Posted on 02/22/2021 8:17:19 AM PST by Capt. Tom
Shares of cruise line operators are sailing higher on hopes a COVID-19 vaccine will allow a return to normalcy and send their cruise ships heading back out to sea.
Carnival (NYSE:CCL)(NYSE:CUK), Norwegian Cruise Lines (NYSE:NCLH), and Royal Caribbean (NYSE:RCL) have all rearranged their finances to allow them to ride out the storm, even as they extend suspensions of any voyages further into the year. Depending on the operator, the earliest passengers will be embarking in May or June.
Yet even if the cruise lines do manage to meet their current sailing schedules, investors should still use caution. Voyages won't be returning en masse right away, and those ships that do shove off from land will not be at capacity.
Cruise ship stocks may still be well off the highs hit before the pandemic struck, but that doesn't mean it's smooth sailing from here.
Anchored in port Norwegian Cruise Line just announced it was delaying once again the departure of cruises aboard three brands. Voyages aboard the Norwegian, Oceania, and Regent Seven Seas brands were all postponed through the end of May 2021.
Other cruise lines have gone even further. Carnival's Princess brand cancelled cruises longer than seven days until November (the U.S. Centers for Disease Control currently prohibits cruises over seven days under its conditional sailing order).
Canada recently ended the possibility of any cruises leaving its ports before March 2022.
Although there are cruises taking place here and there, it's mostly in Asia. Royal Caribbean, for example, began sailing again from Singapore aboard the Quantum of the Seas back in December, but it was open only to residents of Singapore and long-term pass holders.
The lack of any significant revenue, while still having all the attendant expenses of maintaining the ships and crew, has wrecked cruise operator finances.
Laboring under a heavy load Carnival recently had to visit the debt financing well for the fifth time since the pandemic started, raising nearly $600 million. It follows a $1 billion financing trip in November, and has led credit rating agency Moody's to say Carnival's debt rating could sink deeper into junk territory.
Similarly, Royal Caribbean just negotiated a restructuring of nearly $4.5 billion worth of debt so that it would violate covenant restrictions on the loans. Its lenders waived compliance until after the third quarter of 2022, but also prohibited the cruise operator from paying any dividends or buying back any stock during the waiver period.
Without question, these maneuvers give the cruise ships breathing room and will allow them to survive the storm, but surviving is not the same as thriving. Carnival is now over $22 billion in debt, Norwegian has more than $10 billion in debt, and Royal Caribbean has almost $18 billion.
It's why the prospect for a widely distributed and administered COVID-19 vaccine provides hope for an eventual recovery. Yet even putting out to sea again might not be enough.
Still stormy seas Even though the CDC's conditional sailing order allows for a phased restart of cruises from U.S. ports, the industry keeps pushing back its sail dates. That's because there are no real standards and protocols yet for what constitutes safe sailing, and though cruise lines will implement temperature checks, COVID-19 testing, social distancing, and more, there is a long time to go before any of that is used on a widespread basis.
Vaccinations are going to be necessary for passengers to really feel comfortable being confined at sea with others. While some companies have indicated it will be mandatory for crews to be vaccinated, it's still up for debate whether cruise lines will require passengers to also get the vaccine.
Once all of these measures come together, cruising will be deemed safe by consumers. Until those pieces fall into place, however, bets on recovery are more of a gamble than an investment, and the payoff won't be until next year at the earliest.
Investors would be better off being landlubbers than bidding up shares of cruise line stocks.
This article points out the borrowing the Cruise Industry Big 3 has done to stay afloat, and you can understand how the Cruise Lines claim they can continue for x amounts of months without any income. They are running on borrowed money.(which is alright as long as you have the appropriate income)
IMHO A lot of the cruise internet sites like Cruise Hive-Travel Pulse-The Porthole-Cruise Critic-etc. tend to present a scenario pro Cruise Industry, and there is nothing wrong with that . To see the whole picture you may have to read outside those sites.
The Cruise Industry is running on BILLONS of dollars of borrowed money loaned to them, and loans have to be payed back with interest, unlike Grants.
So going cruising these days may require you to play it safe, and get good travel insurance.-Tom
I’m making bucks on the cruise industry. Today carnival is 26 dollars a share. I bought at 12. My friend bought at 8. Grrrr.
These companies milked it for all it was worth. Cruise ships holding five thousand people? That’s nothing but an ocean going petri dish.
Another question - what impact if any would a $15 minimum wage have on the cruise lines? I don't know enough about the industry, and you seem to have some interest and knowledge in the subject. Thanks in advance.
ImJustAnotherOkie wrote: “These companies milked it for all it was worth. Cruise ships holding five thousand people? That’s nothing but an ocean going petri dish.”
Anytime I see someone use the phrase “petri dish”, I know they’ve never been on a cruise. To be fair, you should also characterize our school systems as “petri dishes” since they are the largest source of Noro.
Those bone heads that say petri dish why are they even concerned they dont cruise dont want to we love it. just keep scrolling
Bernard wrote: “Another question - what impact if any would a $15 minimum wage have on the cruise lines?”
Two points. First, US wage laws do not apply to cruise lines since they are foreign flagged.
Second point. You wouldn’t be able to afford a cruise if this did apply.
Third point. Cruise ship personal maybe paid less than US wages but that doesn’t indicate they are underpaid. There is a long waiting list to sign up for crew slots. The wages paid is very high compared to what’s available in their home country. A bartender told me he would only work four years because then he would have saved sufficient money to build and pay for a new home back in Croatia.
al baby wrote: “Those bone heads that say petri dish why are they even concerned they dont cruise dont want to we love it.”
Pretty much the same in all the cruise ship threads. There’s always one bonehead who has to make the ‘petri dish’ comments as if it’s something only they have come up with. Just another form of virtue signalling, they’re too good for a cruise hip. Hope they enjoy their days at the beach.
BTW, does ‘al baby’ refer to Alabama?
The cruise lines use foreign flagged cruise ships so they don't have to follow any of our wage laws.
We probably could pass punitive laws that would make it difficult for them to operate in this country. -Tom
> I’m making bucks on the cruise industry. Today carnival is 26 dollars a share. I bought at 12. <
Baron Rothschild was more right than wrong: “Buy when there’s blood in the streets.”
I, however, follow a different - and much less lucrative - strategy. “Do nothing until the opportunity has passed. Then complain about it on Free Republic.”
🙂
Schools are far more essential. Nothing can replace schools, even as bad as they are now.
Luxury Cruise lines, not so much.
no my first nick name that a black guy in the car stereo business back in the late 70s Good old Ray it stuck I was a skinny lil white surfer dude Great guy i was a pall bearer at his dads funeral i was one of two white dudes there
lmao
Was in St Thomas last week and Main Street, which is overwhelmingly dependent on cruise traffic, was a ghost town.
ImJustAnotherOkie wrote: “Schools are far more essential. Nothing can replace schools, even as bad as they are now.
Luxury Cruise lines, not so much.”
What does that have to do with the fact that you’re far more likely to get noro from your 3rd grader than a cruise ship?
I know what you mean. The locals read the newspaper and see how many ships are in on certain days and avoid going downtown if there are a lot of ship in.
The locals don't have to worry about that now. -Tom
They have negative cash flow, insane amounts of debt, could be shut down at any time at the whim of their creditors.
Welcome to the stock market in 2021.
Hey occasionally I do that as well!
School’s existence is justified,
Cruise industry with 50 to 100k people jammed into that small place for a pleasure cruise is something totally different.
If you can’t see the false analogy hang up the phone.
Zero impact as they are not US flagged.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.