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Jul 10, 2020

Carnival says Italian cruises could be next in return to sailing

Cruise lines can't stay in a zero revenue environment forever: Analyst


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Carnival Corp., which plans to begin cruising again next month from German ports, said Italy could be next as it looks to restart its business following the coronavirus shutdown.

Chief Executive Officer Arnold Donald said the company’s ships will start with less than half their usual levels of passengers as they implement precautions for social distancing. The response to new cruises has been strong, he said, with 1,000 bookings coming in for the company’s German brand, AIDA, immediately after it reopened. Many of the bookings came from first-time cruisers.

“We expect demand to be more than adequate to fill ships in a staggered restart,” Donald said on a conference call with investors Friday. “There’s a lot of pent-up demand.”

Carnival shares rose as much as 12 per cent in New York trading Friday and were up 8.6 per cent to US$15.83 at 11:50 a.m. The stock has suffered along with the rest of the cruise business, falling 71 per cent this year through Thursday.

The industry halted sailing around the world in March as COVID-19 spread rapidly. Carnival and other lines had to hustle to return passengers and crew while raising money to blunt the financial impact of the shutdown.

The company plans to shed 13 ships and is pushing back deliveries of new ones. Donald said it would be 2022 at the earliest before the company returns to its prior level of passenger capacity. Bookings for 2021 are coming in at prices that are a low- to mid-single-digit percentage below those of earlier periods.

Burning Cash

The Miami-based company reported a loss of US$4.3 billion on sales of US$740 million for the quarter that ended in May. The company’s cash burn, with none of its ships sailing, is US$650 million a month.

Carnival returned 260,000 passengers and 77,000 crew to land amid the crisis. About 3,000 crew members are still at sea.

The company holds some US$2.6 billion in customer deposits, most of them credits consumers can use for future bookings.

Donald said Carnival had “less than our market share of incidents” of the virus on board but received a “disproportionate amount of media attention,” given its size as the industry leader.

It’s mounting a public conference on the virus featuring scientists on July 28.

The executive said its brands aren’t seeing the same negative perceptions among consumers as they did back in 2012, when Carnival ships experienced high-profile accidents including a fatal crash in Italy and an engine fire in the Gulf of Mexico. “None of the brands have gone to the low levels we experienced at that time,” Donald said.