Will Cruise Lines Go Bankrupt?
Will Cruise Lines Go Bankrupt?
Will cruise lines go bankrupt? There isn’t a day that goes by where I don’t get this question.
And let me say from the outset that I have no insider knowledge on the subject.
We interact with cruise line executives daily, but mums the word when it comes to their internal financial discussions.
However, just because we don’t have insider knowledge, that doesn’t preclude us from having a cogent opinion.
Let’s Consider the Carnival Cruise Line
Carnival is the largest company in the cruise industry. It operates nine different brands with more than 100 ships in service.
A few of the brands that you might be familiar with are Carnival (of course), Princess Cruises, Holland America Line, Cunard, Seabourn, and others.
Now, just like every other cruise line in the world, Carnival is completely shut down and is currently experiencing significant losses. However, take a peek at this commentary from the folks at Morningstar:
“In order to ensure it sails through the COVID-19 crisis, Carnival has improved its liquidity recently; first, it drew down its $3 billion credit facility; second, it issued $500 million in equity; third, it secured $5.75 billion in loans; and finally, it eliminated its dividend ($1.4 billion). Furthermore, it has $8.7 billion of committed financing to pay for ship deliveries. And as a result of fewer sailings, we expect costs to be significantly reduced in 2020. Ships going into a prolonged layup (most of the fleet) have fixed costs that are set to run around $1 million per month. Thus, the $9 billion in cash recently accessed, as well as customer deposits, should be sufficient to cover near-term expenses, even if all 100-plus ships went into a prolonged layup for the next 12 months (which we don’t anticipate).”
As I am not presently one who adopts a worldview of total doom and gloom, it seems reasonable to me that this mess is over long before 12 months is up. Furthermore, it was just January when the team and I booked 90 cruises for the month. We know that 80,000,000 baby boomers are chomping at the bit to get back out there traveling.
Even further, I am so convinced that the cruise industry will survive through this, I went out and bought quite a few shares of Carnival stock. And, I fully intend to purchase shares of Royal Caribbean and Norwegian Cruise Lines.
Note: this is not financial advice. I happen to have some “mad money” sitting on the sidelines and I’m willing to take the long view on the cruise lines. For these reasons, I am not one who thinks that the cruise lines are going bankrupt. Again, that’s just my opinion.
Let’s Talk About Travel Insurance
Let’s play devil’s advocate and assume that a cruise line that you’ve booked does indeed file for bankruptcy and cancels your cruise. Now what?
Well, if you bought travel insurance from the right company, you’re fully covered. Here’s the language in a policy from Allianz regarding travel supplier defaults:
Your tour operator, airline, or cruise line ceases all operations due to its financial condition, with or without filing for bankruptcy. The following conditions apply:
- Your policy was purchased within 14 days of the date of the first trip payment or deposit;
- The cessation of operations occurs more than seven days after your policy’s Coverage Effective Date;
- Your policy was not purchased directly through the tour operator, airline, or cruise line ceasing operations, or an affiliate of that entity; and
- The tour operator, airline, or cruise line was included in our list of covered suppliers on your policy’s Coverage Effective Date.
As you can see in the list of covered suppliers, all of the cruise lines are currently on the list. So, if you book a cruise with your favorite cruise line, and they are on the list, then you would receive 100% of your money back from the travel insurance company.
Today’s Risk-Free Bookings
Still not convinced? Well, how this?
Virtually every travel brand in the world is offering you a risk-free booking. If you book a cruise or land journey today, and you feel uncomfortable traveling prior to your journey, you simply cash in your risk-free certificate and rebook for up to two-years down the road.
So, as one might say, “what have you got to lose?”
With all of the layers of protection offered to travelers today, it really does make sense to seriously consider taking advantage of the offers in today’s market.
Sure, you may not want to consider travel in the coming months, but late-fall, winter, and 2021 are just waiting for you.
Where can we help you travel?
