The cruise industry is beginning a downsizing the likes of which have never been seen in the modern cruise business. While other segments of the shipping industry have experienced significant downturns prompting the wholesale scrapping of vessels, cruise shipping up until now has been on a continuous growth path.
Faced with no definitive timeline for a return to service and uncertainty over the rate at which travelers will return to cruising, the cruise lines are struggling to improve their liquidity and reduce their monthly cash burn. Carnival Cruise Line in its preliminary second quarter update reported that by extending maturities on its debt, reducing capital expenditures, employment, and operating costs, that it had lowered its monthly burn rate to $650 million from approximately $1 billion. Royal Caribbean Cruise Line is burning between $250 and $275 million a month.
Faced with the need to further lower expenses the cruise lines are now reportedly looking at their primary asset and expense, which are their ships. Carnival announced on June 18, that, “The company already has preliminary agreements for the disposal of 6 ships which are expected to leave the fleet in the next 90 days and is currently working toward additional agreements.”
In recent days the Italian media had been reporting that one of Carnival Corporation’s lines, Costa Cruises, had already sold its ship the Costa Victoria to become an accommodation ship at one of Italy’s shipyards. However, in a surprise announcement, the mayor of Piombino, Italy Francesco Ferrari, announced that the ship had arrived at the Tuscan port to be dismantled. Introduced in 1996, the 75,000 gross ton ship had been an active part of the Costa fleet up until cruise operations were suspended in March.
The surprise announcement that a relatively modern cruise ship would be scrapped is causing a stir among observers of the cruise industry and rampant speculation on which other cruise ships Carnival has agreed to sell. Historically, Carnival Corporation was following a measured growth strategy regarding overall capacity. They were selling approximately four ships a year basing the decisions on a ship’s overall revenue performance, requiring a double-digit return on invested capital, and guest satisfaction from the ship’s cruises.
As the largest cruise corporation, Carnival also had the most diverse fleet and some of the oldest cruise ships operating in major markets. The strategy had been to replace ships that were not generating the results with newer ships which inherently have the opportunity for greater revenue with additional cabin and balcony designs and generate a premium because they are new. However, none of Carnival’s ship sales in recent years had been to scrap yards and indeed very few modern cruise ships had gone to scrap at all.
It is unknown if any of the other large brands such as Royal Caribbean might be considering similar ship sales to reduce costs. However, reports are circulating that Pullmantur, the Spanish brand that announced that it had filed to reorganize under Spain’s insolvency laws, is currently stripping parts and material from the former Royal Caribbean ships the Monarch and Sovereign that it was operating. This has led to speculation that both ships might be being prepared for sale or scrapping.
The U.K.-based Marella Cruises, part of the TUI Group, announced after the suspension that it would be retiring its cruise ship the Marella Celebration. Built in 1984, the 33,000 gross ton cruise ship was the oldest and smallest in the Marella fleet, which has been expanded with ships from Royal Caribbean and Celebrity Cruises. Previously they had said the ship would operate for up to four more years before being retired. Marella had sold her sister ship for scrap leading to speculation that the Marella Celebration will soon depart for the scrap yards in Asia.
One of the challenges for the cruise lines will be to find buyers looking for cruise ships. Brokers have said that some Chinese firms are possibly in the market for cruise ships but most of the second-tier cruise lines that acquired older tonnage are facing similar financial pressures and lack the depth of financial resources to be active with acquisitions. Cruise and Maritime Voyages, which had been actively acquiring cruise ships from Carnival Corporation, confirmed that it is seeking to refinance after media reports that a loan package had collapsed. CMV contracted earlier this year to buy two cruise ships from Carnival’s P&O Cruises in Australia due for delivery in 2021.
Many of the smaller cruise lines that were the traditional buyers for older ships went out of business as the cruise industry grew and consolidated. This may mean that the cruise industry can only turn to the scrappers. A glut of cruise ships could drive down prices in the scrap market and they are more time consuming for the scrappers because of all the outfitting that need to be stripped as well as a structure that often has less prime metals.
The only comparison that can be made to the current situation in the cruise industry is the mid-1970s when the oil crisis combined with the decline in long distance ocean travel collapsed the passenger business. Then ships that were just a decade old were sent to the scrap yards and fleets like P&O and Union-Castle Line quickly disappeared. P&O sold six of its 10 passenger ships for scrap.
Observers will continue to speculate about the depth of the coming cruise sales wondring if it will rival the death of the great ocean liners and which ships can survive.
