The cruise industry, which has been shuttered since March and economically decimated by the coronavirus crisis, could now face collapse after the Centers for Disease Control and Prevention extended no-sail orders within U.S. territorial waters until at least July, according to investment advice company Motley Fool.
In mid-March, at President Donald Trump’s urging, Norwegian, Carnival and Royal Caribbean voluntarily agreed to suspend services for 30 days, without any specific order from the CDC to do so.
Last week, however, the Atlanta-based CDC declared a new mandatory no-sail provision that does not recognize the month cruise ships have already been off the seas.
After the nation's top disease response agency posted orders keeping cruise ships docked last Wednesday night, extending the ban through August, the White House coronavirus task force stepped in to cut it by 20 days, according to USA Today.
When the no-sail order reappeared on the CDC's website hours later, its language had been softened: Ships can sail again in July and an explicit warning that they could be docked even longer had been deleted, according to emails and internal documents obtained by USA Today.
“Sorry to do this, but the Office of the Vice President has instructed us to pull the No Sail Order Extension from the website immediately,” a CDC senior official wrote to staff just after 7 a.m. Thursday, the morning after the notice had been posted.
In order for the cruise companies to ultimately return to service, the CDC is requiring that they come up with their own plans to deal with COVID-19 with minimal help from federal, state and local governments. The plans must be detailed and specific, and will then be subject to review and approval by the CDC and the U.S. Coast Guard.
According to the CDC provisions, cruise lines will need to have plans in place to:
- Monitor passengers and conduct medical screenings on crew members.
- Train crew members on preventing the spread of COVID-19.
- Manage and respond to a COVID-19 outbreak on board.
But implementing the measures could take considerable time, and with no other sources of revenue, financial reserves drained and no help from the $2 trillion economic stimulus, cruise lines appear to be in more serious trouble than any other industry touched by the crisis.
Before the change in policy at CDC, investors had been somewhat optimistic that the industry could emerge from the shutdown with enough financial resources intact to avoid going into bankruptcy protection.
The length of time of the no-sail order depends on several factors, but either way creates an uncertain timeline for return.
The order could be lifted immediately if Health and Human Services Secretary Alex Azar declares the pandemic no longer a public health emergency.
The director of the CDC could modify the order based on new data or other factors, or the order could simply expire on its own.
And if the virus continues to spread unabated, the CDC will likely extend the no-sail order further.
The three major cruise lines are publicly traded on the New York Stock Exchange and have lost considerable market value.
Royal Caribbean is down 70% so far in 2020, while Carnival and Norwegian have seen even bigger declines of between 75% and 80%.
At midday Monday, Royal Caribbean was down another 14%, Carnival was down more than 7% and Norwegian Cruise Line was down nearly 13%.
Each is locked out from $500 billion in emergency funds specifically meant for distressed businesses affected by the outbreak because they are incorporated outside America, in countries with more lenient tax, labor and safety laws. In fact, each pays little, if any, federal taxes.
Royal Caribbean is incorporated in Liberia; Norwegian Cruises is incorporated in Bermuda. Carnival is incorporated in Panama but maintains a U.S. headquarters in Miami, according to CNBC.
The CARES Act — Coronavirus Aid, Relief, and Economic Security — states that a company must be “created or organized in the United States or under the laws of the United States” and “have significant operations in and a majority of its employees based in the United States” to be eligible for relief funds.
Trump has said he wants to help the industry, along with hotels and airlines, CNBC reported.
“We’re going to work very hard on the cruise line business, and we’re going to figure something out,” Trump said.
Trump acknowledged “it’s very hard to make a loan to a company when they are based in a different country,” but said he would like to see cruise lines register in the U.S. to get aid, an idea floated earlier in the day by Sen. Josh Hawley, R-Missouri, according to CNBC.
