Carnival (NYSE:CCL)(NYSE:CUK) tried to dip its feet into the chilly November waters, but it's now joining its smaller rivals in hoping for a December relaunch. Things could get worse. If the Centers for Disease Control and Prevention (CDC) reportedly has its way, we may have to wait until at least February to get the out-of-favor cruising industry back in business.
The moment the CDC extended its No Sail Order until the end of October, we saw Royal Caribbean (NYSE:RCL) and Norwegian Cruise Line Holdings (NYSE:NCLH) cancel all U.S.-originating sailings until early December. With the CDC extending the order a few times now -- and often near the end of the travel ban -- they didn't want to be caught with displaced passengers scrambling at the port for nixed voyages. Carnival initially decided on a clever gamble. It would move most of its future cruises until at least December, but it held back on six ships that would start taking on passengers out of two Florida ports in November. The CDC was in a blinking contest with Carnival, and unfortunately for all three players it was Carnival that blinked first.
So much to gain, and so little to lose
Carnival's move to end its experiment to get six of its vessels operating next month may not seem like a big thing at first, but it's a bigger deal than you probably think. The CDC now won't face much resistance in pushing its No Sail Order to the end of November, and that means the possibility of a regime change for the White House.
It's been widely reported that the CDC was going to extend the previous No Sail Order that ended in September through the end of January. Pressure form the country's executive branch reportedly had the CDC settling on just bumping the order by one more month, but it peppered the extension with concerns about how outbreaks were still happening on European and Asian sailings despite extensive safety and health protocols in place.
Carnival would've had its first ship in the water before the Nov. 3 presidential election, and the CDC may have waited at that point to see if Carnival's safety protocols were enough. Now the cruise industry becomes an election risk, especially if COVID-19 cases show no sign of subsiding. Joe Biden isn't necessarily an enemy of cruise lines, but the CDC would feel less pressure to soften its hard stance if it knew that the White House was in the process of being handed off.
Cruise lines have already been one of the hardest-hit industries among consumer discretionary stocks. How much more water can Carnival, Royal Caribbean, and Norwegian Cruise Line take at this point?
Carnival has already had to cancel so many cruises that it wouldn't have amounted to much of a financial risk to keep those reservations on the books and ride this small call option out. It could've partnered with a few Miami and Cocoa Beach hotels to set passengers up with free beachfront getaways if their voyages were canceled after flying into town in November. It could've sweetened the incentives it already offers on suspended voyages. Pulling the plug on November means the historically lucrative holiday sailings are next on the chopping block. The CDC doesn't seem to be warming up to the idea of reopening the cruising industry, and we're now running out of calendar pages before 2021 is here.