Any signs of bankrupcy for any major cruiselines?

[navybankerteacher]

10 minutes ago, evandbob said:

The more time it takes for America to get a grip on this pandemic, the harder it will be for leisure cruise lines to exist in limbo.  We have done a terrible job of managing a health response, and the virus seems to be winning.

 

We are still in the 1st wave of transmission, and if a 2nd wave in the autumn or winter gets mishandled as well, then we can kiss cruising goodbye.  The cruise lines will not be able to outlast the virus.

 

Perhaps a few ships might still sail in locations where the virus spread has been mitigated, but they will probably not allow Americans to travel there if we can't adopt a reasonable national response to the virus to control and limit its spread.  We sometimes forget we are the world's leader in virus transmission and deaths by a huge margin.

Scenes from Lake of The Ozarks - and other mobbed recreation areas - over this past weekend indicate that the American public lacks the discipline and attention span necessary  to come in from the rain - much less cope with a once-in-a-century pandemic. 

 

Our leaders have largely dropped ripped the ball .

[Wayfairers]

23 hours ago, iancal said:

Who knows?  RCI and Carnival Corp both have multiple cruise line subsidiaries.   Either one could easily let one of their subs slide into bankruptcy if the financial situation warranted it.  This would clearly not be good for the industry as a whole.

 

We do not know since we only see the consolidated financial statements.  We do not get to see the individual  financials on the subs such as Princess,  HAL, Costa, etc for Carnival Corp or Celebrity, Azamara, etc. for RCI Corp.

DH and I have discussed this many times.  If I were leading a cruise line corporation I would definitely consider merging subsidiaries.  You are right we don’t get to see the financial statements of the subsidiaries so we don’t know who makes money and who doesn’t.   Another option to consider is reorganize the entire company with 3  subsidiaries...smaller ship/more expensive option, mid range option and large party ship option.  

[navybankerteacher]

3 minutes ago, Wayfairers said:

DH and I have discussed this many times.  If I were leading a cruise line corporation I would definitely consider merging subsidiaries.  You are right we don’t get to see the financial statements of the subsidiaries so we don’t know who makes money and who doesn’t.   Another option to consider is reorganize the entire company with 3  subsidiaries...smaller ship/more expensive option, mid range option and large party ship option.  

This is essentially how Royal Caribbean is structured - excluding their two European-focused subs- they have Royal Caribbean’s large party ships, Celebrity’s somewhat smaller mid-range, then Azamara’s small ships, followed by Silversea’s top-of-the line luxury ships.

 

[Wayfairers]

11 minutes ago, navybankerteacher said:

This is essentially how Royal Caribbean is structured - excluding their two European-focused subs- they have Royal Caribbean’s large party ships, Celebrity’s somewhat smaller mid-range, then Azamara’s small ships, followed by Silversea’s top-of-the line luxury ships.

 

That’s right....I thinking of Carnival and all of their subsidiaries.  RC could combine Azamara  and Silversea I suppose...I don’t know enough about them to understand the differences between them.  Amazing to think of the number of jobs and overhead ship costs that would be reduced by eliminating a line!    That is a lot of savings.  I’m sure they aren’t paying any ship workers now but the top echelon, but the overhead they are absorbing by having those ships just sitting without decaying has to be enormous.  

[iancal]

No doubt this is a huge payday for the external consultants.  Outside counsel for pending litigation and or subsidiary mergers, restructuring consulting, debt restructuring advisors, etc.    I suspect that the midnight oil is burning at both Corporations with their internal team working of two or three different plans depending on how long this scourge continues.

 

I believe that at the very least Carnival Corp subsidiary cruise lines may look very different when the dust settles.  Both structure and number of ships in operation.

Edited July 6, 2020 by iancal

[Hlitner]

 I think the 4 major cruise companies (RCI, CCL, Norwegian Holdings and MSC) have structured themselves in a way that should get them through the remainder of 2020.  With the possible exception of MSC, I do not think these companies can financially survive a situation where there is no or little cruising in 2021.   We cannot know the financial situation of MSC (it is still basically a privately held company) but the other 3 have all arranged sufficient financing to see them through this year....assuming that they can begin to operate and bring in new revenue.  

