Welcome tothe Carnival Corporation's Fourth Quarter Year End Conference Call. (OperatorInstructions). As a reminder, this conference is being recorded Thursday,December 20, 2007. I would now like to turn the conference over to Mr. HowardFrank, Vice Chairman and Chief Operating Officer. Please go ahead, sir.

Good morning. Good morning, everyone. This is Howard Frankand with me this morning here in Miamiis Micky Arison, Chairman and CEO of Carnival Corporation, David Bernstein, SeniorVP and CFO, and Beth Roberts, our Vice President of Investor Relations. To start off the discussion this morning, David will giveyou some color on the fourth quarter of 2007 and talk a little bit about ourcost metrics going forward into 2008 and then he will turn it back over to meand I will discuss our outlook for 2008. David?

Thank you, Howard. I will begin the conference call byreading the forward-looking statement which we have done in the past. Duringthis conference call we will make certain forward-looking statements. Suchforward-looking statements involve known and unknown risks, uncertainties orother factors which may cause the actual results, performances or achievementsof Carnival to be materially different from any future results performances orachievements expressed or implied by such forward-looking statements. Forfurther information please see Carnival's earnings press release and itsfilings with the Securities and Exchange Commission. For the fourth quarter 2007 our EPS was $0.44 per share, andthis compares to $0.51 per share for 2006. For the full year, our earnings pershare was a record $2.95 in comparison to 2006, which was $2.77. Our EPS forthe fourth quarter came in at the high end of our previous guidance and thisresulted from stronger pricing on bookings taken close to the departure, whichwas partially offset by higher than expected fuel expense. Looking more closely at our fourth quarter operatingresults. Our capacity increased 7.5% with the majority of the increase going toour European brand. Net revenue yields in current dollars increase 4.9% for thequarter. In constant dollars, which eliminates the effects of currency ratechanges, net revenue yield increased 1.1%. This was higher than the previousguidance we gave which we said would be flat for the quarter. And as I said amoment ago, we saw a stronger pricing on close-in booking. Overall in the fourth quarter, we saw yield improvements inour North American brands driven by the continued recovery in the Caribbean which was somewhat offset by lower yields inconstant dollars in our European brands. However, keep in mind that Europeanbrands are still achieving solid results, despite the lower yields operatingincome in constant dollars for our European brands was up for the quarter. I am also glad to…

Thank you, David. Before I move to our outlook for 2008, Iwanted to tell you what an extraordinary celebration we had last week at thenaming ceremony for the new Queen Victoria.It was in Southampton, England. Camilla Parker Bowles, theDuchess of Cornwall and Prince Charles christened the new Queen Victoria in front ofseveral thousand guests. The event received worldwide media coverage and willprovide significant benefits to Cunard brand for many years to come. As you know, earlier this year we announced the venerable QE2will retire at the end of 2008. And we contracted to build the new Queen Elizabethwhich will be delivered in 2010, actually the replacement ship but somewhatlarger than the QE2. We are delighted with the performance of Cunard Line, Ishould add and brand fully global and its market reach. It's well positioned atthe high-end of the cruise market on both sides of the Atlanticand we are confident we can grow this brand profitably in the future. I would also like to highlight another important businessstrategy that we touched on in the press release, and which we believe will haveboth short term and long-term benefits to the company. Last week we announcedthe sizing up of our China, Asia deployment for 2009, the Costa Classica whichcan carry up to 1,680 passengers, would be moved to the Asia market in thespring of 2009 to join the Costa Allegra which has been in Asia for a couple ofyears now. The Classica will be moved in tothe China market and the Allegrawill be moved to Singaporeand operate cruises throughout Southeast Asia.We have been encouraged by the very positive response we are receiving fromthese new markets and believe that as we expand our footprint in Asia, we can establish ourselves as one of the leadingvacation companies in this increasingly important part of the world.…

Thank you. (Operator Instructions). A moment please for the firstquestion and it comes from the line of Ms. FeliciaHendrix, Lehman Brothers. Please go ahead, ma'am.

Hi. Good morning, guys. I have a few questions on these fuelsurcharges. The first is, Howard, I know that fuel surcharges get implemented startingthis February. So, for the full year the net yield guidance that you havegiven, does that include these surcharges or not?

Yes it includes. It includes all revenue including therevenue we get from the fuel supplements. Yeah.

