Carnival to issue $1.25 billion in unsecured bonds to institutions

[Lane Hog]

7 hours ago, Badfinger said:

Buying more debt at a higher rate to pay off existing debt that has a lower rate...yeah, sure...sounds good.

Does "death spiral" ring a bell?

 

Death spiral?  Hogwash.  By your logic, every airline and hotel chain in North America should be out of business.  And yet zero declared bankruptcy as a result of Covid... 

 

Preserving cash in the immediate future by pushing out the date for when some of the debt is due is not a bad move if you're concerned about a recession delaying financial recovery from Covid.

 

Corporations routinely kick debt down the road a few years at a time.  Would you rather see it come due at the peak of a recession or afterward?

[DallasGuy75219]

On 10/19/2022 at 7:22 AM, asalligo said:

FTTF is a perfect example. This costs them almost nothing to provide, it is a pure profit maker. Boarding is almost back to normal, so start FTTF back up. I hate to say it, but they could even up the price further and still sell it out every time they offer it. 

 

On 10/19/2022 at 8:37 AM, ray98 said:

Issue is they haven't even restarted it for Diamond & Platinum where the early room access started.

They can't bring back FTTF or Diamond/Platinum early room access because they are so chronically understaffed. 

 

Room stewards now have ~40 rooms each.  On the Splendor cruise I got off of this week the steward did not even offer the option of AM or PM service.  AM service was the default; for PM service it looked like he was only making up 3rd and 4th berths for rooms with more than two people.  He may have been leaving towel animals for everyone but I told him I didn't need them.  His "official hours" were 9 AM - 1 PM and 5 PM - 7 PM.  I know Carnival is working them more than 6 hours a day but haven't figured out what other work they're assigned the rest of their workday.  In any event though, they're officially given 6 hours a day to service ~40 cabins.

 

Carnival's line is they can't fully staff the ships due to employees who chose not to come back after the restart, inability or difficulty getting employees out of some countries (e.g. China or Russia), and/or delays in visa processing.  On the other hand Carnival obviously has an interest in cutting staffing to the bone given their financial situation. 

 

If/when they are staffed to the point of being able to guarantee early cabin access, expect selling FTTF to be a priority over VIFP benefits for obvious financial reasons.  If it comes back as a VIFP benefit, I can see them cutting it for Plats and giving it to Diamonds only because that substantially increases the number of cabins they can sell FTTF to. And obviously FTTF price points will increase compared to before COVID.

Edited October 22, 2022 by DallasGuy75219

[DallasGuy75219]

8 hours ago, Lane Hog said:

By your logic, every airline and hotel chain in North America should be out of business.  And yet zero declared bankruptcy as a result of Covid... 

Miami Air, Trans States, Compass, Ravn Alaska, ExpressJet (after losing its United Express contract and trying to rebrand as aha!)... and Mesa reportedly on the edge of shutting down.

Edited October 22, 2022 by DallasGuy75219

[BlerkOne]

6 hours ago, DallasGuy75219 said:

Miami Air, Trans States, Compass, Ravn Alaska, ExpressJet (after losing its United Express contract and trying to rebrand as aha!)... and Mesa reportedly on the edge of shutting down.

Who? ExpressJet is shutdown and Mesa has gone bankrupt before, as have most of the majors. Somehow like the Phoenix.... United replaced ExpressJet with CommuteAir - simple business.

[1912]

Back from 7 weeks on the water from the Pacific to Alaska, on to Asia, the Med and finally the Atlantic. 7 weeks of pure bliss ignoring all the crap going on around our doomed planet.

 

MY worthless opinion is at the end of the day Mickey, Donald, Duffy & Co (ain't it hilarious Carnival is run by a bunch of real-life cartoon-named characters?) will be laughing all the way to the bank and poor old Joe Blow, the individual investor, will be left counting his losses. I would expect a reincarnation of sorts from the Arisons. Mark my words.

Like I said, just MY worthless opinion.

Edited October 23, 2022 by 1912

[BlerkOne]

Just now, 1912 said:

Back from 7 weeks on the water from the Pacific to Alaska, on to Asia, the Med and finally the Atlantic. 7 weeks of pure bliss ignoring all the crap going on around our doomed planet.

 

MY worthless opinion is at the end of the day Mickey, Donald, Duffy & Co (ain't it hilarious Carnival is run by a bunch of real-life cartoon-named characters?) will be laughing all the way to the bank and poor old Joe Blow, the individual investor, will be left counting his losses. I would expect a reincarnation of sorts from the Arisons. Mark my words.

Like I said, just MY worthless opinion.

Well, Carnival is owned mostly by institutions, not individuals, and Arnold Donald left some time ago.

[jsglow]

On 10/18/2022 at 11:32 PM, cruisingguy007 said:

 

According this article they are pledged as part of the deal. 

"As part of the bond deal, Carnival’s parent company has transferred to a subsidiary 12 vessels, most of which became operational in the past two years and have a combined value of $8.2bn, which will issue the bond with the ships as collateral."

 

https://www.ft.com/content/bb89b17f-aac9-45cb-865c-5995a7594d9c

 

Is this not correct? 

No it's not correct.  It simply means that the assets described were placed in the same entity that issued the bonds.  Lenders always want the assets where they can 'see' them.  That's more a kin to balance sheet strengthening than it is to pledging an asset as collateral.

