With cruising looking increasingly unlikely to return in any major way until 2021, which lines have gone bust, look at risk or are well placed to survive with no cruises or income?
In May, not long after the shutdown began, the Norwegian Cruise Line group caused an enormous rumpus when they announced that they saw a real fundamental risk that they may not survive the shutdown. So what’s happened? What’s gone on, and what should we be expecting, particularly of the really big groups?
The Carnival corporation group, which of course covers many lines including Carnival, Seabourn, Holland America, Princess, Aida, Costa, and many more. The Royal Caribbean group, which of course includes Royal Caribbean, Celebrity, Azamara and Silversea, and Norwegian Group which includes Oceania and Regent Seven Seas.
So far there are five cruise lines that have actually gone bankrupt, all of them have tended to be smaller more independent cruise lines. So who has actually gone bust? One of the Royal Caribbean partnership went bankrupt fairly early on, and this was Pullmantur, which was a Spanish based cruise line. They went into insolvency and their three ships, which were originally Royal Caribbean ships were removed and have been actually been sent off for scrap.
The second big cruise line to go bust was Cruise and Maritime Voyages, this was a UK based line which had a number of ships.They didn’t own the ships, they leased the ships. It was a popular cruise line, it was a value cruise line sailing all around the world and very popular particularly with the UK and Australians. Birka cruises went bankrupt fairly early on, and they really focused on cruises particularly around the Swedish area and Europe.
FTI cruises, which was a Germany cruise line catering mostly for German passengers and really focusing on Europe and the Caribbean, also went bankrupt.
The first North American based cruise line to close down Blount Small Ship Adventures. But small ship adventures also builds ships and they’re keeping that going, but they decided with everything going on they were not going to reopen. Bloutran a relatively small fleet, and they really focused on coastal and inland voyages around North America.
The cruise lines that have gone bankrupt so far have tended to be smaller more independent cruise lines without really deep pockets or owners with very deep pockets. There is one major cruise line that at this point in time is looking fairly at risk, and that is CrystalCruises.
Now CrystalCruises is part of Genting Hong Kong, which is a big player in cruising and they used to be the big shareholder of Norwegian Cruise Line before they sold that on. They have three key cruise lines, they have Star Cruises and Dream Cruises, which are major major players in Asia and they have CrystalCruises, the ultra-luxury cruise line.
Their holding company currently has over three billion dollars of debt and they stopped payments to creditors to try and refinance. What they have said in recent days is that they have had some interest from investors around the CrystalCruises product itself, the CrystalCruises brand itself.The cruise line itself has issued a statement to travel agents saying they do have a path to keep cruising, to keep going and they will keep paying refunds.
Significantly though, a number of insurance companies will not cover CrystalCruises bookings because there have been these question marks around it. So, at this point in time, although it looks like CrystalCruises will survive it’s definitely a cruise line under pressure. What about the big cruise companies?Certainly, in May, there was lots of speculation about those big companies and their ability to survive, and would all of the brands survive.
However, I think we can say with some confidence, that those three big cruise lines are extremely likely to survive this whole process of the pandemic, because of the way that they’ve restructured. What’sbeen very clear is, although a lot of people are downbeat on cruising, investors, lenders and Wall Street do see a clear long-term future for cruising and the big cruise lines.
What you need to bear in mind is, unlike say airlines or other travel brands, the cruise industry was able to slash their costs dramatically very quickly. Pretty much all of their crew are on contracts, so by ending their contracts or when contracts ended over a hundred thousand or more crew effectively left the business.
They put their ships into cold lay-up, which dramatically reduced costs. They slashed head office numbers or shore side, even in places like the UK they cut their numbers of people working for Carnival Corporation by about 40 percent. Carnival Corporation since the pandemic has, according to the FinancialTimes, raised over 11 and a half-billion dollars. They’re currently burning through around 650 million dollars a month. Arnold Donald, the CEO, has said they have enough cash to keep going till at least June 2021even if there is no cruising.
So I think we can safely say that they’re pretty well covered. The Royal Caribbean group, so that is Royal Caribbean, Celebrity, Azamara, and Silversea, has also been able to raise an enormous amount of money. They’re currently burning through250 million dollars a month.
However, since the start of the pandemic, the Financial Times reports, they have raised7.1 billion dollars, and again what they’re saying is they have enough money to keep going as an entity right through until the middle of 2021even if there is no sailing and no income coming in. Norwegian Cruise Line is burning through 160 million dollars a month, and as I mentioned in May they expressed a lot of concern about the ability to keep going.
However they have managed to raise an enormous amount of money, according to the Financial Times they have raised 5 billion and this is going to cover them through to at least quarter 3 2021 – so even longer than the other groups.
So, as we can see, those major cruise lines and those major brands are very well covered, so unlike the gloomy predictions cruise lines and cruise companies have not folded en-mass as many had predicted they would do, because certainly there is a belief that there is pent-up demand for cruising, cruising will come back in the long term and so investors are comfortable giving money to these companies even though they’re burning anything between 160 million and 650 million dollars a month. The money is taking a bet on the long term of cruising. I have regular cruise updates, so subscribe to the channel so you get alerted when there are new updates, and why don’t you go and watch another one of my cruise updates right now?