Supplements. Sorry, so…

It's all inclusive number. That's correct.

So is there a way to indicate to us or to give us sometransparency, the breakout, kind of what the real yields are versus thesupplement?

Not really, because when the brands actually put the fuel supplementinto their numbers, they just gave us guidance based on the overall revenuenumbers, the yield revenue numbers they expect to get. So, while itincorporates the fuel supplements, there is no way you are really knowing as tohow much of the fuel supplement will actually capture in the overall yieldnumber. Because it may be that there could become deterioration in yield as aresult of putting a fuel supplement in terms of overall yield. So, there is noway knowing. All we can tell you is what the overall yield improvement is goingto look like.

Felicia, this is Micky. We could also tell you that if wecollect the full fuel supplement from every passenger it would equate to about1.5% of the yield improvement.

Okay. But, that's assuming the full 14 days, is that whatyou mean?

Yeah, correct.

Yeah.

Based on the booking pattern, the brands give us an overallrevenue and they don't make the attempt to breakout what is various pieces ofthe revenue going forward. It's impossible to tell because the reality is whenyou bake it together and charge your customer you charge him one price.

Right. But, it's fair to say just based on what you said,assuming the full, it's probably something less than 1.5% in reality correct?

It can't be something more.

Right, right.

It can only be 1.5% or something less.

Okay, just clarifying. And then also when you all gave theEPS impact for fuel each quarter, that's also inclusive, that's after thesupplement?

Supplement is in the revenue, it has nothing to do with thecost.

It's separate from the book revenue.

Okay, so the $0.50 number is separate?

Correct.

Okay, and then absorb therefore in the revenue line, so it'snet-net all there. Okay, that's it. Thanks.

You're welcome.

You're welcome.

And our next question comes from line of Robin Farley fromUBS. Please go ahead.

Thanks. Yeah, just some, I guess one quick clarification onthe fuel supplement. Internally your expectations for yields go up by a 0.5since you introduced the fuel surcharge.

No, I think we just explained that. The various brand basedon their booking pattern gave us the overall…

So, I realize it's in your guidance. I just wondered whatyou would have said internally that expectations you are collecting before youannounced this surcharge if they changed. In another words your internalexpectations did change.

No.

No, we are probably not sure as we answer, because we don'tknow.

Each brand did their own forecast based on their bookingpattern and each brand may have had different expectations at the time weannounced it, but overall…

Okay. So, in another words, you don't know whether that wasadded in or not. You are not comparing to an expectation before your fuelsurcharge announcement?

That's right.

Okay. So...

That's fair.

Okay. So, that clarifies. Thanks. And then also I want...

I want an answer for this North America,yields or overall...

Overall.

Overall, overall.

Okay. And then can you comment on the proposals for potentialchange and sabotage, how that could effect cruises that touch on Hawaii?

The present proposal that customs and border patrol has askedus to comment on would require -- basically would not enable us to operate thepresent itineraries from Southern California to Hawaii and we are making those comments rightnow. I mean, basically right now they are targeting 15 day round trip cruisesfrom Southern California to Hawaii.The negative impact will be devastating to Los Angelesand particularly San Diego.If it applies beyond Hawaii it would also bedevastating to places like Seattle, Key West and other US ports. In all those situations, though, we have alternative itinerariesthat we can operate. So, the real damage will be felt in US ports. We even havea letter for the Visitors and Convention authority in Hawaiithat positions it as the negative for Hawaii.So, the reality is there are alternative itineraries. Clearly, if they supplybeyond Hawaii we could operate from Vancouver instead of Seattleas we did in the past. Or we can operate these cruises out of Ensenada as we did in the past. So, there arealternatives for us, but it unfortunately put some US ports out of business.

Okay. Great. Thank you.

And our next question comes from the line of Michael Savnerwith Banc of America Securities. Please go ahead.

Good morning. Thanks. Two questions, if that's okay. First,can you talk a little bit more about your confidence in the European market,waiting beyond given significant capacity increases? Obviously, it's been areal sustainable market for you in recent years offsetting the Caribbean. But yields are showing some signs of maturityand is this, maybe I would ask differently, what evidence is there that thereis still an enormous untapped market or have the days have real solid yieldincreases, maybe as that set aside for a little while the market digest the newcapacity?

