Can Viking Remain Viable With This Extreme Revenue Loss

[Jim Avery]

29 minutes ago, Eddievouge11 said:

As you may know Viking has suspended operations to the end of June. 

Viking is also not paying their travel agents commissions on Viking cancellations when the passengers request a refund.

This is the same company that wants full payments often a year or more in advance.

It makes one wonder how financial stable that they are?

I am not in the travel biz so am curious why Viking would be expected to pay commissions for cruises not taken or paid for?  Are they paid commissions if, for example, I cancelled a cruise before final payment date and received a refund?  Again, just curious.  Not trying to start some war.

[Azulann]

I just listen to Mr. Hagen 12 minute video that was in an email  to guests today. He explained about Viking as a private company with two big backers one of which is a Canadian teachers fund?  He also said viking had  a very succesful year. His crew of alll Ocean ships will continue to recieve pay doruign this shutdown till July 1.

And  the new Viking.TV will be a new source of information, musci, concert, and greattign form crew members.

I  think this was very informaitve given the frozen in time  we are experiencing. 

I wish Viking well and hope to sail again on a Viking ship in the future.

PS I think he has been following the Viking Sun  thread. he made mention of the 8 passengers on board heading to England.

 

Edited March 31, 2020 by Azulann

[Candlesmith]

3 hours ago, Jim Avery said:

As you may know Viking has suspended operations to the end of June. 

Viking is also not paying their travel agents commissions on Viking cancellations when the passengers request a refund.

This is the same company that wants full payments often a year or more in advance.

It makes one wonder how financial stable that they are?

We have been weighing the pros & cons of cancelling the several cruises we have booked in 2020 & 2021, due in part to the conversations in this thread.  The biggest con, in our minds, more than the loss of our travel insurance premiums, is our unwillingness to be party to helpIng them toward insolvency.  However.....
 

We never doubted for a minute, with Viking or any other cruise line, that the minute we cancelled a booking, our travel advisor would lose her commission.  That would be true for one employed by Viking as well.  It isn’t necessarily a sign of financial instability, or ill will, it’s merely a reality of life.  The sale on which the commission was earned no longer exists, the commission has not been earned, and it goes away as well.

 

It worries me more that the cancellation of multiple future cruises, out of free floating anxiety, for each one cancelled due to Covid-19 could capsize the company when it wasn’t otherwise in trouble.

Edited March 31, 2020 by Candlesmith
Typo

[Captain_Morgan]

4 hours ago, Azulann said:

I just listen to Mr. Hagen 12 minute video that was in an email  to guests today. He explained about Viking as a private company with two big backers one of which is a Canadian teachers fund?  He also said viking had  a very successful year. His crew of all Ocean ships will continue to receive pay during this shutdown till July 1.

And  the new Viking.TV will be a new source of information, music, concert, and greetings form crew members.

I  think this was very informative given the frozen in time  we are experiencing. 

I wish Viking well and hope to sail again on a Viking ship in the future.

PS I think he has been following the Viking Sun  thread. he made mention of the 8 passengers on board heading to England.

 

 

Here is an article from 2016 which summarizes the 'ownership' profile, which i wouldn't refer to as 'big backers' given they only own 17% or about $500 million, which is no drop in the bucket but when you consider the cost of one ship is reported to be approx. $400 million that still means they're having to fund the overly ambitious plans to expand the market share position.

 

https://www.cruiseindustrynews.com/cruise-news/15798-viking-ownership-moves-provide-insight-company-targets-china.html

 

Hard as well not to notice the reference back then from Moody's which referred to their credit status as being downgraded so fast forward to the current climate and I can't imagine things are looking rosy despite the well intended short video clip being produced by Hagen and every other top banana in the industry.

[Heidi13]

6 hours ago, Azulann said:

I just listen to Mr. Hagen 12 minute video that was in an email  to guests today. He explained about Viking as a private company with two big backers one of which is a Canadian teachers fund?  He also said viking had  a very succesful year. His crew of alll Ocean ships will continue to recieve pay doruign this shutdown till July 1.

And  the new Viking.TV will be a new source of information, musci, concert, and greattign form crew members.

I  think this was very informaitve given the frozen in time  we are experiencing. 

