Could the HAL Brand be sold off?

[BermudaBound2014]

38 minutes ago, rkacruiser said:

 

Don't forget the changes that have taken place since July, 2021.  Nobody's crystal ball could have forecast most of what has taken place.  My crystal ball remains in the shop,  Is yours working?  

 

It was July of 2021 that I switched my positions from long to short and that has been an extremely lucrative play, so in this case, I am very grateful that my crystal ball was polished up and shining bright.

 

But in all honesty, it was not difficult to anticipate that with the CDC involved, cruising had a much more difficult and long road back. By July of 2021 there was already tremendous debt. Writing was on the wall.

Edited July 1, 2022 by BermudaBound2014

[The-Inside-Cabin]

5 hours ago, BermudaBound2014 said:

 

Bingo ^

 

If you look at all the airline BK's over the years, the passengers are always protected - e.g. FF miles etc...Shareholders are at risk, but they need the passengers and won't do anything to irritate their future customers.  FCC will be fine - they need customers - empty ships are of no value...

 

There is the odd exception for a small carrier or cruise line, but the passengers on the big guys will be fine...

Edited July 2, 2022 by The-Inside-Cabin

[Mary229]

5 hours ago, The-Inside-Cabin said:

There is the odd exception for a small carrier or cruise line, but the passengers on the big guys will be fine...

Yes, agreed.  We have only witnessed the very weak falling and they fell quickly and likely that was inevitable Covid or not.   Crystal was the exception but their balance sheets, like many Sino Asian corporations, was always hard to determine.  I think the big 3 will be safe for a while.  With a recession firmly in place and unceasing Covid restrictions it will be rough.  They are flooding Alaska and  Mexico and it is not clear if there is any actual competitive strategy in place.

[crusinbanjo]

On 6/29/2022 at 11:13 PM, BermudaBound2014 said:

Lots of people are Vaxxed, boosted, and getting on with living. They just aren't choosing to cruise.

 

Very true, and until the protocols are no longer needed and removed, I suspect people will continue to vote with their feet.  For many people, the trust has been broken and it will take a long time to change that perception.

[iancal]

21 hours ago, cabland said:

Honestly, once I saw the debt loads the cruise lines were taking on during Covid, I just assumed "OK, these guys are ALL going to file for bankruptcy - it is just a hole too big to dig themselves out of".  I still believe that 100%.  Now, does that mean the cruise lines will "go away" - unlikely.  Heck, the assets (those big ships) are primarily of use to, well, cruise lines!  What will likely happen is some form of re-organization where they walk away from the massive debts and their creditors/shareholders get hosed...potentially along with anyone who has FCC, deposits, etc. 

Keep in mind that once someone accepts a FCC in lieu of a refund, etc the credit card transaction is deemed to have been satisfied.  Any credit card protection that might have been in force has been eliminated.

Edited July 2, 2022 by iancal

[BermudaBound2014]

11 hours ago, The-Inside-Cabin said:

 FCC will be fine - they need customers - empty ships are of no value...

 

I'm not sure I agree with this part. FCC's are debt. IMO it's all about the debt at this point. 

 

Of course, they could always manipulate the FCC's. Example; they can keep the FCC's in place but make them not applicable to current sale pricing. Therefore people using FCC would pay XXX for a cruise, while people bringing cash would pay YYYY.   That's a way to reduce debt load to a potential buyer. Right now CCL is literally giving cruises away just to get bodies onboard. 

[The-Inside-Cabin]

3 minutes ago, BermudaBound2014 said:

 

I'm not sure I agree with this part. FCC's are debt. IMO it's all about the debt at this point. 

 

Of course, they could always manipulate the FCC's. Example; they can keep the FCC's in place but make them not applicable to current sale pricing. Therefore people using FCC would pay XXX for a cruise, while people bringing cash would pay YYYY.   That's a way to reduce debt load to a potential buyer. Right now CCL is literally giving cruises away just to get bodies onboard. 

They could but they won't.   Screwing past customers will guarantee their future failures.   I look at the airline BKs.   Frequent Flier miles have always been protected.    

 

Your risk is if their is a liquidation.    This is possible with smaller lines e.g Crystal or smaller airlines.   CCL is too big to liquidate.   Who would be the buyer?  If the industry craters so much that CCL goes under.   No one else will be able to or want to pick up those ships.   