I think, Michael, if you are growing your markets, andbroadly speaking by high teens or 20% and you can achieve, let's say, flatyields on a year-over-year basis, you are doing very, very well. You probablydon't even need to try, the yield managers in those markets don't even try toget higher yields. They are happy to get the flat yields and continue to growthe market. Because what happens in those businesses, of course, the costmetrics, as you expand your fleets and you are putting in larger ships, itgives you huge advantage from an operating line standpoint. So, the idea is, the strategy is, to grow those markets withmore capacity and then over time you will probably feel you've slowed thegrowth which you want. The markets are still rather immature, they are lessthen 1% penetrated with exception in the UKwhich are little bit over 1% compared to over 3% in the US. So, there is huge opportunityto grow in Europe. The demographics arestrong. The length of vacations that Europeans are taking is strong.The baby boomer generation is as evident in Europe as it is here in the US, interms of why our markets are so strong here in US right now for cruising. Sothat part of their market is growing as well, so it's just overall a verystrong market. But we are happy to get, I don't think we are striving toachieve substantial increase in yields here, we are happy to get same yields ifwe can achieve that. And I know you are right, we are benefiting also from thecurrency, but that's above and beyond what we need to do to get to make it workfor us.

I don't agree with the whole premise of your question.Reality is we are growing with European brands and European markets at a veryrapid rate and the absorption has been virtually painless and it’s been anamazing story of how these brands have grown. And remember at the time of themerger, there was very little growth anticipated for those markets. P&O hadno new ships under contract, AIDA had new ships under contract, the only growthwas Costa, which was a brand on the Carnival side that was growing rapidly. Butwe made the decision at the time of the merger of taking advantage of reallythe unique brand positioning we had in Europe and leveraging those brands, andit's a strategy that has worked beautifully for us.

Thanks that's very helpful. I wasn't actually implying thatthe guidance was disappointing more. I just wanted get a sense of how you thinkabout the capacity and the yields overtime. So that answered that question.

I think it’s also important to point out that in thisquarter we ordered two additional ships for Costa and two additional ships forAIDA, which shows a great deal of confidence in those market.

Moving over to TUI for a second, because that's still arelationship I believe you still have, but obviously RCL has taken off whereyou left off. They have taken over. You had said on your last conference callthat while, I think it was that, TUI isn't your biggest distributor in Germany,they are still a very important partner. How can we expect that to change if atall going forward with RCI having their new deal with TUI?

First of all, I don't expect to change it all, but just togive a sense. For AIDA brand which obviously is our overwhelmingly largest Germanbrand, TUI owned retail offices, we don't deal with tour operators by the way,we don't deal with the TUI tour operator in Germany in AIDA. But their ownedretail operation represents 7% of our business. But we don't expect that tochange, and I can tell you that in the U.K. where Royal Caribbean has a JV withthe now TUI/First Choice retail distribution, they continue to sell all our UKbrands, and it's very common in Europe for retail distribution to sell all theproducts out there. So we don't see a problem. I would like to comment on the concept of your question. Imean the concept we had with TUI, with utilizing the TUI brand and how we weregoing to do that is quite different than what's being proposed now. And there'sbeen a lot of commentary that basically RCI step into our shoes, but reality iswe had a deal with TUI that they would have taken 5% of our overall Germanbusiness building up to 25% and building on the back of our existinginfrastructure. The present JV is a 50-50 JV, similar to what is being donein the U.K.with First Choice. And at the time that we started to talking to TUI, AIDAbrand had three new ships, one old ship, and we were beginning to build andthis was two years ago. And the JV that RCI and TUI are talking about wouldhave its first ship earliest in '11 where AIDA would already be eight new shipfleet in a very, very strong market position in Germany. So, quite differentscenarios, I believe, the one common denominators both we and RCI saw anopportunity of leveraging the TUI brand and I think that's correct.

Thanks very much.

And our next question comes from line Tim Conder withWachovia. Please go ahead.

Thank you. A couple of questions. First of all, thanks youfor the clarification on Europe, I know thereis a lot of confusion out there among investors on that. But regarding Europe, what level would yields have to fall in currentdollars before your operating profit per available lower berth day would beflat?

I don't think we know the answer to that question.

And I don't think we care, because we are forecasting slightyields in constant dollars and believe that's a very [chaste] forecast and theirbooking patterns are extremely strong right now.