I wish Viking well and hope to sail again on a Viking ship in the future.

PS I think he has been following the Viking Sun  thread. he made mention of the 8 passengers on board heading to England.

 

For sure Viking HQ is aware of the current situation aboard Viking Sun, as they are in contact with the ship daily. Viking HQ has worked diligently since we departed Australia trying to get us into ports and eventually home.

 

Haven't seen the latest short film, but will check the website. Appreciate the heads up that it is available.

[terrydtx]

I do not want to see Viking fail and become insolvent but I also do not want to risk losing over $14,000 I have already paid for our September cruise from Venice with a FCC. I also have another $3700 spent on airfare. If this cruise is cancelled by Viking I will take the 100% cash refund, I will not risk a FCC. If that happens I may get a full refund on my airfare through my 3rd party travel insurance if American Airlines will not let me use it later or refund cost directly. I can also move that 3rd party insurance, if not used on the airfare, to my Celebrity cruise booked for next year. 

[MrRandal]

13 hours ago, Captain_Morgan said:

 

Here is an article from 2016 which summarizes the 'ownership' profile, which i wouldn't refer to as 'big backers' given they only own 17% or about $500 million, which is no drop in the bucket but when you consider the cost of one ship is reported to be approx. $400 million that still means they're having to fund the overly ambitious plans to expand the market share position.

 

https://www.cruiseindustrynews.com/cruise-news/15798-viking-ownership-moves-provide-insight-company-targets-china.html

 

Hard as well not to notice the reference back then from Moody's which referred to their credit status as being downgraded so fast forward to the current climate and I can't imagine things are looking rosy despite the well intended short video clip being produced by Hagen and every other top banana in the industry.

 

There is much more current info on Tor Hagen, and Vikings present financial situation. I have no idea how much cash they have on hand, as they have been collecting full fares in advance, 12-18 months in many cases. They do have 78 boats and 10,000 employees sitting idle with probably very little income and many, many refunds being paid. For a little insight into Tor and Viking, this is a quote from an article posted in Forbes on May 15, 2019 "Hagen can hardly keep up with the demand. He is borrowing cash furiously (the company’s debt is $2.5 billion) to build more ships, and has also raised equity capital from the Canadian pension board and the U.S. private equity firm TPG."

Edited March 31, 2020 by MrRandal
Correction

[DaveSJ711]

6 minutes ago, MrRandal said:

 

There is much more current info on Tor Hagen, and Vikings present financial situation. I have no idea how much cash they have on hand, as they have been collecting full fares in advance, 12-18 months in many cases. It has the makings of  a giant Ponzi scheme. They do have 78 boats and 10,000 employees sitting idle with probably very little income and many, many refunds being paid. For a little insight into Tor and Viking, this is a quote from an article posted in Forbes on May 15, 2019 "Hagen can hardly keep up with the demand. He is borrowing cash furiously (the company’s debt is $2.5 billion) to build more ships, and has also raised equity capital from the Canadian pension board and the U.S. private equity firm TPG."

 

"Giant Ponzi scheme"?  A Ponzi scheme is a form of fraud.  Are you saying that Viking is doing business fraudulently? 

[MrRandal]

I removed my reference to a Giant Ponzi scheme. Bad analogy, as I'm sure what Viking has been doing is not fraudulent. You decide what to call it when they are the only Cruise Line in the industry to require full payment 12-18 months in advance. Since they decided to cancel all of their operations, they have been stellar, and my understanding is they are issuing refunds to everyone who requests them. I hope they are able to continue to do so, and I hope they survive this scourge intact. But the question, the topic of the post, is can they?

[Hanoj]

7 minutes ago, DaveSJ711 said:

 

"Giant Ponzi scheme"?  A Ponzi scheme is a form of fraud.  Are you saying that Viking is doing business fraudulently? 

 

It is not a Ponzi scheme. Viking is seeking to gain market share in a capital intensive industry. Each VO ship costs about $400,000,000 USD to build. It is not practical to finance growth solely from earnings (excess of revenue over expenses) since it would take too long due to lead times to build the ships, etc. Viking has aggressively borrowed to finance its expansion. With its advance full payment policies, it has indirectly borrowed from guests without paying interest. This strategy works well when there is growth and profitable operations. The risk of this approach is exacerbated when there is a contraction like we are witnessing presently.