Go to Source
A massive fire broke out at the Port of Beirut on Thursday, incinerating a warehouse full of tires and oil within the port’s free zone. The same area was heavily damaged in the ammonium nitrate explosion that leveled the central port area and the adjacent waterfront on August 4. According to Lebanon’s civil defense agency, […]
The National Transportation Safety Board (NTSB) has released a Marine Accident Brief about an accident that occurred on April 15, 2019, involving the towing vessel DeJeanne Maria which struck the end of a submerged dredge pipeline while pushing two spud barges to the Gulf of Mexico. The incident occurred on the Mississippi River in Pass […]
DSV Belgium has solid experience in the transport of pharmaceutical products for different customers. With a pharma hub based at Brussels Airport a lot of experience and know-how has been built up over the years. Last weekend, the forwarder handled one hundred million mouth masks, an important milestone for its Belgian organisation that has put […]
Best known as a leading passenger airport serving Germany’s most populated federal state North Rhine-Westphalia, Düsseldorf has become transformed into a vital distribution point, during the COVID 19 pandemic, for medical equipment and other life-saving goods, mostly from China. Gerton Hulsman, managing director of cargo operations, reports that the handling teams are working hard to […]
With close to 100 daily cargo flights operated to a destination network spanning more than 65 cities across six continents, Emirates SkyCargo is delivering essential supplies and commodities to people around the world. The air cargo carrier is currently operating 11 Boeing 777 freighter aircraft, each with a capacity to transport about 100 tonnes of […]
Operators can continue to use pilots and other crew members who have unable to comply with certain training, recent experience, testing, and checking requirements due to the COVID-19 outbreak in support of essential operations. Additionally, this Special Federal Aviation Regulation (SFAR) provides regulatory relief to certain persons and pilot schools unable to meet duration and […]
Astral Aviation has increased its intra-African network with cargo freighters during the pandemic. While there has been a reduction in capacity to, from, and within Africa, which has been caused by a stoppage of passenger flights and limited frequencies on freighter aircraft, Astral Aviation continues to operate cargo freighters from its Nairobi hub to 13 destinations […]
Emirates SkyCargo has expanded its weekly scheduled cargo flight operations to cover 75 destinations across six continents. Through its wider reach, Emirates SkyCargo is able to transport essential commodities and other urgently needed cargo more rapidly across the world, allowing exporters and importers across markets to benefit from direct access to widebody cargo capacity. Some […]
The UK government’s new post-Brexit tariff regime will result in both winners and losers. The new regime is set to replace the European Union’s Common External Tariff from the end of the Brexit Transition Period on December 31, 2020. The UK’s commitment to the ongoing Brexit process and ending the UK’s transition from EU membership […]
Global commercial aviation charter company Albion Aviation Group is reporting that it is seeing a considerable uptake in its professional cargo broker training courses from the current global pandemic crisis and surge in charter demand. “We have completed a number webinar courses for a whole of host of companies, looking to manage their own cargo […]
Callan Marine is serving as the prime contractor to the Texas Department of Transportation for a maintenance dredging project located at the Bolivar Ferry Terminal, in Galveston, Texas. Work began in May and is estimated to be complete in late July 2020. The project consists of the removal of 600,000 cubic yards of material and […]
The U-Freight Group (UFL), with its considerable involvement in eCommerce logistics, says that the latest statistics showing that global e-commerce sales hit $25.6 trillion in 2018 are a further vindication of its decision to enter this sector of the international freight market several years ago. The latest available estimates, up 8% from 2017, were recently […]
NOAA Fisheries announced Friday that it will cancel five out of its six large-scale research surveys in Alaskan waters this year due to COVID-19. The canceled surveys include the Aleutian Islands bottom trawl survey, the eastern Bering Sea bottom trawl survey, the northern Bering Sea bottom trawl survey, the Bering Sea pollock acoustics survey, and […]
Qatar Airways Cargo transported 56 SkyCell containers with vaccines from one of the largest vaccine manufacturers worldwide on its scheduled freighter and belly-hold cargo flights for its customer, CEVA Logistics. The 54-tonne shipment consisting of pneumococcal and varicella vaccines were flown from Brussels to Mumbai via the carrier’s hub in Doha on two separate flights. […]
Network Airline Management and TAAG Angola Airlines are pleased to announce the renewal of their long-term freighter aircraft contract by an additional 12 months, sealing an ongoing partnership for the foreseeable future. Operating a regular weekly scheduled service from Liege, Belgium, to the capital of Angola, Luanda, Network Airline Management provides a Boeing 747-400F aircraft […]
Tigers has launched a new dedicated Personal Protective Equipment (PPE) section on its eShop, powered by its freight portal SmartHub:Connect. The global logistics and transportation company has also released new software updates for SmartHub:Connect, giving customers shortcuts to buy and process documentation for the shipment of PPE. Tigers is also managing the door-to-door transport of […]