Carnival Is Making a Credible Case for Its No-Hedge Fuel Policy

Carnival has cut fuel consumption per available lower berth day by 26% since 2019. Chief Executive Officer Josh Weinstein estimates that improvement will save the company about $700 million in 2026. That gives its decision to keep fuel unhedged some substance.

I give Carnival credit for making lower consumption its principal defense against higher prices. It is a measurable operating improvement, and this quarter brought further progress. The company is still exposed to the price of every tonne it buys, but it has done meaningful work on how much it needs.

Carnival Corporation, Royal Caribbean Group and Norwegian Cruise Line Holdings all beat third-quarter 2026 earnings expectations despite rising fuel prices. Their approaches to that expense differ. Carnival has favored consumption savings over hedging since 2019, while Royal Caribbean has hedged slightly more than 60% of its 2026 fuel requirements and Norwegian approximately 48%.

The pressure has intensified since the U.S.-Israel war with Iran began on February 28. Brent crude settled at $116.72 a barrel on Friday, its highest level in six months.

Carnival’s efficiency gains extend beyond the headline figure

Carnival reported record quarterly net income of $1.9 billion, revenue of $8.43 billion and adjusted earnings of $1.43 per share. Revenue and adjusted earnings both exceeded analysts’ expectations.

“The best thing that we can do to control that cost is to use less,” Weinstein told CNBC.

The latest consumption figures support him. Third-quarter fuel use was nearly 4% below the year-earlier level and three percentage points better than expected, Chief Financial Officer David Bernstein said on the earnings call. The work includes itinerary management, HVAC optimization and shipboard fuel-saving measures.

Those are less glamorous subjects than a new ship launch. They also produce something useful when oil prices jump: fewer tonnes to pay for.

Carnival generated more than $150 million in operational improvements after its June guidance, offsetting the impact of higher fuel prices. Its broader efficiency efforts also include artificial intelligence in commercial systems and greater automation of shoreside operations, Weinstein said.

The fuel bill nevertheless remained substantial at $615 million, or about 7.3% of quarterly revenue. In the fourth quarter of 2025, before the price spike, Carnival spent $425 million, equivalent to 6.7% of revenue. Those are different quarters, but the current bill makes clear that consumption savings do not put a ceiling on expenditure.

Hedging is cushioning the increase, not removing it

Royal Caribbean’s results show the limits of the alternative, too. Chairman and Chief Executive Officer Jason Liberty credited hedging with cushioning higher fuel prices, but said those prices had absorbed a substantial portion of the quarter’s earnings outperformance in its full-year outlook.

“It’s obviously still impacting us,” Liberty told CNBC. “But we’re continuing to hedge, and we watch.”

Royal Caribbean reported adjusted earnings of $6.57 per share, up from $5.75 a year earlier and above expectations. Revenue rose 8.8% to $5.59 billion, narrowly missing estimates. Lower costs helped earnings, although some expenses shifted into the fourth quarter.

Its quarterly fuel expense was approximately $347 million, or 6.2% of revenue. That compares with $293 million and 6.8% of revenue in the fourth quarter of 2025.

Norwegian also exceeded revenue and earnings expectations, reporting approximately $2.95 billion in sales and adjusted earnings of $1.12 per share. Stronger-than-expected close-in demand and onboard spending, along with cost controls, helped adjusted EBITDA reach $937 million, ahead of its $874 million guidance.

Norwegian’s fuel expense was approximately $196 million, equivalent to 6.6% of revenue, compared with $167 million and 7.4% in the final quarter of 2025. For both Norwegian and Royal Caribbean, the dollar bill increased while its share of revenue declined.

There is a legitimate reason to buy some predictability. Jefferies analyst David Katz told CNBC that hedging is likely to cost more over the long term, but that reduced uncertainty can support valuation multiples.

“When you’re public, the Street will trade your stock around based on the price of fuel,” Katz said.

That is a credible argument for hedging. It is not evidence that Carnival’s approach is wrong. Nor do Carnival’s savings establish that leaving fuel unhedged is the cheapest choice. What they establish is that its main defense is delivering measurable results.

The next quarter brings another sizeable bill

Booking strength has supported higher full-year profit forecasts. Carnival’s booked occupancy and pricing for 2027 are at record levels, while Royal Caribbean’s reservations for that year are ahead by a high-teens percentage.

Norwegian’s recovery remains less advanced. Third-quarter net yield fell 6.7% in constant currency, better than its forecast decline of 8.9%. It expects net yield growth of 1% to 2% in 2027, accelerating in the second half.

For the fourth quarter, Norwegian forecasts consumption of 255,000 metric tons, up from 239,000 metric tons in the third quarter. Its guidance calls for approximately $414 million in adjusted EBITDA and an adjusted loss of about $0.12 per share.

Royal Caribbean expects fourth-quarter fuel expense of $379 million and consumption of 463,000 metric tons, with 58% of the quarter’s requirements hedged through swaps. Carnival projects a $640 million fuel bill.

That is a demanding next test for Carnival. I would judge its policy by whether the consumption gains keep delivering against bills of that size, not by whether another earnings beat makes the fuel problem look manageable for a day.