It didn't take long for Carnival (CCL 2.79%) (CUK 3.14%) to realize that it's not going to be ready to entertain revenue-generating passengers this year. The world's largest cruise line operator canceled all December sailings for its North American brands on Monday afternoon, hours after smaller rival Norwegian Cruise Line Holdings (NCLH 1.74%) had pulled the plug on its December voyages.
The Centers for Disease Control and Prevention (CDC) let its No Sail Order expire at the end of last month, but replacing that with a conditional sail order comes with a lot of strings attached. The cruise line operators realize that it's going to take a lot more than two months to jump through those hoops. January is the new restarting line, and even that might prove to be optimistic.
Time is money for the suspended cruising industry. Putting off sailings for at least another month will eat into the reserves that Carnival, Royal Caribbean (RCL 3.60%), and Norwegian Cruise Line have been stockpiling in recent months.
- Carnival's monthly cash-burn rate right now is roughly $530 million.
- Royal Caribbean is going through $250 million to $290 million a month.
- Norwegian Cruise Line's monthly cash burn is clocking in at about $160 million.
The meter's running with the three leading players collectively burning through almost $1 billion in liquidity a month. Royal Caribbean is the only one that has yet to throw in the towel on December, but that may very well be the case by the time you read this. No cruise line is an island.
It's fair to point out that the industry just lost nearly $1 billion by nixing December sailings. Carnival, Royal Caribbean, and Norwegian Cruise Line will still be losing money when they get back in the water. With both demand and supply whittled down in the new normal, it's not as if profitability awaits the moment that passengers start walking up the gangway again. This is going to be a slow and perhaps financially painful turnaround, and like everything else we've seen in 2020, it's not as if Carnival, Royal Caribbean, and Norwegian Cruise Line can control their own destiny in 2021.
The recovery here will be at the mercy of the pandemic, and then also on where we are in terms of the global recession. It's only at the point where we're past those two obstacles that we will have to assess the consumer appetite for cruising vacations.
"Whenever we restart our cruise operations in the U.S., we certainly look forward to welcoming our guests on board," Carnival CEO Arnold Donald concluded in his cruise line's statement on December cancelations.
This doesn't sound like someone circling January as a firm restart date. This year has been brutal for the investors in the three cruise lines. A lot will have to go right to turn things around in 2021.