The president of Carnival Cruise Line, Christine Duffy, stated in a letter to crew members last week “while we hope to bring back a small number of ships on August 1, that is still very uncertain.” Ms. Duffy continued by stating “what we do know is that whenever we do resume cruising, it will be a gradual, phased in return.”

Cheap Fares

Carnival has been heavily advertising cruises on the representation that it plans to restart certain cruises from Texas and Florida as early as August 1st. Carnival has been advertising cheap cruise fares to entice customers to book cruises, including offering five-day cruises from Galveston, to Cozumel, Mexico, in early August starting at $139, plus taxes, fees and port expenses. This comes out to a base rate around $28-a-day, according to the LA Times.  The popular-among-hard-core cruise-fans blog CruiseRadio was showing cruise deals with Carnival Cruise Line as low as $20 a day per person.

A “Ponzi Scheme?”

Many people in the travel industry doubt that any cruises will actually leave U.S. ports as early as August 1st. The Centers for Disease Control and Prevention (CDC) extended its “no sail” order from mid-April to July 24th. It remains to be seen whether the CDC will again extend the order past the theoretical August 1st cruise date.

Many Carnival customers are still waiting to receive refunds of fares for cruises which were cancelled 60 to 90 days ago. Some cruisers feel that by collecting fares for cruises in August which likely will not take place, Carnival is essentially running a quasi “ponzi scheme.” It is collecting money for new cruises, which probably will not take place, to be used to eventually refund fares which Carnival owes to its customers for the past several months.

Our small firm has been contacted by literally hundreds of passengers complaining that Carnival has not returned their cruise fares for cruises cancelled due to COVID-19. There are many dozens or people complaining about this on Twitter, like this:

Still No New Coronavirus Protocols? 

The CDC requires the cruise lines to submit procedures and protocols to deal with the COVID-19 pandemic for approval by the agency. Carnival has failed to do so to date. This reinforces my belief that Carnival is more interested in advertising and selling cruises than taking steps to reduce the liklihood that coronavirus will infect some of its guests and crew members and spread on its ships.

The point of Ms. Duffy’s letter was to inform its crew members that those ship employees with at least two years of service are eligible for a small monthly stipend of around 30 to 60 days of their basic wages / base salary. Although the letter involves relatively nominal amounts, it is a positive development for any cruise line to compensate its crew like this. Most cruise lines are no longer paying their crew members or paying them only token amounts, NCL and MSC, for example, entirely stopped paying their crew members. NCL is giving the crew whose contracts ended only a $10 a day stipend to buy bottled water or snacks in the onboard crew mart. Viking Cruises, on the other hand, has been paying their crew members a percentage of their wages since it was the first cruise line to supend operations. Royal Caribbean is offering its crew a one time stipend of $400.

Billions of Dollars in Financing But Thousands Laid-Off

At the end of March, Carnival was in dire straites reportedly needing $1,000,000,000 per month to cover its costs. Credit markets were frozen. In layman’s terms this means that conventional lenders had no money to lend.  Carnival had turned to private equity lenders to find money. These lenders allegedly offered financing at 15 percent, plus a substantial equity stake in Carnival. When the Federal Reserve announced that it intended to backstop credit markets, it effectively unfroze credit markets and Carnival was able to obtain money from conventional lenders at 11.5 percent. The result of this defacto bailout is that Carnival received over two billion dollars in financing last month.

Last week, Carnival Corporation announced a series of layoffs and furloughs affecting more than 1,300 workers at its Florida offices.  CEO Arnold Donald released a letter and video to Carnival employees about the terminations and furloughs.  Carnival Corporation stated that 820 positions in South Florida would be eliminated and 537 workers placed on temporary furlough out of its workforce of around 3,000 South Florida employees (more than 45% of its Florida employees).

Earlier last week, Carnival Corporation terminated 450 employees in the United Kingdom, cut the salaries of the remaining staff members by 20% salary through November, and let go of two cruise line executives, Holland America Line president Orlando Ashford and Seabourn president Rick Meadows. Carnival-owned Holland America Line announced at the end of last week that it is laying off around 2,000 employees and furloughing or reducing the hours and pay of its remaining shoreside employees, according to the Seattle Times.

Notwithstanding it’s billion dollar financing, Carnival is still treading water. In order to stay afloat, it will continue to market and sell cruises even though it is “very uncertain” whether the cruises will actually take.

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