Solvency of Cruise Lines

[Steve Q]

Below is a link to an article in today’s WSJ. Not certain if you will be able to access it.

 

The author references a cruise line analyst that believes that the three large cruise line operators have sufficient capital to survive for the next year. The fear seems to be that the companies will not bounce back as rapidly as after 2001 and 2008. The belief is that many customers will be apprehensive about rebooking if the Coronavirus is “still prevalent and untreatable”.

 

Lastly, he states that “Talk of the Trump administration offering aid has faded as opponents point out that cruise lines register their vessels in places like Liberia and Panama to avoid taxes and regulation.”

 

It certainly will be an interesting next few months.

 

https://www.wsj.com/articles/will-landlubbers-venture-back-onto-cruises-in-time-11584712726?mod=itp_wsj&ru=yahoo

 

 

 

 

[JennysUncle]

The ship's registry is relevant to the regulations that apply to its sailing.

Carnival is a US corporation registered in Florida.

[Brentwood Bay]

Carnival also pays the US approximately 1% corporate tax on its annual profits.  That wouldn't make me too keen to assist if I was an American tax payer.

[ontheweb]

1 hour ago, Brentwood Bay said:

Carnival also pays the US approximately 1% corporate tax on its annual profits.  That wouldn't make me too keen to assist if I was an American tax payer.

And what percentage do corporations like Apple and Amazon pay? It's the laws that are screwed up, not the corporations that take advantage of the laws as they are written.

[Steve Q]

Profits earned outside the United States are taxed at a very low rate, if at all. In addition, all of the ships are registered outside the United States for an obvious reason.

[kangforpres]

I'm not keen to bailout the cruise industry or the airline industry and I'm a fan of them both. US airlines have use 96% of their capital for stock buy backs instead of saving some for a disaster like this. The big 3 cruise lines have all over-expanded in my opinion thinking the days of wine and roses would never end.

 

-Paul

[cruiserchuck]

According to its latest SEC 10-K Annual Report, Carnival is not a US Corporation, and does not pay significant US Federal Income tax:

 

"Carnival Corporation was incorporated in Panama in 1972 and Carnival plc was incorporated in England and Wales in 2000. Carnival Corporation and Carnival plc operate a dual listed company."

 

"Substantially all of Carnival Corporation’s income is exempt from U.S. federal income and branch profit taxes."

 

 

[Aquahound]

4 hours ago, JennysUncle said:

The ship's registry is relevant to the regulations that apply to its sailing.

Carnival is a US corporation registered in Florida.

 

They're headquartered in Miami.  They're incorporated in Panama.

[kevingastreich]

5 hours ago, Steve Q said:

Lastly, he states that “Talk of the Trump administration offering aid has faded as opponents point out that cruise lines register their vessels in places like Liberia and Panama to avoid taxes and regulation.”

 

 

 

 

 

 

Live by the sword, Die by the sword?

[DaveRRT]

yep im sure they pay no taxes , port fees and all the employees are tax exempt all the cabs and ubers that take you there pay no tax the food people that supply the produce and drinks pay no tax also , plus the crew will make much more in their home country. Could we try to think a little before we destroy our country please

[npcl]

8 hours ago, JennysUncle said:

The ship's registry is relevant to the regulations that apply to its sailing.

Carnival is a US corporation registered in Florida.

Carnival is actually incorporated in Panama

[npcl]

6 hours ago, Steve Q said:

Profits earned outside the United States are taxed at a very low rate, if at all. In addition, all of the ships are registered outside the United States for an obvious reason.

The cruise lines use a loophole in the tax code where they do not pay taxes on ship related income, even if that income came from someone in the US. The only pay taxes on income earned from properties inside the US such as HAL and Princesses Alaskian hotel and tour businesses.

[HappyInVan]

The Fed may help some cruise companies by purchasing their commercial paper. But. it will be expensive.

 

https://www.ft.com/content/b36baa20-685d-11ea-800d-da70cff6e4d3

 

 

As has been discussed, would the Fed help 'global' companies like CCL?

[Jammu2]

Some will need to reduce inefficient capacity. Some may consolidate lines or merge with other firms. I fear for the HAL brand.

 

We are thinking of using our FCC and the cancel for any reason offer and booking for fall. 

 

I see things going teo directions: one, smaller, more expensive and exclusive. Two, massive ship to basically nowhere party boats. I hope I am wrong but if it comes to pass I know where I will be.

[Germancruiser]

7 hours ago, kangforpres said:

I'm not keen to bailout the cruise industry or the airline industry and I'm a fan of them both. US airlines have use 96% of their capital for stock buy backs instead of saving some for a disaster like this. The big 3 cruise lines have all over-expanded in my opinion thinking the days of wine and roses would never end.

 

-Paul

I totaly agree- the have all over - expanded. Days of wine and roses always came to an end- always! I fear after the crisis there will be a world wide rezession- where people strugle to keep in work and pay their rent or the mortage of their houses! At least for a while i suppose the years of wine and roses of wild expansion for the cruise industry are over.

[bouhunter]

Once they are actually sailing again, whenever that is, they are going to have another problem.  Millions will be unemployed, millions more lost half their retirement savings.  Many potential customers won't have the money to cruise, or won't choose to because of their new financial condition.  Same issue for restaurants, retailers etc.  All businesses will struggle for a long time.

