Carnival says it needs 3 years and a new CEO to recover from its recent accidents

With a jaw-dropping change in the leadership suites at Carnival Corp. announced today, the world’s largest cruise company sees a long, tough road ahead for its flagship Carnival Cruise Lines brand, and Carnival tapped as its new CEO an individual with no operational experience in the cruise industry to lead the turnaround.

The backdrop to the board’s decision to remove Carnival chairman and CEO Micky Arison’s CEO role — a position he’s occupied since 1979 — and to elevate board member Arnold Donald to the CEO slot, is the view officials espoused today that it will take two to three years for Carnival Cruise Lines to execute a recovery.

In its second quarter financial results, Carnival Corp. revealed that the performance of Carnival Cruise Lines, which just completed $115 million in upgrades and fixes to the now-relaunched Carnival Triumph, is lagging that of its other nine brands as a whole.

From the end of March through the rest of 2013, Carnival Cruise Lines’ booking volumes and pricing are below what they were for the same period in 2012, the company stated.

Two to three years if things go right

Arison told analysts today that consultants Carnival hired looked outside the cruise industry  to other companies that experienced a similar drop in consumer perception, and found that Carnival Cruise Lines is “tracking the same way.”

Arison, who will give up the CEO post he’s held for 34 years on July 3 and stay on as chairman, said the consultants believe it will take two to three years for the Carnival Cruise Lines brand to recover, and that “assumes we get it right.”

Carnival Cruise Lines, with its 24 ships and passenger capacity of nearly 62,000, is by far Carnival Corp.’s most important brand.

Part of the plan calls for increased marketing spend and enhanced communications with travel agents. On the latter mission, Carnival Corp. recently drafted Bob Dickinson, who retired as Carnival Cruise Lines CEO in 2007, to orchestrate the outreach.

CEO gamble

Carnival’s choice of Donald to replace Arison next month in the CEO post is a curious, but not unprecedented, decision.

Donald has served on the Carnival board since 2003 and is therefore very familiar with both Carnival and the cruise industry, but he’s never held a management position in the cruise industry.

Donald said today that he’s honored to lead the team operationally “in its next stage of growth,” but acknowledged that he will have to get more in-depth knowledge about the leadership team and the operation “relatively quickly.”

“We are well-equipped to address over time any challenges facing our industry,” Donald said.

Donald currently is a principal of private investment firm AWDPLC LLC, and from 2010 to 2012 served as president and CEO of The Executive Leadership Council, an organization comprised of current and former African-American CEOs.

Donald served as chairman of Merisant Co., which manufactures sweetener products such as Equal, from 2000-2005, and from 1998-2000 Donald was president of agricultural company Monsanto’s nutrition and consumer divisions.

Arison said he personally recommended Donald to become Carnival Corp. CEO, and the pick was unanimously backed by the Carnival board.

No outside search

Although Arison said a transition has long been in the works and splitting the CEO-chairman roles is favored by UK regulatory authorities, he acknowledged that Carnival did not hire consultants to conduct a “full external search.”

There are numerous precedents for companies to hire executives who are outsiders to take a fresh approach and lead a turnaround, and perhaps that’s what Carnival needs.

The world’s largest cruise company clearly is facing challenges from the 2012 Costa Cruises and 2013 Carnival Triumph incidents, respectively, and Carnival Cruise Lines’ predicament won’t be solved by the usual discounting formula.

For his part, Arison said: “I’m not going anywhere,” adding that he plans to stay on as chairman for an extended period.

As far as his future role, Arison said he will do “whatever Arnold needs,” and plans to contribute his extensive knowledge about new-builds, for instance.

Carnival will look to Donald to “run day-to-day,” Arison said.