Members of media gather at the Diamond Princess cruise ship, operated by Carnival Corp., docked in Yokohama, Japan, on Friday, Feb. 7, 2020.
Toru Hanai | Bloomberg Getty Images
Jackie Ceren has seen a lot in 41 years working in the travel industry, but she’s never seen anything like what’s happened to the cruise industry since the outbreak of the deadly coronavirus.
Passengers have fallen ill and died as cruise ships become the sites of epidemics. In response, ports have denied vessels entry, travelers have canceled trips and the largest cruise companies in the world have suspended operations.
“I’ve only ever seen them close cruise ports for like hurricanes or earthquakes,” said Ceren, a travel agent based out of Florida. “And I’ve been through SARS, Ebola, Swine Flu. I’ve seen it all.”
Every booking she had has now canceled. “This is like a travel apocalypse,” Ceren said.
Two of her clients were actually stuck at sea. Ray Cutro, 73, and his wife Arline ultimately made the decision to abort their four-month Viking cruise trip around the world.
They were just over two months in, Cutro said, and the ship was sailing around Australia trying to re-chart a course that avoided China, then the epicenter of the new coronavirus pandemic. It was the end of February, he said, and ports around Southeast Asia were turning the ship away, fearing a situation similar to that which occurred earlier in February when an outbreak spread aboard the Diamond Princess in Japan.
The captain called an all-hands meeting with the passengers, Cutro said, adding that the captain and company handled the situation well. The message was, “you can get off or you can stay on, but we don’t know where we’re going,” Cutro recalled. His mind was already made up.
“We were fooling ourselves to stay,” he said, so he and his wife flew home to Florida last week.
Cutro said he paid $100,000 for the four-month cruise that was supposed to be a celebration of him and his wife’s 50th anniversary. The Viking Sun voyage was supposed to set a record for the longest continuous passenger cruise trip ever. Cutro said the company is compensating them for at least some of the trip, but the decision to cut the trip short wasn’t easy, he said. As the virus continues to sweep across the world, he thinks he made the right decision.
“The whole world feels like a cruise ship now,” he said.
It started with the Diamond Princess, a vessel operated by Carnival Corp.’s Princess Cruises. Its 3,700 passengers and crew were quarantined at a Japanese port on Feb. 4 after a previous guest, who didn’t have any symptoms while aboard the ship, tested positive for the virus after he returned to Hong Kong.
More than 700 passengers and crew on the ship ultimately tested positive for the novel coronavirus, known as COVID-19, and at least 8 died. The Japanese government and other nations eventually evacuated their citizens from the vessel.
Another Carnival-owned ship, the Grand Princess, was forced to moor off the coast of California when 21 people tested positive for the virus. After several days, California officials brought the ship on Monday to the Port of Oakland, where the last passengers disembarked Friday for transport to federal quarantine facilities. More than 1,000 crew remained aboard the ship, which is anchored in the bay.
Amid the rapid spread of the virus on ships and on-board quarantines, the State Department last week warned Americans against traveling by cruise ship.
“When the government came out and said don’t go on anymore cruises, that was it. That was the death blow,” Ceren said. “What they have created is fear.”
California Gov. Gavin Newsom said he is weighing cruise restrictions along the California coast as he awaits new federal guidelines for the industry. He said cruise operators should introduce aggressive requirements for travelers “at the peril of that industry collapsing.”
The fallout from the deadly Princess Cruises fiasco wasn’t limited to Carnival Corp. All three publicly traded cruise line companies, including Norwegian Cruise Line and Royal Caribbean, were left with little choice but to suspend voyages as the authorities threatened to crack down.
Their stocks have collapsed, leading the market’s broader sell-off that saw the Dow lose over 20% of its value the past month. Carnival’s stock has dropped by nearly 60% while Royal Caribbean and Norwegian have lost more than 70% of their value over the past 30 days.
‘Cruise line 9/11’
Ceren compared the buckling of the cruise lines with the devastating impact of the Sept. 11, 2001 terrorist attacks on the airline industry. The federal government shut airports after the attacks; passenger demand plummeted; and businesses suspended non-essential travel. According to Ceren, the coronavirus has been even worse for the cruise lines.
“Things happen, but nothing of this caliber,” Ceren said. “This is worse than 9/11 when they were canceling flights all over the place. This is the cruise lines’ 9/11.”
Despite federal relief efforts, several major American airlines declared bankruptcy in the aftermath of the 9/11 attacks. Ceren, however, predicts the cruise lines will recover. They have already dropped ticket prices to entice customers on trips once the pandemic is under control.
Both Royal Caribbean and Norwegian Cruises have pulled on fresh lines of credit to weather the storm. Last week, Norwegian secured an additional revolving loan of $675 million and Royal announced it was increasing its revolving credit capacity by $550 million.
“These are extraordinary times and we are taking these steps to manage the company prudently and conservatively,” Royal CEO Richard Fain said.
The increasing debt is nothing to be concerned about yet, said Colin Mansfield, director at Fitch Ratings, who has experience covering the cruise industry. He added that if the outbreak is just a near-term shock to the industry, they’ll likely recover quickly once it’s under control.
“The cruise companies really have a lot of tools at their disposal,” Mansfield said, adding that cruise companies have a lot of flexibility in terms of reducing expenses to cover reduced cash flow.
“From that perspective having those options is a good thing,” he continued. “It would really only be a bad thing if this ends up being a more long-term shock than is expected right now.”
‘We don’t really know’
Customers, investors and authorities have a lot of questions about how Princesses Cruises was hit so hard by the virus and what it means for the the future of the cruise industry. Carnival Corp., so far, has few answers.
A company spokesman told CNBC that the cruise industry has taken proactive steps to provide a level of advanced screening, pre-boarding and on-ship health and safety protocols.
Leaders of the cruise industry including Carnival Corp. CEO Arnold Donald, recently met with Vice President Mike Pence and health officials regarding steps forward.
“We want to work with the cruise line industry to ensure that when we come through this, that cruise lines and the medical services that are available for the passengers and all of the crew, that cruise lines are safer than ever before and can prosper for years to come,” Vice President Mike Pence said Friday at a news briefing.
On Saturday, Pence even hinted that the cruise lines could receive financial assistance from the federal government.
But Princess Cruises President Jan Swartz admitted there remain a lot of unanswered questions.
“We’ve been asked, and we’ve asked ourselves, why COVID-19 seems to be impacting Princess so heavily,” Swartz said. “We don’t really know.”