The impact of COVID-19 on the shipping industry, and specifically cruise shipping, is expected to continue well into 2021 according to Port Canaveral. At the port’s monthly meeting on August 26, Captain John Murray, CEO of Port Canaveral, shared his expectations with the board as they began to plan the port’s budget for the coming fiscal year.
Encouraged by the board to be conservative, Murray said that while he hopes he is wrong, he does not expect any resumption in cruising until 2021. He noted that MSC Cruises is still planning a November first resumption positioning the MSC Seaside in Port Canaveral for the first time. While noting MSC’s success at restarting cruising sailing from Italy, Murray believes factors including the CDC and developing acceptable health protocols will likely extend the restart timetable.
In addition to not expecting cruising to resume until next year, Murray also projected that the industry’s restart will be very gradual leading the port to develop its conservative plan. Responding to commissioners’ questions he projected in part due to the timing require to re-crew and prepare the ships that there would be a 45 to 60-day lead time from when the cruise lines get permission to restart until the first cruise would depart.
Port Canaveral is also expecting a more gradual ramp-up once cruising resumes. Currently they are budgeting for an expectation that four cruise lines would resume sailing from the port at the beginning of 2021, each with only one ship and operating at 50 percent of capacity. While the cruise executives have also projected a phased return to service, Port Canaveral is budgeting single ship operations for the entire first quarter of 2021. They expect the four cruise lines might add a second ship in April, or the second quarter of 2021, and then they might also see a fifth cruise line return to the port.
Based on the European model and likely protocols, Port Canaveral is also expecting a very different operating environment. They believe that cruises will be shorter in duration and note that each destination will need to be vetted. In addition, they are planning for possible pre-boarding COVID-19 testing at the terminals and longer boarding windows with staggered arrival times for passengers.
All of the changes are also expected to take a significant toll on the port’s operating budget. As much as three-quarters of the port’s budget comes from cruise related revenues. For fiscal 2020, they had originally forecast nearly $90 million in cruise related revenues, which was cut in half after COVID-19 forced the cruising suspension. For the fiscal 2021 budget, starting this October, the port has lowered its projection for cruise revenues to just $34 million.
The port’s executives told the board that they had taken their first steps to readjust expenses and operations as early as late March 2020, just days after cruising was suspended. They have deferred $48 million in capital expenditures and in July cut the workforce by more than 40 percent with furloughs and layoffs. Even with these steps, Port Canaveral projects a 40 percent shortfall versus its original 2020 budget. The revised 202 budget calls for a more than $17 million loss. They are expecting an operating profit for the coming year, but have not ruled out additional staff reductions including possibly laying off some of its security officers.
While cargo operations traditionally make up only about a quarter of Port Canaveral’s annual operating income, the cargo operations have remained steady and even slight ahead of budget this year. They have seen dramatic declines in jet fuel moving through the port typically to Orlando Airport, but other segments in break bulk including lumber and aggregates have been strong, as has the ro-ro automobile trade. Between October 1, 2019 and July 31, 2020, Port Canaveral had 328 cargo calls moving 4.2 million tons of cargo. Port Canaveral projects growth in cargo operations with a nine percent increase in cargo revenues forecast for the new fiscal year budget.
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