 

Obviously Viking is seeking to come out of this crisis well positioned for the future. I commend them for the lead they have taken during this pandemic to prioritize customer service and employee care. It will be interesting to see what happens with advance  full payment policies in the future. They have been able to do it due to demand for their cruises exceeding supply. That is, many of their cruises had sold out well in advance of sailing prior to this pandemic. I expect many things will be different once the pandemic ceases. The cruise industry, and Viking in particular, had been growing fast. As long as the present impediments to travel are lifted (i.e., no permanent restrictions like passengers over 70 requiring doctor approval), things have a greater chance of returning to normal. But, this is doubtful since many areas/ports were considering measures to reduce tourist volumes. For example, I have read accounts that the waters in Venice have cleared considerably and fish and dolphins have returned. Thus, I expect there will be less travel in the future. Hopefully,  a better balance can be achieved in managing human activity and the planet's resources and other forms of life.

 

[Captain_Morgan]

42 minutes ago, MrRandal said:

 

There is much more current info on Tor Hagen, and Vikings present financial situation. I have no idea how much cash they have on hand, as they have been collecting full fares in advance, 12-18 months in many cases. They do have 78 boats and 10,000 employees sitting idle with probably very little income and many, many refunds being paid. For a little insight into Tor and Viking, this is a quote from an article posted in Forbes on May 15, 2019 "Hagen can hardly keep up with the demand. He is borrowing cash furiously (the company’s debt is $2.5 billion) to build more ships, and has also raised equity capital from the Canadian pension board and the U.S. private equity firm TPG."

 

I agree the puff piece article in Forbes is more recent, but the facts remain the same that equity capital was raised by selling off a percentage of the company to the entities mentioned.  Before people get their knickers in a knot because I called it a puff piece, I think its safe to say that ALL articles outlining a person's success fall under that category as they're not critical and do nothing but serve to elevate the stature of the subject.  Nothing wrong with it, but it is what it is...

 

What will be interesting as well in the future is how (if at all) the river portion of the business rebounds as its far and away a larger portion of the empire and although it doesn't run year round (in Europe) like the ocean going ships do, they are by far the biggest aspect of the company and what the name is synonymous with.  I can't see there being any demand whatsoever for river cruises when many if not all of the countries visited are afflicted by the current pandemic not to mention the fact that the proximity to which the boats travel to potentially affected areas would make it a non-starter in my mind.  At least with the ocean going ships you can go 'out to sea' and try to get away from the source of the problem.

 

As you've said, with thousands of employees sitting idle and being paid (for how long?) and refunds being doled out to thousands more its not a particularly good outlook financially for them and every other player in the industry.

[duquephart]

And therein lies the rub.

[Aiken375]

Thanks to whoever posted the info on the Forbes article.  A very interesting read indeed!  For those who don't want to take time to read it, here are some of my takeaways.  Viking has 78 ships and 9000 employees.  The company has a net worth of $3.4B, with $1.6 B in net revenue (updated data from Moody's indicates $2.0 B in net revenue for 12 months ending 9/30/19).  Their debt was $2.5B per Forbes.  That gives a debt to equity ratio of 0.73.  Not sure what is normal in the cruise industry, but this seems quite high to me.  Moody's lowered their credit rating on Viking March 30th from B1 to B2 (not sure what the full scale is).

 

All of the above negative stuff is somewhat balanced by these positives: their ships have 9000 staterooms that Forbes says were 98% occupied (pretty amazing to me).  Half the business is ocean ships. Italian taxpayers financed 96% of the cost of the first ocean ships, and the German government backed the cost of 57 river ships (!).  Torsten Hagen, who owns 75% of the company, graduated from Harvard with an MBA, and worked as a consultant at McKinsey, where he helped Holland America avoid bankruptcy.  His goal has always been to own THE ocean cruise line.  He used the river ships as a stepping stone to that goal.  And as we all know, he developed it so well that he was able to demand full payment sometimes as long as 18 months in advance.   The article says he loves to take chances.  Well, he certainly has one on his hands now, but I'm not sure I would want to bet against him.

 

Your thoughts?   

[duquephart]

This isn't taking chances. This is dealing with disaster.

