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COVID-19 and the Cruise Line Industry

December 31, 2020 Coronavirus COVID-19

Cruising has long been a desirable and affordable mode of vacation for millions every year, however, following the COVID-19 pandemic cruising became a hotbed for infection. This article will discuss what happened to the cruise lines early in the pandemic, how the industry responded to the shut down, and where the future of cruising may be headed for the industry and passengers.

How did we get here?

Almost a year ago, December 2019, SARS-CoV-2, the virus that causes coronavirus (COVID-19) is first identified in Wuhan, China. In January of 2020 the Center for Disease Control (“CDC”) confirms person-to-person spread of the New Coronavirus in the United States. The CDC recommends avoiding travel on cruise ships in Southeast Asia in February of 2020 due to issues surrounding passengers testing positive on the Diamond Princess. In March of 2020 the CDC’s recommendation is broadened to include deferring all cruise ship travel worldwide for those with underlying health conditions and for persons aged over 70 years. On March 11, 2020 World Health Organization (“WHO”) declares COVID-19 a pandemic. By March 17, 2020 cases of COVID-19 are associated with at least 25 additional cruise ship voyages. The close quarters on a cruise ship, multiple ports in multiple countries, and inefficient screening process for passengers allow the virus to transmit easily in a ship environment. To see a detailed chronology, click here.

The cruise industry came under great criticism for continuing to sail and collect revenues versus cancelling all cruises in furtherance of crewmember and passenger safety.

Immediate consequences to cruise industry

The CDC issued a No Sail Order in place from March 14 to October 29, 2020 that suspended cruise ship passenger operations in the United States. An article by CNBC called the coronavirus pandemic the “cruise lines’ 9/11”. Specific impacts to the cruise line companies were:

  • Revenues dropped substantially as all planned cruises were cancelled.
  • Carnival Corporation’s stock dropped by nearly 60% while Royal Caribbean Group and Norwegian Cruise Line Holdings have lost more than 70% of their market value between February and March 2020 according to CNBC.
  • Office staff and at sea employees were laid off or furloughed.

Repatriating the crew

Crew members were stranded on cruise ships while cruise line companies and home countries determined new protocols to repatriate the now unemployed workers. The CDC limited crew repatriation flights on commercial planes to limit contact with general public originally only allowing charter flights for crew members. CDC guidelines have since been updated with requirements of isolation and testing, including the requirement that executives sign off on disembarkation arrangements. Desperation grew as about 100,000 crew members were stranded at sea indefinitely in the US following the industry shut down on March 13, 2020. At least two crew members have died jumping overboard. The Miami Herald reported a hunger strike aboard the Royal Caribbean Navigator of the Seas ship until the company proved it was sending home crew members.

Royal Caribbean said it will use its ships to repatriate citizens of St. Kitts, Domincia, St. Lucia, Grenada, Trinidad, St. Vincent and the Grenadines, Colombia, Panama, Costa Rica, Honduras, Guatemala, Belize, Haiti, Dominican Republic and Jamaica according to the Miami Herald. In the same article it was reported that Carnival Corporation agreed to repatriate 998 people on flights to foreign countries from the U.S.; Norwegian Cruise Line Holdings agreed to repatriate 3,542 people; and Disney Cruise Line agreed to repatriate 1,190 people. Some countries have been cautious in opening their borders to let stranded nationals back, out of fear they could further spread the disease. Foreign governments expected assistance with the costs associated with isolating and testing their citizens, while the cruise lines asserted their crew members were safe to return without evidence of such.

A Time magazine article reports of a lawsuit filed in the Southern District of Florida in which cruise line crew members claim they are effectively “held hostage” on ships working without pay. Plaintiffs aboard the Bahamas Paradise Cruise Line ships allege they have been “unnecessarily kept on ships for months on end” in addition to suffering “lost wages and lost employment opportunities.” Crew members further allege they were required to continue cooking, cleaning, and maintaining ships without pay after the pandemic shut down cruises in March. The lawsuit states the egregiously delayed repatriation is tantamount to false imprisonment. A major delay in returning the crew was the cruise line’s assertion that they could not afford charter flights, which was the initial standard required by the CDC to prevent disembarking crew members from spreading the virus on commercial flights, says Dragan Janicijevic, the lead plaintiff. According to the lawsuit, the cruise lines allegedly coerced crew members aboard the ship to sign a document stating they were voluntarily staying onboard without pay with the threat that if they did not sign, they would not be rehired.

Borrowed Money?

Many cruise lines are registered in foreign countries to avoid paying the U.S. corporate tax rate of 21% according to a USA Today article. Carnival’s ships are registered in Panama. Celebrity Cruises owned by Royal Caribbean sails most, if not all of its vessels, under the Liberian flag. However, under the March 27 CARES Act economic stimulus package excluded cruise lines which were ineligible for either grants or loans through these programs according to USA Today. The Cruise Line Industry Association (CLIA), the industry trade group, denied that its member companies had asked for federal or public assistance.  CNBC reports both Royal Caribbean and Norwegian Cruises have pulled fresh lines of credit. Norwegian obtained an additional revolving loan of $675 million and Royal Caribbean increased its revolving capacity by $550 million.