Okay. I guess you are just asking the significance -- justsort of another way to ask global significance of leverage as you are gettingon the capacity growth over there. The other thing is related to theassumptions with the fuel surcharge. Micky, you gave us some color as to theyhad about 1.5% on yields assuming a 100%. Are you seeing any resistance at allto the fuel surcharge at this point?

Sure. Obviously when you announce something like this youare going to have a certain percentage of people that are going to complaintabout it and are going to be unhappy about it. And I would say that that 99% ofboth travel agents and consumers accepted it with no issue, no problem. 1%probably sent us some level of complaint and one-tenth of 1% were vehement complainers. Now recognizing that we probably had 2 million people on thebooks, that's a lot of people, even one-tenth of 1%. But when you look atbooking patterns pre-installs the period of the surcharge, that's really withthe exception of a slight blip in cancellation thereafter was announced and Imean really slight blip, otherwise it went very, very smoothly, probably farbetter than we anticipated at the time of the announcement.

I won't -- Yes this is Howard. I went through thecancellations with one of the brands yesterday as a result of implementing afew supplements, and you can barely see the difference between last year'scancellation and this year's cancellation during the period. It's really de minimums.So, it's really—well it seems to be – many people by and large accept thenotion that the fuel prices escalated very dramatically in the fourth quarterthat — we are not the only industry that I think (inaudible) supplement, Ithink people understand it.

I think, when you are looking at the time of the announcementthe fuel was pushing a $100, and today we basically told you we are talkingabout $400 million from the company. I think people overall understand andrecognize that we are asking them to participate in a very small piece of theincrease. Tim Conder - A.G.Edwards & Sons: Okay. And lastly any color on Asia,are you reaching operating profit there yet, and the contribution in thequarter is expected for '08 to yield?

Asia was never expected todeliver with one ship, 800 or so passenger ship operating in its own marketwith its own brand with a high degree of distribution and marketing cost. We'venever expected to make a profit. It was going to be an investment for us solong as we only had one ship in the region, Tim. So, until we size up the twoships and I don't – and it will continue to be an investment, although,obviously, as yields have strengthened the investment has gone to lesser or so,[baked] into of course overall numbers is an embedded investment in Asia during 2008 and in the beginning part of 2009 untilthe second ship gets in.

But the improvements have been dramatic and that's obviouslythe reason why we felt we can go ahead and size up a larger ship like the CostaClassica can drive a profit out of Asia. Tim Conder - A.G.Edwards & Sons: Great, great. Thank you and congratulations.

Next question comes from the line of Assia Georgieva withInfinity Research. Please go ahead

Good morning. One question which I've asked before and wehave seen the obviously yield and stronger bookings since June of this year.And Micky you had tried to answer that before, but I wonder have you done anymore analysis why this year when the macro headwinds are much more significantthan an year ago, we are actually seeing such positive developments. Andobviously I welcome them, I just have been asked numerous times what the reasonsfor those would be and I am not sure that I have a good answer.

That makes two of us.

I think as we sat down and talk about what's going on in thelarger economy and what's going on in our business and try to figure out a rationaleas to why our performance continues to be strong and the overall economycontinues to show signs of weakening, all we can give you is our hypothesis onwhat we think that's happening. And I think there are several things that arehappening. But I think broadly speaking you need to understand that a third ofour business today is global, it comes outside of the US. So, we are only focusing onthat two-thirds of our business which is North American based. And as we've indicated over the last several years, wecontinue to see growth in that part of the market where (inaudible) was a retiring,a greater [wealth] effect that occurs every year in the US, and that to a largerdegree our premium brands and our luxury brands are focused on, on that verystrong part of the growing market. So while the overall economy is showing signs of weakness, Idon't really believe it affects that consumer to any significant degree, andthen when go down to more of our mid-market products for the shorter cruises.Well, I think that part of the business probably is more susceptible to aslowdown in the economy. I think what happens is that people trade down to alower priced cruise. So, I think in past years we've seen tremendous resiliencyin that part of the market as we've gone through periods of slowing economiesand even through periods of recession. And that's not to say that we are immunefrom the recession, we'll feel the effects it will probably be in that part ofthe business. But at this point in time as you indicated Caribbeanbusiness is quite strong, and continues to show no abatement in terms of ourability to get good prices.