 

There is always a first time but I am not worried about losing FCC with CCL. 

[BermudaBound2014]

5 minutes ago, The-Inside-Cabin said:

They could but they won't.   Screwing past customers will guarantee their future failures.   I look at the airline BKs.   Frequent Flier miles have always been protected.    

 

Your risk is if their is a liquidation.    This is possible with smaller lines e.g Crystal or smaller airlines.   CCL is too big to liquidate.   Who would be the buyer?  If the industry craters so much that CCL goes under.   No one else will be able to or want to pick up those ships.   

 

There is always a first time but I am not worried about losing FCC with CCL. 

 

I don't think a total liquidation of CCL is in the future, but I can see them selling off several brands. Downsizing and becoming leaner and more efficient will help with that 35 Billion dollars of debt they have racked up.  I think the Saudi sovereignty is a solid buyer. There are others. Private equity and hedge funds rule the world ;-). 

 

I do not hold FCC in any company at the moment, but different strokes. Only time will tell. 🙂 

[The-Inside-Cabin]

46 minutes ago, BermudaBound2014 said:

 

I don't think a total liquidation of CCL is in the future, but I can see them selling off several brands. Downsizing and becoming leaner and more efficient will help with that 35 Billion dollars of debt they have racked up.  I think the Saudi sovereignty is a solid buyer. There are others. Private equity and hedge funds rule the world ;-). 

 

I do not hold FCC in any company at the moment, but different strokes. Only time will tell. 🙂 

When airlines go BK, and I have some experience with AA a decade ago, we saw them cancel leases, return aircraft outside of normal lease terms,  screw over a lot of vendors but the passenger experience was largely unchanged - oh a few things on the margins - less meal service in coach etc....AA was able to shed a lot of debt and return to profitability.    The demand was always present.    I dumped a lot of AA stock at 50 cents a share - thinking 50 cents is better than zero - well low and behold - the equity holders in the BK did not get wiped out and I should have held on...

 

However, in the cruise industry -  demand is not so steady - people will forgo a vacation more than they will forgo a business trip or a visit back home, or to a wedding.   And if people still want to take a vacation, a cruise vacation is often the first item to be axed in the family budget.   So if demand craters for CCL, it is probably cratering everywhere and no cruise line would be in the mood to buy anything.    Saudi already floated a lot of money to CCL (I think) and they are always looking for ways to diversify out of oil.   For them owning CCL outright could be a smart move as then are looking at a longer term play than most investors.     I don't seem them being active owners, but the CEO would have a new boss.

 

Who would want to buy HAL - lock stock and barrel?   Someone who thinks they could run it better - higher prices/lower costs or achieve economies of scale in certain overhead functions?    If this was a case of weak demand in North American markets and strong demand in Europe/Asia I could see someone buying HAL to gain capacity - or if someone had a fleet of old ships and wanted to upgrade their entire fleet at a firesale price - that could be an option.   

 

My guess is that in demand falls, CCL will do what it can to reduce capacity and that might mean consolidating brands - I could see princess and HAL merging.

 

Someone else may know the answer, but would CCL be able to file under US BK law?   or because of their ships being flagged somewhere else do they have to play by different rules.

 

 

 

 

[Guest ldtr]

18 minutes ago, BermudaBound2014 said:

 

I'm not sure I agree with this part. FCC's are debt. IMO it's all about the debt at this point. 

 

Of course, they could always manipulate the FCC's. Example; they can keep the FCC's in place but make them not applicable to current sale pricing. Therefore people using FCC would pay XXX for a cruise, while people bringing cash would pay YYYY.   That's a way to reduce debt load to a potential buyer. Right now CCL is literally giving cruises away just to get bodies onboard. 

If they were to follow what airlines have done, and for that matter, other consumer facing businesses, that have gone through a bk and successfully restructured, customer accounts and credits have mostly been kept intact, including credits such as FCCs. Loyalty programs might lose benefits, but not the customer accounts. After all to be successful in such a move the debt holders must be convinced that the new company will be successful and you do not get there by alienating a large segment of existing customers.

 

If they go thar way the customers will be kept whole. It is the shareholders that will be wiped.

