This video is made possible by CuriosityStream. Get the CuriosityStream/Nebula bundle deal,on sale now for $15 a year, to watch our brand new Nebula Original Documentary at CuriosityStream.com/Wendover. In March, 2020, the cruise industry shut down. There are no qualifiers to that sentence—it’snot that certain ships from certain companies in certain countries shut down. It’s that every ship from every companyin every country stopped accepting passengers in March, 2020. That’s… unprecedented. Never before, in modern times, has there beensuch a complete, global shut down of an industry of this size. This isn’t like airlines or restaurants or movie theaters. They couldn’t keep operating at a certainlevel or with certain precautions or in certain geographies—every single cruise ship shutdown. The second that happened, though, time startedticking. Cruise lines were on the clock with the biggestchallenge they might ever face: they had to survive as organizations with no revenue,no passengers, and little-to-no government support until it was safe and legal to sailagain. As it turns out, doing nothing, as a company,is actually quite a lot of work. After ships dropped off their last loads ofpassengers, thousands of people remained onboard: the crew.
Naturally, management started to wonder whatthey should do with them. At first, the answer was nothing. You see, as the shutdown started, much ofthe global cruise fleet was in the Caribbean, finishing up the peak season before crossingthe Atlantic for the summer Mediterranean cruise season. As most Caribbean cruises leave from the US,that meant that the American CDC’s March 14th no-sail order was what officially preventedthem from sailing—even if in practice most shut down voluntarily. That no-sail order, however, was initiallyslated to expire after just thirty days, so most cruise lines decided to leave their shipsstaffed and wait it out, under the hope that they could salvage their summer seasons. On April 9th, though, the CDC extended theorder for 100 days, until July 24th, making it very clear that this would not be a short-termstoppage. In most cases, cruise ships are subject tothe laws of the countries in which they’re registered, which means that most cruise linesregister their vessels in countries with loose labor laws like Panama, the Bahamas, or Malta. That typically lets them hire from anywhere,which in practice gives them access to low-wage labor pools from places like Eastern Europeor the Philippines. Now, cruise ships are, of course, massive,and correspondently need a massive number of staff to run. The Carnival Panorama, for example, has acrew size of 1,450 people, and Carnival, its owner, has some 23 ships. That meant that, once they decided to officiallypull the plug in April, 2020, they had some 26,000 staff members from all around the worldwho each needed to get home.
In the era of pared-back flight schedules,border closures, and complex testing and quarantine protocols, it soon became very clear thatfinding 26,000 flight itineraries for 26,000 stranded crew members would not be a quickand simple exercise. So, rather than 26,000 itineraries, they cutit back to just about seven. In late-April, 18 of Carnival’s 23 ships started sailing to a spot off the coast of Grand Bahama Island. Then, once together, over a few days in earlyMay, some 10,000 crew members shuffled between the various ships using tenders. The task entailed more or less grouping thecrew into geographic regions—south-east Asian crew boarded the Carnival Conquest,south-Asian crew boarded the Ecstasy, eastern-European crew boarded the Magic, and so on and so forth. Once the crew transfer was completed, on May4th, seven ships—the Liberty, Dream, Magic, Breeze, Ecstasy, Conquest, and Glory—left. The Carnival Glory had the shortest journeyof them all—tasked with repatriating many of the Caribbean crew-members to their homes. Just five days after departing, it dockedin St Lucia, then the next day in St Vincent & The Grenadines, then St George’s, Barbados,and so on and so forth—completing a multi-week milk-run of the West Indies.
Next to complete its mission was the CarnivalBreeze, dropping British crew off in Southampton, while the Carnival Magic made a quick stopin Gibraltar before arriving in Dubrovnik, Croatia to repatriate much of Carnival’seastern-European crew. Meanwhile, the journeys of the Liberty, Dream,Conquest, and Ecstasy were just getting started as they each stopped at various South Africanports to re-stock, refuel, and drop off African crew-members. After two weeks of sailing the Indian Ocean,the Dream and Conquest arrived in the waters off the coast of Denpasar to bring many ofthe Indonesian crew home, while the Liberty arrived in Mumbai, India. The Dream then made a quick journey west toJakarta to drop off more of its Indonesian crew, just as the Ecstasy made it to Mumbaias well, carrying even more Indian crew members. Then, as soon as the Conquest met the Dreamin Jakarta, the two sailed together to Manila to drop off a huge number of Philippine staffmembers, while the Liberty and Ecstasy sailed south to anchor off the coast of Colombo anddrop off Sri Lankan crew. With that, as June turned into July, thisrepatriation mission was complete, with some crew having spent two months sailing fromthe Bahamas to get back home. While getting these 26,000 crew members offtheir boats and off their payroll was a major concern of management at Carnival once thelong-term nature of the shut-down became clear, attention, among all cruise line managementteams, quickly refocused onto how to actually survive as a business when there’s no businessto be made.
