robin. It’s good to see you in front of the queue again.

So, Robin, when we put together our December guidance, the numbers were relatively close, some of it was driven by the -- in the first quarter, but the improvement that we saw, 3.1% increase in on-boarding other revenue, those numbers are very difficult to pinpoint each quarter. So overall, we are -- we started out the year with about flat, first half of the year, we beat the first quarter and we didn't see anything changing significantly in the second quarter. So we just maintain the flat yield guidance for the second quarter. The difference between the quarters at all and we're just not that good for a half a point between the first quarter and the second quarter.

So, was the upside though in Q1 mostly came from the onboard and obviously you don't have the advanced visibility on that. Is there anything about the itinerary differences or anything that or trends that -- are you just saying, just assuming that the onboard upside won't happen in Q2 until you actually see it? Maybe that -- is that how to think about?

Yeah. So, you know that, overall for the year, I think I said in December, we guide to approximately 2% in onboard overall. The number isn’t exactly 2% by quarter, but the overall is approximately 2%. And as I said before, it's very difficult to say exactly what comes in, the itineraries in the markets are very different. There are lots of other programs we can roll out. And we continue to see a strong trend in onboard revenue, and we hope we can do better -- continue to do better in future quarters as well.

I think Robin, just the overall guidance for the year just reinforces what we've seen so far. It just gives us confidence on the guidance we've given for the year and we certainly don't see any weakening or anything like that in terms of yield.

Our next question comes from Steve Wieczynski with Stifel.

So I guess the first question would be around Europe and maybe if you could help us think that market today versus where you were back in December and I guess, what I'm getting at is the things over there gotten better, have they stayed the same or have certain markets weakened and maybe also if you could talk about the promotional environment over there as well.

First of all, as you know, we've got double digit capacity increase in Europe in kind of uneven economic environment. But the reality is, the bookings are strong and we're doing some proactive management. Our yield management teams have decided to be way ahead on occupancy relative, given the capacity increases. And so hopefully we'll have an opportunity to deliver flattish yields or whatever for the course of the year, but the most important thing is to grow earnings. And we are anticipating earnings growth in Europe with the combination of what's going on, but right now we feel solid in where we are. We feel confident and strong again with the guidance and with the fact we're going to grow earnings.

I don't think anything materially changed from our viewpoint in December if anything, it’s probably a tad better in Europe. We did split the world that I talked about the NAA brands being at higher prices and the EA brands, their book position being at lower prices. So, if you look at our overall yield guidance for the year, it really is a tale of two different worlds. The NAA brands are probably looking at guidance for the year that’s probably double our overall corporate guidance, whereas for our EA brands, you're looking at sort of flattish overall yields built in, and that's how you get to the combined 1%. But nothing has materially changed since December, like I said, probably a tad better than we anticipated.

And that kind of goes into my second question, David, I guess, I guess one of the questions we've gotten a lot is, so then why would your yield guidance for the year kind of be unchanged, given the 50 basis point beat you had in the first quarter, it seems like the feedback we've gotten from your competitors and the trade relating to wave has been extremely, extremely strong. So what's kind of holding you back from pushing that yield guidance a little bit higher right now?

So the higher yield guidance in the first quarter was worth $0.02. You're just talking about $0.02 in EPS overall. And so there's still a lot left to go and the uncertainty in onboard and other, and so at this point in time, we're maintaining our guidance for the year operationally overall. There's a lot of other unknown factors, hurricane seasons and lots of other things out there. So we always provide for that and hopefully we have a good hurricane season. But we're in a good well booked position as we had indicated, we’re ahead of the prior year on increased -- 4.6% increase capacity and we feel very good about our overall situation.

We have less volume to go now than we had this time last year, even with the overall capacity increase. So that's, again, reinforcing what you just said, a very strong indicator of successful demand creation, but we're really focused on earnings and I understand people look at yields and it's really difficult to do these comparisons because you had a basketball, orange and a ping pong ball in terms of theirs. And, the comparisons aren't that meaningful because we have such a different mix. We have nine brands with, some are below the fleet average, some are above and so on and so forth. So those are difficult things as we focus on the earnings, growing earnings are growing return on invested capital. But, again, you're right. Things have been strong. And what we have a ways to go when that all the way through yet and we're just as always allowing for things to happen, because there have been headwinds, and there will probably be few shares at once.

