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CCL announces additional ships being disposed of

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14 minutes ago, Aquahound said:

 

Destiny?  

Destiny is the Carnival Sunshine now and the Triumph is the Carnival Sunrise.

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5 hours ago, Sir PMP said:

Bye, bye Zaandam, Volendam, Zuiderdam, Oosterdam..

Why the Zuiderdam and Oosterdam, I can see the Volendam, Zaandam, Rotterdam and Amsterdam being sold but not the other 2 which are newer and larger with more amenities.

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10 minutes ago, MISTER 67 said:

Why the Zuiderdam and Oosterdam, I can see the Volendam, Zaandam, Rotterdam and Amsterdam being sold but not the other 2 which are newer and larger with more amenities.

They both are not in the best shape, Zuiderdam is the oldest, only the Noordam is in tip top shape.

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I think HAL fleet is safe (for now). I see the additional 5 ships being Sun Princess, Sea Princess, Pacific Explorer (P&O Australia - former Dawn Princess), AIDAcara and AIDAmira.

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My guess would be that it is not just age.  I would expect that past ship profitability and condition would also be a consideration

 

I suspect that Carnival will try to get as much  financial bad news as possible recognized in the current fiscal year.  This would include reserve money  for restructuring, loss on disposals,  etc as can be recognized.   This will place them in a better position for FY21.

Edited by iancal

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8 hours ago, iancal said:

My guess would be that it is not just age.  I would expect that past ship profitability and condition would also be a consideration

 

I suspect that Carnival will try to get as much  financial bad news as possible recognized in the current fiscal year.  This would include reserve money  for restructuring, loss on disposals,  etc as can be recognized.   This will place them in a better position for FY21.

It happens alot - companies having bad news/earnings/etc. use the opportunity to "wash out" any other bad deals they have on the books.  I saw it first hand when I worked for a public company. 

 

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As far as financials these 18 ships have been fully depreciated.  When a company sells a depreciated asset they must recapture the depreciation triggering a huge income tax event.  That gain* can be offset by the losses.  This loss year gives them a unique opportunity to dispose of tax liability without having to pay taxes.  

 

*The gain, in US tax law, is treated as ordinary income.  

 

So if you want to know which ships they are selling, they are selling the fully depreciated "paid off" ships.   That is what businesses do.  

Edited by Mary229

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Yesterday Peaceboat announced long term charter of Sun Princess and Carnival this morning confirmed the anticipated disposal of Carnival Fascination, so add these two to the list of definites.

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The original acquisition cost may be fully amortized....but perhaps not all of the capital improvements.

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34 minutes ago, Mary229 said:

As far as financials these 18 ships have been fully depreciated.  When a company sells a depreciated asset they must recapture the depreciation triggering a huge income tax event.  That gain* can be offset by the losses.  This loss year gives them a unique opportunity to dispose of tax liability without having to pay taxes.  

 

*The gain, in US tax law, is treated as ordinary income.  

 

So if you want to know which ships they are selling, they are selling the fully depreciated "paid off" ships.   That is what businesses do.  

I am not a tax expert, but I thought that if you have a gain on the sale of an asset (like a fully depreciated ship) it qualifies to be taxed at a lower capital gains tax rate, not ordinary income??

 

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1 minute ago, DaveOKC said:

I am not a tax expert, but I thought that if you have a gain on the sale of an asset (like a fully depreciated ship) it qualifies to be taxed at a lower capital gains tax rate, not ordinary income??

 

It is not a "gain".  It is recapture. Just like when you sell a rental property.  You have been depreciating that property for the entire ownership period.  When you sell a property you have two components 1. any gain over your cost basis, original price plus improvements and 2. depreciation recapture.  The depreciation can be much larger than any capital gain and is treated as ordinary income.   The gain is as you said, Dave

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1 hour ago, Mary229 said:

It is not a "gain".  It is recapture. Just like when you sell a rental property.  You have been depreciating that property for the entire ownership period.  When you sell a property you have two components 1. any gain over your cost basis, original price plus improvements and 2. depreciation recapture.  The depreciation can be much larger than any capital gain and is treated as ordinary income.   The gain is as you said, Dave

Got it - thanks for clarifying.  Of course, with all the losses they are incurring this year, it will be a long time before they have to pay taxes.

 

 

Edited by DaveOKC

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Who really knows what ships will be impacted.

 

Each cruise line in the Carnival Corp umbrella probably has a priority list of ships to be dumped based on a number of factors.  Carnival Corp will pick and choose based on the best financial interests of the Corporation and the subsidiary.

 

There will probably be more disposals in the future.

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None of the tax discussion is relevant because they are not US companies.

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Tax regulations are different for certain. But audited financial statements will be similar.  With a reserve for taxes-payable, or tax losses in the current year that may be recouped from prior years (depending on the jurisdiction)  or reserved to be carried forward against future years.

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20 hours ago, Sir PMP said:

They both are not in the best shape, Zuiderdam is the oldest, only the Noordam is in tip top shape.

We sailed on the Oosterdam last year and thought it was in great shape, new carpeting everywhere, new furniture here and there and clean as a whistle. We haven't sailed on the Zuiderdam since it's inaugural year so don't know what kind of shape she's in. Don't know who would buy the Zaandsm, someone wrote last year that she's  rusting out on the floor between the crew deck and the engine room.

Edited by MISTER 67

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18 minutes ago, MISTER 67 said:

We sailed on the Oosterdam last year and thought it was in great shape, new carpeting everywhere, new furniture here and there and clean as a whistle. We haven't sailed on the Zuiderdam since it's inaugural year so don't know what kind of shape she's in. Don't know who would buy the Zaandsm, someone wrote last year that she's  rusting out on the floor between the crew deck and the engine room.

Oosterdam had leaking problems when I was on it...

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No doubt there are many considerations when deciding which ships to either sell or scrap.  I found it interesting that the Carnival Fantasy was in dry dock in 2019 but was one of the first ships Carnival sent to the scrap yard.   The videos I have seen on YouTube showed they didn’t even bother to strip her of her furniture, etc.  

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37 minutes ago, Randyk47 said:

No doubt there are many considerations when deciding which ships to either sell or scrap.  I found it interesting that the Carnival Fantasy was in dry dock in 2019 but was one of the first ships Carnival sent to the scrap yard.   The videos I have seen on YouTube showed they didn’t even bother to strip her of her furniture, etc.  

I was wondering about condition.  Could be that with all of the time laid up these ships have been fully inspected and a laundry list of future repairs made. 

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2 hours ago, MISTER 67 said:

.....................Don't know who would buy the Zaandsm, someone wrote last year that she's  rusting out on the floor between the crew deck and the engine room.

 

If that was currently (or while sailing prior to the pandemic stoppage) the case, the U.S. Coast Guard would not let her sail since she would not pass their regular safety inspections

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Don't know what the condition of Zaandam is.  But...we watch the late booking prices on the Vancouver Alaska run.  We have done so for a number of years. 

 

For whatever reason, Zaandam is routinely one of the first to drop prices inside the final payment window, sometimes going as low as $269 (before taxes) and has typically had insides and outsides (sometimes obstructed) very close to sailing and after all other ships have sold out.   At any point post final payment Zaandam is usually the least expensive offering.  The only other ship close to this is an older Princess ship.

 

We have often wondered why this is.

Edited by iancal

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