BofA warns cruise demand eroding

[Mary229]

Just now, rkacruiser said:

 

Are you aware of the number of shares that the Arison family and the various entities tied to them hold?  Your scenario is most unlikely in my opinion.  

100% accurate.  The family is very involved and also enjoys a good reputation both in the travel industry and among the global financiers. 

[BermudaBound2014]

NOt to mention the airlines had a soft landing  funded by the Feds. Highly unlikely in the case of cruising. 

[Guest ldtr]

1 hour ago, rkacruiser said:

 

Are you aware of the number of shares that the Arison family and the various entities tied to them hold?  Your scenario is most unlikely in my opinion.  

yep I am aware of the shares owned by them.  The stock holdings of board members is public info.

 

If it comes down to failure of the company or putting together a rescue plan even those that have lots of shares will go the rescue route  Especially since there are way to make up for a substantial portion of their stock, for the folks involved in the decision at senior levels. Often better to do that then watch it drop as a zombie company.

[rkacruiser]

2 minutes ago, ldtr said:

yep I am aware of the shares owned by them.  The stock holdings of board members is public info.

 

If it comes down to failure of the company or putting together a rescue plan even those that have lots of shares will go the rescue route  Especially since there are way to make up for a substantial portion of their stock, for the folks involved in the decision at senior levels. Often better to do that then watch it drop as a zombie company.

 

Thanks for your post.  We will see, won't we.  

[Guest ldtr]

51 minutes ago, BermudaBound2014 said:

NOt to mention the airlines had a soft landing  funded by the Feds. Highly unlikely in the case of cruising. 

Most of the airlines have not had soft landing engineered by the government. when they have gone through bk.  Usually they have done it to offload debt, pension responsibilities, and contracts. Some of the airlines have gone through multiple times. They need to at times to remain competitive with the airlines that have gone BK and got rid of pension costs.

 

The key is the ability to negotiate a plan with the debt holders.

 

Have seen some cases where some senior mgt have come out with more stock in the new recapitalized company then the old one. It all depends upon the plan negotiated with debt holders and what you can get through the court overseeing the BK.

Edited June 17, 2022 by ldtr

[rkacruiser]

47 minutes ago, BermudaBound2014 said:

NOt to mention the airlines had a soft landing  funded by the Feds. Highly unlikely in the case of cruising. 

 

I understand some of the logic of the inequality of treating the hospitality/travel industry differently by our Government.  Not going to say that it's wrong.  Delta is an American company.  CCL is not.  

 

But, what about the restaurant industry?  What about the hotel industry?  There are American owned companies which did receive some financial support, but, as I understand the situation, their need has not been addressed.  

 

7 minutes ago, ldtr said:

Most of the airlines have not had soft landing engineered by the when they have gone through bk. Usually they have done it to offload debt, pension responsibilities, and contracts. Some of the airlines have gone through multiple times.

 

 

And how greatly such has improved the guest experience on those airlines!  

 

8 minutes ago, ldtr said:

Have seen some cases where some senior mgt have come out with more stock in the new recapitalization company then the old one

 

While we, the little guys, receive what?  

[Guest ldtr]

12 minutes ago, rkacruiser said:

 

I understand some of the logic of the inequality of treating the hospitality/travel industry differently by our Government.  Not going to say that it's wrong.  Delta is an American company.  CCL is not.  

 

But, what about the restaurant industry?  What about the hotel industry?  There are American owned companies which did receive some financial support, but, as I understand the situation, their need has not been addressed.  

 

 

And how greatly such has improved the guest experience on those airlines!  

 

 

While we, the little guys, receive what?  

In most cases the customers do not even know that a BK took place.  The key is that they are kept whole.  

 

Regular shareholders get nada.  They do not get the large stock awards in the new organization that senior management key employees get to keep them there during and after the process.

 

Interesting sales of stock by insiders during the last year. 

[Guest ldtr]

15 hours ago, rkacruiser said:

 

Thanks for your post.  We will see, won't we.  

