Cautionary Note Concerning Factors That May Affect Future Results

Some of the statements, estimates or projections contained in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this joint Quarterly Report on Form 10-Q are "forward-looking statements" that involve risks, uncertainties and assumptions with respect to us, including some statements concerning future results, outlooks, plans, goals and other events which have not yet occurred. These statements are intended to qualify for the safe harbors from liability provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We have tried, whenever possible, to identify these statements by using words like "will," "may," "could," "should," "would," "believe," "expect," "anticipate," "forecast," "future," "intend," "plan," "estimate" and similar expressions of future intent or the negative of such terms.

Because forward-looking statements involve risks and uncertainties, there are many factors that could cause our actual results, performance or achievements to differ materially from those expressed or implied in this joint Quarterly Report on Form 10-Q. Forward-looking statements include those statements which may impact, among other things, the forecasting of our earnings per share, net revenue yields, booking levels, pricing, occupancy, operating, financing and/or tax costs, fuel expenses, costs per available lower berth day ("ALBD"), estimates of ship depreciable lives and residual values, liquidity, goodwill and trademark fair values, outlook or business prospects. These factors include, but are not limited to, the following:

- general economic and business conditions, including fuel price increases, high unemployment rates, and declines in the securities, real estate and other markets, and perceptions of these conditions may adversely impact the levels of our potential vacationers' discretionary income and net worth and this group's confidence in their country's economy;

- fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against the euro and sterling;

- the international political climate, armed conflicts, terrorist and pirate attacks and threats thereof, and other world events affecting the safety and security of travel;

- conditions in the cruise and land-based vacation industries, including competition from other cruise ship operators and providers of other vacation alternatives and overcapacity offered by cruise ship and land-based vacation alternatives;

- accidents, the spread of contagious diseases, adverse weather conditions or natural disasters, such as hurricanes and earthquakes, and other incidents (including, but not limited to, ship fires and machinery and equipment failures or improper operation thereof), which could cause, among other things, individual or multiple port closures, injury, death, alteration of cruise itineraries or cancellation of a cruise or series of cruises or tours;

- adverse publicity concerning the cruise industry in general, or us in particular;

- lack of acceptance of new itineraries, products and services by our guests;

- changing consumer preferences;

- changes in and compliance with laws and regulations relating to employment, environmental, health, safety, security, tax and other regulatory regimes under which we operate;

- increases in global fuel demand and pricing, fuel supply disruptions and/or other events on our fuel and other expenses, liquidity and credit ratings;

- increases in our future fuel expenses from implementing approved International Maritime Organization regulations, which require the use of higher priced low sulfur fuels in certain cruising areas;

- changes in operating and financing costs, including changes in interest rates, food, insurance, payroll and security costs;

- our ability to implement our shipbuilding programs and ship maintenance, repairs and refurbishments, including ordering additional ships for our cruise brands from European shipyards on terms that are favorable or consistent with our expectations;

- whether our future operating cash flow will be sufficient to fund future obligations and whether we will be able to obtain financing, if necessary, in sufficient amounts and on terms that are favorable or consistent with our expectations;

- our ability to attract and retain qualified shipboard crew and maintain good relations with employee unions;

- continuing financial viability of our travel agent distribution system, air service providers and cruise shipyards and their subcontractors;

- availability and pricing of air travel services, especially as a result of significant increases in air travel costs;

- changes in the global credit markets on our counterparty risks, including those associated with our cash equivalents, committed financing facilities, contingent obligations, derivative instruments, insurance contracts and new ship progress payment guarantees;

- our decisions to self-insure against various risks or our inability to obtain insurance for certain risks at reasonable rates;

- disruptions and other damages to our information technology networks;

- lack of continued availability of attractive, convenient and safe port destinations; and

- risks associated with the DLC structure, including the uncertainty of its tax status.

Forward-looking statements should not be relied upon as a prediction of actual results. Subject to any continuing obligations under applicable law or any relevant listing rules, we expressly disclaim any obligation to disseminate, after the date of this joint Quarterly Report on Form 10-Q, any updates or revisions to any such forward-looking statements to reflect any change in expectations or events, conditions or circumstances on which any such statements are based.

Outlook for the Remainder of Fiscal 2009

As of June 18, 2009, we said that we expected our diluted earnings per share for the third quarter and full year of 2009 would be in the range of $1.15 to $1.19 and $2.00 to $2.10, respectively. Our guidance was based on fuel prices per metric ton of $406 and $353 for the third quarter and full year of 2009, respectively. In addition, this guidance was also based on currency exchange rates of $1.39 to the euro and $1.61 to sterling for the third quarter and $1.37 to the euro and $1.54 to sterling for the full year of 2009.