Edited March 22, 2020 by bouhunter

[molemaui]

2 hours ago, bouhunter said:

Once they are actually sailing again, whenever that is, they are going to have another problem.  Millions will be unemployed, millions more lost half their retirement savings.  Many potential customers won't have the money to cruise, or won't choose to because of their new financial condition.  Same issue for restaurants, retailers etc.  All businesses will struggle for a long time.

 

Although you present a pretty dire prediction, I believe your projections are more in line what will happen. Hoping you're overreacting or simply wrong but I don't think so. 

[Boatdrill]

20 hours ago, Brentwood Bay said:

Carnival also pays the US approximately 1% corporate tax on its annual profits.  That wouldn't make me too keen to assist if I was an American tax payer.

Carnival also pays US companies for ships' food, supplies, mechanical parts, berthing fees, etc. As well as longshoremen,  shore operation companies, corporate employees in Miami, etc.  Their reach into the US economy is a long one. 

[rotjeknor]

15 hours ago, DaveRRT said:

 Could we try to think a little before we destroy our country please

Especially when your in the ballot box....

[Heartgrove]

41 minutes ago, Boatdrill said:

Carnival also pays US companies for ships' food, supplies, mechanical parts, berthing fees, etc. As well as longshoremen,  shore operation companies, corporate employees in Miami, etc.  Their reach into the US economy is a long one. 

Yes, hopefully the companies that support the industry would receive some stimulus funding. But a good business model in satisfactory economic times is to not overextend and depend on one customer for more than 50%, or less if possible. This is how capitalism works, after all.

 

UAL has for now transitioned to essentially only a domestic market carrier. I wonder if it is posturing for more economic relief?

Edited March 22, 2020 by Heartgrove

[kwb101]

Interesting article:

Let the Cruise Lines Sink: They are over-indebted, hire too few Americans, and perform no vital service

I'm a free-market type, but do enjoy HAL's itineraries and ships. I'm of mixed emotions. (Someone defined mixed emotions as watching your mother-in-law go off a cliff in your new car.)

[AL3XCruise]

20 hours ago, DaveRRT said:

yep im sure they pay no taxes , port fees and all the employees are tax exempt all the cabs and ubers that take you there pay no tax the food people that supply the produce and drinks pay no tax also , plus the crew will make much more in their home country. Could we try to think a little before we destroy our country please

 

They pay far less in taxes than US based hotels, entertainment venues, and restaurants.  The employ far fewer US citizens and residents than US based hotels, entertainment venues, and restaurants.  And, incidentally, if cruising were to see a downturn, many cruisers would be spending their money at US based hotels, entertainment venues, and restaurants. 

 

A roundtrip ticket, a night in a hotel, a couple meals, and an uber ride don't compare to a week or two vacation on the Florida cost in terms of the benefit in jobs and tax revenue.  Even if a significant portion of cruisers elect to vacation overseas, it is likely the domestic hospitality industry would see a boost. 

 

People seem to assume that all cruisers would just stay home, and all businesses that work with cruise lines would be unable to provide service to any other customers.  Industry organizations push data that reinforces this view, using spurious analysis to try and claim the impact they have on the US economy.

 

I do feel for the vast number of people that would be impacted by a severe decline in the cruise industry, and I'd personally miss the opportunity to cruise.  I don't want to see any line fail or its employees suffer.  But in times where dollars are short and needs are long, I think governments need to focus on propping up industries that provide essential services and/or offer substantial employment opportunities for their residents.  In the grand scheme of things, cruise lines do neither.

 

I look forward to supporting them by cruising in the future.  

 

 

[Smeecanada]

Hopefully, this will bring all travel back into more realistic pricing for the average person.  Hotel costs / admission fees / etc. are just getting way out of the average family's reach.  

[ON cruiser]

Thanks KWB, for linking that article in your above post (# 21). As a free-market guy, I tend to agree. Not everything can be "too big to fail". If people have not watched the great film, The Big Short, while social distancing at home, now is the time for it.

 

After the 2008 recession, GM reduced brands, axing Oldsmobile and Pontiac. I wonder if the major corporate entities, which operate various cruise-lines brands, will have to do the same?  I think change and restructuring is a real possibility for the industry, whether it involves acquisition or merger, or Chapter 11 .

 

My personal worry is that I have a Seabourn cruise booked, and just charged final payment to my credit card before this all blew up. The cruise is now impossible as it was to Alaska, Vancouver return, and Canada has prohibited cruises at this time. As I have not reached the payment date on my credit card, I am thinking to call my credit card and dispute the payment, so it goes into suspense rather than me shelling out a huge amount of money that may take quite some time to get back. I would rather keep the money while this gets sorted out, thanks. Even if all stay solvent, it will take Seabourn some weeks to get around to it.

 

And KWB, while I loved and miss my mother-in-law, I still think your definition of "mixed emotions" is great. 

[gatour]

21 hours ago, HappyInVan said:

The Fed may help some cruise companies by purchasing their commercial paper. But. it will be expensive.

 

https://www.ft.com/content/b36baa20-685d-11ea-800d-da70cff6e4d3

 

 

As has been discussed, would the Fed help 'global' companies like CCL?

Well they have helped  Bank of America/Merrill Lynch both of which had and still have global operations.  Also they helped GM and Chrysler which had and still have operations.  In all three cases they are "global" companies.

 

Should they help the cruise lines, I am on the fence.