I will go back to my original post on this subject where I said,

 

I am not predicting it, but I would not be surprised if.

 

Then proceeded to describe what form it would take if it did happen.

Edited June 17, 2022 by ldtr

[HappyInVan]

18 hours ago, rkacruiser said:

 

Are you aware of the number of shares that the Arison family and the various entities tied to them hold?  Your scenario is most unlikely in my opinion.  

 

Hmmmm. It's possible that its the creditors who take the initiative. Before we get to that point, we can expect more downsizing and asset liquidation.

 

IMHO, it's okay to buy a hundred shares at this price level for OBC. Investors (>100k shares) need to assess the risk carefully. Better to buy on good news?

[Mary229]

23 minutes ago, HappyInVan said:

 

Hmmmm. It's possible that its the creditors who take the initiative. Before we get to that point, we can expect more downsizing and asset liquidation.

 

IMHO, it's okay to buy a hundred shares at this price level for OBC. Investors (>100k shares) need to assess the risk carefully. Better to buy on good news?

Creditors can’t do anything unless a payment is missed, that is the law in all of the western world.     Whether to spend less than $1000 on a stock purchase for OBC depends on your personal travel plans. 

[gilboman]

19 hours ago, BermudaBound2014 said:

NOt to mention the airlines had a soft landing  funded by the Feds. Highly unlikely in the case of cruising. 

true because air travel is actual transportation and necessity and mostly employ americans... cruising is pure leisure ...they're not going to bail them out (nor should they, especially as majority of staff are not american)..  

[gilboman]

On 6/10/2022 at 8:56 PM, Hlitner said:

First, CCL, RCI, and NCLH were all forced to obtain financing under less than ideal terms.  That is what happens when a corporation is desperate, and has little leverage in the financial markets.  It has been reported that CCL is under negotiations to sell Seabourn to the Saudi Public Investment Fund (PIF) which would give CCL the ability handle their debt for the near future.   Make no mistake, the cruise lines are in more trouble then some think.  When they obtained their financing (during the worst part of COVID) is was assumed they would be back to something akin to normal operations by the 2nd half of 2021.  Here we are nearly a year later and the bottom is falling out due to inflation, rapidly increasing interest rates, and customer demand far below what was expected.   I also think (and this is my pure speculation) that when the cruise lines tired to paint a rosy picture talking about excellent future bookings they were exaggerating.  My speculation is that much of those advance bookings were folks booking with Future Cruise Credits (from cancelled cruises) who were time limited on using these credits.  But those Future Cruise Credits are simply a contingent liabilty.....or essentially accounts payable.

 

Many folks are still afraid to cruise and travel.  Even on our most recent cruise (27 day Seabourn cruise) there were only about 500 passengers on a 600 passenger ship.  And quite a few of those 500 were using FCCs from previous cancelled (due to COVID) cruises.   Last October when we cruised for 14 days on the Seabourn Odyssey we had about 130 passengers on a 450 passenger ship!   And yet the cruise line fully staffed that cruise with no apparent cut-backs!  Bottom line is that many cruises these days are either losing money of barely breaking even.  

 

So what is the analyst as BOA seeing?  FCCs are starting to expire (or be used) and booking are not up to anything close to what was previously predicted.  There is also price elasticity issues in the cruise world (especially with the mass market lies) which make it difficult for cruise lines to increase their prices in an era of rapid expansion of operating expenses.   I believe (and this is strictly my speculation) that the cruise lines "exaggerated" the positive booking info (last year and a few months ago) by counting bookings that were simply folks using Future Cruise Credits issued from cancelled cruises.  These FCCs do not generate much income for the cruise lines and are really a liability.  

 

What is even more distressing are all the negative reviews I am seeing from folks on recent HAL cruises.   Here is a link to an interesting recent post.  I put it here since I imagine most HAL folks would not have seen this post on a different part of CC:

 

Hank

not to discount experience of others...but i had amazing time on Konigsdam in May in alaska and it was our first HAL cruise and we liked it so much we are booking NE canada in september !

