After a weekend of news that was far from relaxing, the stock market opened the new week with a considerable slide. The political ramifications of the death of Supreme Court Justice Ruth Bader Ginsburg added to already considerable uncertainty about the presidential election. In Europe, news of a bank scandal raised new worries about the stability of the global financial system.
Predictably, market benchmarks slid sharply on the news. Just after 11:15 a.m. EDT today, the Dow Jones Industrial Average (^DJI -1.54%) was down 829 points to 26,829. The S&P 500 (^GSPC -2.11%) had fallen 78 points to 3,242, and the Nasdaq Composite (^IXIC) lost 206 points to 10,587.
Cruise ship operators have hoped for an uptick in the economy to help them as they seek to emerge from their long period of suspended activity. Today, Royal Caribbean (RCL -7.91%) and Norwegian Cruise Line Holdings (NCLH -5.33%) took major steps toward getting themselves back in operation. But shareholders of those two companies, as well as rival Carnival (CCL -6.82%), still seem unconvinced that the measures will solve the companies' fundamental problems.
Trying to satisfy the CDC
Earlier this summer, Norwegian and Royal Caribbean helped to set up a group to come up with detailed health and safety protocols. In doing so, they hoped to persuade regulators like the Centers for Disease Control and Prevention (CDC) that they could operate without causing negative implications in the fight against the COVID-19 pandemic.
The proposed protocols, announced today, would be comprehensive. They address a number of vital areas, including how passengers and crew members would be screened and tested before the beginning of voyages. Also included were procedures for how to handle outbreaks when they arise, measures to improve sanitation on board, and considerations for changing normal operations to reduce the likelihood of COVID transmission.
It's clear that such protocols are an essential condition before the CDC and other regulators will allow cruise ship operators to return to full operation. What's less clear is whether those protocols will be sufficient, or whether the CDC and others will require further work to ensure passenger and crew safety.
Time is not on cruise ship operators' side
The problem that cruise companies face is that every day they're not allowed to operate at full capacity puts more financial pressure on them. Carnival last week indicated that it would have to sell more stock in order to raise capital, in part because the company has already incurred so much debt that trying to borrow would be impossible under any reasonable terms.
On the optimistic side, Carnival has resumed operations in some parts of the world. But even there, sailings are taking place under very different conditions. Limitations on travelers crossing international borders are also a problem, both for wooing passengers in the first place and for scheduling cruises that include destinations outside the home port's country.
When the stock market gets choppy, investors often have the least patience for stocks of companies that are facing considerable business challenges. The COVID-19 pandemic has posed an existential threat to cruise ship operators. It's still far from certain that the industry will be able to survive the immense losses from not having been able to operate for much of 2020. Even if it does, investors might not be happy with the outcome.