The North America and Australia (NAA) segment experienced an 11% capacity increase, contributing significantly to the growth in passenger ticket revenues. This expansion demonstrates a strategic focus on high-demand markets.

The company added several new ships to its fleet, including the Carnival Cruise Line 5,360-passenger capacity ship that entered into service in December 2023, and the Princess Cruises 4,310-passenger capacity ship that entered into service in February 2024. These additions increase overall capacity and revenue potential.

In June 2024, Carnival announced the integration of P&O Cruises Australia into Carnival Cruise Line by March 2025. This strategic move aims to streamline operations and potentially improve efficiency.

Interest expense, net of capitalized interest, decreased by $93 million, or 17%, to $450 million in 2024 from $542 million in 2023. This reduction is attributed to a decrease in total debt and lower interest rates, showcasing effective financial management.

While operating costs increased due to capacity expansion, the company implemented cost control measures, such as lower repair and maintenance expenses, which partially offset these increases. This indicates a focus on operational efficiency.

As of May 31, 2024, the company was in compliance with all applicable covenants under its debt agreements. This demonstrates sound financial management and adherence to contractual obligations.

The report acknowledges that events and conditions around the world, including geopolitical uncertainty, war, inflation, and higher interest rates, could lead to a decline in demand for cruises. These factors highlight the sensitivity of the business to external economic and political conditions.

The company recognizes that factors associated with climate change, including evolving regulations and increasing global concern, could adversely affect its business. This includes the potential impact of the EU Emissions Trading Scheme (ETS), which is expected to cost approximately $50 million in 2024.

The company acknowledges the ongoing risk of breaches in data security and lapses in data privacy, which could adversely impact business operations and reputation. This highlights the importance of cybersecurity and data protection measures.

The company identifies overcapacity and competition in the cruise and land-based vacation industry as potential risks that could negatively impact cruise sales, pricing, and destination options. This underscores the importance of differentiating offerings and maintaining competitive pricing.

The NAA segment's capacity increase was caused by the addition of several ships, including the Carnival Cruise Line 4,090-passenger capacity ship that was transferred from Costa Cruises and entered into service in May 2023, and the Seabourn 260-passenger capacity ship that entered into service in July 2023. The Europe segment was partially offset by the return to service of two ships as part of the completion of our return to guest cruise operations and Cunard 2,960-passenger capacity ship that entered into service in May 2024.

The company manages fuel consumption through fleet optimization, energy efficiency, itinerary efficiency, and new technologies. This indicates a focus on reducing fuel costs and improving operational efficiency.

The changes in operating costs and expenses for the Europe segment were not material.

Carnival manages fuel consumption through fleet optimization, energy efficiency, itinerary efficiency and new technologies and alternative fuels.

The company continues to pursue opportunities to repay portions of its existing indebtedness and refinance future debt maturities to extend maturity dates and reduce interest expense. This demonstrates a proactive approach to managing its capital structure.

Capital expenditures of $3.5 billion were primarily attributable to the delivery of a 5,360 and a 4,310-passenger capacity NAA segment ships and one 2,960-passenger capacity Europe segment ship. This highlights the company's ongoing investment in fleet expansion.

The company is focused on sustainability matters. The increasing global focus on climate change, including the reduction of greenhouse gas emissions and new and evolving regulatory requirements, is reasonably likely to have a material negative impact on our future financial results.

Demand for cruises has been greatest during our third quarter, which includes the Northern Hemisphere summer months. This higher demand during the third quarter results in higher ticket prices and occupancy levels and, accordingly, the largest share of our operating income is typically earned during this period.

We believe the volatility in the price of fuel and foreign currency exchange rates are reasonably likely to impact our profitability.