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Major cruise lines worry new virus restrictions too tough to turn profit

Coronavirus: Royal Caribbean reports big losses due to pandemic

Two of the world’s major cruise lines are warning that social distancing measures requiring voyages at less-than-full capacity “would be a severe blow” to an industry already financially devastated by the shutdown of global operations since March.

Norwegian Cruise Line and Royal Caribbean pointed mostly to protocols outside the United States that they fear would strike at the heart of the industry's bottom line, according to a report by Financial Times.

But the Centers for Disease Control and Prevention in Atlanta has imposed deep restrictions in U.S. territorial waters as well.

For now, ships with more than 250 passengers have been banned from sailing from the U.S. until July 24. That capacity is considerably lower than a typical ocean cruise, which sets sail with about 3,000 passengers.

“One of the hallmarks of the cruise industry is that we always sail with full ships. It’s one of the basic tenets of our business model,” Frank Del Rio, chief executive of Norwegian Cruise Line, told Financial Times.

Further complicating matters, guidelines issued last week by the European Union recommended cruise companies cut the duration of voyages to between three and seven days, make fewer port stops, avoid offering buffets and get passengers to maintain 5 feet of social distance.

The guidelines also urged stricter health checks for people over age 65, who account for 30% of all cruise passengers. Onboard shows and activities could also be spread out by age group.

The industry has faced an uncertain timeline for return since the pandemic shutdown began in mid-March.

That’s when all three major cruise lines, including Carnival, voluntarily agreed to suspend services for 30 days, without any specific order from the CDC to do so.

Since then, all three have continued to extend suspensions month to month while the CDC keeps “no-sail” orders in place within U.S. territorial waters.

In order for cruises to ultimately return to the sea, the CDC is requiring the companies to 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.

The cruise lines said they are prepared for the CDC to implement further health restrictions in the meantime.

“There isn’t a one size fits all answer to this,” said Richard Fain, chief executive of Royal Caribbean, according to Financial Times. “There are different steps that are appropriate at different times and different places.” Fain added: “A lot of people assume that you simply take what happens on land and apply it on to the sea.”

Norwegian and Royal Caribbean have assembled a panel of experts to develop health protocols that are expected by the end of August. Carnival Cruises, which controls 70% of the cruise market, has assembled its own group of experts to take part in a summit on the impact of coronavirus in late July, Financial Times reported.

Norwegian and Royal Caribbean have said cruises would not resume until the new protections are fully in place, according to Financial Times.

Industry officials knew that implementing the measures would take considerable time, and with no other sources of revenue, financial reserves drained and no help from the $2 trillion economic stimulus, cruise lines wound up in more serious trouble than any other industry touched by the economic crisis.

Norwegian, Carnival and Royal Caribbean were locked out from the economic stimulus because they are incorporated outside America, in countries with more lenient tax, labor and safety laws.