You have to always remember that we are talking in the contextof comparing to prior year or prior two years and we came off very difficultperiod post-Katrina where Caribbean yields were very, very poor. And so, we aredealing in the Caribbean when we are talkingabout strong improvements in yields. We are talking off of relatively easycomparables where yields were pretty low, and so we are starting to recover andare recovering and seeing those yield improvements because we started from arelatively low based post Katrina.

But, Micky, when I look at the numbers in Q4 of '07 theylook better than Q4 of '06 when we were down quite significantly, especiallyfirst time cruiser markets in the traditional Caribbean and at this point thatwe are ahead of Q4 of '05. So, it seems that there are some significant gooddeal wins for the industry. And, again, I am just struggling with the reasonwhy and the demographic shift have obviously been taking place for a few years,then all of the sudden the last six months have been so good for…

I think we are far better off just explaining to you ourbooking pattern and allowing you to discuss those issues with your economist,because you are asking macroeconomic questions that at least from my knowledgeI can't speak for everybody at the table. My knowledge is basically the cruiseindustry and that's where we can react. I mean, we have seen cycles in thisbusiness over 35 years that have not related to anything macroeconomically andI have seen it over and over and over again. I have seen good times with very,very high capacity increases and I have seen weak times with very low capacityincreases. I have seen the same thing in economic times that were good and bad.These cycles are to some degree inexplicable, but they are real and we are justtelling you what we see in the booking patterns.

If you have [bold insights] let met know because then we canuse it for the next call. But, obviously we can only kind of think of what'shappening, why are we performing as strongly as we are in the weakeningeconomy. And we don't really have the good answer other then good valuerelative to other vacations. That people are really stressed out and need totake their vacations, it's a higher priority that it was years ago, takingvacations. As husband and wives are working now and they need to get time offand there is a lot of that going on, I think, in terms of cycle traffic thatare affecting our business. I do think that as we've gotten now two years awayfrom that devastating hurricane season, and Micky has said this in the past, Ithink that has really helped our business as well.

I also think, and we probably don't do this enough, we haveto give credit to our brand management teams. I mean, they are doing anoutstanding, outstanding job whether it's our teams in mainland Europe and Italy and Germanyor UK or the managements inthe United States.I mean they have been doing an outstanding job.

Well, I feel a lot better now that I am not the only one whodoesn't understand the [weather]. So, thank you very much. Thank you. That wasthe only question I had.

Okay. Thank you, it’s all that.

And our next question comes from the line of Jamie Rollowith Morgan Stanley. Please go ahead.

Yeah, thanks. Good morning. Just had a couple of questionson your guidance, please. You have given full year yield growth of 3% to 4%next year, but of 4 to 5 infirst half. That could imply quite a big slowdown in the second half. Is thatjust your natural conservatism? It doesn't sound like you are factoring in anyeconomic weakness or is it something else there?

By the way, you understand we give yield guidance which isan aggregation of ten different companies. It's really, I think more relatedtougher comparisons for the second half of '07 versus '08 than it is for anychange in the pattern or anything like that. There maybe, I think also asrevenue was forecasted out beyond the first half of the year, there may be someelements of conservatism on their part, but we have no way of knowing, becauseI think it’s further out you are less confident than they are because they havevery good confidence and good sight, good vision for the first half of theyear.

I will say that the limited visibility we have for thesecond half, with that limited visibility the pattern appears to be the same asthe first half. We are well ahead and bookings are strong and so it's nothingin the pattern that is making us do that. It's a more a function of lessvisibility and maybe a little bit tougher comparison.

And did I hear you’re right by saying that your book ticketsprices on constant dollar are up 7.5%?

In which quarter?

No, that was actual dollars. That was current dollars.

Current dollars.

Current dollars.

It depends on which periods you are talking about. I saidticket pricing was up 7.5% higher than a year ago 4.3% in constant dollars.

Okay. Sorry.

All [of that laid] over 2007.

Current dollar is what appears in our P&L and currentdollar is the only comparable you have got because nobody helps to give youconstant.

Thanks and just the other sort of related question is, isthat 3% to 4% growth is all driven by your North American brands. So, thatobviously implies the North American brand yields are up sort of more like 5%to 6%. I am just wondering where that takes you back to, does that take youback to the level of yields before the weakness starts in the Caribbeanor is there more to go for there?