[Dukefan]

This decision by Viking does not appear to be a decision by a company that has any major short term financial concerns:

 

http://crew-center.com/viking-crew-receive-goodwill-payment-new-hires-eligible-financial-support

Edited April 5, 2020 by Dukefan

[lackcreativity]

9 minutes ago, Dukefan said:

This decision by Viking does not appear to be a decision by a company that has any major short term financial concerns:

 

http://crew-center.com/viking-crew-receive-goodwill-payment-new-hires-eligible-financial-support

It reinforces my respect for the Viking brand, as Mr. Hagen wants to support one of the company's most valuable assets. It also does provide some reassurance to me as a consumer that my soon to be paid balance on a fall cruise will retain its value. Still not an absolute guarantee, but I am not sure those are available in these times.

[Captain_Morgan]

16 hours ago, Aiken375 said:

Thanks to whoever posted the info on the Forbes article.  A very interesting read indeed!  For those who don't want to take time to read it, here are some of my takeaways.  Viking has 78 ships and 9000 employees.  The company has a net worth of $3.4B, with $1.6 B in net revenue (updated data from Moody's indicates $2.0 B in net revenue for 12 months ending 9/30/19).  Their debt was $2.5B per Forbes.  That gives a debt to equity ratio of 0.73.  Not sure what is normal in the cruise industry, but this seems quite high to me.  Moody's lowered their credit rating on Viking March 30th from B1 to B2 (not sure what the full scale is).

 

Your thoughts?   

 

Re. the debt to equity ratio, here is a snapshot for the main players in the industry to put things into perspective for the same period.

 

Carnival Corp had a ratio of 0.38 

Norwegian Cruise Line Holdings had a ratio of 0.93

Royal Caribbean had a ratio of 0.74

 

source:  https://www.macrotrends.net/stocks/charts/RCL/royal-caribbean-cruises/debt-equity-ratio

 

Bearing in mind of course that all of the above are publicly traded companies and they're much larger operations

[tomworldwidewaftage]

Hello everyone,

 

I see some others posters on this board are still aboard Viking Sun.

Hope all is well, sorry we didn't get to meet. 

Let us know what's what and how things end up for you all.

 

We arrived in India on Jan. 31st, to tour India and waiting for the Viking Sun.

 

We were suppose to embark Viking Sun in Mumbai on April 3rd.

On March 11th Viking e mailed said they were cancelling our cruise.

That day we notified Viking we want the 100% refund.

 

Were disappointed reading other boards were Viking Sun on March 8th.  disembarked in Bali.

Wondering what the 3 day delay was waiting from March 8th to sending the e mail cancelling the cruise.

 

We cancelled the remainder of our tour as things were closing here in India.

Domestic flights were being cancelled and changed to later times.

Which meant missed connections, and airports closing.

 

We're now in Mumbai with hotels closings daily.

We hope the hotel we're in stays open, and we're able to stay.

Until when ever all the lock downs ends, and flights resume,

and things return to what ever the new normal will be.

 

The hotel has 345 rooms only 35 occupied with guests.

Hotel staff are living in the hotel staying on site.

 

Still waiting for Viking to refund our $$$$$$

 

Be safe everyone.

 

Tom

 

 

 

 

Edited April 6, 2020 by tomworldwidewaftage

[Aiken375]

On 4/5/2020 at 2:10 PM, Captain_Morgan said:

 

Re. the debt to equity ratio, here is a snapshot for the main players in the industry to put things into perspective for the same period.

 

Carnival Corp had a ratio of 0.38 

Norwegian Cruise Line Holdings had a ratio of 0.93

Royal Caribbean had a ratio of 0.74

 

source:  https://www.macrotrends.net/stocks/charts/RCL/royal-caribbean-cruises/debt-equity-ratio

 

Bearing in mind of course that all of the above are publicly traded companies and they're much larger operations

Using your source, I was able to glean the following regarding cash on hand as of 1/1/20:

Viking $1700 million (from Moody's)

CCL      $518 million

NCL     $253 million

RCCL   $244 million

This would seem to put Viking in a much better position than the others.  