[Guest ldtr]

Just now, The-Inside-Cabin said:

When airlines go BK, and I have some experience with AA a decade ago, we saw them cancel leases, return aircraft outside of normal lease terms,  screw over a lot of vendors but the passenger experience was largely unchanged - oh a few things on the margins - less meal service in coach etc....AA was able to shed a lot of debt and return to profitability.    The demand was always present.    I dumped a lot of AA stock at 50 cents a share - thinking 50 cents is better than zero - well low and behold - the equity holders in the BK did not get wiped out and I should have held on...

 

However, in the cruise industry -  demand is not so steady - people will forgo a vacation more than they will forgo a business trip or a visit back home, or to a wedding.   And if people still want to take a vacation, a cruise vacation is often the first item to be axed in the family budget.   So if demand craters for CCL, it is probably cratering everywhere and no cruise line would be in the mood to buy anything.    Saudi already floated a lot of money to CCL (I think) and they are always looking for ways to diversify out of oil.   For them owning CCL outright could be a smart move as then are looking at a longer term play than most investors.     I don't seem them being active owners, but the CEO would have a new boss.

 

Who would want to buy HAL - lock stock and barrel?   Someone who thinks they could run it better - higher prices/lower costs or achieve economies of scale in certain overhead functions?    If this was a case of weak demand in North American markets and strong demand in Europe/Asia I could see someone buying HAL to gain capacity - or if someone had a fleet of old ships and wanted to upgrade their entire fleet at a firesale price - that could be an option.   

 

My guess is that in demand falls, CCL will do what it can to reduce capacity and that might mean consolidating brands - I could see princess and HAL merging.

 

Someone else may know the answer, but would CCL be able to file under US BK law?   or because of their ships being flagged somewhere else do they have to play by different rules.

 

 

 

 

CCL is incorporated in England and Panama, both of which do allow restructuring BK. The ships are often held as fully owned subsidiary companies. A bigger question would be the construction debts against the ships that are guaranteed by governments in the EU.

 

Would be a complex activity that would keep a lot of lawyers busy.

[LAFFNVEGAS]

1 hour ago, The-Inside-Cabin said:

When airlines go BK, and I have some experience with AA a decade ago, we saw them cancel leases, return aircraft outside of normal lease terms,  screw over a lot of vendors but the passenger experience was largely unchanged - oh a few things on the margins - less meal service in coach etc....AA was able to shed a lot of debt and return to profitability.    The demand was always present.    I dumped a lot of AA stock at 50 cents a share - thinking 50 cents is better than zero - well low and behold - the equity holders in the BK did not get wiped out and I should have held on...

 

However, in the cruise industry -  demand is not so steady - people will forgo a vacation more than they will forgo a business trip or a visit back home, or to a wedding.   And if people still want to take a vacation, a cruise vacation is often the first item to be axed in the family budget.   So if demand craters for CCL, it is probably cratering everywhere and no cruise line would be in the mood to buy anything.    Saudi already floated a lot of money to CCL (I think) and they are always looking for ways to diversify out of oil.   For them owning CCL outright could be a smart move as then are looking at a longer term play than most investors.     I don't seem them being active owners, but the CEO would have a new boss.

 

Who would want to buy HAL - lock stock and barrel?   Someone who thinks they could run it better - higher prices/lower costs or achieve economies of scale in certain overhead functions?    If this was a case of weak demand in North American markets and strong demand in Europe/Asia I could see someone buying HAL to gain capacity - or if someone had a fleet of old ships and wanted to upgrade their entire fleet at a firesale price - that could be an option.   

 

My guess is that in demand falls, CCL will do what it can to reduce capacity and that might mean consolidating brands - I could see princess and HAL merging.

 

Someone else may know the answer, but would CCL be able to file under US BK law?   or because of their ships being flagged somewhere else do they have to play by different rules.

 

 

 

 

I agree totally with what you are saying but to add to it a bit the Merger of Princess and Holland America has been a slow process toward that for the past 10+ years so that has already been happening. Heads of departments of Engineering, Hotel, Housekeeping Food and Beverage manage both cruise lines. Airline schedules of course are all the same department. The merging became even stronger during the Cruise Pause when people were laid off and departments merged. Many bean counters and top management at the top over see both as well as Seabourn.

