Odds Cruiselines Won’t Survive?

[LocoLoco1]

I wonder what Odds the Vegas bookmakers or Wall Street short-sellers have on Cruiselines NOT surviving this?? Without a Vaccine, I see that as possible. 

[navybankerteacher]

It is most likely that some major cruise lines will not survive in present form. A number of smaller lines have already closed down. But the industry is virtually certain to survive - although in different form with different players.  The age of the ever bigger ships may be over - as more ports are likely to restrict access —- but virtually every industry reshapes itself - one way or the other.   How many US airlines flying in the 1980’s are still flying today.  Many of the names seem the same - but few of the airline companies survived - most went through bankruptcy in the intervening years - with just the names surviving.

[Roz]

There is still a demand for cruising, and there will be a bigger demand for cruising once Covid subsides.  Where there's a demand, someone will come in to fill the void (and make money).

[LocoLoco1]

I note that CRYSTAL cruises’ parent Co. is laying the keels for new ships. Smaller, rebranded with Int’l Hotel franchise name and focused on Veranda privacy. I see cruising post-vaccine as STILL having to struggle with Noro-virus, poor Internet, and fierce competition from All-inclusive land resorts and Dell Webb type communities and Waterparks worldwide. World cruises ala Cunard & HAL?? Fewer. 

[Heidi13]

Crystal was sold by original owners NYK Line to Genting HK about 5 yrs ago. However, Genting is experiencing financial difficulties, have ceased making payments to creditors, as of Aug 2020. They are attempting to restructure their debt.

 

Genting also owns Star Cruises and another Asian Line.

 

Unless Genting can restructure their debt, Crystal may not survive to accept the new tonnage. 

[Hlitner]

52 minutes ago, Heidi13 said:

Crystal was sold by original owners NYK Line to Genting HK about 5 yrs ago. However, Genting is experiencing financial difficulties, have ceased making payments to creditors, as of Aug 2020. They are attempting to restructure their debt.

 

Genting also owns Star Cruises and another Asian Line.

 

Unless Genting can restructure their debt, Crystal may not survive to accept the new tonnage. 

Yep, Crystal has some big problems.  But we also think that  Crystal is a quality product that might be ripe for the taking by other companies.   We do think there is going to be major restructuring throughout the cruise industry and it has already started.  Older less profitable ships are being scuttled, there is talk about more consolidation within the CCL family, and there have been some obvious slow downs on new build schedules.  But history tells us that when times get tough, there are some companies that will take advantage of the situation to expand.  I would keep an eye on MSC and CCL both of which seem to be positioned to take advantage of opportunities.  This assume that cruising can commence major operations in the first half of 2021.  Otherwise, all bets are off.

 

Hank

[iancal]

I believe that cruise lines will survive.  There may well be bankruptcies and financial re-organizations.   Bankrupcty could in fact give some organizations the financial relief that they need to move forward.

 

Bankrupcy does not mean that cruise lines will disappear.  Just think of the large firms that have been in bankruptcy in the past and are currently in business.  GM, United Airlines, AA, Chrysler, Johns Manville to name a few.  So perhaps Carnival will amalgamate Princess and HAL, or drop one or two of their cruise line name plates altogether.   The ships will eventually sail, even if the logo on the funnel is different.

 

It could be that the several brands are dropped in the manner that GM and Chrysler dropped nameplates such as  Pontiac, Olsdmobile, Plymouth, etc.  This would not surprise me in the least.  Smaller, less financially stable cruise lines may disappear altogether however I have no doubt they will be replaced by others.

 

If the demand post covid exists, then I have no doubt that there will be cruise lines in the market to satisfy that demand.  

Edited October 22, 2020 by iancal

[neverbeenhere]

The short interest in Carnival Corporation stock is all over the place (of course), but I'd say it's about double what it was a year ago.

[iancal]

I believe that the smart money was in and out of Carnival Corp  a long time ago. 

 

In at $8.  Out at $16/17 a very short time later.

 

[mnocket]

It's important to recognize that the risk is different for customers and shareholders.  Customers MAY lose their deposits if a cruise line reorganizes under bankruptcy and the new entity doesn't honor prior commitments (this would be a departure from past practices).  Shareholders, on the other hand, would likely lose their entire investment. 

 

The later is precisely why bankruptcy will become an ever more attractive option for cruise lines.  By wiping out existing shareholders and reorganizing into a "new" company, cruise lines will be able to recapitalize by selling shares in the "new' company.  It may be the only way they can come out the other side with the necessary capital to service the huge debt they have taken on and have the working capital to sustain operations.  For this reason, cruise line bankruptcies may become the rule not the exception.