[Captain_Morgan]

17 minutes ago, Aiken375 said:

Using your source, I was able to glean the following regarding cash on hand as of 1/1/20:

Viking $1700 million (from Moody's)

CCL      $518 million

 

NCL     $253 million

 

RCCL   $244 million

 

This would seem to put Viking in a much better position than the others.  

 

 

Yes, the article in question (Moody's) referred to good cash balances of about $1.7 billion which is nothing to sneeze at for sure; however, it also said, "In the short run, Viking's credit profile will be dominated by the length of time that cruise operations continue to be highly disrupted and the resulting impacts on the company's cash consumption and its liquidity profile. The normal ongoing credit risks include Viking's high leverage which Moody's forecasts could approximate 6.0x at the end of 2021 assuming modest levels of EBITDA in 2020 and some recovery in 2021, but not back to the earnings generated in 2019. The company's credit profile is also constrained by its limited diversification both in terms of geography and customer base and the cyclicality, seasonality, and capital intensity inherent in the cruise industry."

 

Add to the equation the cost of building new ships (approx. $400 million apiece) which is no doubt insured to a large degree given the unforeseen delays, and the burn rate on operating costs (Carnival Corp. estimated costs being approx. $500 million per month) and the money will run out sooner rather than later I'm sure, hence the reason in the case of Carnival they had to raise nearly $5 billion to stay in business for the next 12-13 months.

 

If Carnival requires approx. $5 billion to keep their corporation afloat (pardon the pun) for 12 months working on a significantly reduced operating structure (i.e. ships parked with skeleton crews being paid a percentage of salaries) I imagine its going to cost Viking the majority of whatever cash reserves they have on hand to do the same.

[Baron Barracuda]

2 hours ago, Captain_Morgan said:

 

 

 

If Carnival requires approx. $5 billion to keep their corporation afloat (pardon the pun) for 12 months working on a significantly reduced operating structure (i.e. ships parked with skeleton crews being paid a percentage of salaries) I imagine its going to cost Viking the majority of whatever cash reserves they have on hand to do the same.

Not doubt Viking is experiencing sizable cash burn, however hard to draw comparisons between a line with 7 ships to CCL which has over 100.  The CCL ships are also much larger and presumably costlier to maintain.  Viking does have 76 river ships currently out of service but expect they require less maintenance than ocean going vessels. 

[Captain_Morgan]

6 hours ago, Baron Barracuda said:

Not doubt Viking is experiencing sizable cash burn, however hard to draw comparisons between a line with 7 ships to CCL which has over 100.  The CCL ships are also much larger and presumably costlier to maintain.  Viking does have 76 river ships currently out of service but expect they require less maintenance than ocean going vessels. 

 

Completely agree that its like comparing apples and oranges, but there still remains a sizable cash burn even with 7 ships when you consider that works out to about 3000 crew approximately onboard working full time and being paid, as well as a further 3000 at home approximately also receiving at least 50% of their salaries.

From what I've heard from friends and colleagues whom we've met over the years in the industry across the other brands it seems they're already downsizing their crew and cutting costs.

 

As for the river ships, I think they're used to laying them up as they're only a seasonal operation anyway but of course there's also an added cost there for prolonged lay up, not to mention if they're going to extend some kind of pay relief for those out of work there too.

 

One thing is for certain that there's no bottomless pit of cash within the industry and as has been mentioned elsewhere, it seems Viking's approach of taking full payment in advance has aided in the padding of their accounts, but I wonder how long before they sell of another piece of the pie like CCL did recently?!?

[tomworldwidewaftage]

FYI

 

https://www.cruisecritic.com/news/5254/?source=132200&fbclid=IwAR2_0IpHckx3Xr72D4BYKJVKENijdRwBWxTVgxWkOOMy7F0eXfdKblo4sCg

[Cienfuegos]

Viking drew down several credit lines to increase cash in the drawer. Nothing wrong with that, but it does impact the comparisons with prior financial periods.

 

when ratings are reduced, available credit lines may dry up. Or be subjected to new terms.

[tomworldwidewaftage]

Viking said 21 business days for our refund, which would have been April 9th.

On April 10th Viking said refunds were going out by next week.

Today Viking is saying 90 days for our refund.

 

Stock analysis are say the public trading cruise lines will be burning a Billion dollars a month.

 

I convinced Viking won't stay out of bankruptcy before we get our refund.