Our next question comes from Felicia Hendrix with Barclays.

So David, when we look out to the rest of the year, and we think through the second half, just by doing the math, the net yields need to be up a couple hundred basis points, to get to your full year, but at the same time, we're seeing kind of a mix of Europe go up. I know, some of it is your kind of NAA type of seasonal Europe, but we're also seeing your European centric capacity also mixed up. So I'm just wondering if you can kind of help us think through the second half, given the deployment and where Europe falls in that.

So, for the second half of the year, obviously, given the first quarter yield, and the second quarter guidance, the second quarter clearly is going to be up over 1% in order to get to the first half, sorry, second half over 1%, in order to get to the average for the year of 1%. That is a combination of onboard as well as ticket in the back half of the year. And, we are, when we look at the overall booking trends, particularly in our NAA brands, which I said we're ahead at higher prices, we are seeing that being reflected in the numbers and we feel confident that we can achieve that. The EA brands are off setting some of that, as we had talked about over the last couple of quarters.

And then can you just talk about Alaska, because it seems like there's -- it's been a bit of a change in what you're seeing there since the last quarter. I think last, on the last call, you said pricing was flat and now you're saying that pricing is down in Alaska. So can you just walk us through what's unfolding there?

Yeah, I mean, we are seeing -- we do have 17 ships in Alaska. We've got an 8% capacity increase. There are, overall, when you put it all together, the book position, we did say was down versus pricing in line, but keep in mind in December, it was very, very early for Alaska. As you get into wave season, you see a much more substantial portion of Alaska being booked. And -- but remember that 2018 was record pricing in Alaska. And so overall, we feel very good about our pricing it, for the various brands we have up there.

And just last thing on just the base loading strategy that you're employing in the EA region. And then also, you didn't really comment on the UK. So I was wondering, because your competitors have talked about seeing some volatility there. So hoping you could talk about the UK also, but in the base loading that you're seeing there, have you been able to kind of see any kind of increase in pricing as you get closer to the cruises, in other words, to the actual specific -- in other words, has your base building strategy kind of been successful? And then if you could just comment on UK?

Sure. So the revenue management strategy we feel has been very successful that we're optimizing the yield for 2019 in total. As I said in my prepared remarks, we did make some revenue management decisions over the last year. We were ahead, in some cases, we were considerably ahead and we have been seeing good improvement close in and overtime. And as far as the UK is concerned, we had said, as Arnold said, there is uncertainty relating to Brexit. The UK is doing okay. But clearly had it not been for the uncertainty, we probably would have done perhaps a little bit better in the UK. It's really hard to – you will never know for sure.

Our next question comes from Harry Curtis with Nomura Instinet.

I wish I could diversify the line of questioning here. My apologies. I'm wondering about any -- do you have any evidence of improved pricing sequentially, as we look ahead into Europe and Alaska this summer for the balance of the -- for the inventory that you haven't sold, are you seeing some beginning trends in rising sequential pricing for any given week or any given itinerary?

I would say it’s a couple of things. First of all, when you think about the comparisons to prior year, we had tougher comparisons early. So the second half comparisons are not as difficult. So when we start talking and comparing yields first half, second half, you've got a plus from that. In terms of pure pricing, our revenue yield sciences and deploying yield and all the tools we’re using, they're constantly chasing what's going to create the optimal outcome. And that varies by brand, by itinerary and is built up itinerary by itinerary. So the simple answer to your question is, of course, we're seeing pricing strengthening, as you get close in. Of course, you are. And so we also are saying we're going to have second half yield much strong than the first half yield. But what we're really saying is we're going to drive earnings and earnings are going to grow this year and in the future, they're going to grow double digit on average, earnings are going to grow this year at single digits, we're working hard to make sure we do even better. And we're going to elevate return on invested capital. So that's the real message but the yield story for us is relatively complex. We've got luxury brands, premium brands, we have nine brands, , different world markets, et cetera. And even when within a brand, there can be yield improvement, it can weigh down the average to our corporation if that brand is below the fleet average. So, it's a complex thing. But overall, the simple answer to your question is, of course, we see strengthening as we close in, we've got less the book.