I personally thought that as we came out of the pandemic they would annouce a complete merger with Princess winning in the name game but right now I am having second thoughts on that because they need to get cash flow going. One side would lose that if they totally merged losing faithful followers of which ever brand no longer existed. I think on the inter workings of HAL and PCL they will become one company but to the consumer things will remain as we see it now.

Cost cutting measures are increasing monthly, Someone that has not cruised either line in a few years will see huge changes. HAL actually started their cost cutting prior to the pandemic so they are pros with the axe, it is Princess that has long time Princess cruisers that are shocked with cut backs and maintence that should have been done on their ships. Only time will tell if these cut backs will work or only hurt them further.

[ShipsAreTheBest]

I really don’t think there will be an outright merger of HAL and Princess.  Almost all that could be done in that regard has already occurred (back office).  That’s where mergers get the biggest bang for the buck.  While there are similarities in style between the two brands, there are enough differences to set them apart and attract their own customers who have a preference.  I like both.  I like HAL better - Princess has gone too big while HAL has stayed (relatively) medium sized, although trending bigger.  I think HAL crews are better whereas Princess has better entertainment.  They should continue to exploit  the synergies that they have (and look for more), but combining the brands with one coming out on top over the other is not the way to go.  

[iancal]

Operational efficiencies. IMHO,  will not significantly solve their current challenges.

 

Their problem is a huge fixed expense ratio, debt charges, fuel costs,  uncertain demand, and revenue.

 

If there is no improvement over the next two quarters I suspect that we will start to see some significant announcements from Carnival Corp and from the the other two...RCI and NCL groups.

[rkacruiser]

17 minutes ago, iancal said:

Operational efficiencies. IMHO,  will not significantly solve their current challenges.

 

Their problem is a huge fixed expense ratio, debt charges, fuel costs,  uncertain demand, and revenue.

 

I agree except the demand seems to remain strong and once the guests are aboard, they are spending money.  Will it continue?  TBD.

 

I believe there has been trimming in the corporate structure of Princess and HAL.  More needed?  Maybe.  Is a President of Princess and one for HAL really needed along with the staff associated with those positions?  Ms. Schwarz is the head of the whole operation, is she not?  What is the real job the these underlings other than for PR and, at least for Princess, to have his name at the bottom of the "welcoming" letter in the Captain's Circle magazine?  (And, by the way, there hasn't been a Mariner publication that I have received in a long time.)

[iceman93]

8 hours ago, ShipsAreTheBest said:

I really don’t think there will be an outright merger of HAL and Princess.  Almost all that could be done in that regard has already occurred (back office).

This makes sense to me.  I know the analogy isn't perfect, but it's like if McDonald's and Burger King merged.  It would make no sense to convert all the restaurants to McDonald's; there are too many customers who prefer the Whopper to the Big Mac, for example.  And too many places where the locations are too close to support two McDonald's, but a McDonald's and Burger King can quite happily coexist.  So streamlining operations behind the scenes but continuing to offer customers two different (but very similar) experiences makes sense.

[ShipsAreTheBest]

11 hours ago, iceman93 said:

This makes sense to me.  I know the analogy isn't perfect, but it's like if McDonald's and Burger King merged.  It would make no sense to convert all the restaurants to McDonald's; there are too many customers who prefer the Whopper to the Big Mac, for example.  And too many places where the locations are too close to support two McDonald's, but a McDonald's and Burger King can quite happily coexist.  So streamlining operations behind the scenes but continuing to offer customers two different (but very similar) experiences makes sense.

Excellent analogy.  You might see CCL spin off a brand or two (for example Princess and/or HAL), but don’t expect to see them combine them.  Doesn’t generate the synergies they already have AND it doesn’t solve the real problem - the debt load! 

[JRG]

On 6/28/2022 at 5:41 PM, Mary229 said:

What they offer have two limitations - price and space.  It is always, always, always, dollars per square foot.

 

I agree with almost all of your postings in this and other threads as they have alot f of merit,   but I think you will agree that this one might be changing.

 

Smartphones will enable Bingo and Casino games to provide revenue without a need for retail space via ship wi-fi and now that sports gambling has been approved all they need to do is build the app.

 

Utilizing technology in this way  makes sense and bypasses all the complications that come with crowding people into common areas.

 

This is the type of change that HAL needs to evaluate to keep and attract new customers.

Maybe its too much too late though?

