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Cruise giant Carnival Corporation to remove more ships from its fleet

The Great Shrinking of the Cruise Fleets continues.

National, September 15, 2020: Cruise giant Carnival Corporation on Tuesday revealed that its nine brands were in the process of removing at least 18 ships from their fleets as they cut costs and reorganize in anticipation of a slow restart to cruising.

That’s three more ships than the company had previously disclosed.

In a regulatory filing with the U.S. Securities and Exchange Commission, the company said eight of the ships already had left its fleets. The rest will leave in the coming months.

Based in Miami, Carnival Corporation is the parent company of Carnival Cruise Line, Holland America, Princess Cruises, Seabourn and five other brands that went into the coronavirus crisis with a combined fleet of 104 ships.

Together, the nine brands account for about 45% of all cruises taken in the world, and Carnival Corporation is thus seen as a bellwether for the cruise industry.

All nine of the Carnival Corporation brands halted departures in mid-March due to the crisis, and many have canceled all sailings into November or beyond. It’s a shutdown that is unlike anything seen in the history of modern cruising, and it’s causing the company great financial hardship.

The departure of 18 vessels at once is unprecedented in the company’s history. It amounts to 17% of the ships in the combined fleets of the nine Carnival Corporation brands. That said, the vessels that are leaving only account for about 12% of the combined passenger capacity of the brands, the company said in its regulatory filing.

Carnival Corporation didn’t specify which ships were leaving the company’s fleets. But many of the vessels already are known. Carnival Corporation’s Holland America brand in July announced it would dispose of four vessels — Maasdam, Veendam, Rotterdam and Amsterdam. The company’s Carnival Cruise Line brand also has announced the removal of four ships — Carnival Fantasy, Carnival Imagination, Carnival Inspiration and Carnival Fascination.

In addition, the company’s U.K.-focused brand, P&O Cruises, recently said one of its vessels, Oceana, had left its fleet, and the company’s Europe-focused Costa Cruises brand has disposed of three ships since January: Costa Victoria, Costa neoRomantica and Costa Atlantica. A fourth Costa ship, Costa Mediterranea, will be transferred to a new Chinese cruise line in May.

In addition, the company’s P&O Cruises Australia brand has announced the departure of two of its vessels, Pacific Aria and Pacific Dawn according to the reports published in thepointsguy.com.

In the regulatory filing, Carnival Corporation suggested the vessels that are leaving are its most inefficient ships. While they represent about 12% of capacity, they only account for about 3% of operating income in 2019, the company noted.

Carnival Corporation also said new ship deliveries had been delayed. The line now only expects five of the nine ships it had ordered for delivery in 2020 and 2021 to arrive in that time frame.

The disclosures, in an 8-K filing, came as Carnival Corporation offered a preliminary look at its earnings for its third quarter, a period when it did not have a single ship sailing with passengers. The company said it had lost $2.9 billion during the quarter, which ended on Aug. 31. The number included $900 million in non-cash impairment charges.

The company also said it had burned through about $770 million in cash per month during the third quarter. During the fourth quarter, it expects its cash burn to drop to around $530 million per month.

As of Aug. 31, the company had about $8.2 billion in cash and cash equivalents on hand — enough to keep it solvent for more than a year at the current cash burn rate.

For now, nearly all of Carnival Corporation’s ships remain on hiatus.

In early September, one of the company’s ships — the 2,260-passenger Costa Deliziosa —  resumed sailing in the Mediterranean. The vessel is operating seven-night voyages out of Trieste, Italy, to Italian ports for Italians. A second Costa Cruises ship is scheduled to resume operations out of Italy in the coming days.

Shares of Carnival Corporation (CCL) were down around 7% in early trading Tuesday on the news of the line’s third quarter loss and additional ship disposals.

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