I can tell you that the pattern and the booking curves areout there with our strongest year and right there was '05 and better. So, wehave seen a significant bounce back. Whether the yields are fully there or not,I don't think so.

I don't think they are quite up to the level of strengththat we have achieved in years passed.

The pattern is there, but the not pricing yet.

But, you get still some opportunity to grow in there.

And again, you have to recognize that our pricing philosophyis to get better pricing out there early. So, it's kind of logical that thepricing wouldn't be there. But the booking pattern and booking curve is outthere which is very encouraging

And as we've changed the itineraries over the years it makesthings difficult to compare year-over-year and apples-to-apples basis the wayyou are implying.

Yeah. Very.

Great. Thank you very much.

You are welcome Jamie

And our next question comes from the line of Hakan Ipekci withMerrill Lynch. Please go ahead.

Okay. Thank you. Two questions. The first one is, do youexpect the cost pressures to moderate somewhat on per berth basis next year ona constant dollar? Is that purely as you said the increased economies of scalesin Europe or do you expect some of thepressures underweighted in the food to moderate somewhat.

We are getting, I am not going to forecast the exactinflationary pressures year-over-year for the various items. I mean we are stillseeing the pressures for 2008, and the cost reductions are driven by theeconomies of scale that we are achieving in Europe,and that's not to imply that our North American brands aren't achievingeconomies of scale as well, it's just not as dramatic with the lower percentageincrease in capacity.

I see. Okay, and with respect to Asia with the new vessels, theyare going to be kind of similar where you are going to have a mixed passengerstructure, where you have Asians and non-Asians, and if that's the case how doyou position slightly older vessels for Europeans or North Americans when youhave other competing products out there which are somewhat newer and slightlymore premium.

Let me go to your Asiaquestion. I think the plan is, and I don't think it's been publicly finalizedyet, but the plan is that the larger ship will go into China and will sail at of Tianjinand Shanghai and also will be sailing at Hong Kong. And a good part of that ship will be sold into the Chinese market, which is a market that we had been developing on fiveand six night cruises.

Okay.

But then as we do longer itineraries, while [resource] marketall those itineraries in China,we also market those itineraries in other parts of Asia, as well as in Europeand America.So I am not sure if it answers your question. But maybe we will basically bedoing longer cruises out of Singaporeas we move to Singaporein the longer cruises. That is Singaporewill be a market throughout Asia as well as in Australiaand other Asian market as well as Europe and the US.

The guest comments have been excellent both from the Asiansand from the European passengers, and the ship age has not been an issue theguest satisfaction levels have been very high. And really I am not exactly surewhat ships you are talking about, but the reality is, that the market that weare in we have huge brand strength over any competition.

I mean a brand like Holland,you know some of the more premium products. But it seems like customers seemquite happy, so that answers my question.

When a brand like Holland America goes in there, it's marketing primarilythe North America. So we are marketing todifferent people, different geographic areas. So one has nothing to do with theother, one doesn't compete with the other in a way.

Okay. Thank you.

Our next question comes from the line of Mark Greenberg withAIM Fund. Please go ahead.

Good morning. I wanted to ask you about that related coupleof questions with currency. Can you talk about recovery of business and the Caribbean and so on? Any indications how of the bookingin the Caribbean and Alaska as Americans are not taking trips overseas as ofthe weak dollar or it's because Europeans are coming to United States becauseof the weak dollar?

All I can tell you is, that our USbrands are doing extremely well in Europe. Nowhow much of that is currency related, because they are buying the cruise indollars, and in fact all they are onboard spending is in dollars. It's hard to say,but we are clearly using that as a selling point for North American passengersthat they can take a European vacation primarily dollar based. So that could betheoretically helping the strength of the North American brand selling in NorthAmerica to Europe.But clearly as the business globalizes, we are seeing all nationalitiestraveling in all different destinations and that is helping all the brands pushtheir yields up.

What about the American not going overseas because of theweak dollar, any indication people are staying home just because it's cheaperor because a European vacation is just so expensive now?

Again, it's the reverse. We are selling European vacationsin dollars.

The [process] are positive in the sense that Americans cantake a European vacation using dollars largely going on a cruise, because wesell in dollars for our European vacation. And indeed that marketingopportunity is being used by our brand as well. So if the people who can'tafford to go to European and buy Euro or buy Sterling,they can afford to go to Europe and use dollarsthat's a huge cost advantage for me.

