The COVID-19 pandemic had a catastrophic impact on Carnival Corporation (CCL) and other major cruise operators, forcing extensive shutdowns of operations across the industry. In recent weeks, though, Carnival Cruise Line has made an assertive push to relaunch its ships and even to expand operations. It has become the first major U.S. cruise company to return its entire fleet to guest operations. The question remains, however, whether guest demand will return to pre-pandemic levels.
- In May 2022, Carnival announced that it had relaunched its entire Carnival Cruise Line operations, as well as 80% of its Princess Cruises operations.
- Carnival, like many other cruise line companies, substantially ceased its guest operations early in the COVID-19 pandemic.
- The company's aggressive move to relaunch ships and expand its operations could signal that it is recovering well, but there are other headwinds to face including price increases, inflation, and lingering COVID-19 concerns.
Relaunching of Ships and Expansion of Operations
Since the start of May, Carnival has announced numerous steps to relaunch and even expand its cruise operations. Early in the month, Carnival Cruise Lines said that it had relaunched its entire U.S. fleet. The company then said that three more of the ships in its international Princess Cruises line had returned to guest operations. With those three ships, 80% of the Princess fleet is back to cruising.
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, set to debut in 2023 and 2024.
Impact for Investors
Carnival's moves to restart and grow its guest operations could be a sign of the company's optimism that the cruise industry is continuing to recover following the sharp declines in performance it experienced earlier in the COVID-19 pandemic. If customer demand can meet these growing operations, the company could return to profitability following significant losses. Carnival reported a net loss of $1.9 billion for Q1 FY 2022, although it expects to report net income by Q3 of this year.
There are also other factors that investors might consider as well. Consumer prices have steadily risen due to inflation, which may spell trouble for a leisure travel company like Carnival. Carnival has also faced backlash for its own price increases, including more expensive on-board services and gratuities. These factors could subdue customer demand. But a more optimistic investor might suggest that cruise passengers cooped up for two years due to the pandemic may be willing to overlook a costlier trip.
Is Carnival Operating Cruises Again?
As of early May, Carnival says it is the first major U.S. cruise operator to have its entire fleet in operation following the 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 that it will return to profitability by Q3 of this year, driven by returning customer demand.
What Does Carnival's Relaunching of Its Fleet Mean for Investors?
Investors may see Carnival's move to relaunch and grow its guest operations as a sign that the company is recovering strongly from the pandemic shutdown. On the other hand, pandemic concerns linger, as do issues related to price increases due to inflation. So it's difficult to say how Carnival's profitability will be affected.