Edited October 22, 2020 by mnocket

[iancal]

1 hour ago, mnocket said:

It's important to recognize that the risk is different for customers and shareholders.  Customers MAY lose their deposits if a cruise line reorganizes under bankruptcy and the new entity doesn't honor prior commitments (this would be a departure from past practices).  Shareholders, on the other hand, would likely lose their entire investment. 

 

The later is precisely why bankruptcy will become an ever more attractive option for cruise lines.  By wiping out existing shareholders and reorganizing into a "new" company, cruise lines will be able to recapitalize by selling shares in the "new' company.  It may be the only way they can come out the other side with the necessary capital to service the huge debt they have taken on and have the working capital to sustain operations.  For this reason, cruise line bankruptcies may become the rule not the exception.

Agree completely.  Ditto for some airlines and other large travel vendors.   It is a well trodden corporate path.  I have no doubt that the cruise lines have high priced  separate legal, financial/restructuring, and marketing teams looking at multiple options.

 

  Unsecured creditors will be at the end of the list.

[bigrednole]

Survive...100%. Survive without having to file some form of bankruptcy...50/50. If the cruise lines are not able to sail ships from the US, they will look to other countries that are more open. 

[Hlitner]

7 minutes ago, bigrednole said:

Survive...100%. Survive without having to file some form of bankruptcy...50/50. If the cruise lines are not able to sail ships from the US, they will look to other countries that are more open. 

I don't think that is going to be very helpful.  The reality is that for the huge US based cruise lines, the overwhelming percentage of passengers are from North America.  Many of these folks do not want to spend the money (or time) flying to distant lands and many countries around the world are currently closed for tourism.  Even if you want to fly to Europe for a cruise it may not be possible.  As to Asia, there are still no ports open to cruise ships.  Australia and NZ are both closed to tourists and cruises.  

 

So when you say "look to other countries that are more open" my question would be "where?"

 

Hank

[CruisingAlong4Now]

Checking the list of companies for whom bankruptcy/financial default is not covered by your travel insurance is one way to access risk. 

[navybankerteacher]

21 hours ago, mnocket said:

It's important to recognize that the risk is different for customers and shareholders.  Customers MAY lose their deposits if a cruise line reorganizes under bankruptcy and the new entity doesn't honor prior commitments (this would be a departure from past practices).  Shareholders, on the other hand, would likely lose their entire investment. 

 

The later is precisely why bankruptcy will become an ever more attractive option for cruise lines.  By wiping out existing shareholders and reorganizing into a "new" company, cruise lines will be able to recapitalize by selling shares in the "new' company.  It may be the only way they can come out the other side with the necessary capital to service the huge debt they have taken on and have the working capital to sustain operations.  For this reason, cruise line bankruptcies may become the rule not the exception.

While it can be tempting for corporate management to consider reorganization through bankruptcy , the individuals who constitute such “management” (usually the directors) may not be that eager.  Many of them are large stock-holders themselves, risking the value of their equity positions, and they may risk existing interest in long-term payouts - not to mention loss of their positions.   

Edited October 23, 2020 by navybankerteacher

[iancal]

By the time bankruptcy is  really on the table the stock is already at a low ebb, stock options are under water, and other rewards based on revenue and profit are no longer possible.   It comes down to retention bonus', separation agreements, and future lucrative employment.

 

I suspect that in many instances the decision moves away from the management team to the banks and the first line credit holders.  Some of whom will no doubt are on the Board.  There comes a point where they have real concern for their value of their security.  

 

There may come a time for some cruise lines when the cash needed for basic operations exceed what is available and potential funders decline because either there is no security to attach or the value of that security is highly questionable.   Not a good place to be.

Edited October 23, 2020 by iancal

[Heidi13]

On 10/22/2020 at 8:33 AM, Hlitner said:

Yep, Crystal has some big problems.  But we also think that  Crystal is a quality product that might be ripe for the taking by other companies.   We do think there is going to be major restructuring throughout the cruise industry and it has already started.  Older less profitable ships are being scuttled, there is talk about more consolidation within the CCL family, and there have been some obvious slow downs on new build schedules.  But history tells us that when times get tough, there are some companies that will take advantage of the situation to expand.  I would keep an eye on MSC and CCL both of which seem to be positioned to take advantage of opportunities.  This assume that cruising can commence major operations in the first half of 2021.  Otherwise, all bets are off.

 

Hank

 

Yes, Crystal has a loyal pax base, so is definitely a candidate for take-over, should Genting have to divest assets to survive.

 

The MSC model has worked, so I wouldn't discount other major and profitable cargo ship owners getting into the pax business, at rock bottom prices. The world's largest shipping line is Maersk, which is highly diversified in the industry, so if the price was right, they could consider entering the pax market.

 

After a rough spell, NYK has returned to profit, so could also be a candidate to re-purchase Crystal, or other pax vessel assets.

