Would Carnival Corp consider converting one of its lines to river cruising

[Mary229]

29 minutes ago, npcl said:

It is funding the drain.  At their burn rate they will need every cent they can get just to survive.  Considering the amount of increased debt load they are going to have enough problems paying the interest on their debt when they can start cruising again.  Any major delay in restarting going into 2021 and they may need to restructure.

 

They have brand in mostly mass market lines at price points substantially less than charged by river cruises.  The primary reason that those ocean going lines that have expanded into river cruises have been the luxury lines such as crystal that already have price points in the range of river cruises.

I guess we will have to disagree on their business acumen.  I am not blind to their problems but their problems are no different than anyone else in the industry. 

[chengkp75]

1 hour ago, Mary229 said:

I guess we will have to disagree on their business acumen.  I am not blind to their problems but their problems are no different than anyone else in the industry. 

That is correct, but you don't see NCL or RCI looking into river cruises, because they are burning through the same amount of money.

[Mary229]

1 hour ago, chengkp75 said:

That is correct, but you don't see NCL or RCI looking into river cruises, because they are burning through the same amount of money.

it is  just a different world view.  First I opened this thread as not a practical analysis but a bit of fun speculation.  As a business person myself I have thrown in the towel on the next 6 months and am exploring new markets for the reemergence of the consumer.  Whenever there are major upheavals there are usually significant changes in consumer behavior.   I firmly believe CCL is also exploring options not that I think river cruising is at the top of their list.  Hopefully the industry killing concept of only running 4 day cruises to nowhere is not the only idea they are exploring 

[rafinmd]

2 hours ago, chengkp75 said:

That is correct, but you don't see NCL or RCI looking into river cruises, because they are burning through the same amount of money.

While I thank you for your continued dose of reality I'm beginning to think it's counter-productive.  It appears the OP has set her sights on a pipe dream and no facts will get in the way.  Maybe if we don't respond the topic will die a blissful death.

 

Roy

Edited July 23, 2020 by rafinmd

[rkacruiser]

The new issue of Cruise Industry News has articles that have information about the cash burn rate for NCL, RCI, and CCL.  From what I read, there is a major difference among the Big 3.

[npcl]

1 hour ago, rkacruiser said:

The new issue of Cruise Industry News has articles that have information about the cash burn rate for NCL, RCI, and CCL.  From what I read, there is a major difference among the Big 3.

When you compare burn rate, current assets and current liabilities and normalize by corporate size they are pretty close.  They would all run into severe problems within a few months of each other.

 

CCL has the highest burn rate, but most cash (cruise Industry news is a bit high according to CCLs last filing), NCLH lowest, but least cash. RCL in the middle.  Burn rate in direct relationship to size and pre-covid market share.

 

According to most recent filings

CCL

Current Assets   8,2 Billion

Current Liabilities   11.8 Billion

burn rate around 600 million per month.

 

RCL

Current Assets   4.6 billion

Current Liabilities 8.9 billion

 

NCLH

Current Assets  1.7 billion

current liabilities 2.9 billion

 

With cruising unlikely to startup in any major way in 2020 they are all counting pennies.

Edited July 24, 2020 by npcl

[#55worktoplay]

On 7/20/2020 at 4:23 PM, chengkp75 said:

The most recent MARAD study showed that it is 2.7 times as expensive to operate a US flag ship (albeit a cargo ship, not a passenger vessel) than a foreign flag ship. A passenger vessel will only be even more expensive, and that is not all in crew costs, but in inspections and equipment costs.  And the cost to build the boats will be higher than their European or Asian cruises, so that cost has to be covered as well.  The other challenge will be obtaining trained crew.  Unlike foreign flag ocean cruise ships or river cruises,  where only the deck and engine departments are credentialed mariners, the USCG requires all crew, whether a cabin steward or a dishwasher to be fully credentialed, and unlike foreign flag operations, there is not a ready pool of credentialed hotel staff just waiting for a job, which means frequently sailing short handed, as NCL has found with their POA US crew.  Also, the crew can walk off the ship and quit at any time, unlike foreign crew in a US port.  Then there is the maritime labor unions that Viking will have to learn to live with.  As NCL found, and continues to struggle with, there are vast challenges presented by operating US flag over foreign flag.

