Norwegian and Carnival cruise lines headed in opposite directions as industry cautiously plans reopening
COVID-19 has wiped out cruise industry
The world's third-largest cruise ship operator cast doubt on its ability to stay afloat as a company for much longer, even as one of its biggest rivals said it is taking its first tentative steps toward reopening after COVID-19.
Norwegian Cruise Line Holdings Ltd. warned investors it doesn't have enough money to cover its financial obligations this year, an announcement that caused shares in the company to sell off heavily.
"COVID-19 has had, and is expected to continue to have, a significant impact on our financial condition and operations, which adversely affects our ability to obtain acceptable financing to fund resulting reductions in cash from operations," Norwegian Cruise Line said.
The company said that as of April 24, advanced bookings for the remainder of the year were "meaningfully lower than the prior year, with pricing down mid-single digits."
The company announced an emergency stock and bond sale to raise $1.6 billion US to try to keep the company afloat
Norwegian shares lost about 20 per cent on the New York Stock Exchange to change hands just below $12 a share. As recently as February, those same shares were worth more than $55 apiece.
Cruise ships have been thrown into disarray by the COVID-19 pandemic, as the U.S. Centers for Disease Control and Prevention issued a "no sail" order to all cruise companies in U.S. waters on March 14.
That order was set to expire on April 10, but has since been extended multiple times. Unless there is a further extension, the no sail order is set to expire on July 24. But Norwegian's dire warnings on Tuesday cast doubt on its ability to stay in business.
The company has suspended all of its cruises at least until the end of June, and has so far provided no indication of when it could conceivably set sail again.
In a regulatory filing the company said it owed $6 billion at the end of last year and given its lack of revenue, its current debts "have raised substantial doubt about the Company's ability to continue as a going concern, as the Company does not have sufficient liquidity to meet its obligations over the next twelve months."
Carnival announces 8 new cruises in August
Norwegian's bleak tone for its future comes as rival Carnival said it is taking the first tentative steps toward reopening operations later this summer.
Carnival — the world's largest cruise operator, which owns 27 ships and transported five million people last year — said it is booking eight cruises scheduled to leave from Texas and Florida some time in August, bound for destinations in the Caribbean and Mexico.
"We continue to engage with the CDC and government officials at a variety of levels about new protocols we would implement prior to a return to sailing," the company said. "We will also be in discussions with officials in the destinations we visit."
Carnival's CEO recently said the company can last through 2020 with no revenue from cruises.
Royal Caribbean, the world's second-largest cruise operator, has yet to make any public announcements about when it may return to service.
The cruise industry dominated by those three names was left out of a $2.3-trillion US stimulus package for troubled companies as the major players are all incorporated outside the United States.
Tara Smith, a professor of epidemiology at Kent State University's College of Public Health, said she's not sure how cruising can be done safely. Even with reduced capacity, she said, ventilation systems can still spread droplets through enclosed spaces.
"Everything would still have to be distanced," she said. "Dancing, concerts on board, other types of entertainment? Doubtful. Pools? Probably overcrowded. Dining? No idea how they'd do it."
With files from The Associated Press and Reuters