Fitch Affirms Carnival's IDR at 'A-', Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings has affirmed Carnival Corporation and Carnival plc's
(Carnival) credit ratings as follows:

--Carnival Corporation Issuer Default Rating (IDR) at 'A-'

--Carnival plc IDR at 'A-'

--Bank credit facility at 'A-';

--Senior unsecured debt at 'A-';

--Short-term IDR at 'F2';

--Commercial paper at 'F2'.

Carnival had $9.45 billion of outstanding debt as of May 31, 2008.
The Rating Outlook is Stable.

Carnival's ratings reflect the company's market-leading
competitive position, geographic and market segment diversification,
its access to capital at attractive rates, and adequate liquidity
position. Carnival's business profile benefits from the cruise line
industry's strong sustainable investment characteristics: high
barriers to entry, attractive demographics, oligopoly industry
structure, mobile assets, favorable tax status and high visibility on
new supply.

Key credit concerns for Carnival center on the significant
increase in fuel costs and the tenuous state of the U.S. economy with
considerable pressure on consumer discretionary income. The cruise
line industry is a capital intensive industry that is prone to
travel-related demand shocks.

Continued operating pressure:

Over the past three quarters ending May 31, 2008, the dramatic 51%
increase in per unit fuel costs has more than offset solid net revenue
yield growth of 6%, which has benefited from favorable currency
movements due to Carnival's international exposure. As a result,
cruise EBITDA per unit has declined by roughly 7% over the last three
quarters. However, Carnival's 9% capacity growth has more than offset
the impact to aggregate cruise EBITDA, resulting in a 1% increase
during that time.

While the underlying per unit revenue trend has softened (net
yields in constant dollars are expected to grow 2%-3% in 2008 compared
with initial expectations of 3%-4% growth), it remains in line with
long-term historic trends and the advance booking curve remains
comfortably extended. The softening was due primarily to reduced
onboard spending expectations, which account for 20%-25% of cruise
revenues and has been more impacted by economic pressure than ticket
prices while having less visibility on forward trends. However,
industrywide supply growth in North America is likely to be only 2% in
2008-2009, which is well below long-term historic averages. That
should help the supply/demand scenario and mitigate negative demand
trends given the current U.S. economic environment.

Capital allocation and rating context:

Incorporated into current ratings is Fitch's expectation that
Carnival continues to manage its capital allocation within the context
of its credit rating given the weakening operating outlook. Carnival
generated $3.89 billion of adjusted EBITDA and $4.07 billion of cash
from operations (CFO) in 2007. Its 7%-8% average annual capacity
growth from 2008-2010 should enable it to mostly offset per unit
profit pressure and continue to grow aggregate EBITDA.

The cruise line industry is capital intensive; firm contracts for
ship orders are typically placed 3-4 years in advance of delivery. As
a result, most of the company's cash generation over the next few
years will support its shipbuilding program and maintenance/other
expenditures. Carnival will spend roughly $3.5 billion-$4.0 billion in
total capex annually to fuel capacity growth that is more heavily
weighted toward its European brands than its North American brands.

Over the last few years, Carnival has significantly increased the
level of capital returned to shareholders as it had room within the
rating category, but has scaled back recently in the current economic
environment. Carnival returned $1.27 billion of capital to
shareholders (dividends and share repurchase, net of issuance) in
fiscal year (FY) 2007, following $1.58 billion in FY2006 and $889
million in FY2005. The policy has skewed toward stickier dividend
payments rather than discretionary share repurchase. Carnival has
maintained a steady quarterly dividend since late last year after two
increases in 2007 raised the dividend by 45%. As a result, dividends
now total roughly $1.26 billion annually. In addition, Carnival has
not repurchased shares after buying back $84 million in December 2007,
which followed $326 million of share repurchases in FY2007 and $841
million in FY2006.

Fitch has indicated that given the attractive business profile,
FFO-based leverage of 2.0x-2.5x and FFO-based coverage of 9.0x -11.0x
are financial metrics consistent with the current rating and the
company remains within that range. However, its cushion within the
rating category has diminished with the operating pressure. As of the
end of its fiscal first quarter 2008 (Q1'08), Fitch calculates
FFO-based leverage of 2.4x and FFO-based coverage of 9.2x. For
comparative analysis relative to other industries, Fitch believes it
is important to focus on FFO-based (or after-tax based) credit metrics
for cruise lines due to the industry's favorable tax status.
EBITDA-based credit metric comparisons would understate cruise lines'
relative credit profile, in Fitch's view.

Liquidity and access to capital:

A key factor in Carnival's 'A-' rating is its financial
flexibility through its solid liquidity position and multiple sources
of capital at attractive rates. As of Feb. 29, Carnival had $4.9
billion of liquidity supported by:

--Cash and equivalents: $966 million;

--Credit facility availability (LT and ST): $2.1 billion;

--Committed ship financing (export credits): $1.8 billion.

Carnival's export credit financing is likely to fund much of the
upcoming shipbuilding program currently at rates below 5%. Carnival's
ability to obtain this financing at attractive rates and on an
unsecured basis has been viewed positively in the rating.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality,
conflicts of interest, affiliate firewall, compliance and other
relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings
Michael Paladino, CFA, +1-212-908-9113 (New York)
William Warlick, +1-312-368-3141 (Chicago)
Media Relations:
Sandro Scenga, +1-212-908-0278 (New York)

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