The above forward-looking statements involve risks and uncertainties. Various factors could cause our actual results to differ materially from those expressed above including, but not limited to, economic conditions, foreign currency exchange rates, fuel expenses, weather, regulatory changes, geopolitical and other factors that could impact consumer demand or costs and expenses. You should read the above forward-looking statement together with the discussion of these and other risks under "Cautionary Note Concerning Factors That May Affect Future Results."

Critical Accounting Estimates

Impairment reviews of our ships and goodwill and trademarks, which have been allocated to our cruise line reporting units, require us to make significant estimates to determine the fair values of these assets or reporting units. The determination of these fair values includes numerous uncertainties.

However, due to the ongoing uncertainty in market conditions, which may negatively impact the performance of our reporting units, we will continue to monitor and evaluate the carrying values of our goodwill and trademarks. If market and economic conditions or our units' business performance deteriorates significantly then we would perform interim impairment reviews. Any such impairment reviews could result in recognition of a goodwill and/or trademark impairment charge in 2009 or thereafter. We will be performing our 2009 annual goodwill and trademark impairment reviews as of July 31, 2009.

For a further discussion of our critical accounting estimates, see "Management's Discussion and Analysis of Financial Condition and Results of Operations," which is included in Carnival Corporation & plc's 2008 joint Annual Report on Form 10-K.

Seasonality and Expected Capacity Growth

Our revenues from the sale of passenger tickets are seasonal. Historically, demand for cruises has been greatest during our third fiscal quarter, which includes the Northern Hemisphere summer months. This higher demand during the third quarter results in higher net revenue yields and, accordingly, the largest share of our net income is earned during this period. The seasonality of our results is increased due to ships being taken out of service for maintenance, which we typically schedule during non-peak demand periods. In addition, substantially all of Holland America Tours' and Princess Tours' revenues and net income are generated from May through September in conjunction with the Alaska cruise season.

The year-over-year percentage increase in our ALBD capacity for the third and fourth quarters of 2009 is currently expected to be 5.5% and 7.6%, respectively. Our annual ALBD capacity increase for fiscal 2009, 2010, 2011 and 2012 is currently expected to be 5.4%, 7.2%, 5.8% and 3.9%, respectively. The above percentage increases result primarily from new ships entering service and exclude any other future ship orders, acquisitions, retirements or sales.

Selected Cruise and Other Information

Selected cruise and other information was as follows:



                                                  Three Months               Six Months
                                                 Ended May 31,             Ended May 31,
                                               2009         2008         2009         2008
Passengers carried (in thousands)               2,029        1,985        3,898        3,896

Occupancy percentage(a)                         103.3 %      104.8 %      103.6 %      104.5 %

Fuel consumption (metric tons in thousands)       799          803        1,552        1,588

Fuel cost per metric ton(b)                   $   304      $   530      $   291      $   514

Currency
U.S. dollar to €1                             $  1.33      $  1.56      $  1.33      $  1.51

U.S. dollar to £1                             $  1.48      $  1.98      $  1.47      $  1.98

(a) In accordance with cruise industry practice, occupancy is calculated using a denominator of two passengers per cabin even though some cabins can accommodate three or more passengers. Percentages in excess of 100% indicate that on average more than two passengers occupied some cabins.

(b) Fuel cost per metric ton is calculated by dividing the cost of our fuel by the number of metric tons consumed.

Revenues

Our total revenues decreased $430 million, or 12.7%, from $3.4 billion in 2008 to $2.9 billion in 2009. This was caused by a $611 million revenue decrease that was primarily due to the adverse impact of the economic downturn on our cruise ticket pricing and onboard and other revenues, as well as a stronger U.S. dollar against the euro and sterling compared to 2008. In addition, the U.S. Centers for Disease Control and Prevention's ("CDC") recommendations against non-essential travel to Mexico as a result of the H1N1 flu virus also adversely impacted our revenues because we had to alter several of our cruise ships' itineraries. This revenue decrease was partially offset by our 5.9% capacity increase in ALBDs (see "Key Performance Non-GAAP Financial Indicators"). Our capacity increased 4.2% for our North American cruise brands and 8.0% for our European cruise brands in 2009 compared to 2008, as we continue to implement our strategy of expanding in the European cruise marketplace.

Onboard and other revenues included concessionaire revenues of $199 million in 2009 and $220 million in 2008. Onboard and other revenues decreased $70 million in 2009 compared to 2008, primarily because there was lower onboard spending for all of the major onboard revenue-producing activities, as well as the impact of the stronger U.S. dollar against the euro and sterling compared to 2008, partially offset by our 5.9% increase in ALBDs.

Costs and Expenses

Operating costs decreased $274 million, or 12.7%, from $2.2 billion in 2008 to $1.9 billion in 2009. This decrease was primarily due to $180 million of lower fuel prices, the impact of the stronger U.S. dollar against the euro and sterling, decreased commissions primarily as a result of our lower ticket revenues and lower fuel consumption as a result of our fuel saving initiatives compared to 2008. This decrease was partially offset as a result of increased capacity driven by our 5.9% increase in ALBDs and a $24 million increase in dry-dock expenses due to more ships being in dry-dock.

