Carnival which owns nine cruise brands around the world has revealed it will be disposing of six cruise ships in the next 90 days.
Carnival Provides Update and Latest Impact Due to Suspension
As part of the cruise company’s update on earnings and how it’s dealing with the current global health crisis, it was revealed that a total of six cruise ships would be disposed of over the next three months.
Carnival which owns major cruise lines including Princess Cruises, Carnival Cruise Line, Costa Cruises, Aida Cruises, P&O Cruises, P&O Australia, Cunard Line, Seabourn, and Holland America Line expects to resume cruises soon but it will be in a phased-in manner after collaborations with governments and health authorities. Specific ships and cruise lines will resume sailings over time from a select number of easily accessible homeports.
The cruise company is expecting a slow return with only limited capacity so a removal of some ships will take place and delays in new ship deliveries. The removal of cruise ships will take place before the end of 2020 and they have already planned removals which would have been done over several years in normal times.
The Carnival Corporation stated:
In connection with its capacity optimization strategy, the company intends to accelerate the removal of ships in fiscal 2020 which were previously expected to be sold over the ensuing years. The company already has preliminary agreements for the disposal of 6 ships which are expected to leave the fleet in the next 90 days and is currently working toward additional agreements.
There are already preliminary agreements for six cruise ships to be sold off and work is also being done towards additional agreements. It’s not known which cruise ships would be sold but we already know that Costa Victoria which is operated by Costa Cruises is being sold to the San Giorgio del Porto group.
Rumor has it that the vessel could be used as a floating hotel for workers at sites owned by the company, hopefully, we’ll get some official word on this in the future. We could also see older cruise ships across different cruise lines being sold off such as Carnival Cruise Line’s aging Fantasy-class ships including the Carnival Fantasy.
By disposing of the ships the cruise company will be able to raise more cash to help its cruise brands ride out the current suspension of operations. Even though cruise lines such as Carnival Cruise Line are hoping to return with eight cruise ships from August, nothing is yet set in stone and further extensions on the pause of operations could be a possibility along with many more aspects.
Carnival has released a forward look at possibilities impacting the business due to COVID-19 and other causes which of course can’t be fully predicted:
- COVID-19 has had, and is expected to continue to have, a significant impact on our financial condition and operations, which impacts our ability to obtain acceptable financing to fund resulting reductions in cash from operations. The current, and uncertain future, impact of the COVID-19 outbreak, including its effect on the ability or desire of people to travel (including on cruises), is expected to continue to impact our results, operations, outlooks, plans, goals, growth, reputation, litigation, cash flows, liquidity, and stock price
- As a result of the COVID-19 outbreak, we have paused our guest cruise operations, and if we are unable to re-commence normal operations in the near-term, and further extend covenant waivers for certain agreements for which waivers do not currently cover periods after March 2021 (if needed), we may be out of compliance with a maintenance covenant in certain of our debt facilities
- World events impacting the ability or desire of people to travel may lead to a decline in demand for cruises
- Incidents concerning our ships, guests or the cruise vacation industry as well as adverse weather conditions and other natural disasters may impact the satisfaction of our guests and crew and lead to reputational damage
- Changes in and non-compliance with laws and regulations under which we operate, such as those relating to health, environment, safety and security, data privacy and protection, anti-corruption, economic sanctions, trade protection and tax may lead to litigation, enforcement actions, fines, penalties, and reputational damage
- Breaches in data security and lapses in data privacy as well as disruptions and other damages to our principal offices, information technology operations and system networks and failure to keep pace with developments in technology may adversely impact our business operations, the satisfaction of our guests and crew and lead to reputational damage
- Ability to recruit, develop and retain qualified shipboard personnel who live away from home for extended periods of time may adversely impact our business operations, guest services and satisfaction
- Increases in fuel prices, changes in the types of fuel consumed and availability of fuel supply may adversely impact our scheduled itineraries and costs
- Fluctuations in foreign currency exchange rates may adversely impact our financial results
- Overcapacity and competition in the cruise and land-based vacation industry may lead to a decline in our cruise sales, pricing and destination options
- Geographic regions in which we try to expand our business may be slow to develop or ultimately not develop how we expect
- Inability to implement our shipbuilding programs and ship repairs, maintenance and refurbishments may adversely impact our business operations and the satisfaction of our guests
The focus is not just trying to ride out the pandemic but also work on new health measures for when cruise ships to make a return. Another aspect has been a huge effort in repatriating approximately 60,000 crew members around the world to more than 130 countries. This has included commercial or charted flights and the 49 cruise ships which have traveled more than 400,000 nautical miles to get them home.
Another important response from Carnival to cope with the suspension of operations is putting ships in a cold lay-up. The company estimates that ship operations and administrative expenses will be around $250 million per month once all ships are in paused status. There are currently 62 Carnival-owned vessels in their final pause located and all of the ships are expected to be the same during the third quarter.
The COVID-19 pandemic has had a huge impact on the cruise industry and just spare a thought for the thousands of crew members who remain on ships around the world to keep them maintained.
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