 

And crew on US vessels must be US citizens, or 25% of the unlicensed crew (not the deck/engine officers) can be Green Card holders, but not foreigners on work visas.

After all of what is going on there may be many experienced hospitality Americans looking for work who would gladly take a position.

[Mary229]

CCL early on said they had enough financial resources to get through December 2020 without cruising.  Since that original announcement they have increased their credit resources.  CCL is 41% of the US cruise market.  As CCL goes so goes the market.  I think their history indicates they are strategic planners.  I do not think they are just scrambling, they did earlier but I think they are now adapting.  Some in this thread have pointed out the issues with American river cruising, all valid.  I do think within 24 months they will make a major acquisition as a result of the obvious coming consolidation in their own corporate house but also in the worldwide industry.  

Edited July 24, 2020 by Mary229

[npcl]

3 minutes ago, Mary229 said:

CCL early on said they had enough financial resources to get through December 2020 without cruising.  Since that original announcement they have increased their credit resources.  CCL is 41% of the US cruise market.  As CCL goes so goes the market.  I think their history indicates they are strategic planners.  I do not think they are just scrambling, they did earlier but I think they are now adapting.  Some in this thread have pointed out the issues with American river cruising, all valid.  I do think within 24 months they will make a major acquisition as a result of the obvious coming consolidation in their own corporate house but also in the worldwide industry.  

Like the airlines, that are also capital intensive, low margin businesses, they are more likely to have to declare BK in the next 24 months than to make an acquisition of another company.

 

 

[chengkp75]

16 hours ago, #55worktoplay said:

After all of what is going on there may be many experienced hospitality Americans looking for work who would gladly take a position.

While the folks in the hospitality industry have been hit extremely hard, I'm not sure that they would want to spend several hundred dollars for documentation, wait a couple of months for that documentation to come in (and there are slowdowns in USCG credentialing currently), and then take a minimum wage job, where they will have to join a union, and give up a percentage of their first paychecks as union initiation fee, pay quarterly union dues, and operate under union hiring procedures, which are seniority driven for the most part.  I would suspect that many would be able to make more on unemployment, without the stimulus benefit, than the total cost of a short-term (2 years or less) US flag cruise job.

[chengkp75]

3 hours ago, npcl said:

Like the airlines, that are also capital intensive, low margin businesses, they are more likely to have to declare BK in the next 24 months than to make an acquisition of another company.

 

 

I always get a chuckle when folks talk about the "vast" profits that cruise lines make, when in fact their Return on Investment is very middle of the road compared to all other industries.  Costs a lot to put up a billion bucks for a new ship, and then crew it up and supply it, before the first passenger even sets foot on it.

[JeffElizabeth]

On 7/19/2020 at 5:39 PM, Mary229 said:

CCL has a history of buying other lines, maybe that is how they will do it.   I can’t see them sitting idly by while others are sailing.  The American consumer trusts and knows them, that is their greatest advantage 

That is what I would expect them to do. Buy a line that has temporary cash flow issues. 

[Sam Ting]

4 hours ago, chengkp75 said:

I always get a chuckle when folks talk about the "vast" profits that cruise lines make, when in fact their Return on Investment is very middle of the road compared to all other industries.  Costs a lot to put up a billion bucks for a new ship, and then crew it up and supply it, before the first passenger even sets foot on it.

 

Must be a terrible business. Lol. Horrible, just horrible.  Ridiculous. 

[rkacruiser]

The burn rate of cash difference among the 3 major cruise lines as reported in Cruise Industry News is of concern to me.  

 

As far as I am concerned as a shareholder of CCL, that rate needs to be significantly reduced ASAP.  

[npcl]

3 hours ago, rkacruiser said:

The burn rate of cash difference among the 3 major cruise lines as reported in Cruise Industry News is of concern to me.  

 

As far as I am concerned as a shareholder of CCL, that rate needs to be significantly reduced ASAP.  

All of them have less current assets than current liabilities with a ratio from .5 to .7  Their burn rate is similar in ratio to their cash on hand.  Highest burn  = CCL but it has the largest fleet and the most cash.  NCLH has lowest burn, but smallest fleet and least cash.  All of them are in trouble if they do not have a reasonable percentage of their fleet back cruising in 9 months. 

 

The only thing really saving them is the ability to access the bond market at pretty high rates (over 10% for CCL's last billion dollar offering).

Edited July 25, 2020 by npcl