Selling and administration expenses decreased $32 million, or 7.5%, from $425 million in 2008 to $393 million in 2009. The decrease was primarily currency driven, and was partially offset by our 5.9% increase in ALBDs.

Depreciation and amortization expense increased $5 million, or 1.6%, from $312 million in 2008 to $317 million in 2009, primarily due to the 5.9% increase in ALBDs through the addition of new ships and additional ship improvement expenditures, partially offset by the impact of the stronger U.S. dollar against the euro and sterling.

Our total costs and expenses as a percentage of revenues increased from 85.7% in 2008 to 88.0% in 2009.

Operating Income

Our operating income decreased $129 million from $482 million in 2008 to $353 million in 2009 primarily because of the reasons discussed above.

Nonoperating (Expense) Income

Net interest expense, excluding capitalized interest, decreased $8 million to $97 million in 2009 from $105 million in 2008. On a constant dollar basis, this decrease was primarily due to a $12 million decrease in interest expense from lower average interest rates on average borrowings, partially offset by $9 million of lower interest income due to a lower average level of invested cash and lower average interest rates on invested balances. In addition, interest expense decreased by $6 million as a result of the stronger U.S. dollar against the euro and sterling compared to 2008.

ALBDs is a standard measure of passenger capacity for the period, which we use to perform rate and capacity variance analyses to determine the main non-capacity driven factors that cause our cruise revenues and expenses to vary. ALBDs assume that each cabin we offer for sale accommodates two passengers and is computed by multiplying passenger capacity by revenue-producing ship operating days in the period.

We use net cruise revenues per ALBD ("net revenue yields") and net cruise costs per ALBD as significant non-GAAP financial measures of our cruise segment financial performance. These measures enable us to separate the impact of predictable capacity changes from the more unpredictable rate changes that affect our business. We believe these non-GAAP measures provide a better gauge to measure our revenue and cost performance instead of the standard U.S. GAAP-based financial measures. There are no specific rules for determining our non-GAAP financial measures and, accordingly, it is possible that they may not be exactly comparable to the like-kind information presented by other cruise companies, which is a potential risk associated with using them to compare us to other cruise companies.

Net revenue yields are commonly used in the cruise industry to measure a company's cruise segment revenue performance and for revenue management purposes. We use "net cruise revenues" rather than "gross cruise revenues" to calculate net revenue yields. We believe that net cruise revenues is a more meaningful measure in determining revenue yield than gross cruise revenues because it reflects the cruise revenues earned net of our most significant variable costs, which are travel agent commissions, cost of air transportation and certain other variable direct costs associated with onboard and other revenues. Substantially all of our remaining cruise costs are largely fixed, except for the impact of changing prices, once our ship capacity levels have been determined.

Net cruise costs per ALBD is the most significant measure we use to monitor our ability to control our cruise segment costs rather than gross cruise costs per ALBD. We exclude the same variable costs that are included in the calculation of net cruise revenues to calculate net cruise costs to avoid duplicating these variable costs in these two non-GAAP financial measures.

In addition, because a significant portion of our operations utilize the euro or sterling to measure their results and financial condition, the translation of those operations to our U.S. dollar reporting currency results in decreases in reported U.S. dollar revenues and expenses if the U.S. dollar strengthens against these foreign currencies, and increases in reported U.S. dollar revenues and expenses if the U.S. dollar weakens against these foreign currencies. Accordingly, we also monitor and report our two non-GAAP financial measures assuming the current period currency exchange rates have remained constant with the prior year's comparable period rates, or on a "constant dollar basis," in order to remove the impact of changes in exchange rates on our non-U.S. dollar cruise operations. We believe that this is a useful measure since it facilitates a comparative view of the growth of our business in a fluctuating currency exchange rate environment.

                                                   Three Months Ended May 31,
                                                              2009
                                                            Constant
                                            2009             Dollar             2008
                                             (in millions, except ALBDs and yields)
Cruise revenues
Passenger tickets                       $      2,242      $      2,461      $      2,588
Onboard and other                                673               718               743

Gross cruise revenues                          2,915             3,179             3,331
Less cruise costs
Commissions, transportation and other           (440 )            (495 )            (525 )
Onboard and other                               (110 )            (120 )            (121 )

Net cruise revenues                     $      2,365      $      2,564      $      2,685

ALBDs                                     15,329,812        15,329,812        14,480,881

Gross revenue yields                    $     190.19      $     207.36      $     230.04

Net revenue yields                      $     154.24      $     167.22      $     185.45