So, I guess it's the sort of the same question repackaged. I'm wondering what level of confidence do you have, particularly in the EA brands that, as we get closer to the third quarter, and that there's a low risk of you having to do some incremental promotion and pricing coming down?

We have less to sell. So I think we're in good shape now. And Europe, it had been all along, it’s just, again, we are along our original guidance there. We -- nothing has weakened or worsened or anything like that.

Our next question comes from David Beckel with Bernstein Research.

I'm hearing a lot of emphasis on earnings growth for the long term, and sort of how the revenue management system plays into that. But if my math is correct, it looks like even ex-fuel and 4x, you're looking at sort of 6-ish percent EPS growth this year. So I guess in light of what you've done with your revenue management strategy this year, which is to emphasize, I guess, stability and confidence, how should we, as investors, expect EPS growth to improve going forward? Is it really just European structural weaknesses here or is this lower for longer something that we should expect going forward?

Okay, so let's just focus on earnings, because that's a good part. So if you look at the 5%, 6%, that’s directionally accurate with what you calculated. We obviously, this year, we have some shifts coming in late in the year. We've got anticipated increased levels of capacity coming for the next several years. So we've obviously, from a cost standpoint, spent more this year in advance of actually having the capacity, what it will take for us to do double digit, I think 1% of yield is equal to something like 25% of earnings per share increase and 1% of cost. It's like 3%. So some combination of one more percent in yield or less and 1% better cost performance was, we are directionally capable of doing or even better, and you're at a double digit earnings growth with the capacity we have. And so, that's why we have the confidence we have, we understand what's happened with the business, but there's not like structural weakness, when you use those kinds of words, the fact is we've got double digit capacity increase in Europe and the ships are being filled and they're actually ahead on the booking, we've got significant capacity increase in other markets without going in and we don't give guidance by market stuff. But historically, what's happened so far and what we're anticipating, Caribbean is super strong, NAA brands are strong. So there's no real structural weakness, it’s just dynamics and artifacts of when you bring in capacity, how you spend in advance, prepare all of that. Meanwhile, we're still growing earnings now.

So just a side question attached to that then, if, say, Europe is sort of stabilized for the rest of the year, the expectation I think from your point would be the yield up as you go along. How much sort of upside could we expect from the sort of base loading strategy as that, if that were to materialize throughout the year?

I think, again, the guidance we’re giving you for the year reflects what we think at this point in time our best guess for the results would be. And so we fact it all things in to our guidance, including knowing there's going to be some headwinds that we haven't seen yet or whatever has happened every year and it's already happened this past quarter. And so we’ll work hard to beat the guidance, like we always do, but I think the guidance is reflective of what we anticipate Europe, North American and globally.

And just one quick follow on, there's some concern about the Costa brand and MSC’s introduction of new capacity this year and then going forward. Are you seeing a fairly competitive dynamic from MSC, particularly in Europe as it affects Costa?

While, we typically feel that the brands are pretty independent of each other and other cruise companies, we need them to fill their ships and fill them early because there is something that relates in the marketplace, with just the psychology of pricing and that can be a cap on what you can achieve, based on what other companies are charging in the marketplace or whatever. So, having said that, if there is a brand that has a competitive set because of the source market and the proximity, I would say MSC and Costa would probably be the closest to having some significant overlap in competitiveness versus say most of the other brands compared to any of the other brands. But having said that, we feel confident at Costa. We see opportunity from an operational standpoint to grow earnings this year. We have some capacity increase in Costa that is not new build this year and past European part of the business. But next year, we've got Costa Smeralda coming in, she's booked great. So for, I mean, very strong, double digit kind of improvement opportunity there. And so we see Costa being strong and looking forward to the brand, continuing to perform well and perform even better going forward.

Our next question comes from James Hardiman with Wedbush Securities.