Later in the pandemic cruise lines are having to cut even more expenses in order to stay afloat. Carnival Corporation, a Miami-headquartered cruise company lost $770 million per month last quarter or roughly $287 a second according to an Orlando Weekly article. In order to offset some of the losses Carnival Corporation will reportedly sell 18 of its ships under various subsidiary brand names. Carnival Corporation President and CEO Arnold Donald notes that the retiring of the 18 ships will have “a structurally lower cost base, while retaining the most cash generative assets in our portfolio.” COVID-19 related concerns are changing guest demands for more social distancing, outdoor spaces, efficient screening measures, and corporate policy transparency. With the high level of uncertainly regarding this type of travel, travel insurance purchases are increasing, and consumers are demanding more liberal refund policies. Additionally, increasing environmental responsibility both on the consumer side and the business side, affect what features new ships will have in the future such as exhaust gas cleaning and water treatment systems.

Where the industry is headed

As of October 30, 2020, the CDC opened a phased approach to resuming passenger operations called The Framework for Conditional Sailing order. Cruise ship operators must demonstrate adherence to testing, quarantine and isolation, and social distancing requirements to protect crew members before passenger travel will be allowed in later phases. While no cruise line has expressly stated it publicly, many industry experts wonder if corporations are waiting until the COVID-19 vaccine is widely available. Cruise line cancellations into the spring 2021 season have caused a stir in the cruising world with many cruise lines choosing similar start dates such as March 1 and April 1 of 2021. Current restart conditions set by the government are intense with new safety standards such as having a laboratory on board to process COVID-19 tests that will take months to implement. Additionally, cruising is still listed at the highest warning level (“avoid nonessential travel”) with no guidance as to when that restriction will be lessened.

Working towards sailing again

Royal Caribbean has had 100,000 people sign up for a new Volunteer of the Seas program of test cruises in less than one week. This program allows cruisers to register interest to be part of test sailings to practice the new CDC protocols. These cruises will likely not be as pleasurable as cruising pre-pandemic, as the CDC now requires check-in, embarkation, and COVID-19 quarantine drills to be run in addition to muster lifeboat drills. Test voyages may only take volunteers over 18 years of age who have no pre-existing conditions, to limit the risk of those on board. Laboratories on board may also be a requirement in the future to test passengers and crew members. While Carnival Corporation CEO Donald is confident looking forward at the proven resiliency of and pent-up demand for cruise travel, it may take some time for the industry to regain its pre-pandemic glory. With the lower mortality rate of COVID-19 patients and initial rollout of the vaccine the public’s perception of risk level associated with traveling is declining, however cruise options are limited until the CDC modifies their Conditional Sailing Order. Cruise lines are making an effort to create a safer experience for passengers including:

  • mandatory masking when in public areas of the vessel.
  • hand sanitizing.
  • contactless interactions.
  • enforced physical distancing.
  • enhanced air filtration systems onboard such as HEPA filters and UV-C irradiation.
  • proof of negative COVID-19 test.
  • observing necessary quarantine requirements, pre or post cruise, as set out by destination and home countries.

It’s a step in the right direction, and only time will tell whether these efforts will be enough to keep passengers and crewmembers safe.

The future, free cruises and the duty of care

Uncertainty might be the only certainty with business. This is especially true for cruise line companies attempting to return to Pre-COVID “business as usual.”  The test cruise or cruises proposed by Royal Caribbean presents interesting and perplexing liability issues.  Typically, cruise carriers owe the duty of reasonable care to make a cruise ship safe, which includes the duty to warn of non-obvious unsafe conditions.  These duties are owed to “fair paying passengers.”  Royal Caribbean is essentially asking for volunteers to partake in a free cruise and who, therefore, may not qualify as “fair paying passengers.”  Ordinarily, a cruise line is not allowed to require such passengers to sign a pre-cruise release and waiver, since cruise operators are prohibited from exculpating themselves from its own negligence or that of its employees or agents because of 46 U.S.C.S. § 30509.  It remains to be seen if Royal Caribbean moves forward with their “free” cruise and if the cruise line requires its volunteers to sign a pre-cruise release and waiver.  As to the cruise lines, at least the major cruise lines, it seems clear that with the recent vaccines it will hopefully only be a matter of time before the cruise ships are sailing again, utilizing sufficient precautionary measures. 

 

Sources:
https://www.cruisecritic.com/news/5735/?et_cid=3377133&et_rid=260170480&et_referrer=Boards%20-%20CC-US

https://www.cruisecritic.com/news/5774/?et_cid=3381944&et_rid=260170480&et_referrer=Boards%20-%20CC-US

https://www.cruisecritic.com/articles.cfm?ID=241

https://www.sun-sentinel.com/business/fl-bz-customers-still-wait-for-refunds-ss-prem-20201203-jwwuc72a7ff23oird5j6wkg6t4-story.html

https://cruising.org/en

https://www.linkedin.com/posts/clia-cruise-lines-international-association-_wearecruise-activity-6698606063417217024-U3w_

https://www.youtube.com/watch?v=YoYYOL7XsMc&feature=youtu.be

https://www.aarp.org/travel/vacation-ideas/cruises/info-2020/cruise-status-during-pandemic.html

https://time.com/5875938/cruise-ship-worker-lawsuit-coronavirus/

https://www.orlandoweekly.com/Blogs/archives/2020/09/22/florida-based-carnival-losing-more-than-17000-a-minute-offloads-18-ships-in-effort-to-stay-afloat

https://www.cnbc.com/2020/03/15/cruise-lines-911-how-coronavirus-brought-industry-to-its-knees.html

https://www.usatoday.com/story/news/factcheck/2020/06/10/fact-check-cruise-ship-companies-didnt-seek-us-covid-19-bailout/5332960002/