Edited July 3, 2022 by JRG

[BermudaBound2014]

16 minutes ago, JRG said:

 

I agree with almost all of your postings in this and other threads as they have alot f of merit,   but I think you will agree that this one might be changing.

 

Smartphones will enable Bingo and Casino games to provide revenue without a need for retail space via ship wi-fi and now that sports gambling has been approved all they need to do is build the app.

 

Utilizing technology in this way  makes sense and bypasses all the complications that come with crowding people into common areas.

 

This is the type of change that HAL needs to evaluate to keep and attract new customers.

Maybe its too much too late though?

 

Interesting concept. It would seem to me that the demographics of HAL cruisers would lean toward less tech savoy experiences, but that's just a wild guess on my part. The new partnership with MGM casino online gaming deal is being launched on HAL so that should be a good indicator. I do like thinking outside the box.

 

"Through this partnership, gaming will be available on more than 50 ships ported in the U.S. spanning Carnival Cruise Line, Holland America Line and Princess Cruises."

https://www.prnewswire.com/news-releases/betmgm-and-carnival-corporation-partner-to-offer-cruise-ship-gaming-301569556.html

 

[Guest ldtr]

Just now, BermudaBound2014 said:

 

Interesting concept. It would seem to me that the demographics of HAL cruisers would lean toward less tech savoy experiences, but that's just a wild guess on my part. The new partnership with MGM casino online gaming deal is being launched on HAL so that should be a good indicator. I do like thinking outside the box.

 

"Through this partnership, gaming will be available on more than 50 ships ported in the U.S. spanning Carnival Cruise Line, Holland America Line and Princess Cruises."

https://www.prnewswire.com/news-releases/betmgm-and-carnival-corporation-partner-to-offer-cruise-ship-gaming-301569556.html

 

Except the demographics on HAL is changing. With some of their changes such as the music walk and new mid size ships the demographics are getting younger.

[BermudaBound2014]

15 minutes ago, ldtr said:

Except the demographics on HAL is changing. With some of their changes such as the music walk and new mid size ships the demographics are getting younger.

Sure, HAL is trying to attract a younger crowd, however according to the CLIA the average age of HAL cruiser is 64 well above the average age across all lines (47.6).  That is why my post specifically stated “lean toward” 😉 

[Guest ldtr]

1 hour ago, BermudaBound2014 said:

Sure, HAL is trying to attract a younger crowd, however according to the CLIA the average age of HAL cruiser is 64 well above the average age across all lines (47.6).  That is why my post specifically stated “lean toward” 😉 

when exactly do those demographics date from.

 

On recent HAL cruises the ages seem similar to and maybe even younger than Princess on cruises under 14 days.

 

As we all know the longer the cruise the older the demographics tends to be and HAL does run more longer cruises than most of the other lines which will skew the demographics a bit.

Edited July 3, 2022 by ldtr

[Guest ldtr]

2 hours ago, BermudaBound2014 said:

Sure, HAL is trying to attract a younger crowd, however according to the CLIA the average age of HAL cruiser is 64 well above the average age across all lines (47.6).  That is why my post specifically stated “lean toward” 😉 

Frommers most current report puts HAL average age at 57, around the same as Princess. This is different from earlier that 2018.

 

The younger ages are more skewed by the family lines such as Carnival amd Royal who carry the most passengers and are by far the youngest average age.

[Mary229]

6 hours ago, JRG said:

 

I agree with almost all of your postings in this and other threads as they have alot f of merit,   but I think you will agree that this one might be changing.

 

Smartphones will enable Bingo and Casino games to provide revenue without a need for retail space via ship wi-fi and now that sports gambling has been approved all they need to do is build the app.

 

Utilizing technology in this way  makes sense and bypasses all the complications that come with crowding people into common areas.

 

This is the type of change that HAL needs to evaluate to keep and attract new customers.

Maybe its too much too late though?

The two things are not mutually exclusive.   Mich of retail on a ship is concessions.   There are many possible uses for spaces to have them generate money.  I dare say, without any statistics to back me up, but a retail concessions likely generates more revenue than a cabin in that space.  Retail includes restaurants, cooking classes, art classes, cigar shops, computer shops/instruction and more

[iancal]

At the end of the day I believe that debt and debt servicing will be the bogeyman and the stimulus for change. 

 

No idea what that change will entail.