The COVID-19 pandemic had a catastrophic impact on Carnival Corporation (CCL) and other major cruise operators, forcing widespread shutdowns of operations across the industry. However, in recent weeks, Carnival Cruise Line has made a confident push to relaunch its ships and even expand operations. It has become the first major US cruise line to return its entire fleet to guest operations. However, the question remains whether guest demand will return to pre-pandemic levels.
Main Agreement
- In May 2022, Carnival announced that it had restarted all of its Carnival cruise line operations, as well as 80% of its Princess Cruises operations.
- Carnival, like many other cruise lines, significantly disrupted its guest operations at the start of the COVID-19 pandemic.
- The company’s aggressive move to restart ships and expand its operations may signal that it is recovering well, but there are other headwinds to contend with, including rising prices, inflation and ongoing COVID concerns -19.
Relaunch of Vessels and Expansion of Operations
Since early May, Carnival has announced multiple steps to restart and even expand its cruise operations. Earlier this month, Carnival Cruise Lines said it had restarted its entire US fleet. The company later said three of the other ships on its international Princess Cruises line had returned to guest operations. With those three ships, 80% of the Princess fleet is back on the cruise.
The company has even made moves to expand its operations. On May 12, the company broke ground on a new cruise port on Grand Bahama Island in the Bahamas, expected to open in 2024. Carnival Corporation also recently announced new itineraries for its luxury Cunard brand, which will debut in 2023 and 2024.
Impact on investors
Carnival’s moves to restart and grow its guest operations may be a sign of the company’s optimism that the cruise industry is continuing to recover from the sharp decline in performance it experienced earlier in the COVID-19 pandemic. If customer demand can meet these growing operations, the company can return to profitability after significant losses. Carnival reported a net loss of $1.9 billion for the first quarter of FY 2022, although it expects to report net income by the third quarter of this year.
There are other factors that investors can consider as well. Consumer prices have been steadily rising due to inflation, which can spell trouble for a cruise company like Carnival. Carnival has also faced backlash for its own price hikes, including more expensive onboard services and rewards. These factors may underlie customer demand. But a more optimistic investor might suggest that cruise passengers coopted for two years because of the pandemic might be willing to skip a more expensive trip.
Is the carnival sailing again?
As of early May, Carnival says it is the first major U.S. cruise operator to have its entire fleet operating after a pandemic-related shutdown.
Will customers return to carnival cruises?
The cruise industry was largely shut down due to the COVID-19 pandemic, with most companies suspending all or nearly all guest operations. Carnival expects it to return to profitability in the third quarter of this year, driven by returning customer demand.
What does Carnival’s fleet relaunch mean for investors?
Investors may see Carnival’s move to restart and grow its guest operations as a sign that the company is rebounding strongly from the pandemic shutdown. On the other hand, pandemic concerns persist, as do issues related to rising prices due to inflation. So it’s hard to say how Carnival’s profitability will be affected.