In the third quarter of 2019, each of thethree largest cruise companies made billions in profits. In the same quarter one year later, Carnivalearned $31 million in revenue, Norwegian $6.5 million, and Royal Caribbean managed to earn-$33 million in revenue—something almost unheard of among large companies. So, how you do survive as a company when youquite literally have no way to make money? Well, cruise lines did have one thing goingfor them. Prior to COVID, they were highly, highly profitable. In fact, many often pocketed hundreds of dollarsin profit per passenger. In addition, cruising is a highly cyclical industry. What that means is that when the overall economyis good, the cruise business is quite good, while when the overall economy is bad, thecruise business is quite bad. That's because, when money gets tight fora person, one of the first things to go is vacation. Therefore, cruise lines are used to weatheringout leaner times, so they traditionally keep quite a lot of money in their war chests. At the end of the third financial quarterof 2020, by which time the companies had unlocked more liquid assets and passed the initialshock phase of the shutdown, Norwegian Cruise Line Holdings, the third-largest cruise conglomeratein the world, had some $2.4 billion in the bank. Meanwhile, the Royal Caribbean Group had about$3 billion in cash, while the Carnival Group, by far the largest cruise company in the world,held about $8.2 billion in cash. That was what’s referred to as their “runway,”and the task was to get their burn-rate, how much they spend per day to stay in existence,to its lowest possible level.
In the case of Carnival, if they spent $50million per day, for example, they would only survive some 164 days without revenue. If they were able to get that down to only$25 million a day, though, they’d have 328 days, almost a year, of runway. Once the long-term nature of the shutdownbecame clear, furloughing or firing almost all on-ship staff and a sizable chunk of onshorestaff was an easy decision for cruise line management. One of the tougher decisions was what to dowith their key assets: the ships. Unlike people, they couldn’t just let themgo. In the case of Carnival, their oldest, smallest,and cheapest ship—the Ecstasy—cost some $275 million to build back in 1991. Nowadays, they’re building $780 millionships like the Carnival Panorama. Put all together, this means a cruise line’sfleet is incredibly valuable, and since the ships weren’t carrying passengers aroundthe world, they had to put them somewhere. However, as it turns out, both the world’scruise ports and the world’s cruise ships weren’t built with a total industry shutdownin mind. First of all, you can’t just turn off acruise ship, tie it up, and lock the door behind you. With very little exception, from the momenta ship enters service to the moment it’s decommissioned, there are people onboard asthese massive machines require constant monitoring and maintenance to stay in working order. In addition, cruise ports were built to suitthe need, and since the early days of the industry, the need has been for ships to stopevery week or so to unload passengers, restock, and load back up.
They’re designed for the majority of shipsto be at sea which historically was fine, because the majority of ships were alwaysat sea. Now, however, that means there just isn’tenough space in the world’s cruise ports for every cruise ship to tie up and wait thingsout. In fact, there’s not even close to enoughspace, and most ports charge ships tens of thousands of dollars per day to tie up, sothe vast majority of the world’s cruise fleet is out at sea… floating around. They each now carry an average of about 100crew members—a fraction of their normal staffing levels—performing the most essential functions—navigation, maintenance, engineering, food preparation, medical care, and more. In the case of Carnival, 15 of their 23 shipsare currently anchored off the coast of the Bahamas, and about once a week, one of themwill sail to Miami to pick up food, mail, and other supplies, which they then transferbetween the ships upon return. Most lines are operating with some versionof this floating cluster approach as it’s clearly one of the lowest-cost methods forstorage that keeps ships in an adequate state of readiness for when cruising finally returns. And that’s the key question right now: whenwill it going to be possible for cruising to return? In Summer, 2020, some thought the answer wasthen. Particularly in Europe, which had a robustsummer travel season, quite a few smaller cruise ships and even some larger ones broughtpassengers back onboard, with precautions. In general, this meant the ships were capacitycapped and passengers had to be tested before boarding, were subject to temperature checks,were required to wear a mask in communal areas, and could only go ashore on managed excursions.
