What happened

Shares of Carnival (CCL 1.96%) (CUK 1.60%) were riding a wave of enthusiasm 4% higher in morning trading Friday, even as the overall market was down. The cruise ship operator released a third-quarter business update that showed bookings for 2022 cruises were running ahead of pre-pandemic levels.

So what

The cruise industry was arguably the hardest hit by the pandemic because even when the rest of the economy was allowed to reopen, cruise operators were forced to remain in port. It took the threat of a lawsuit from Florida against the U.S. Centers for Disease Control and Prevention before the agency relented and allowed ships to sail once again.

Cruise ship sailing into port

Image source: Getty Images.

In the 18-month period that Carnival, Norwegian Cruise Line Holdings (NCLH 3.50%), and Royal Caribbean (RCL 1.94%) were effectively shut down with no source of revenue, their expenses for ship maintenance and crews continued, forcing them to take on significant amounts of debt. At the end of the second quarter, Carnival had $26 billion in debt on its balance sheet. To put that in perspective, at the end of 2019 before the COVID-19 outbreak, the leading cruise line had less than $10 billion in debt.

Now what

Carnival says the back half of 2022 is looking especially bright as cumulative advance bookings are ahead of what was a very strong 2019. That shows there remains a strong undercurrent of demand for voyages, and while this travel and tourism stock's third-quarter booking volumes are below what they were in the second quarter due to the impact of coronavirus variant outbreaks, they remain ahead of the first quarter.

Moreover, with eight of its nine cruise brands having resumed sailings, voyages Carnival has undertaken during the quarter are cash flow positive, and it expects that to continue.