For more information, please call Roaming Boomers Travel Services at (480) 550-1235 or use our convenient online information request (click here) and we’ll reach out to you.
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Read your weekend posting every time. Can you change your background as its obscures reading your post. Look at the recent one with the Morningstar post. Can’t read it with the background in the way.
Hi Wayne, I will have our tech team look into it. Sorry.
Cruise lines can do these:
Sell off older ships.
Rebrand, remarket .
New themes, decor, etc
Revamp cruise exp from survey of passengers, vendors etc.
More Med Teams.
Uniform pandemic rules for all cruise lines to follow
Test stations IF warranted
More Inclusive fee Pay 1 price for cruise.
Improve shore trips.
X train crews, rotate crews
Automate dishwashing, laundry, Mn Eng, Nav, Comm services.
Menu more wholesome, reduce steaming foods
(esp Mexican fare)
More single activities ages 20+ Non marrieds.
OK weddings aboard ship more.
Donate said ship for a Hospital ship or floating college campus ?
More can be done.
Compete with cruise lines prices, menu, services, trips.
Downplay jewelry & art IF warranted.
Win win for cruise line industry & public
Hi David —
Always enjoy your newsletter and your ‘upbeat’ attitude. We need it these days.
One question: I interpret the following comment to mean that insurance cannot be bought from the airline or tour company, but only through Allianz or an agent. Is that correct? ‘Your policy was not purchased directly through the tour operator, airline, or cruise line ceasing operations, or an affiliate of that entity;”
Can’t wait to travel again!
Hi Slyvia, I will reach out to our Allianz rep to answer that. Stay tuned.
Hi David, i appreciate your positive attitude and optimism. However, as a retired finance executive, i must admit I am not so sanguine re the economic prospects for the cruise lines, and hospitality industry in general. We are witnessing a catastrophic event for which there is NO precedent in modern economic history, where both Peoples’ confidence and pocket books, around the globe, have been simultaneously so deeply damaged. Speaking for myself, my wife and I (as part of the vulnerable population) are NOT planning ANY travel for at least 12-18 months unless a truly effective vaccine is discovered prior. Stay safe my friend.
No, you can buy travel insurance through an airline or tour company. However, if that airline and/or tour company were to go bankrupt, then your claim would be denied.
Thanks for checking, David. Seems we should buy directly from insurance company or agent.
I’m waiting for my refund from Holland. We were suppose to travel to Alaska this past May.
No money back as of yet.
Should I worry I won’t get it?
If you haven’t already, give them a call. I know that the cruise lines are severely backlogged with all of the cancelations and rebookings going on right now.
I am waiting for future cruise credit from Holland America for a cruise booked in February 2019. This was cancelled by our agent In March 2020 although according to HA have request logged as 29 May 2020. Rang 26 June, 31 July, 14 Aug, 24 Aug. On the last call was told it would be done that day and on my account in a few days. Still waiting. The public face of HA in Uk at least is now only available 4 days a week. We are also waiting for FCC FROM P and O cruises. Cruise cancelled and Acc requested in March 2020. When you ring you just get a few irrelevant messages and the get cut off. We rebooked another cruise which was cancelled when they sold the ship. A third cruise has been booked but still no FCC. Sent an e mail but told response would take around 28 days.
I had to cancel a cruise due to covid and my deposit was returned in the form of future cruise credits. If the cruiseline goes bankrupt before I use the credits, do I lose the $ value of the credits? If I book a cruise using the credit, and the cruiseline goes bankrupt, will my travel insurance company give me the money back for the credit?
Thank for your help.
Thanks for stopping by. While I’m not currently concerned about the mainline cruise lines going out of business, a cruise line going out of business would be harmful to any future cruise credits you might have. It would likely be litigated during bankruptcy proceedings. Most travel insurance companies will cover you if a cruise line goes bankrupt. However, many of the companies maintain a list of companies covered should bankruptcy occur. You should call your travel insurance company to determine your specific coverage.