I wanted to ask a little bit about some of the practical implications of Brexit. We're hearing from various consumers that currency and sort of passport issues are sort of their primary travel related concerns, can you maybe speak to those things and correct me if I'm wrong, but if I'm a British passenger, I don't need to worry about fluctuating currencies, if I'm taking one of your ships from the UK. And then secondly, with passports, I know there's a lot of confusion and I know that the British government is trying to get out in front of that. Are there any practical passport issues associated with the various potential outcomes of Brexit as we move forward?

Okay, so more broadly, even though there's been uncertainty around Brexit and so on and so forth, the UK brands are doing well and have withstood the headwind, we will have to keep monitoring to see what kind of long term effect specific to you two questions on currency and passport, on the currency side, without PNO brand is British based, a 10 pound sterling, et cetera. So, obviously, no impact there and it's 98%, British guest sailing on PNO on the UK for us. So there that one is fine. Cunard is a British based brand, but it is a global international brand, it has a number of British guests on it, but it has -- every sailing has guests from all around the world. And it's not pound sterling based, so there's some currency potential impacts there depending on fluctuations either way. On the passport issue, I'm not familiar with the details there, but I don't see -- I haven't heard anything from anyone to indicate any extra complications or major problems or where would be a discouragement to cruise or anything like that. So, I don't know the details, but I have heard nothing that would suggest it’s a problem at all for us.

I guess what I was just getting at there, it seems like maybe cruises is a more favorable way to travel, given what's going on than sort of going on your own with?

Cruise is our more favorite way to travel on the surface.

Certainly, I think your point that you're trying to make is if you compare it to a land based vacation, particularly in the UK, they're paying in British pounds, and it's British pounds on board. So there is less uncertainty, relative to the currency movement and -- versus taking a land based alternative.

That's exactly what I was getting at. And then sort of the second question here, you've talked about the significant capacity increases in Europe as one of the reasons why you're booking ahead but at lower prices. I guess if we peel that back a little bit between the new capacity coming online in Europe versus some of the older ships, anecdotally, when you talk about the new ships, it seems like the pricing there is really good. So, what's happening there, is it that the new ships are sort of cannibalizing and oh, that's a bad word, the older ships in Europe from a pricing perspective or are they both maybe feeling the impacts of higher capacity and maybe economy concerns?

In this particular year, there are no new builds. And what would I look? So either we have significant new builds there, but it's not cannibalizing or anything, but in terms of Costa, the new build is not coming until almost the end of this fiscal year. So and IUDO, we have a number of new ships and IUDI is a strong performer overall and we don't have any new ships in this year and PNO.

Arnold said in his prepared remarks, I mean, the ongoing economic malaise in Continental Europe and all of the heightened political uncertainty in Germany and France is clearly affecting our overall market in Continental Europe.

Our next question comes from Tim Conder with Wells Fargo Securities.

Thank you and thank you for the color on Europe overall. So I mean, just to summarize that, it sounds like the UK, little lumpiness with Brexit, but doing okay, so far. Germany continues to do well, and then the Southern European economy is still ongoing, being the most relevant drag. Is that a pretty fair characterization?

It's reasonably fair directionally.

Okay.

The reason is, we don't give guidance by brands or markets and stuff. So, that’s the only reason why you’re hearing the directional comments, but go ahead please.

Okay. Shifting further EU, just it’s not a large market, but important long term and thrown in with your commentary was Asia. Just any additional color on China in particular, given the ongoing trade issues and just what you're saying year-over-year, over the last 90 days, have that trended better or worse, about the same. And then on Medallion, the success that you're having on the ships that it's on, is there a way that you can accelerate that either via Medallion or other methods to further gain those benefits, so the customer experience and higher onboard spending? Any additional color you could provide there?

