The companies have no choice but to ride out the financially devastating pause.
With mounting debt, the outlook for Royal Caribbean’s second quarter looks no better.
The company expects its debt to reach $5 billion by the end of the year and has had to borrow money by pledging some of its ships, according to Yahoo Finance.
During a Wednesday call with investors, Royal Caribbean International CEO Michael Bayley announced the cruise line will cancel all sailings through July 31 due to the coronavirus pandemic. “We expect to return to service on Aug. 1.”
Bayley also held a webinar last week to answer questions from travel agents related to the timing of the return.
“There’s going to be a point in time in the future, I think, when all of these things cross, and it’ll be the perfect moment to announce that we’ll be returning to service. I really don’t know when that will be.”
The company’s stock price grew some this week as investors were optimistic about the restart of operations in China and the expectation of growing demand for cruises in 2021 as eager travelers emerge from lockdown.
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.
The orders of course do not apply outside of U.S. territorial waters. Previously, however, Royal Caribbean was forced to cancel all Canadian and Alaska sailings through June 30, after Canada closed its ports.
In mid-March, at President Donald Trump’s urging, all three major cruise lines voluntarily agreed to suspend services for 30 days, without any specific order from the CDC to do so.
The Atlanta-based CDC declared a new mandatory no-sail provision that does not recognize the time cruise ships have already been off the seas.
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.
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.