Carnival Corp. defended its $236 million U.S. government contract to provide ship-based housing after Hurricane Katrina, telling lawmakers Wednesday the firm was charging only what it would have earned from its regular cruise business.
The contract for three ships to provide emergency housing for 7,116 people has been criticized by some in Congress, who have said the price tag was higher than the company would have earned from its normal business.
Terry Thornton, vice president of marketing planning at Carnival Cruise Lines, told the House of Representatives Committee investigating the government’s response to Hurricane Katrina that it was a competitively bid contract.
“From the outset of the charter negotiations, Carnival informed the government that its objective was to charge only what it would have otherwise earned from the vessels operating in a post-Katrina marketplace,” he said in testimony.
The operator of Canival, Cunard, Princess Holland America and other cruise lines, reported net profit for its 2005 third-quarter rose 11.7 percent to $1.15 billion compared with third-quarter 2004. In its September 19 earnings release, the cruise operator credited the rise to higher ticket prices, onboard revenues and, to a lesser extent, higher occupancy.
Thornton said Carnival pay U.S. taxes on the money it earned from the contract.
The contract includes charges to cover U.S. taxes and also has provisions allowing the firm to recoup costs if it is determined its international work force is subject to the U.S. taxes and minimum wages, Thorton testified.
Two of the three ships are currently docked in New Orleans where they are housing police, fire fighters, relief workers and their families, Thornton said. The third ship has been moved to Pascagoula, Mississippi, and it is housing storm victims. He said the $184 per person cost per day includes food, laundry service and medical care.
Thornton said the company had incurred substantial loss of business because of the contracts. The company had to cancel reservations for 120,000 customers and provide full refunds to them. He said the company also paid commissions to travel agents who had booked the canceled vacations.