Okay, thank you. So first of all, in China, it's still a very small part of our business, we're excited about the Costa Venezia going over to join the Costa fleet in China. Overall, things are strengthening there. There's less capacity expansion than it's been in previous years. And we've expanded our distribution approach and we’ve had success with that. And so, things are strengthening. Our philosophy there remains the same, that we see it as accretive overall as long as it’s accretive, a ship will be there. If it's not accretive, we would move it and so, generally speaking, China in particular is definitely strengthening from yield standpoint, et cetera, all that. But we think this could be choppy for a while and so we always prepare to do whatever we need to do right now. We think Venezia in particular is going to strengthen the Cruise in China, period, and definitely be an enhancement to our fleet. And right now, things are going well. With regards to OceanMedallion class, we’re very pleased with where we are, we have the Caribbean Princess, Regal Princess and Royal princess are all now up and running. Caribbean Princess is probably the most fully activated with many other features capable and ocean being available to the guests. Regal is not quite as far along and Royal, which is on the West Coast right now is just beginning to ramp up. So we see great results, as I mentioned, in terms of guest experience and attitude. We have several more ships that will be brought up to speed and those others will get more of the features the rest of the year. But, it is new and we want to experience it and we want to make certain that in the end, it is driving not just kind of nice conversation, but also driving the improvements from both a revenue generating standpoint and cost standpoint and a crew experience standpoint. And it looks very, very positive, but it's new and we think we need to win out in a race. We don't have to -- Princess is doing fine, as the other brands, all the other brands have innovations on the way as well that are different. But we're excited about it, but we'll take our time and once we fully activate it, see where we are and one thing we are expanding is the fastest Internet FC, which is Medallion that, which is part of the overall ocean platform, but it's not dependent on the ocean platform. And that's been a huge hit with guests and crew. And so that's something we are more rapidly expanding in the fleet.

Okay. And then one final if I may, Australia, I think David, you alluded to that, given the recent hurricanes, a little bit of disruption, anything that was material, I guess, quantifiable there from that?

Yeah, we're just talking about a couple of million dollars. It was probably six cruises that were impacted, but nothing material, just your normal. Brisbane was impacted by the hurricane and some ships came in late in your normal occurrence.

Our next question comes from Brandt Montour with JPMorgan.

Good morning, everyone. Thanks for taking my questions. On the back of that question about China, I was just curious on the Venezia, which historically it's been difficult to get Chinese consumers to spend onboard at least the same level as we do here in the West, but realizing it's just in its main voyage now, what have you done differently with that hardware, with that in mind, and/or is it more of kind of an evolution for you in China to mostly change the distribution side of things?

Well, a lot of things have to be developed in China, because it's an embryonic market, but in terms of the ship itself, we have some fabulous features on this ship. We've got some really customized gaming venues, which we think it will keep, we have fabulous karaoke area, which we think is going to be a very nice revenue generator for the ship. We have a module area on the ship, which again, could be another good revenue generator. So there are a number of things. In addition, some of the specialty restaurants, we have a hot top restaurant on board for the comfort food that they were like, and so there's quite a number of revenue generating features on the ship that we think will help drive onboard.

And there's also significantly more retail space and chops on board, which is a significant contributor to onboard revenue in that market, high end chops in particular.

And then apologies, one more Europe question, if I may. David, you mentioned Europe obviously sort of unchanged, perhaps a tad better, would it be possible to just break out that last part into ticket versus onboard in what you're seeing?

Oh, when I said tad better, I was just referring to the overall booking situation of what I expected in Europe versus, in December versus what we've actually seen happen over the last three months. It's small movements and clearly it's been, like I said, it's had positive, but nothing that is significantly to our guidance at this point.

Our next question comes from Jared Shojaian with Wolfe Research.

Hey, good morning, everyone. Thanks for taking my question. As we look forward to next year, you're selling two lower yielding cost of ships and you have a lot of capacity coming on, particularly with higher yielding Princess ships. So are you expecting hardware to be mix positive to yield in 2020? Is that your assumption?

So for 2020, we haven't given out any particular guidance, but I think we’ve said overall in the past, that given the size of our company, any mix overall on a yield perspective for the overall corporation tends to be rather small in our overall numbers. So, but we will analyze that as we go forward into 2020 and we prepare guidance, and we'll let you know if anything changes.

Okay. And I know you're talking about longer term double digit earnings growth, and I know you're not giving any guidance beyond 2019. But was there any reason why we shouldn't be thinking in terms of 2020 being double digit earnings growth, and I think just to make the math work in order to get there, you're going to have to see better yields and better cost performance than what you're seeing this year. So, maybe you can just talk to that a little bit? Is that your expectation? And I guess, really, how should we think about that?

