Carnival, the world’s largest cruise operator, is looking to raise $6bn (£4.8bn) in new funding as it admitted that demand may never recover after the coronavirus pandemic.
The cruise giant, whose lines include the UK’s P&O Cruises and Cunard, and the Princess brand whose ships were the first to be quarantined offshore due to coronavirus, will raise $3bn in bonds secured on its ships, a further $1.75bn in convertible bonds and $1.25bn through issuing new shares.
The impact on cruises could potentially outweigh almost all other sectors of the deeply damaged travel and tourism industry, which has been brought to a virtual global halt by Covid-19. The spectacle of passengers on the Diamond Princess, confined to cabin while the ship was docked off Japan, became a global story in February as the virus spread.
Cruise passengers tend to be heavily represented by the over-70s, the demographic most vulnerable to Covid-19, and ships are known to swiftly spread outbreaks of all viruses, such as the comparatively benign vomiting bug norovirus.
Although it has paused all cruise holidays, several of Carnival’s ships remain at sea and unable to disembark passengers, including some sailings with coronavirus fatalities still on board.
Carnival’s subsidiary Princess Cruise Lines is still involved in a standoff in Australia, where the Ruby Princess is anchored near Sydney with more than 1,000 crew on board. The ship is now believed to have been a major cause of bringing coronavirus to Australia, with one in 10 recorded cases having been cruise passengers.
While Carnival has recorded around $3bn in annual profits from just under $20bn in revenues last year, it expects to post losses this year and its future is now uncertain.
In a downbeat statement to the stock market announcing its refinancing plans, Carnival listed the ways in which the spread of Covid-19 was affecting its business. It said the “resulting illness and loss of life… could have a long-term impact on the appeal of our brands, which would diminish demand for vacations on our vessels.”
Future cruises, when restarted, would likely be subject to “heightened governmental regulations and travel bans and restrictions” which would limit customers and ports of call.
The cruise operator said it had incurred significant additional costs in repatriating passengers, assisting stranded crew and sanitising ships. It is also being sued by passengers aboard the Grand Princess, who were detained off California for five days earlier this month with coronavirus cases on board.
Carnival added: “We have never previously experienced a complete cessation of our cruising operations, and as a consequence, our ability to be predictive regarding the impact of such a cessation on our brands and future prospects is uncertain.”
The crisis has also shed light on the industry’s employment and accounting practices. US president Donald Trump said a bailout of Carnival would be difficult because the corporation is registered in Panama, rather than in America.
Carnival’s London-listed shares rebounded after falling in early trading and closed up 8% at 981p.