 

but i do share your opinion on overall state of the cruise industry

[Mary229]

7 minutes ago, gilboman said:

not to discount experience of others...but i had amazing time on Konigsdam in May in alaska and it was our first HAL cruise and we liked it so much we are booking NE canada in september !

 

but i do share your opinion on overall state of the cruise industry

I agree.  When I first read the review embedded in Hank’s post I chuckled.  We were on that same cruise plus had sailed on the NS from Florida.  Everyone sails for different reasons and those reasons will bias their review.  I simply needed to get to Europe and for less than the cost of a first class airline ticket I got a 3 week cruise. I was, overall, a happy camper.

[Guest ldtr]

2 hours ago, Mary229 said:

Creditors can’t do anything unless a payment is missed, that is the law in all of the western world.     Whether to spend less than $1000 on a stock purchase for OBC depends on your personal travel plans. 

Not quite.  For corporate loans and other debt instruments there are always conditions that a company must continue to meet (Covenants).  in many cases when company violates a covenant the debt can be called.  Though often there is a negotiation between the company and the debt holder. Missing a payment on a loan is certainly one of the covenants, quite often missing a payment on any loan with trigger a covenant on any other loans. I have seen covenants cover a wide range of restrictions and  requirements. For example, a lender might require the borrower must always maintain a certain minimum level of working capital or keep financial ratios within specified ranges.

 

The following is an extraction from one of CCL's 8k filings that lists some covenants.

 

The Indenture contains covenants that limit the ability of the Corporation, Carnival plc and their restricted subsidiaries to, among other things: (i) incur additional indebtedness or issue certain preferred shares; (ii) make dividend payments on or make other distributions in respect of their capital stock or make other restricted payments; (iii) make certain investments; (iv) sell certain assets; (v) create liens on assets; (vi) consolidate, merge, sell or otherwise dispose of all or substantially all of their assets; and (vii) enter into certain transactions with their

Edited June 17, 2022 by ldtr

[rkacruiser]

4 hours ago, HappyInVan said:

IMHO, it's okay to buy a hundred shares at this price level for OBC. Investors (>100k shares) need to assess the risk carefully

 

In an article on Yahoo Finance this week, the writer stated that CCL is an attractive buy under $10.  (It closed about 40 cents under $10 today.)  Long term holding?  The writer did not think that was a good idea.

 

 

[Guest ldtr]

4 hours ago, gilboman said:

true because air travel is actual transportation and necessity and mostly employ americans... cruising is pure leisure ...they're not going to bail them out (nor should they, especially as majority of staff are not american)..  

While the government did assist the airlines during the pandemic, over the past 50 years or so the government has not stepped in when the airlines have gone through bankruptcy. It is a fairly common and routine event among large airlines in the US.

 

Some of the minors have gone out of business, the majors have continued in business, usually without and observable change to the customers.

[rkacruiser]

8 minutes ago, ldtr said:

Some of the minors have gone out of business, the majors have continued in business, usually without and observable change to the customers.

 

Oh really?  There has not been a change in customer service in recent years? 

[BermudaBound2014]

13 minutes ago, ldtr said:

While the government did assist the airlines during the pandemic, over the past 50 years or so the government has not stepped in when the airlines have gone through bankruptcy. It is a fairly common and routine event among large airlines in the US.

 

Some of the minors have gone out of business, the majors have continued in business, usually without and observable change to the customers.

 

The government also gave Massive assistance after 911. I'm not making a judgement on right or wrong, simply saying that the airlines have had a soft place to land when they have been subject to events out of their control. 

[Guest ldtr]

2 hours ago, BermudaBound2014 said:

 

The government also gave Massive assistance after 911. I'm not making a judgement on right or wrong, simply saying that the airlines have had a soft place to land when they have been subject to events out of their control. 

Again I am talking about government aid during an airline BK. In response to someone's comment that the airlines have been able to do so because of government aid giving them a soft landing. Again in 911 none of the majors declared BK.   