 

Other potential candidates are Cosco, Mitsui OSK, OOCL, Hydundai and Seaspan International.

 

I will be watching industry development closely, especially if cruising doesn't return early in 2021.

 

 

[bigrednole]

4 hours ago, Hlitner said:

So when you say "look to other countries that are more open" my question would be "where?"

Bahamas, Canada, Mexico. Most people have to fly in anyway, so flying to one of these countries is not much different. For us here in the US, the CDC, ports, and cruise lines need to have a serious discussion. No more of this trivial stuff and unrealistic demands. Covid isn't going anywhere, vaccines that work are years away, and it is better to plan for it than to think it will be gone.

[navybankerteacher]

3 hours ago, iancal said:

By the time bankruptcy is  really on the table the stock is already at a low ebb, stock options are under water, and other rewards based on revenue and profit are no longer possible.   It comes down to retention bonus', separation agreements, and future lucrative employment.

 

I suspect that in many instances the decision moves away from the management team to the banks and the first line credit holders.  Some of whom will no doubt are on the Board.  There comes a point where they have real concern for their value of their security.  

 

There may come a time for some cruise lines when the cash needed for basic operations exceed what is available and potential funders decline because either there is no security to attach or the value of that security is highly questionable.   Not a good place to be.

In most cases the management team does not want to wait until involuntary proceedings are filed by unpaid creditors.  Their chances of surviving are much better (in the US being named as “debtor in possession” - giving them , at least at the outset, a seat at the table) if they pull the plug before that decision/option slips away from them.

[sfaaa]

On 10/21/2020 at 6:58 PM, LocoLoco1 said:

I wonder what Odds the Vegas bookmakers or Wall Street short-sellers have on Cruiselines NOT surviving this?? Without a Vaccine, I see that as possible. 

10 different vaccines are on stage 3 testing and we only need one to work. My money is on having a vaccine in 2021.

[LocoLoco1]

I needed to book my free FCC cruise with HAL by December or lose it. Booked an early April cruise thru the Panama Canal. I’ll say, ‘doubtful at best’.

[Hlitner]

19 minutes ago, bigrednole said:

Bahamas, Canada, Mexico. Most people have to fly in anyway, so flying to one of these countries is not much different. For us here in the US, the CDC, ports, and cruise lines need to have a serious discussion. No more of this trivial stuff and unrealistic demands. Covid isn't going anywhere, vaccines that work are years away, and it is better to plan for it than to think it will be gone.

The Bahamas are lifting their 14 day quarantine restriction on Nov 1 but have other restrictions in place such as having to continuously prove one is COVID free.   They also have implemented something they call a Bahamas Health Travel Visa.  Nobody seems to be sure how this would apply to cruises, but the Bahamas is not generally used for embarkation.  As to Canada there is still a travel ban for Americans other then for essential travel.  There is also a PR issue in that the Canadians are very supportive of their government's efforts to ban Americans.

 

Now Mexico is one possibility.  Personally I am a big fan of Mexico (we live in Puerto Vallarta for 10 weeks a year) and I do think it might be possible for some cruises to originate in Puerto Vallarta where the cruise ship marina can dock 3 ships and has a brand new facility at Pier #1.  But that would be of little help to the largest part of the US cruise market which to the Caribbean and eastern Mexico.  That being said, Mexico currently has a big COVID problem (vastly undercounted) and Puerto Vallarta is a real hotspot.  It might be difficult to convince a lot of travelers (especially those unfamiliar with Mexico) to fly in that country.  Our own family and friends have thought, for years, that DW and I are crazy to live (part time) in Mexico.  In their minds Mexico is a place of cartels, drugs, murder and kidnapping and they think everyone gets sick on the food.  By the way, having lived in Mexico for 15 winters and dined out more then 1000 times at hundreds of venues, DW and I have only been sick once....at that was food poisoning caused by fish imported from South America.

 

Hank

[iancal]

I certainly would not want to be holding a significant FCC in lieu of refund-with or without a best before date.   If possible, I would be opting for a refund ASAP.   A few hundred on a deposit is one thing.....thousands on an FCC is quite a different animal.   Far too many unknowns at the moment.  With the covid situation, cruise line sailings, and the financial health of the cruise line.  Same for airline fares.

[pc_load_letter]

Zero

Edited October 23, 2020 by pc_load_letter

[getting older slowly]

I think the big thing is all the debt cruise line are amounting......

 

and went cruising does start... it will not be as profitable...

due to restricted itenerties ( countries which are closed to cruise ships )

Maybe reduced numbers...

 

So with that in mind the cruise industry has at least another year of rocky ground

 before they can start looking at good profitability... and pay off the debt...  

 

Magic 8 ball    says......  what looks good now.... might be gone in a year...

 

Don