Anecdotally, I spend a lot of time in Europe in the summer,and I think for me this summer there's more Americans than ever in Europe. So I don't know if those statistics will bearthat out, but the reality is, we do know that there was a huge, huge issue inthe passport office, getting passports this summer. So, clearly people aretraveling overseas.

Okay.

And our next comes from the line of Edward Stanford withCazenove. Please go ahead.

Hi, good morning, everybody. Just a couple of questions.First of all, would you be able to let us know what sort of percentage of yourinventory is booked in over the next three quarters? And secondly, I didn'tquite hear what you said the North American capacity would be in the thirdquarter, and could you possibly just let us know what the fourth quarter groupcapacity this year?

Edward, we don't provide specific percentages of inventorybooked by quarter or even actually for the full year. All what I did say isthat, relatively to last year we were five points ahead year-over-year.

The North American [brain] capacity is up 1.5% for the thirdquarter

And 4.6% for the fourth quarter

Thank you very much.

And also I think it's important to note the Caribbeancapacity for the year both for the industry and the company are down slightly,which I think is also contributing to stronger Caribbeanyields.

Thank you. And our next question comes from the line ofDavid Leibowitz with Burnham. Please go ahead. David Leibowitz –Burnham: Good morning. I apologize for the frog in my throat. What isthe status right now of [port] projects that you have in the works and what arethe dollars investment, and lastly how quickly you might be able to get a returnon that investment?

Thank you David. You sound terrific, Howard.

Yeah, well, David we got a couple of projects. One is downin Honduras, on the Island of Roatan. It's really just getting on theway from the design standpoint. We already called in Roatan but we call downtownin the larger city on the island. This will move the calls to a more pristinearea and we'll have two docks and a whole project in wonderful guest experienceincluding beaches and so on right there. I think the cost is in theneighborhood of $50 million - $55 million and I think we are scheduled to openit in 2009. It's just getting underway now, but once it opens we do get areturn on those projects.

[Cazenove's] rebuilding process is ongoing and

We will set up a few projects in St. Maarten where we aretesting and lending them about $34 million to develop that second [tier], somore ships can pull in rather than tending in to shore.

When we do a project, as David mentioned, like that in St.Maarten, it's less an investment to get a return on, its more we providefinancial support to the government to do that and they pay it back over periodof years. So, we get an interest rate of return on that money. David Leibowitz –Burnham: And my second question is, how do you determine which brandwill be faring berth, for instance you mentioned Princess is now going to havea ship in Britainyear around as it were. How do you determine which of your brands you put intowhich markets?

Well, Princess has had a dedicated UK ship now for a number of years.I must say both Royal Caribbean and Princess have very, very significant marketpositions in the UK under US brand, and the Princess brand has been anestablished UK brand from before the merger. So, we continue to leverage thedemand for US type productin the UKusing the Princess brand. And, clearly, these decisions are made depending onwhat brand we feel is best suited to particular markets. Like Princess also in Australia, Costa in Asia.I mean we take these decisions based on what brands we feel are best suited tothose markets and whether there is a market potential for a particular brand. David Leibowitz –Burnham: And that having being said, are we saying that whether it'sCarnival or AIDA or some of your other brands are best suited for the homemarkets that they currently serve rather than a specific foreign market?

This gets really complicated, because the reality is that wedid a little slide at the Queen Victoria where our North American brands in Europe sourced, what percentage was it? 44%?

40%...

40 something percent.

International.

Internationally. So, number of these brands are marketing.The only brands we have that truly market of 90 plus percent of theirpassengers to their home markets is P&O in the UK, Ocean Village in the UK,and AIDA in Germany. All others really market globally. Now, Carnival Cruise line clearly gets significantpercentage of their business in North America.Holland America does as well and Princessdoes as well. But, the reality is that this is become a global business formost of our brands. And in certain itineraries there is great deal of appealfrom a number of markets. And this is where I go into my slide about GNP growthworldwide being over hundred countries having 4% GNP growth and participating.And I think that's one of the reasons why the Med and Baltic cruises have beenso strong is because they are supported globally from passengers from all overthe world interested to see places like Venice or St. Petersburg, et cetera. David Leibowitz –Burnham: Thank you very much.

