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Carnival Suspending Princess Cruise Operations Due to Global Coronavirus Pandemic

By Jon Quast - Mar 12, 2020 at 8:48AM

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A major source of revenue won't come in for the next two months, as Carnival looks to protect its customers and employees.

One day after the World Health Organization officially characterized COVID-19 as a pandemic, Carnival Corporation (CCL 12.44%) has voluntarily suspended global operations for its popular Princess Cruises. In an official statement from the company, it stated that all 18 cruise ships operating under the Princess name will not be departing for their scheduled cruises. The pause is effective immediately and will last until May 10 -- 60 days.

Investors didn't receive this surprise announcement well. The stock was paused in pre-market trading while the announcement was made, before opening the day down 18%.

Man stares at red stock chart in desperation.

Image source: Getty Images.

Sinking cruise-ship stocks

According to Carnival, over 50,000 people travel with Princess Cruises every day. The choice to voluntarily pause cruises is a decision with its passengers' and employees' well-being in mind. Even still, the news isn't likely to be well received by those who were planning on sailing the seas in the coming days. Attempting to not lose loyal customers, Carnival is offering to transfer passengers to future cruises, as well as provide future on-ship benefits.

A decision of this magnitude has yet to be made by competitors Royal Caribbean (RCL 15.78%) and Norwegian Cruise Line (NCLH 15.36%), but could be a sign of things to come. All consumer-discretionary stocks are subject to macro-economic cycles to some extent. But the overwhelming uncertainty currently facing the cruise industry specifically has sent each of these three stocks down at least 60% year to date. 

Recently Royal Caribbean made moves to boost its liquidity in the coming year. Considering that a major source of Carnival's revenue is now turned off, the company could make similar liquidity moves in the coming weeks.

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Stocks Mentioned

Carnival Corporation Stock Quote
Carnival Corporation
$10.85 (12.44%) $1.20
Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
$41.76 (15.78%) $5.69
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
$13.22 (15.36%) $1.76

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