Carnival postpones its millionaire investment of the Carnival Victory/Carnival Radiance

[jimbo5544]

14 minutes ago, wannagonow123 said:

So, if they do not complete the renovations, and keep the old name, will I be eligible for a full refund? I did not book the Valor. My cruise is in Jan 2021. 

 

The Radiance was supposed to be the redone Victory, not the Valor.  Just trying to keep the info straight.

[quattrohead]

It will be quietly renamed and sent to Alang, they have way too much capacity now.

Sometimes you have to spend money to save it, a $100M penalty for breach of contract will save them $100M.

I am not being a rear end orifice, it's a sound business decision.

Edited May 20, 2020 by quattrohead
Fat fingers.

[Jamman54]

6 minutes ago, quattrohead said:

It will be quietly renamed and sent to Alang, they have way too much capacity now.

Sometimes you have to spend money to save it, a $100M penalty for breach of contract will save them $900M.

I am not being a rear end orifice, it's a sound business decision.

Where are you getting your numbers from? The refurbishment is costing $219M USD.

[ProgRockCruiser]

Pondering on this, if the materials are already mostly bought (and very likely not returnable, it's not like the supplier can sell the customized waterworks to RCI), and the ship is already partially stripped down, then the labor to put it all back together in the old configuration isn't too much different than the labor to install the upgrades.

 

So to me that means it would only make sense to delay the work and do nothing, in order to save cashflow.  Whereas getting the ship upgraded and back into service will allow actual revenue generation against those already-incurred material and labor costs.

 

So I'm thinking it will go ahead.  Maybe delayed further if things get complicated or slow down due to working environment restrictions at the shipyard.

 

I guess we'll just have to wait and see.  If an announcement is made soon that they have resumed work, that would be a big relief, obviously.

[quattrohead]

This is also a good point of view, it should be the other plan Carnival are talking about for this ship.

They should clean it up though, it looks like a wreck in the picture.

[Joebucks]

Seems pretty reasonable to me. At the end of the day, it's not business critical to spend 200 million when you have denied new revenue for quite some time and the mission has turned to staying afloat instead of marketing. Obviously, there are contracts and other factors that play into this as well.

[jimbo5544]

1 hour ago, quattrohead said:

It will be quietly renamed and sent to Alang, they have way too much capacity now.

Sometimes you have to spend money to save it, a $100M penalty for breach of contract will save them $100M.

I am not being a rear end orifice, it's a sound business decision.

Not happening, and a delay might be a wise business decision, what you propose...not so much. 

[firefly333]

The ship yard in italy was closed and the article I posted about mardi gras said workers coming back slowly and not all back. Issuing ppe of 7 masks a week to each worker. 

 

I'd say a delay in in the cards. 

 

Closed a month, at most half the workers were back and having to work in masks. I dont see them finishing on time.

Edited May 20, 2020 by firefly333
Spellcheck grrr, ppe, not pipe

[chengkp75]

Most likely they will leave the ship out of service, and delay both the renovation and the return to service of the Victory until revenues start coming back in, and demand increases to the point where all the other ships are sailing full.

 

And, don't forget that cruise ships aren't the yard's only business.  They currently have at least one Spanish Naval vessel under construction, and I imagine that will take precedence, as well as any other jobs further along than the Victory (think there's another navy vessel underway as well).

Edited May 20, 2020 by chengkp75

[BlerkOne]

If cruise ship capacity is reduced to 50% or less for the next couple of years, Carnival may need the ship sooner rather than later. And new ships, or even transformed ships, generally have a higher demand than existing ships.

[chengkp75]

18 minutes ago, BlerkOne said:

If cruise ship capacity is reduced to 50% or less for the next couple of years, Carnival may need the ship sooner rather than later. And new ships, or even transformed ships, generally have a higher demand than existing ships.

That assumes that the demand remains higher than capacity for returning the ship to service, and also if the demand is so great, then the existing ships will become the "demand" since they are what is available.  Not sure that the difference in revenue for a renovated ship operating at half capacity over an older ship at half capacity will cover or justify the outlay of a couple hundred million, certainly in the short term, which is what corporation business models look at.

