Out of Hibernation
How Much have the World’s Largest Cruise Lines Downsized During the Pandemic?
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March 17, 2021
[Updates: October 28, 2021]
Text & Infographic by Joseph Slattery
Most everyone in and around the cruise industry believes that the light in the tunnel, this time, isn’t a mirage. After nearly a year in hibernation — a time marked by false hopes and a few false starts — the end appears to be in sight.
On January 11th, Carnival Corporation CEO Arnold Donald brightened an otherwise sour earnings report by suggesting that his entire 9-brand fleet would be back in operation by year’s end. Overly optimistic? I don’t think so. A few brands are already sailing in Asia and Europe. The rest should have at least a fledging operation in place by late summer. The second half of 2021 is shaping up to be a Wild West blend of exuberance and angst, a revving up of operations under conditions that will seem to change by the hour.
If I’m right, the operational “pause” will time out at between 12 and 18 months for most brands. When they’re all powered up together, what will we see? Like an overly-expresso’d baseball general manager in the off-season, some have bought, sold, and traded their way to a new look, while others have been content to stoke the fire. A record number of ship transactions will be recorded in 2020 and 2021. Last year was peppered with news depicting a flotilla of large, relatively new vessels on funereal journeys to Turkish and Indian scrapyards. The ten largest cruise brands in the world -- post-pandemic measured by lower berths – together have sold or scrapped 20 ships since the pandemic began. Second-tier brands have added to the tally. Carnival Corporation has so far discharged 18 older, less efficient vessels, part of its strategy to become leaner and meaner to face a balance sheet weakened by debt and equity dilution.
The pandemic has slowed ship construction, both directly and through renegotiated terms. Nonetheless, in 2020 and 2021, with a tiny fraction of the usual fanfare, the mega-brands will average one newbuild delivery each. So with the divestitures, their combined fleet will be 9 ships lighter over the course of two years, from 164 to 155. [Update: Combined fleet now down by 10 ships, from 164 to 154.)
Such metrics jive with the media-fueled narrative of the industry’s downsizing, a storyline that replaced the previous one predicting its demise. But this an illusion. As Ross Perot liked to say, the devil is in the detail. The 20 ships discharged by the top-ten brands averaged 1,842 [Update: 1,811] lower berths each. The eleven new deliveries averaging 4,405 berths. I’ll save you the math: based on what’s been announced to-date, at the turn of 2022, the carrying capacity of the world’s ten largest cruise lines will be over 11,000 berths more than when the pandemic started. That’s an increase of 2.5% [Update: 2.3%].
Anyone who sees this growth as disappointedly tepid will be heartened to know that the construction pipeline is chock with 14 more vessels – 62,000 berths -- earmarked for the top-ten alone in 2022 and 2023. Without more divestitures that will bump capacity another 13%. There will be more divestitures, of course, perhaps even in 2021 -- but the weakest branches have already been trimmed. Who said the cruise industry is dead? [Update: there was one more divestiture, AIDAcara]
Since last summer, against a backdrop of uncontrollable setbacks and delay, cruise operators have sung in harmony the ballad of strong, pent-up demand. My back-of-the-napkin guess is that somewhere around 40 million cruise vacations – possibly more – will have been forgone during the pandemic. Cruise loyalists are amassed at the gates. When conditions are safe and confidence restored, the rebound will be astonishing. But that too, will pass, and the heavy lifting will resume. Long-term growth will come not from core loyalists but from the broader vacation market, travelers who are skeptical about cruising. A year ago, the media acted like a pack of wolves associating cruise ships with the virus, fanning the fire they’ve stoked since the Costa Concordia tragedy in 2012. How have perceptions changed in the last year? In my opinion, the cruise industry has managed the pandemic well, but it is not my opinion that counts.
Notes:
The ten largest brands based on projected capacity 01 January, 2022 are: Royal Caribbean International, Carnival Cruise Lines, MSC Cruises, Norwegian Cruise Line, Costa Cruises, AIDA Cruises, Celebrity Cruises, Holland America Line and P&O-UK. Prior to the 2020 delivery of P&O’s 5200-berth Iona, TUI Cruises (Germany) was in the #10 position.
As indicated, Carnival Corporation has been more aggressive than peers in ship divestitures. The six Carnival brands in the top ten will have sacrificed net 11 ships and are down 0.5% in capacity, while the four non-Carnival brands have gained two ships and have added 5.9% capacity. [Update: With AIDA’s divestiture of AIDAcara, the Carnival top-ten brands have sacrificed net 12 ships and are down 1.0% in capacity]
Carnival Corporation’s downsizing was driven by Carnival Cruise Lines (-3.9% capacity), Princess (-12.6%) and Holland America (-10.7%). Together the trio released 13 ships while taking delivery of one each.
MSC grows almost 18% after taking custody of the colossi newbuilds Virtuosa and Seashore.
Carnival Corporation has publicly stated its intention to discharge 19 ships during the pandemic. As of this writing 18 have been announced. Note that there is a difference between the corporate roll-up and the 18 [19] divested by the corporations six largest brands. Two Princess ships were handed over to P&O Australia, which in turn sold two smaller, older ships to outside interests. [Update: Carnival Corporation announced the 19th divestiture — AIDAcara — in June 2021]
Figures for Celebrity Cruises do not include the Xpedition/Galapagos operation.