Gross and net cruise costs per ALBD were computed by dividing the gross or net cruise costs, without rounding, by ALBDs as follows:

                                                               Three Months Ended May 31,
                                                                            2009
                                                                          Constant
                                                    2009                   Dollar                 2008
                                                     (in millions, except ALBDs and costs per ALBD)
Cruise operating expenses                      $         1,850         $         2,001        $      2,115
Cruise selling and administrative expenses                 386                     418                 416

Gross cruise costs                                       2,236                   2,419               2,531
Less cruise costs included in net cruise
revenues
Commissions, transportation and other                     (440 )                  (495 )              (525 )
Onboard and other                                         (110 )                  (120 )              (121 )

Net cruise costs                               $         1,686         $         1,804        $      1,885

ALBDs                                               15,329,812              15,329,812          14,480,881

Gross cruise costs per ALBD                    $        145.90         $        157.81        $     174.79

Net cruise costs per ALBD                      $        109.95         $        117.68        $     130.20

Net cruise revenues decreased $320 million, or 11.9%, to $2.4 billion in 2009 from $2.7 billion in 2008. This was caused by a $478 million, or 16.8%, decrease in net revenue yields in 2009 compared to 2008 (gross revenue yields decreased by 17.3%). This decrease was partially offset by a 5.9% increase in ALBDs between 2009 and 2008 that accounted for $158 million. The net revenue yield decrease in 2009 was primarily due to the adverse impact of the economic downturn on our cruise ticket pricing and onboard and other revenues, as well as the impact of a stronger U.S. dollar against the euro and sterling compared to 2008. In addition, the CDC's recommendations against non-essential travel to Mexico as a result of the H1N1 flu virus also adversely impacted our net revenue yields as previously discussed. Net revenue yields as measured on a constant dollar basis decreased 9.8% in 2009 compared to 2008, which was comprised of a 10.0% decrease in passenger ticket yields and a 9.4% decrease in onboard and other revenue yields. Gross cruise revenues decreased $416 million, or 12.5%, to $2.9 billion in 2009 from $3.3 billion in 2008 for largely the same reasons as discussed above for net cruise revenues.

Six Months Ended May 31, 2009 ("2009") Compared to the Six Months Ended May 31, 2008 ("2008")

Revenues

Our total revenues decreased $718 million, or 11.0%, from $6.5 billion in 2008 to $5.8 billion in 2009. This was caused by a $969 million revenue decrease that was primarily due to the adverse impact of the economic downturn on our cruise ticket pricing and onboard and other revenues, as well as the impact of a stronger U.S. dollar against the euro and sterling compared to 2008. This revenue decrease was partially offset by our 4.1% capacity increase in ALBDs (see "Key Performance Non-GAAP Financial Indicators"). Our capacity increased 3.1% for our North American cruise brands and 7.1% for our European cruise brands in 2009 compared to 2008, as we continue to implement our strategy of expanding in the European cruise marketplace.

Onboard and other revenues included concessionaire revenues of $375 million in 2009 and $406 million in 2008. Onboard and other revenues decreased $138 million in 2009 compared to 2008, primarily because there was lower onboard spending for all of the major onboard revenue-producing activities, as well as the impact of the stronger U.S. dollar against the euro and sterling compared to 2008, partially offset by our 4.1% increase in ALBDs.

Costs and Expenses

Operating costs decreased $538 million, or 12.6%, from $4.3 billion in 2008 to $3.7 billion in 2009. This decrease was primarily due to $347 million of lower fuel prices, the impact of the stronger U.S. dollar against the euro and sterling and decreased commissions primarily as a result of our lower ticket revenues and lower fuel consumption as a result of fuel saving initiatives compared to 2008. This decrease was partially offset as a result of increased capacity driven by our 4.1% increase in ALBDs and a $50 million increase in dry-dock expenses.

Selling and administration expenses decreased $65 million, or 7.6%, from $850 million in 2008 to $785 million in 2009. The decrease was primarily currency driven, and was partially offset by our 4.1% increase in ALBDs.

Depreciation and amortization expense increased $15 million, or 2.4%, from $613 million in 2008 to $628 million in 2009, primarily due to the 4.1% increase in ALBDs through the addition of new ships and additional ship improvement expenditures, partially offset by the currency impact.

Our total costs and expenses as a percentage of revenues increased from 87.8% in 2008 to 88.6% in 2009.

Operating Income

Our operating income decreased $130 million from $794 million in 2008 to $664 million in 2009 primarily because of the reasons discussed above.

Net interest expense, excluding capitalized interest, decreased $7 million to $199 million in 2009 from $206 million in 2008. On a constant dollar basis, there was a $15 million increase in net interest expense because of lower interest income due to a lower average level of invested cash and lower average interest rates on invested balances and a $13 million increase from a higher level of average borrowings, partially offset by a $25 million decrease in . . .