Despite the fact that cruise lines were not part of the CARES Act stimulus package, despite the fact that companies have canceled sailings through May because of the coronavirus, the industry is in far better shape than the airlines.
According to a new report in the Miami Herald, the three largest cruise lines – Carnival Corporation, Royal Caribbean Cruises Ltd. and Norwegian Cruise Line Holdings – have raised enough cash to last at least 10 months without offering a single cruise, analysts say.
“We’re reducing capital expenditures across our company and working hard to add liquidity,” Carnival Corp. CEO Arnold Donald said in a call with the media on Thursday, noting that the company is prepared for a $0-revenue scenario through the rest of 2020. “We hope that will prove to be unnecessary, but we need to be prepared for the worst. We are prepared for the worst-case scenario.”
The cruise lines have managed to do it with a combination of furloughs and paycuts – Royal Caribbean laid off 26 percent of its U.S. staff earlier this week and Norwegian Cruise Line has cut pay – as well as a reduction of expenses and raising cash. Carnival has raised nearly $6 billion through new debt and equity positions, according to the Herald.
The question is, will there be passengers when cruises return? The industry took a huge public relations hit after thousands of passengers on ships contracted or died of COVIC-19. And at the same time it has dealt with its financial issues, the industry has been forced to deal with warnings from federal health officials that cruises are breeding grounds for spreading disease.
“The industry has to understand that expectations of their passengers have increased,” Rockford Weitz, director of the Fletcher School Maritime Studies Program at Tufts University, told the Miami Herald. “It’s going to be expected by the customer base that the industry is doing more than they did before to maintain a sanitary environment. That’s what the industry should be focusing on.”
Still, 2021 bookings are up through a combination of fare sales and re-bookings from credits offered to those whose sailings were canceled by the virus.
UBS analyst Robin Farley told the paper that Carnival Corporation has an estimated liquidity to last the longest without revenue, at around 14 months, followed by Royal Caribbean with enough for 11-12 months, and Norwegian Cruise Line with enough for 9-10 months. That pushes all three companies into next year.
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