Well, as I mentioned, we've had some pre-spend to prepare for the capacity coming not just in 2020, but beyond. And that won't be repeating itself going forward. So, there's clearly some opportunity with cost plus the fact that as you bring the new ships on, they’re inherently more efficient, et cetera. So -- and with the scale, you're leveraging, you’re amortizing across more scale. So all of that bodes well for the cost picture. That's number one. Number two, we're still focused on creating demand. And again, we're not giving guidance to a 2020 or anything, but as you look at things like the brands that are bringing the ships in and the relative pricing and itineraries and so on and so forth, along with the demand creation, things we're doing, we see opportunity. But the really important thing here is, we don't need a lot to be very different to generate, we are engineering and purposely intentionally on a path to double digit earnings growth on average year in and year out and elevated sustained double digit return on invested capital. And so we don't need a lot to be very different. We don't need to dramatically change anything. If we just execute where we're headed, that's what we'll see. And whether it is or isn't in a given year, on average, it will be, but can be influenced by fuel and currency and other things, but operationally, we definitely are on a path to deliver.

And one more, a follow up to that if I may. Are you expecting to get a fuel expense benefit in 2020, just from lower IFO fuel prices from IMO 2020? And then there's been some recent news just on closed loop versus open loop scrubbers and sort of how that debate is going to play out with just some of the regulatory pressure. Would love to get your take on that and just sort of understand how you could be potentially negatively affected by that closed loop versus open loop debate?

Yeah, I think I'll do the open loop close loop first. For us, we have now third party data, including the Government of Japan did their own studies and everything. So, we have plenty of information to provide to courts around the world and authorities around the world that show that open loop is a very effective way to have advanced air quality, systems operate and so we're confident with that. We know there have been some isolated ports that made decisions I think with the information we have and we can provide, we're optimistic. We’re prepared either way to be honest, not so much we can go closed loop versus open loop, but in terms of number of ports now, have court ironing, and we plug in any way and so on. So, there's so many dynamics there, we fact all possibilities into our remodeling and we're confident going forward. In terms of fuel prices, the oil companies can’t say where the fuel prices are going to be. So I'll let David, he might be able to, I don't know, David, go ahead.

No, I won't try to predict the price of HFO or bunker or MGL for 2020. But, we have said that in 2019, about 80% of our consumption is bunker and 20% is MGL. We've also indicated that as we move into 2020, we do expect to see about a third of our consumption be MGL. So, it's really hard to tell. Most people are expecting a increase in MGL and a reduction in HFO price as we move into 2020 for the demand. It depends on the direction of each movement and the balance. It's a close call at this point, whether it will be up or down. We do get the benefit on two-thirds if bunker goes down. And we do have, at the end of this year, we expect to have 88 ships equipped with advanced air quality systems, we will continue to implement more across our fleet. So that third, the consumption being MGL, that will decrease overtime back to 20 and even below 20% as we move forward. So operator, we will take one more question.

The next question comes from Assia Georgieva with Infinity Research.

Couple of questions. I do a lot of pricing work and it seems over the years that for European sourced passengers, the timeframe is sort of around May is key in terms of their bookings for European based voyages. Is that something that you have seen and is there possibly a little bit of caution at this point for the European source business? Because we haven't gone through that mini European wave season?

We have had solid bookings for our European itineraries, both for our North American brands as well as our EA brands. And so I haven't noticed anything in particular in May, over the last few years. But I will ask around and see if I can get any more information on that.

And the second question, with the extent of dry dock for the Sunrise, which takes place during this Q2, does that have an impact on yield either way?

No, because you're taking this ship out of service and there's no ALBDs. It actually has a impact on cost, because you do still continue to have some cost per crew and other things during the dry dock period. But there are no ALBDs associated with it.

But when she comes out, she will almost certainly command a yield premium. And so that will be helpful.

Well, we certainly hope for that and expect that. Thank you so much for taking my question.

Thank you.

All right, everyone. Thank you so much. We appreciate it. We're totally focused on delivering for the year and then beyond the double digit earnings growth on average and the increased return on invested capital. So look forward. Thank you guys for your interest and talk to you next quarter.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.