And our next question comes from the line of Scott Barryfrom Credit Suisse. Please go ahead.

Thanks. Most of my questions have been answered. Just onequick one, could you post the six new builds that you've ordered here duringlast quarter. Could you update us on the capital spending for '08 through 2010?Thanks.

Scott, I am going to have -- Beth is going to leaf throughher book and give you that information in a moment. And as she does that, maybewe can move. Is that all, Scott, you have, we will give it to you soon as.

Yeah. That's right. No problem.

We can take the question Operator. Thank you.

Excellent. And the next question is a follow-up questionfrom line of Felicia Hendrix from Lehman Brothers again. Please go ahead.

Hi. Just very quickly, housekeeping. Beth, maybe you cangive us guidance for '08 interest expense, D&A and actually the full yearfirst quarter capacity increase, you just gave North America?

Sure.

We're still waiting for Scott.

I'll go message Scott. For the interest expense for theyear, we are looking for a $360 million to $380 million and for D&A we arelooking for a $290 billion to a $310 billion, those are both ranges for thefull year. For capacity for the -- in total by quarter for 2008 for the Companyinclusive by via of the first quarter is 10.6, the second quarter is 7.9, thethird quarter is 8.8, the fourth quarter is 8.7, which gets you to the total onthe year of 9%

Thanks. And so the interest expense is net -- interestexpense is net of interest income?

Yes, it is.

Okay. Thank you

Are you stilling working on the….

Going back to the…

Okay, you're still working on Scott's question. We will takeone more question.

The next question comes from the line of Bart Glenn with AIMInvestments. Please go ahead.

Thank you. I just had one follow-up on the weak dollar. Iwas curious, can you quantify what benefits you might be seeing with Caribbeanprice or Alaska firm, the U.S. consumers staying home due to the weak dollaror also from foreign tourist into the U.S. because it is cheaper than itused to be for them?

I don't that we can actually -- I don't know that weactually know that, even try to -- even if you guess in terms of the U.S. consumer, one of the challenges, though,you would think that clearly more and more Europeans are coming to the U.S.because it's a less expensive vacation. But one of the challenges of gettinginto the U.S.today is many, many foreigners have to go and have to get visa. And then, theyhave to go through customs and immigration, which is getting more the line thelonger, it's more difficult, the people being more challenged and theexperience is not only a very pleasant experience. So there is a lot ofresistance that we are getting to the European's and South American and so onto come through these gateways in the U.S. So that's been a negativecourse and the travel industry has been lobbying to try to improve thatsituation.

We are hearing more and more of that and part of the reasonwhy Costa operates a winter program out of Guadalupe for Europeans is becausethey don't have to go through that or P&O operates out of Barbados. Theyuse to operate out of Fort Lauderdale,but the reality is that they just get too much push back on this region. So,they operate out of Barbados,where they don't have to ferry US. So, this is clearly an issue, but it's verydifficult for us to tell, as I said our North American business into Europe is very, very strong, so we don't really see,while for logical conclusion we don't really see it in the pattern.

Thank you.

And I wanted to get back, Scott, we don't have the exactschedule that shows the details by year, but to generally answer your question,in 2007 we had delivery of 5 ships and the CapEx was $3.3 billion. With thenews that six new ships that we took on order in the fourth quarter, the trendis five ships for 2008, five ships for 2009 , six ships for 2010, and four shipsfor 2011. At the moment we still have just two ships on order for 2012. So, youcan extrapolate onward from 2007, but we are looking at something north of $3billion per year in terms of CapEx.

Didn’t get more specific on that -- we have the figures, Iam having here.

Okay. And with that operator I am happy to close it out, Iwant to wish you all Merry Christmas and a happy and healthy New Year andhopefully, we'll get to see some of you in New York.

Happy Hanukkah and Happy Kwanzaa too.

On January the 13th, by the way, we do have Three Queens in New York on Sunday,January the 13th.

And come out wave.

And come out and say hello to three Queens, I mean ships Imean they are ships actually, QE2, Queen Mary 2 and Queen Victoria. So, hopefully we will be seeingyou all, some of you in January. All the best. Thank you, bye, bye.

Bye, bye.

Ladies and gentlemen that does conclude the conference callfor today, we thank you for participation and we ask that you please disconnectyour line.