Will there be consolidation within the cruise line industry?

[DaniDanielle]

We were booked on the May 10th Oasis, then rebooked for September 6th.  Bayonne is fifteen minutes from us so we were excited Oasis was coming.  Now with this 70 not being able to sail thing who knows☹️

[gatour]

3 hours ago, fudgbug said:

Ya, I have and once was enough.  It was on the Sovereign.

I sailed on Sovereign when she the largest cruise ship in the world.  She would now be considered small to middling.  Wondering what ships you sail on now.

 

Getting back to the original topic.

 

Consolidation, no.  They are all fighting their own battles.

 

I see RCCL saleing their smaller ships.

 

CCL is an interesting case.  They like to use their older/smaller ships in smaller niche markets that can't fill a larger/newer ship.  These ships are "paid for"  I.E. they have already returned the initial build costs (years ago).  So they are only paying for operating and maintenance costs.  Think what happens when you pay off your mortgage.  You are now only paying utilities, property taxes and maintenance (i.e. periodically repainting the house).

 

The Saudi stock purchase did not dilute the number of existing shares.  These were existing shares owned by other investment banks, firms, etc.  No money went into Carnival coffers.  In regards to the cultural thing being thrust on the ships.  The Saudi sovereign fund has multiple investments in things that would not be allowed at home.

 

In regards to a cargo shipping company buying one of the cruise lines I highly doubt that would happen.  MSC is a privately owned company, so the decision to branch out and try out the cruise market would only have had to be ran by a few others.  As opposed to a corporate board/shareholders.

 

Investment firms most likely have interest in buying into the cruise line.  Over the last 10-20 years, they would leverage buy out restaurants.  Take out cash and property ownership and then spin off the restaurant chain with tons of crushing debt.  This wouldn't work with the cruise companies because of their high fixed cost and lack of liquidity of their primary assets, the ships themselves.

 

Carnival will probably survive more or less as is, maybe shedding a few ships and cancelling newbuilds.

 

RCCL may have to enter bankruptcy but it will be more of an reorganization/forgiveness of debt.  With the inclusion of a sale/retirement of some ships

 

NCL.  This is the wild card.  It will survive in some shape or form.  Who owns them is another question.

[John&LaLa]

4 hours ago, fudgbug said:

Not unhappy - just don't sail on the big ships. 🙂 🙂

 

You really don't understand what people here call big. 😉

 

See you're a fan of the boutique lines.

Why are you slumming over here?

Edited April 13, 2020 by John&LaLa

[John&LaLa]

1 hour ago, gatour said:

CCL is an interesting case.  They like to use their older/smaller ships in smaller niche markets that can't fill a larger/newer ship.  These ships are "paid for"  I.E. they have already returned the initial build costs (years ago).  So they are only paying for operating and maintenance costs.  Think what happens when you pay off your mortgage.  You are now only paying utilities, property taxes and maintenance (i.e. periodically repainting the house).

 

I thought No ship is ever paid for, they constantly remortgage them to buy new ones, update old ones, build new projects, etc... That's my understanding.  They always have debt service.

 

Edited April 13, 2020 by John&LaLa

[ONECRUISER]

6 hours ago, fudgbug said:

Ya, I have and once was enough.  It was on the Sovereign.

Yeah in 80's when boarded her first month started Cruises the brand new Sovereign was the Largest Cruise Ship built, now almost smallest of Royals ships

[Biker19]

7 hours ago, John&LaLa said:

 

I thought No ship is ever paid for, they constantly remortgage them to buy new ones, update old ones, build new projects, etc... That's my understanding.  They always have debt service.

 

It's not real obvious in their SEC fillings, but there doesn't seem to be any direct debt attributable to a particular ship more than about 12 years old. 

[John&LaLa]

2 hours ago, Biker19 said:

It's not real obvious in their SEC fillings, but there doesn't seem to be any direct debt attributable to a particular ship more than about 12 years old. 

 

Interesting business model.

My last employer had massive fleets of trucks and leased them back from a holding company forever. Maybe thats an American plan for tax purposes. Don't the airlines work like that?

 

Where do they get capital for amplification?

[Biker19]

1 minute ago, John&LaLa said:

Where do they get capital for amplification?

Probably a combination of cash flow and generic debt.

[Ourusualbeach]

2 hours ago, John&LaLa said:

Where do they get capital for amplification?

Thise nickels and dimes add up.  😉

[Got Out There]

I saw the latest video from Richard Fain...he does a nice job with these quick little videos.  For some reason I got to thinking about Adam Goldstein, his former right hand person.  I had the chance to meet both of them several years ago and they surely, in my opinion, could not be much more different then they are from one another. 

 

RF, seemed more passionate about the business and less about the details, on the other hand AG seemed far more engaged with the financial aspects of the business and came off not as passionate as RF.  I could have them both wrong, to be honest it was a 10-15 minute chat with the two of them, separately at different times. 

 

Both appeared to be very competent leaders and very driven.  So with AG's departure in early March, makes me wonder if the early stages of Covid-19 accelerated his departure.  Not from a cost perspective, but perhaps a disagreement with the outlook and strategy.  His departure did seem to somewhat come out of nowhere.

 

Regardless of all of this, the potential startup of the cruise industry seems to not be right around the corner or perhaps even this year.  I find it odd that everyone is focused on "when is the peak" of Covid-19 will occur, and then assume that perhaps a month or two later all will be back to normal.  The reality is that the virus is not going away and one of three things needs to happen for cruising to start....

 

A vaccine is developed and readily available.  A magic pill is created that quickly and effectively treats the virus.  Or some sort of quick result test becomes readily available and passengers can be screened quickly before boarding.   

 

I have thought about this some, with the incentive being that my wife and I would like to cruise again soon, if it is safe.  There are probably other options that I have not considered, but the bottom line is we are looking forward to sailing again soon and hope that Royal is still there flying her own colors and the drinks are flowing.....

 

One can hope right?

[Biker19]

7 minutes ago, Got Out There said:

His departure did seem to somewhat come out of nowhere.

He has been on his way out for over a year - he was taken off the RCCL SEC paperwork 2 years ago.

[John&LaLa]

34 minutes ago, Biker19 said:

He has been on his way out for over a year - he was taken off the RCCL SEC paperwork 2 years ago.

 

Isn't he the genius at CLIA now🤔

[Ourusualbeach]

46 minutes ago, Got Out There said:

His departure did seem to somewhat come out of nowhere.

Not really.  Ever since he left as President of RCI less and less was heard from him.  He was removed from the Corporate officers listings and his salary went to peanuts compared to what he was making.  For the last year he has been more involved with CLIA.  Writings been on the wall for quite a while. 

[Ourusualbeach]

6 minutes ago, John&LaLa said:

 

Isn't he the genius at CLIA now🤔

Yes