Carnival CEO Warns Downturn To Last Two More Years For Cruise Industry

Carnival Corporation’s chief executive, Arnold Donald, delivered some undesirable news for r/WallStreetBets, Robinhood traders, and Barstool Sports’ Dave Portnoy, all of whom have panic-bought cruise ship stocks during the virus pandemic low, observed in the first half of 2020. In an interview, the CEO told Financial Times that the world’s largest cruise liner doesn’t expect a “V-shaped” recovery until at least 2023.

Since the low last March, Carnival shares are up more than 265% in 237 trading sessions. The premise behind dip-buying Carnival shares was based on the notion people would return to cruise ships post-COVID-19 vaccine rollouts. But as Donald lays out in the interview, he warned cruise ships had received a reputational fallout after various outbreaks on vessels that could prolong a recovery to at least 2023.

Readers may recall Carnival continued to operate cruise lines even after multiple warnings of the virus pandemic spreading across the world. Carnival saw outbreaks on several vessels, including Diamond Princess and Grand Princess. The company’s failure to halt the ships in the early months of the pandemic resulted in a damaged reputation.

Donald said the cruise liner had reduced its fleet by 18% (19 out of 107) as it sees lower passenger volume for the foreseeable future. Many of the cruise ships were sold or scrapped. He said the reduced fleet could begin to sail in the second half of this year, adding that there are so many uncertainties:

“[It] depends on so many variables, because every destination is going to have its own level of comfort and what regulations are going to be.”

With cruise liners’ reputation tarnished, he said they must work harder to attract new customers. Before the pandemic, baby boomers flooded ships; but as the virus struck, restrictions halted sailings, and many older folks opted to purchase RVs instead. Donald will likely need to attract millennials and some Generation Z to increase passenger volumes. Though at the moment, he admitted the cruise operator’s campaign to attract new customers could be an uphill battle.

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“The biggest hurdle to restarting once regulators give cruise companies their approval is returning its 90,000 staff to ships,” Donald warned. He said the process could months considering international travel restrictions and quarantines are different per country.

At the moment, the company is operating a small number of sailings in Europe and Asia. Even to this day, there are still virus outbreaks being reported on cruise ships.

Donald said the “only request” to public health officials was that there were “no undue restrictions, constraints, disadvantages placed on the cruise industry versus the rest of travel and tourism.”

Some cruise operators have already requested passengers get tested or have proof of vaccinations before entering the ship.

For the cruise industry to regain trust among customers – they might have to offer a COVID passport program, similar to airlines, or perhaps just deeply discounted prices to attract broke millennials.

Source: Zero Hedge

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