 

There are many unknowns that are still impacting planning.  Getting the remaining crew members off ships and back to their homes is a huge problem (and expensive).  Trying to revamp itineraries and crew ships to restart operations is also a problem.  Another huge unknown is whether ships will be welcomed at any port and the terms that will be imposed by various ports.  If cruising becomes too onerous for the passengers, how many will put up with the hassles?   What I find amazing is that 6 months into this pandemic we do not know more then we knew a few months ago.

 

Hank

[iancal]

I believe time is against the cruise industry.  As the shutdown continues I believe that some percentage of cruisers will turn their attention away to other forms of vacation and vacation travel.   And/or commit those 'cruising funds' to other longer term financial commitments.   For those that remain interested in cruising I believe that the longer the shutdown goes on, the slower the recovery will be.  We do thumbnail plans of where we want to travel over the next two years.  Cruising is not even a consideration at this point.  I do not believe that we are very different than other travelers.

 

Clearly there is a base of committed cruisers, some of whom would be foolish enough to board a cruise ship today if they could, however I doubt that there are enough of these folks to turn the P&L from red to even the faintest shade of black.

Edited July 6, 2020 by iancal

[drsel]

I just read that all 3 Pullmantur ships are being scrapped and not sold

 

 

[iancal]

No surprise.  I wonder if the cruise line subs do a running  P&L over the years  on each ship and if so will this, along with the 5 year projected mtce and drydock costs of each ship, play a part in determining which ships will be scrapped/sold.

[mnocket]

45 minutes ago, drsel said:

I just read that all 3 Pullmantur ships are being scrapped and not sold

 

 

That's kinda the problem.  Cruise line assets are largely comprised of their ships.  A ship is worth what someone else is willing to pay for it.  In this environment, there just isn't a large market for cruise ships - especially older ones.  Hence the value of cruise line's assets continue to decline.  So we have an industry with no revenue, huge increases in debt and declining asset values.  It's hard to not believe that some, if not many, cruise lines will eventually go belly up. 

[navybankerteacher]

I think there will be a future market for the likes of Silversea and probably also Azamara - while small ships and superior service attract a customer base which can afford some luxuries.  

It is harder to see how the mass market ships can continue to attract the necessary numbers of more bargain-oriented cruisers at competitive fares if they have to limit passenger load and/or increase operating expenses as a result of COVID precautions.

 

It might just be that NCL, Carnival an RCCL grew a number of their subsidiary lines into an unsustainable business model.

[navybankerteacher]

2 hours ago, iancal said:

...

 

Clearly there is a base of committed cruisers, some of whom would be foolish enough to board a cruise ship today if they could, however I doubt that there are enough of these folks to turn the P&L from red to even the faintest shade of black.

There certainly is - Carnival alone has 12 ships scheduled for some 70 Caribbean itineraries in October. About 20 of them are already reported as sold out. 

 

When you referred to that “...base of committed cruisers...” did you mean to say cruisers who should be committed?

[drsel]

I hope that those 20 sailings in October are really sold out and not cancelled.

if so, that is great news !

it just shows the pent up demand for cruising

 

 

[iancal]

We would not even consider flying into FLL/MIA or San Diego and  doing an overnight pre cruise,  let alone be foolish enough to board a cruise ship.  

 

Edited July 6, 2020 by iancal

[Roz]

56 minutes ago, iancal said:

We would not even consider flying into FLL/MIA or San Diego and  doing an overnight pre cruise,  let alone be foolish enough to board a cruise ship.  

 

 

A lot can change in 3-4 months.

[sfaaa]

4 hours ago, Hlitner said:

 I think the 4 major cruise companies (RCI, CCL, Norwegian Holdings and MSC) have structured themselves in a way that should get them through the remainder of 2020.  With the possible exception of MSC, I do not think these companies can financially survive a situation where there is no or little cruising in 2021.   We cannot know the financial situation of MSC (it is still basically a privately held company) but the other 3 have all arranged sufficient financing to see them through this year....assuming that they can begin to operate and bring in new revenue.  

 

 

MSC is now processing refunds.  It also voluntarily released its audited financial statements to the public. These are all positive signs.

Edited July 6, 2020 by sfaaa

[AF-1]

We can hope for the best.  Hopefully by Oct we will know more than we do now.

[rkacruiser]

6 hours ago, Wayfairers said:

 You are right we don’t get to see the financial statements of the subsidiaries so we don’t know who makes money and who doesn’t.  

