What happened 

Shares of Carnival (CCL -5.56%), Royal Caribbean Cruises (RCL -0.72%), and Norwegian Cruise Line Holdings (NCLH -4.24%) all fell double digits on Monday as the U.S. government extended a no-sail order that will keep cruise ships out of commission for the foreseeable future

Carnival's shares dropped as much as 11.8% and are down 8.5% at 11:50 a.m., Royal Caribbean dropped up to 15.3% and is now down 13.9%, and Norwegian Cruise Line plunged 16.2% and is now off 13.6%. 

Cruise ship on open water at sunset.

Image source: Getty Images.

So what

The U.S. Center for Disease Control and Prevention (CDC) issued an order that ceases the operations of cruise ships in waters that the U.S. has jurisdiction over until some pretty hefty conditions are met. The order not to sail will continue until one of three conditions are met, as outlined in this excerpt: 

This Order shall continue in operation until the earliest of three situations. First, the expiration of the Secretary of Health and Human Services' declaration that COVID-19 constitutes a public health emergency. Second, the CDC Director rescinds or modifies the order based on specific public health or other considerations. Or third, 100 days from the date of publication in the Federal Register. 

Given the spread of COVID-19 and the long duration of cases in countries affected earlier than the U.S., it doesn't seem likely the public health emergency will end soon. So it might be 100 days before cruise ships can board passengers. But even that seems like a moving target given the quickly changing landscape. 

I think investors are coming to grips with the fact that it's going to be many months before cruise liners get back to operation. And even when they do, it's not clear that demand will return simultaneously, given the CDC's recommendation not to go on cruises. 

Now what

It's a long road ahead for cruise line companies, and all they can do is shore up their balance sheets and try to ride out the COVID-19 storm. Carnival has been most aggressive, raising $6.6 billion through debt and equity issuance. Royal Caribbean added a $2.2 billion term loan facility that'll bolster its cash position. Norwegian Cruise Line hasn't acted yet, but don't be surprised to see some new financing soon. 

The first challenge these companies will have is getting through the COVID-19 shutdown, which may cost each billions of dollars. Then ramping up their businesses to any level of positive cash flow may take a while. The global economy is likely already in a recession, and over the next year, we may see consumer discretionary and travel spending drop as a result. Vacations like cruises may not be attractive even a year or two from now when this no-sail order has been lifted. And investors are coming to grips with the fact that revenue isn't going to start coming back in anytime soon.