Wall Street had another terrible day on Wednesday, as investors reacted negatively to the official declaration that the COVID-19 coronavirus outbreak had reached pandemic proportions. The news from the World Health Organization wasn't unexpected but still highlighted the severity of the health crisis and made the efforts that federal, state, and local government entities in the U.S. have made thus far look insignificant and ineffective.

Volatility in the Dow Jones Industrial Average (^DJI 0.34%), S&P 500 (^GSPC 0.12%), and Nasdaq Composite (^IXIC -0.07%) continued, with the declines bringing major benchmarks ever closer to the 20% overall decline necessary for a bear market to bring an end to the decade-long bull market of the 2010s.

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As we've seen recently, industries affected most by the coronavirus took much larger hits than the overall market. In particular, cruise ship operators have taken it on the chin lately, and Norwegian Cruise Line Holdings (NCLH -0.88%) and Royal Caribbean Cruises (RCL -0.66%) led their peers lower on the day with declines of 27% and 14%, respectively.

An industry stuck in the fog

The primary problem with cruise line operators right now is that the future of the entire industry is uncertain. The U.S. State Department took unprecedented action earlier this week, releasing a blanket declaration that U.S. citizens should not travel by cruise ship, adding to the pressure operators already faced from falling demand from passengers.

Cruise ship in Sydney Harbor.

Image source: Royal Caribbean.

The State Department's statement particularly warned those travelers who have health conditions against going on cruises, citing evidence from the U.S. Centers for Disease Control and Prevention that the risk of infection from the coronavirus in a cruise ship environment is higher.

Many countries are implementing screening procedures that are particularly onerous, denying cruise ships the right to have passengers disembark in port or subjecting passengers to quarantine procedures. The State Department also said that U.S. citizens shouldn't count on special flights to bring them back to the U.S. in the event of an evacuation of a cruise ship overseas.

Cruise operators also face the challenge of getting potential passengers to their departing ports. With many travelers nervous about travel by air and the possibility of exposure to the coronavirus en route, there are several reasons why those who might have considered cruises in the past are opting to stay home.

How bad will it get for cruise operators?

The most difficult part of the situation for cruise ship operators is the inability to know exactly how bad things will get and for how long. Yesterday, Royal Caribbean said that it was taking measures to improve its liquidity, arranging for a $550 million increase in its revolving credit line and looking at cost-cutting measures to reduce capital expenditures and operating costs by another $1.7 billion this year.

Yet it also withdrew the guidance it had provided for the first quarter and for the full 2020 year, citing the fact that it simply can't predict the magnitude, duration, and scope of disruptions caused by the COVID-19 outbreak. As Royal Caribbean CEO Richard Fain put it, "These are extraordinary times, and we are taking these steps to manage the company prudently and conservatively."

Norwegian also made its own move to boost its credit capacity yesterday. Securing a new $675 million credit line will provide some additional liquidity, but the company still has substantial debt on its balance sheet.

The capital moves come as bond-rating agencies look at whether to reduce ratings on bonds issued by cruise ship operators. Royal Caribbean, in particular, is in danger of seeing its debt fall to junk-bond status, which would increase future borrowing costs and possibly make it more difficult to arrange for additional liquidity.

The only bright spot recently has come from the White House, with President Trump pledging assistance for the cruise industry. Yet exactly what that help might look like isn't clear, especially if a broader recession strikes the overall economy. Until it is -- and investors get a better sense of what's to come -- the seas could remain choppy for Royal Caribbean, Norwegian, and their peers.