[BlerkOne]

Just now, chengkp75 said:

That assumes that the demand remains higher than capacity for returning the ship to service, and also if the demand is so great, then the existing ships will become the "demand" since they are what is available.  Not sure that the difference in revenue for a renovated ship operating at half capacity over an older ship at half capacity will cover or justify the outlay of a couple hundred million, certainly in the short term, which is what corporation business models look at.

 

With some 60% of Carnival Corp passengers opting for future cruise credits instead of refund, there certainly is demand. I believe they have until the end of this year to pick a cruise or lose.

 

I believe Radiance can be completed in 2 months or less, so believe the shipyard would like to get it off of the books and paid for it. To such an extent they might even renegotiate price. They are going to need money, too, and 2 months is faster than a new build.

[Trueblueky]

12 hours ago, WhaleTailFlCruiser said:

I dunno how they could do that with people such as models booked on the Radiance as well as still booking it. 

People such as models?

I don't understand.

[Purvis1231]

14 hours ago, jimbo5544 said:

They are not scrapping any ship

I hope you are right but time will tell. 

[ProgRockCruiser]

3 hours ago, chengkp75 said:

That assumes that the demand remains higher than capacity for returning the ship to service, and also if the demand is so great, then the existing ships will become the "demand" since they are what is available.  Not sure that the difference in revenue for a renovated ship operating at half capacity over an older ship at half capacity will cover or justify the outlay of a couple hundred million, certainly in the short term, which is what corporation business models look at.

Do you, or does anyone else, know whether Carnival would have paid a certain amount of the cost already, to get materials on order and delivered?  From what I gather / remember, the shipyard had started the removal of the old bits, and were not too far from putting the new bits in.  I am comparing to how a typical consumer may work with a home renovation, or how some of the contracts I work in real life work: 10% down on signing, 30% more when materials delivered, 40% more when majority of work complete (this may be split into smaller milestones), 20% for final payment after punchlist is knocked out.

 

So there may already be a sunk cost, and the remaining balance may be small enough to justify completing the job and getting the ship back into service.

 

If the shipyard is responsible for all costs to date until the renovation is done, then I can see Carnival being OK with further delays if they don't "need" the ship back just yet.

[chengkp75]

28 minutes ago, ProgRockCruiser said:

Do you, or does anyone else, know whether Carnival would have paid a certain amount of the cost already, to get materials on order and delivered?  From what I gather / remember, the shipyard had started the removal of the old bits, and were not too far from putting the new bits in.  I am comparing to how a typical consumer may work with a home renovation, or how some of the contracts I work in real life work: 10% down on signing, 30% more when materials delivered, 40% more when majority of work complete (this may be split into smaller milestones), 20% for final payment after punchlist is knocked out.

 

So there may already be a sunk cost, and the remaining balance may be small enough to justify completing the job and getting the ship back into service.

 

If the shipyard is responsible for all costs to date until the renovation is done, then I can see Carnival being OK with further delays if they don't "need" the ship back just yet.

Well, a cruise ship renovation is a complex thing.  First off, there is the drydock work, including the 4th Special Survey work.  This will have been bid on by the shipyard as a combination of flat rate items (actually docking the ship, propeller maintenance), other items on a square meter rate (how much surface area to hydroblast to remove marine growth, how much area that needs to be sandblasted and primed, that can vary and will be determined after docking), also items like steel repair that may not be noted until after the ship is dry or after the Special Survey thickness gauging is done, is bid on an area rate, and then there are the time and material bids for items that are perhaps out of the ordinary.  Materials, for the most part, with the exception of hull steel, are owner supplied.  So, these may have been purchased, and are required anyway for the statutory drydock work due by October.  Additional costs are manufacturer's technical reps for the propellers, seals, stabilizers, and electrical switchgear, for example, and these are owner's cost.  The tech reps get paid when the job is done.  As I say, the drydock materials may be bought and paid for, but they will be needed whether the renovation goes through or not.  As for the shipyard payment, there is usually only a small deposit placed, and the balance on completion.

 

Now, for the hotel renovation and conversion to the "Radiance".  This work, as is almost all cruise ship hotel renovations is not done by the shipyard, and is done by contractors who have experience doing this work.  While there will be a purchase order to these contractors for their services, they don't get paid until job is completed, unless their particular work involves supplying the materials and then supervising or conducting the installation, in that case there will be some payment when materials are delivered to the shipyard, but the balance upon completion.  Much of the materials used in renovations is supplied as "just in time" inventory, meaning the supplier will normally produce it with just enough lead time to get it to the shipyard "just in time" to install it.  So, some of the renovation materials may be paid for, some may not, a lot depends on the size of the order with each supplier.  And, again, installation cost is not paid until completion.

