At the televised coronavirus press conference this morning, President Trump announced that he is considering using Carnival Cruise Line ships as floating hospitals for coronavirus patients. President Trump stated that he received a “generous offer” from Carnival Corporation’s Chairman Micky Arison.
Trump further stated that he will be speaking with the governors of the state of New York and California to obtain their thoughts regarding how the cruise ships might be used. The president said that he was scheduled to meet with FEMA after the press conference.
The U.S. federal government used Carnival cruise ships in the past following hurricanes which struck the Caribbean in the fall of 2017 and New Orleans in 2005. Carnival made tremendous profits after the Federal Emergency Management Administration (FEMA) accepted no-bid contracts totaling over $310,000,000 for the use of four ships.
Although Trump characterized cruise tycoon Arison’s offer as “generous,” he did not mention any details of the proposed deal.
The last deal which Carnival struck with FEMA was in 2017. The deal involved the charter of the Carnival Fascination to house relief workers in St. Croix following a series of hurricanes in 2017. Carnival referred to the lucrative deal as evidencing a humanitarian commitment to the Caribbean relief efforts.
I later obtained a copy of a Carnival-FEMA charter agreement for the use of the cruise ship pursuant to the Freedom of Information Act (FOIA) request to FEMA. The relevant terms are that FEMA agreed to pay Carnival $74,700,000 for the use of the Carnival Fascination over the course of four months. The charter agreement included $39,700,000 plus “costs” of $35,000,000 for a total of $74,700,000.
In 2005, Carnival made another no-bid deal with FEMA to charter the Carnival Sensation, Carnival Ecstasy andCarnival’s Holiday for 6 months following hurricane Katrina. FEMA paid Carnival $192,000,000 plus $44,000,000 for fuel and other expenses.
FEMA was roundly criticized for paying a total of $236,000,000 for the three Carnival ships over the course of six months, an amount which the Washington Post called an “exhorbitant price.” The Post commented that if the ships were at capacity for six months, the price per evacuee would total over twice what an average passenger would pay which “would include entertainment and the cost of actually making the ship move.”
In 2005, following hurricane Katrina, the cruise trade organization, CLIA, requested that the U.S. Treasury Department exempt Carnival from paying income tax on the cruise ships it chartered to FEMA, even though the ships were moored in U.S. waters during the entire charter, making them clearly subject to U.S. taxes.
Carnival and its cruise executives have experienced huge losses in the stock market over the last several weeks, particularly after it finally suspended its operations. Carnival’s stock price has fallen from a one year high of around $60 a share down to around $10 today. Carnival is obviously looking to recoup its loss of billions of dollars in operating income. Last year Carnival Corporation netted profits of over $3,200,000,000 on total income of around $20,000,000,000.
Carnival Corporation is incorporated outside of the U.S. and registers all of its over-100 cruise ships in countries like Panama and the Bahamas in order to avoid U.S. taxes and labor & wage laws. Micky Arison reportedly has a net worth around $10,000,000,000.
When the terms of the Carnival-FEMA agreement eventually emerge (we will be making a FOIA request today), expect to see charter agreements showing that Carnival will receive substantially more for the charter of its cruise ships than it would have earned if the ship were full of fare-paying passengers.
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Carnival clarified the offer in a press release later this afternoon. Saying the ships would not be used for treating those with coronavirus or who are under quarantine. Also Carnival later said that it is “offering the use of the ships at the costs of operating the ship with no profit to the company.”
The Washingto Post reported that “crew members would handle maritime operations, food service and cleaning, while, in this proposal, local government bodies or hospitals would take care of medical services.” It is less than clear exactly what the crew members, many of whom rely exclusively on tips, will receive in compensation for cleaning, cooking and delivering food.
Photo credits: Roger W from Sarasota, Florida, U.S.A. – George Town – Carnival Freedom, CC BY-SA 2.0, commons / wikimedia.