Cruise line Cruise Lines International is slashing its labor costs by $200 million, bringing its total labor costs under control to $3.2 billion, according to a new internal memo obtained by Axios.
The company said it is spending the savings to reduce costs for workers at its two largest cruise lines and boost profitability.
The memo, which was sent to top executives and management at the company’s parent company Carnival Corp., lays out how the company will use the savings in the coming years to improve the overall health and safety of its crews, improve operations, and boost cruise line revenues.
The savings include $500 million to reduce overtime and related costs, $300 million to increase staffing levels at its four ship-based operations, $200.5 million to boost staffing levels in the four ship facilities, and $50 million to expand facilities and training programs at the three cruise ship ports.
Carnival’s management team also said it will be investing $350 million to improve customer service, customer service support, and customer support infrastructure in the next three years.
The new memo, dated May 3, outlines how the cruise line will make the changes necessary to save money on labor costs in the years ahead.
The cruise ship industry has been struggling to keep up with the rise in ship-related injuries and fatalities, and has seen a sharp rise in passenger and crew injuries in the last few years.
But Cruise Lines said in March that its crew-related health and productivity metrics improved significantly since the beginning of this year.
The firm said the savings will help cruise line executives improve operating and operational efficiency and make the company more competitive.
The reduction in labor spending will also help to reduce Carnival’s financial impact in the future, the memo said.
The $3 billion in savings will be reinvested in other areas, including its long-term operations and its growth.
“Cruise lines are facing a tremendous challenge, and we’re making a number of strategic investments to make our cruise line operations more competitive, including investing in safety measures, automation, and equipment improvements,” John F. Kelly, chief operating officer of Cruise Lines, said in a statement.
“This new internal review demonstrates our commitment to being a leader in cruise line safety and productivity.”
The memo said the company has also increased the number of employees at its three ship-operated ports and has added new training programs for workers.
“These efforts will support the growth of the cruise ship business and allow us to provide more high-quality service to our guests, guests, and our partners,” Kelly said.
In addition, the company said its board of directors has directed that the company consider reducing its employee base to 20 percent by 2019.
The ship-focused memo also said that Carnival has begun a plan to “reduce costs by reducing crewing costs by half, and increasing safety staffing levels.”
Carnival said it has already cut its employee workforce by 2,000 positions.
It is not clear whether those cuts will be made retroactively.
The management team has been considering several ways to cut costs, including consolidating operations and cutting jobs, but the memo suggests that Carnival is focusing on saving money on the labor side.
“We will continue to work to improve operating efficiencies and enhance our onboard systems to reduce risk, and are taking the necessary actions to ensure that our guests enjoy the experience of the Carnival Experience at all times,” the memo read.
The Carnival memo did not say how the savings would be spent.
The travel industry has seen some of the highest injuries and fatality rates in the industry, and Carnival said in April that its workforce had more than doubled in the past four years.
Carnival said that its ship-specific injury rate in the United States, for example, is the highest in the country, with a fatality rate of 12 percent.
The industry has struggled with safety concerns over safety equipment, and its ships have been involved in major accidents.
In 2014, a Carnival ship sank off the coast of Portugal after a passenger jet skidded off the deck.
Carnival also suffered a serious accident in 2017 in which a ship collided with a river and a tug boat.
A similar accident occurred in 2019 in which two ships collided in a small island off the California coast.
Carnival has been grappling with labor issues in recent years as well.
In January, it said that it was ending an agreement with the International Longshoremen’s Association to keep its contract with the union after the two sides reached an agreement that would allow the company to negotiate better wages and benefits with its workers.
The labor deal was struck in February but was not signed.
The International Union of Operating Engineers, the union representing cruise ship operators, called for the end of the contract.
The union said the contract would not help workers, which are underpaid and overworked.
The deal was negotiated by the company and the IUE and it was set to expire in 2019.
Last week, the IUOE called on the International Federation of the Red Cross to withdraw its