 

Even given that demolition work has been started, and perhaps some installation, I would be surprised if Carnival is 20% into the total cost at this time.  I don't know if the ship ever was in drydock for that work by the yard or not, if so, that could jump the amount paid, but again that is a statutory expense and would need to be done whether the ship gets changed to the Radiance or not.

 

If Carnival were to postpone everything, they would just pay for work completed, and materials delivered, still guess this would be less than 50%, and more like 30%.

Edited May 20, 2020 by chengkp75

[quattrohead]

I doubt they will make money on a ship only half full, so they certainly won't want to run many ships half full.

I think the early months are a shake down test and EVERYONE hopes the virus continues to die down to a manageable level.

It's going to be tough for the next few months....will we slide into a recession ?

[WhaleTailFlCruiser]

18 hours ago, firefly333 said:

Not that it matters but it's not a conquest class ship, its pre conquest. Some changes when conquest came out. I did triumph a few times, but conquest was better.

 

Still woildnt be scrapped but I'm wondering what will actually sail out of Galveston if I book it for panama. Is it in the shipyard partially done, can it sail as it's old self, what would I be booking. I'd like the new food venues and be disappointed to book and not get them. 

 

Such uncertain times for cruise booking. 

 

Close enough honestly but regardless, Carnival isn't going to scrap such a new ship. 

[WhaleTailFlCruiser]

2 hours ago, quattrohead said:

I doubt they will make money on a ship only half full, so they certainly won't want to run many ships half full.

I think the early months are a shake down test and EVERYONE hopes the virus continues to die down to a manageable level.

It's going to be tough for the next few months....will we slide into a recession ?

 

We are already there anyone thinks the economy will suddenly be back to where it was pre Virus right away aren't in a reality it will take months even a year or two for the economy to recover. 

[BlerkOne]

2 hours ago, quattrohead said:

I doubt they will make money on a ship only half full, so they certainly won't want to run many ships half full.

I think the early months are a shake down test and EVERYONE hopes the virus continues to die down to a manageable level.

It's going to be tough for the next few months....will we slide into a recession ?

 

I expect promotions to generate demand with prices raised when/if they can. I expect higher prices on land and sea for some time.

[Aplmac]

On 5/19/2020 at 1:34 PM, Saint Greg said:

It's smart.

This isn't the best time for cruise lines to be spending money.

I bet they would've walked back Mardi Gras

if it were in early enough of a stage to do so.

 

Agreed.

 

But... too far along now to stop.

You can't stop when you've got to this stage

 

[SMSACE6]

I may have missed some info along the way, but had the refurbishment of Victory already started? or not.  If not, than I hope they retain Victory as she was, or is.  I sailed on her in 2015, loved the ship, loved the sea oriented theme, of coral, sea horses, (yes those seahorses!) LOL.  I would much rather see the Victory just updated with more modern rooms, and maybe some new food venues, but not add extra rooms, and reduce the public space.  again, just my own opinion, and I know others will differ.

 

[Saint Greg]

2 hours ago, Aplmac said:

 

Agreed.

 

But... too far along now to stop.

You can't stop when you've got to this stage

 

 

Of course. That's why I said "I bet they would've if it were in an early enough stage to do so." I've seen the ship. I know it's too late.

 

 

Edited May 21, 2020 by Saint Greg

[airdale]

We will know more in July or August.  I really dislike all these unknown conditions and I can only take a wild guess as to what the powers to be of these cruise lines must be going through.  That being said, Carnival has a lot of hoops to jump through prior to sailing.  The house investigated committee looking into the Norovirus outbreak in 2018 and then the CORVID 19 this year.  Then all the cruisers who were onboard, stranded, infected, lost jobs because they could not get back to work, died, etc. ,that have not gotten their day in court yet, and you know the lawyers can smell the blood in the waters.  Oh, lets not forget the CDC and the Coast Guard having to release our ports for cruising.

[thesmiths]

I think it is a good business move to not upgrade at this point.

 

As far as Mardi Gras,, You have to keep going on her.

 

 

Edited May 21, 2020 by thesmiths