 

As a long time CCL investor, that has frustrated me--as well as others--for years.  

[Hlitner]

41 minutes ago, sfaaa said:

MSC is now processing refunds.  It also voluntarily released its audited financial statements to the public. These are all positive signs.

I had put MSC into their own category because of their organizational structure.  Although they do make some of their financial info public, they are not under the same disclosure obligations as the other 3 major cruise players.   But MSC has very deep pockets and the family does not need to completely depend on the cruise industry to survive.  In the case of CCL, RCI and Norwegian Holdings they are almost totally dependent on the cruise industry.  All three of those companies have just about sold their soul to obtain necessary financing to get through this year.  Even if they survive, the burden of high interest loans and some other related issues such as convertible stock will hang over their heads for many years.

 

Hank

[AF-1]

Hank it will be a tough two years for all the major cruise lines

[rkacruiser]

20 hours ago, navybankerteacher said:

They have already raised money - $ billions,  at interest rates many multiples of current corporate financing norms.  How often can they go to the well?

 

This is what concerns me greatly.  Interest that will have to be paid that will severely impact the company's ability to pay dividends or share buybacks for years.  Issue more stock?  Well, who would buy that?  With their debt all ready in the Junk category, what lender is going to lend them more?

 

This is going to be a very "pollyanna" comment.  Given the extremely significant stake that Mr. Arison, his family, and their intertwined businesses and investments are in Carnival Corporation, if there is a way of preventing bankruptcy, Mr. Arison and company will find a way to do so.  I can't envision seeing Mr. Arison on a Miami street corner selling used smartphones in the future.  

[navybankerteacher]

8 minutes ago, rkacruiser said:

 

This is what concerns me greatly.  Interest that will have to be paid that will severely impact the company's ability to pay dividends or share buybacks for years.  Issue more stock?  Well, who would buy that?  With their debt all ready in the Junk category, what lender is going to lend them more?

 

This is going to be a very "pollyanna" comment.  Given the extremely significant stake that Mr. Arison, his family, and their intertwined businesses and investments are in Carnival Corporation, if there is a way of preventing bankruptcy, Mr. Arison and company will find a way to do so.  I can't envision seeing Mr. Arison on a Miami street corner selling used smartphones in the future.  

I hope you do not think that senior management of Carnival have ALL their eggs in that one basket.  It is likely that their current compensation plans permit them to take far more out of Carnival than they are presently investing in Carnival.  I do not think your bleak visions of their future will materialize.

[Heidi13]

6 hours ago, Wayfairers said:

DH and I have discussed this many times.  If I were leading a cruise line corporation I would definitely consider merging subsidiaries.  You are right we don’t get to see the financial statements of the subsidiaries so we don’t know who makes money and who doesn’t.   Another option to consider is reorganize the entire company with 3  subsidiaries...smaller ship/more expensive option, mid range option and large party ship option.  

 

This has been taking place fairly slowly for a number of years. Many years ago during a meeting with Carnival Group's VP of HR, they mentioned each of their brands consider their other brands as their biggest competition, not other cruise lines. Each Carnival brand was operated individually.

 

A number of changes have already been made. After Costa Concordia they all had to adhere to a Corporate mandated Bridge Procedures, Corporate audit teams and simulator training, which was based on the model developed and already used by 4 of their brands. Masters had no option to not comply.

 

Then a few years ago they created the HAL Group, which includes HAL, Princess & Seabourn. The shoreside structure was amalgamated resulting in some job loses and/or re-assignments.

 

While they have taken some small steps, definitely lots of room for further consolidation.

[rkacruiser]

28 minutes ago, Heidi13 said:

While they have taken some small steps, definitely lots of room for further consolidation.

 

The current situation probably is going to speed up whatever plans there may have been.

[rkacruiser]

1 hour ago, navybankerteacher said:

I hope you do not think that senior management of Carnival have ALL their eggs in that one basket.  It is likely that their current compensation plans permit them to take far more out of Carnival than they are presently investing in Carnival.  I do not think your bleak visions of their future will materialize.

 

I surely hope such will not materialize!

 

What is the mantra about 401K Plans?  Don't overload your investments in your own company's plan?  

 

I was taught by Grand-Parents and Parents to have one's savings and investments spread among "many pots".  I have done so.  What did the Principals in CCL learn?