With these and other rules, cruise companiesthought they might have cracked the code of sailing safely and profitably during a pandemic,but then reality hit. On the MS Roald Amundsen—an expedition cruiseship that typically carries 500 or so passengers through the Arctic or Antarctic—62 peopletested positive for COVID after a trip around Svalbard, putting stress on the contact-tracingsystem of northern Norway. Elsewhere in Norway, the SeaDream 1 had tocancel a cruise after a positive COVID test, and then a few months later, the very sameship left Barbados on the very first cruise in the Caribbean since the start of the pandemic,which soon had to be cancelled due to nine passengers and crew testing positive. On the other side of the continent, UnCruiseadventures left Juneau in early August on the very first cruise with passengers froman American port since March, 2020, until a passenger’s test came back positive, forcingthem to return to port, put all passengers under quarantine, and cancel the rest of theirseason. This is the reality of cruising during a pandemic. As long as passengers are originating froma place with rampant community spread, no matter how many precautions are taken, itdoesn’t work from a public health perspective, it doesn’t work from a business perspective,it just simply doesn’t work. Therefore, for the most part, even in thecases where governments weren’t stopping them, cruise lines stopped trying.
Nowadays, however, in Spring, 2021, tens ofmillions of COVID vaccines are entering people’s arms every day around the world, and a solution has arisen. Instead of trying to prevent COVID from spreadingon their ships, the cruise lines are simply going to prevent people who could have COVIDfrom getting on their ships. Many of the major players, including RoyalCaribbean, are requiring all adult passengers to be fully vaccinated before boarding. Even though no vaccine is 100% effective,having a fully vaccinated ship means that even if someone does board with COVID, thiswill not set off a chain reaction of community spread throughout the entire vessel. Given these new policies, cruise lines arereworking their schedules to center their business on the places where vaccines arerolling out the fastest. For example, with less than two months notice,Royal Caribbean announced that it would be sailing from Israel, home of the world’sfastest vaccination campaign, for the first time ever with one of the largest cruise shipsin the world—the Odyssey of the Seas. In addition, while the summer cruise seasonis traditionally centered on the Mediterranean, in 2021, many of the first cruises to restartwill be based out of the Caribbean, in close proximity to the US, which has also had oneof the world’s fastest vaccination campaigns.
Cruise lines have, for the most part, succeededwith their grand challenge. At the end of 2020, Royal Caribbean, for example,still had $3.6 billion in the bank, as runway, and had pushed their burn rate down to $270million a month. That means they can survive without revenueuntil at least February 9th, 2022. Norwegian Cruise Line, meanwhile, had enoughto make it until April 25th, 2022, while Carnival had enough to last June 9th, 2022. The cruise lines will be fine. But there is another side to the equation. While cruise lines are typically massive,global enterprises, they rely on the places they visit… they rely on all the small businessesthat operate tours and excursions for passengers at each port of call. Specifically, they rely on places like Ketchikan,Alaska. Last summer, under strict COVID protocols,I travelled there with a film crew to document a summer like no other—a summer where the1.2 million annual cruise tourists that keep the economy of this small town of 8,000 alivejust didn’t show up. Two summers ago, Ketchikan was one of themost sought after cruise-destinations in the world—they would quite literally run outof space on the docks. Last summer, they were experiencing the mostacute form of economic ruin. The documentary I made, profiling this, isout now exclusively on Nebula. It’s the first on-location project we’vereleased in almost a year, and I think you’ll find it quite interesting. Of course, as any long-time Wendover viewerknows, the best and cheapest way to get access to Nebula is with the CuriosityStream/Nebulabundle deal—available on sale for $15 a year right now at CuriosityStream.com/Wendover.
This gets you access to both Nebula and CuriosityStream,where you can watch thousands of great non-fiction shows and documentaries, like China’s LastLittle Train—which profiles the last working narrow gauge steam railway in China, connectingan area without cars, buses, or even roads to the outside world. Of course, these subscriptions are what goesto fund the great Nebula originals that many of you have come to enjoy, and they help independentcreators like us stay independent. So, get a year’s worth of education andentertainment, with access to both CuriosityStream and Nebula, where you can watch our brandnew documentary, for just $15 a year with the current sale at CuriosityStream.com/Wendover.
Reviewed by Kashif
on
August 25, 2021
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