A cruising conundrum

The cruise industry is continuing to reel from the impact of the COVID-19 pandemic and in a latest turn of events, Princess Cruises announced yesterday that it will pause global operations of its 18 cruise ships for the next two months, impacting voyages departing March 12 to May 10.

Princess Cruises, owned by the Carnival Corporation, calls on Bahamian ports both in Nassau and Princess Cays in Eleuthera, and its cruises plan to be back in operation on May 11, according to a company statement on what its president Jan Swartz called “a difficult business decision”.

The impact of COVID-19 on this country’s tourism inflows for the rest of the fiscal year and beyond remains to be seen, but shares of Carnival Cruise Lines, Royal Caribbean Cruise Lines (RCCL) and Norwegian Cruise Lines saw double-digit losses this week following a U.S. State Department advisory that urged U.S. citizens not to travel by cruise ship.

Preliminary tourism figures put the number of cruise arrivals for The Bahamas in the first quarter of 2020 up by 11.3 percent over the previous period, with a 20.4 percent decrease in Nassau/Paradise Island (P.I.); a 15.6 percent decrease in Grand Bahama; and a 77.9 percent increase in the out islands.

Year to date, Carnival’s shares were down nearly 53 percent; RCCL was down more than 61 percent and Norwegian was down approximately 65 percent, with global ratings agency Standard and Poor’s (S&P) putting Carnival and RCCL on CreditWatch with a negative slant, according to CNBC’s Trading Nation.

On Tuesday, RCCL announced that due to the spread and recent developments related to the COVID-19 outbreak, the company had increased its revolving credit capacity by $550 million, and was “pursuing additional actions to improve its liquidity by reducing capital expenditures, operating expenses and taking other actions to improve liquidity by at least a further $1.7 billion in 2020”.

“The company is also planning reductions to the 2021 capital expenditures and operating expenses,” RCCL said of its liquidity actions and 2020 outlook.

RCCL and its joint partner the ITM Group signed a heads of agreement (HOA) and sales purchase agreement for proposed projects in Freeport, Grand Bahama, last week, and RCCL has announced its Royal Beach Club development for Paradise Island.

Last year, Carnival signed an HOA with government for its port project at Sharp Rocks in Freeport.

Russell Benson, RCCL vice president of government affairs, told this newspaper yesterday that he “does not think” recent developments will impact the timeline of construction in Freeport, and expressed the company’s excitement about its plans for P.I.

Cruise ships are floating cities, and are considered by experts to be petri dishes for outbreaks — a reality that has gained international attention due to the COVID-19 pandemic, and has resulted in ships with infected passengers being denied entry at ports worldwide.

This reality hit close to home yesterday when the Fred Olsen Cruise Line ship The Braemar, with at least five positive cases of COVID-19 on board, was denied entry by The Bahamas government in the interest of protecting “the health and safety of the Bahamian people and residents of The Bahamas”.

The ship was en-route to Barbados but changed course to The Bahamas following “a cautious response” from the local authorities, the cruise line said.

In a statement, the Ministry of Transport advised that the Bahamas Maritime Authority “has reaffirmed to the Braemar that should it arrive in Bahamian waters, The Bahamas will do all that it can to provide humanitarian assistance”.

Assistance, the ministry added, “may include providing fuel, food, water and other supplies as needed by the vessel”.

Last month, Jamaica and Grand Cayman denied entry to the MSC Meraviglia after fears that a crew member might have been infected with COVID-19. The crew member ultimately tested positive for Influenza A.

With growing numbers of people re-thinking their cruising plans, and fears that other cruise lines may follow Princess Cruises in a temporary halting of their operations, the cruise industry is faced with an expensive conundrum.

According to ratings agency Moody’s, which has lowered its outlook for the cruise and lodging industry from stable to negative, “no lodging or cruise company could be immune to financial consequences” if COVID-19 confirmed cases continue to rise in North America.

We meantime await this administration’s plan to support the nation’s economy and mitigate revenue losses as we brace for the economic fallout of the COVID-19 pandemic.

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