 

There has not been government aid during the various airlines BK's.

Edited June 18, 2022 by ldtr

[Guest ldtr]

2 hours ago, rkacruiser said:

 

Oh really?  There has not been a change in customer service in recent years? 

Certainly the airlines have changed over the years, just about every business has.  But those changes did not occur during or when they went through a BK.  The most interesting things is that there has not been a major US airline declare BK in the last few years. The last US major was American in 2011, Delta in 2005, and United in 2002, Hawaiian in 2003.  

 

American was the last of the majors and finally did because the pension costs placed them at a considerable competitive disadvantage to their competitors.  

 

You have had some minor airlines such as Island Air 2017, Via 2019 and California Pacific 2019 that have gone the ch 7 route due to inability to get funding for a Ch 11, reorg.

 

If the major cruise lines were to declare BK I would expect them to reorg, not dissolve, and like the major airlines do it in a way that keeps the customers whole when it comes to deposits, fares paid, and future cruise credits on account.

Edited June 18, 2022 by ldtr

[iancal]

I have no idea what will transpire.  Suspect some re-orgs,perhaps some downsizing, or perhaps collapsing a few brand offerings a la GM.
 

One thing to remember.  These are not US companies.  The opposite is true…they have done their best to avoid being subject to US laws and regulations.

 

One thing fro certain.  The lobby firms representing the various cruise firms and the industry will be having a great revenue year!

 

 Nor would they be considered essential industries to the overall economy.  

 

[ontheweb]

11 hours ago, rkacruiser said:

 

Oh really?  There has not been a change in customer service in recent years? 

Unfortunately in recent years, a change for the worse in customer service is not unique to the airlines.

[BermudaBound2014]

12 hours ago, ldtr said:

Again I am talking about government aid during an airline BK. In response to someone's comment that the airlines have been able to do so because of government aid giving them a soft landing. Again in 911 none of the majors declared BK.   

 

There has not been government aid during the various airlines BK's.

 

You may want to go back and reread post #77 

[Guest ldtr]

6 hours ago, BermudaBound2014 said:

 

You may want to go back and reread post #77 

Sure and you might want to go back and read what I said in 68

where I said

 

While not projecting a major cruise line BK, I would not be surprised if CCL, or RCL, or NCLH were to do an airline style bankruptcy where they wipe out the shareholders and issue new equity to the debt holders and retire the existing debt.

 

Where I clearly compared cruise line to when airlines have declared BK

 

to which you commented in 77

 

Not to mention the airlines had a soft landing  funded by the Feds. Highly unlikely in the case of cruising. 

 

To which I commented that the government has not participated to help out an airline when they have gone through BK.  Which was the context of the previous discussion comparing the route a cruise line might take if they were to declare BK, as a comparison with how airlines have done it repeatedly without negatively passengers at the time the action was taken.

[Guest ldtr]

12 hours ago, iancal said:

I have no idea what will transpire.  Suspect some re-orgs,perhaps some downsizing, or perhaps collapsing a few brand offerings a la GM.
 

One thing to remember.  These are not US companies.  The opposite is true…they have done their best to avoid being subject to US laws and regulations.

 

One thing fro certain.  The lobby firms representing the various cruise firms and the industry will be having a great revenue year!

 

 Nor would they be considered essential industries to the overall economy.  

 

If they were to take such action, it only depends upon their ability to convince the debt holders that they have a viable plan to successfully run the company after a restructuring, in which the equity holders would be largely wiped out, and the debt holders would be given equity in the restructured company in line with the amount of debt they held.  The only government involvement would be the filing in accordance with the BK laws in the country they are incorporated in and the related judge that will be over seeing the case.  With the case of CCL it would be a bit more complex since they are in both the UK and Panama. (Carnival Corp and Carnival PLC).

 

Again I am not predicting such at action for any of the 3 major cruise line holding companies, but would not be surprised if one were to move in that direction