 

Oh, and BTW, pledging an asset isn't a dirty word. None of you bought a house without doing it. 

[Lane Hog]

On 10/22/2022 at 9:00 AM, DallasGuy75219 said:

Miami Air, Trans States, Compass, Ravn Alaska, ExpressJet (after losing its United Express contract and trying to rebrand as aha!)... and Mesa reportedly on the edge of shutting down.

Most of those airlines shut down or declared because of a lack of pilots and an inability to meet performance requirements...  Trans States had already announced their wind down in Feb 2020 before anyone knew what Covid was.  Ravn shut down after a fatal accident with PenAir took out one of their five airplane fleet, but admittedly used Covid as an excuse (and resumed flying eight months later).

 

The bigger point is that they're now all generating cash.  United has a debt to equity of 6.4x, compared to 4.6x for American, 6.8 for RCL and 4.0x for CCL. 

[DallasGuy75219]

1 hour ago, Lane Hog said:

Most of those airlines shut down or declared because of a lack of pilots and an inability to meet performance requirements... 

... for majors that no longer needed their capacity anyway when demand for air travel plummeted in 2020.  That capacity would have been cut at some point in 2020 anyway regardless of whether the regionals could staff it, with 50-seat flying (inherently high unit cost) being cut first for the worst performing (e.g. Trans States' trainwreck of an operation) and most expensive (e.g. ExpressJet's high-seniority pilots).

[Lane Hog]

On 10/24/2022 at 12:09 AM, DallasGuy75219 said:

... for majors that no longer needed their capacity anyway when demand for air travel plummeted in 2020.  That capacity would have been cut at some point in 2020 anyway regardless of whether the regionals could staff it, with 50-seat flying (inherently high unit cost) being cut first for the worst performing (e.g. Trans States' trainwreck of an operation) and most expensive (e.g. ExpressJet's high-seniority pilots).

You're not wrong about the capacity.  It was advantageous for the majors that Trans States and ExpressJet took themselves out of the contracts vs. the other way around.  Every other airline made it work thru the crisis phase -- those two plus Ravn had far more serious structural issues prior to COVID that called their long term viability into question.  The same holds up with overseas airlines.  Some who were already financially shaky didn't do very well.  Those who were healthy did.

My point goes to the larger issue i.e. the huge increase in debt at the majors didn't result in bankruptcies.  Nobody is seriously discussing either American or United declaring bankruptcy or liquidating.  The same holds for Carnival and Royal. 

Yes, they currently have a lot of debt relative to their assets, but they also generate a lot of cash when the market isn't being artificially restrained by government mandates that block them from conducting their businesses... 

Edited October 25, 2022 by Lane Hog

[BlerkOne]

Who cares about mismanaged airlines?

[quattrohead]

31 minutes ago, BlerkOne said:

Who cares about mismanaged airlines?

I am sure there is a forum just like this one for flying squawking about the same issues. 😂

[ohioNCLcruiser]

15 minutes ago, quattrohead said:

I am sure there is a forum just like this one for flying squawking about the same issues. 😂

You know it..airliners (dot) net! 😄

[Lane Hog]

Airlines are the closest comparable industry to look at as a benchmark because they're capex heavy, portable assets, historically carry similar debt to equity ratios, and increasingly have a high dependence on leisure travel to generate cash.

 

Comparing two big cruiselines doesn't really room leave much room for a comparison.

[BlerkOne]

3 hours ago, Lane Hog said:

Airlines are the closest comparable industry to look at as a benchmark because they're capex heavy, portable assets, historically carry similar debt to equity ratios, and increasingly have a high dependence on leisure travel to generate cash.

 

Comparing two big cruiselines doesn't really room leave much room for a comparison.

In no universe are airlines comparable. Airlines sell transportation and cruise lines sell vacations. Airlines depend on business travelers and cruise lines depend on leisure travelers. Airlines get bail outs and cruise lines don't. Many planes are leased. Etc., etc. etc.

[MauiWowie57]

On 10/22/2022 at 11:53 PM, icft said:

Carnival did a very good job of financially planning for covid. But then the CDC declared war on cruise lines. Now there is a high chance of recession. And finally Carnival is toast in the fuel area.

 

It is looking very risky for Carnival and all the cruise lines.

They did; they got through COVID despite the CDC's efforts, only to get hit with inflation/recession/invasion. I don't know how bad a recession would actually be for them - having lived through a few, the pain isn't felt equally throughout the economy. Regarding their financials - well ... darn, I'm still a stockholder, but I expect there's a 50% chance (based on professional financial analysts) 'something' will happen. Most likely scenario is what the airlines have repeatedly done - go into some chapter, discharge obligations, draft up a 'recovery' plan and move forwards. Unless they scuttle all the ships, there's still a viable going concern there, but as we all  know, can't just bleed cash for two years of no sailings and not have long term issues.

[Lane Hog]

On 10/26/2022 at 12:31 PM, BlerkOne said:

In no universe are airlines comparable. Airlines sell transportation and cruise lines sell vacations. Airlines depend on business travelers and cruise lines depend on leisure travelers. Airlines get bail outs and cruise lines don't. Many planes are leased. Etc., etc. etc.

Nibble at the edges and you will find differences.  Take it down to the fundamentals and it's not too dissimilar.