DISSERTATION UNIVERSITY OF AEGEAN DEPARTMENT OF SHIPPING, TRADE AND TRANSPORT FINANCING ON THE THREE BIGGEST CRUISE COMPANIES - KOLLAROU ELENI ...

DISSERTATION

             UNIVERSITY OF AEGEAN
 DEPARTMENT OF SHIPPING, TRADE AND TRANSPORT

FINANCING ON THE THREE BIGGEST CRUISE COMPANIES

                KOLLAROU ELENI
                A.M.:2212016063

TABLE OF CONTENTS

• Chapter 1 : Introduction-History of Cruise Ship…………………………1
• Chapter 2 : Companies General information ………………………………2
                        • Royal Caribbean
                   • Carnival Corporation & plc
                 • Norwegian Cruise Line Holdings
• Chapter 3 : Introduction to financing in the cruising industry………8
• Chapter 4 : Royal Caribbean Cruises Ltd Financing……………………12
• Chapter 5 : Carnival Corporation & plc Financing……………………13
• Chapter 6 : Norwegian Cruise Line Holdings Financing………………15
• Chapter 7 : The Coronavirus impact……………………………………………16
• Conclusion…………………………………………………………………………………17
• Bibliography…………………………………………………………………………18

INTRODUCTION

This introduction describes the rationale for and the scope of a study to examine the
financing of the three most developed cruise companies, as of today, Royal
Caribbean, Norwegian Cruise Line and Carnival Corporation & plc. Most of the cruise
companies have gained their clienteles trust and have a prominent place at the
cruise industry. The majority of them were founded in the second half of the 20th
century, and specifically for cruising, some other were founded over 100 years ago
as cargo shipping lines. After many failures and mergers in the 1990s , many
companies that were used as company brands, within the big corporations came to
rise through the constant support of their customers and the loyalty that they
provided. Due to the constant changes in the industry, ship owners are always on
the hunt in order to keep their vessels updated, by renaming, renovating or even
selling them from time to time .The main purpose of a cruise company in general, is
to provide to their customers leisure travel, cruise tours, and entertainment and
many more amenities, in order to differ from their competitors. According to the
quality and the price of every trip there is a classification of the lines. There are four
classifications, the cheapest, the budget, the luxury and the all-inclusive brands.
There is a wide range of special activities to every vessel, but also off board like
many different land tours, custom made to every place.Due to the increased
popularity of cruises during the years there is a huge variety of activities to choose
from. Some of these amenities include dance clubs, water parks, casinos, great
restaurants, gym, theater and many more. There always something for everyone,
despite the age or the ethnicity, just because cruise companies have all different
kinds of activities and use many formulas just to get everything right. Due to the
high demand and continuous growth of the clientele of the cruise lines, there has
been a huge increase of the cruise ships the past twenty years. This is why the cruise
companies try to find but also invent many new ways to fund their companies, with
the goal of the maximum revenue.

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HISTORY OF THE CRUISE SHIP

Until the 19th century the main purpose of the ships was the transportation of goods
from one place to another .The first ship to ever be identified as a cruise ship was
Francesco I. Francesco I was built in 1831, having the flag of the Kingdom of the two
Sicilies. It’s first trip was in 1833, stopping in Taormina, Catania, Syracuse, Malta,
Corfu, Patras, Delphi, Zante, Athens Smyrna and Constantinople, sailing from
Naples. The cruise offered some great amenities as dancing floors, guided tours of
most of the destinations and many parties. The first company to ever introduce a trip
as a form of cruising was P&O in 1844. Their main advertisement was sea tours of
Gibraltar, Malta and Athens. It sailed from Southampton, England this trip was a first
of its kind, that’s why P&O is called the forerunner of the modern cruise holidays we
know today. Also, in the 19th century, in Europe due to political tensions, they were
many people who wanted to flee from Europe to the USA, which ended up in an
increase of the transatlantic crossings by ship. This way many companies took notice
and started invest in biggest ships, with the sole purpose of passenger
transportation. In the 1960s, with the rapid development of air transportations,
cruise companies had to find a way to rise to the occasion, as the jet liners were
more efficient. To remold their high profile, cruise lines opened their doors to the
lower class, with the motive of getting more people on board. Since 1995, many
smaller companies rose, creating a constant competition, to which shipping
company will take on the largest vessel in the sea.

                        COMPANIES INFORMATION

                          ROYAL CARIBBEAN CRUISES

Royal Caribbean Cruises is a $4 billion company that is based in Miami, Florida. As of
today Royal Caribbean is controlling five brands and a total of 42 ships, making it the
second largest cruise line in the market. Despite the fact that they have their
headquarters in Miami, their company has succeeded in expanding their business all

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over the world by landing cruises that reach pretty much every existing port out
there .During the first years after its establishment, Royal Caribbean’s growth was
favored by the general financial situation of the blooming economy after the war.
Later, while the industry was recovering from the consequences of the Cold War, the
rapid technological evolution came to play a vital role in the cruising industry’s
resurgence. The military market created during the Vietnam War and the recession
that followed as a result, led the company to differentiate its priorities and
objectives, benefitting the private sector.

Using the strategy of innovation and the increasingly lavish offerings, they have
managed to have a net income over $1.8 billion for the year of 2019.Royal
Caribbean, as one of the leading companies at its field, owns five cruise brands and a
big percentage of ownership to others. Despite the fact that the each try to pursue a
different market, all of the monthly financial statements are are reported together.
Its brand has its own marketing and assets in order to approach more customers,
these brands are:

Royal Caribbean International

This cruise line was established in 1968 in Norway and it is under Royal Caribbean
Group’s name since 1997. Royal Caribbean has eight classes of ships :

   -   Empress class : this class has a single ship built in 1990, originally named
       Nordic Empress, but now renamed as Empress of the Seas.
   -   Sovereign class : this class also has one ship, named Majesty of the Seas.
   -   Vision class: consists of four ships, Grandeur of the Seas, Rhapsody of the
       Seas, Enchantment of the Seas and Vision of the Seas.
   -   Voyager class: has five ships, Voyager of the Seas, Explorer of the Seas,
       Adventure of the Seas, Navigator of the Seas and mariner of the Seas.
   -   Radiance class: is composed of four ships, Radiance of the Seas, Brilliance of
       the Seas, Serenade of the Seas and Jewel of the Seas.
   -   Freedom class: has a total of three ships, Freedom of the Seas, Liberty of the
       Seas and Independence of the Seas.
   -   Oasis class: comprised of four ships, Oasis of the Seas, Allure of the Seas,
       Harmony of the Seas and Symphony of the Seas.
   -   Quantum class: constituted of four ships , Quantum of the Seas, Anthem of
       the Seas, Ovation of the Seas and Spectrum of the Seas.

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Royal Caribbean International has also ordered six new ships, which will be all added
to the fleet by the end of 2025.

Celebrity Cruises
As the rest of Royal Caribbean’s subsidiaries, Celebrity Cruises has also its
headquarters in Miami, Florida. Originally founded in 1988, by the Greece-based
Chardris Group, Celebrity Cruises falls in the premium class of cruises. By being
inserted in this category, Celebrity Cruises has some of the amenities of the more
luxurious cruises while retaining some mass features like their low-cost facilities that
could make experience look and feel even more luxurious. Celebrity’s signature logo
is an ‘X’, which symbolizes the letter ‘chi’, meaning the first letter of Chandri’s name.
Celebrity has four classes of ships, Millennium class, Solstice class, Edge class and
Expedition vessels, with a total of fourteen ships.

-Millennium class : Celebrity Millennium, Celebrity Infinity, Celebrity Summit,
Celebrity Constellation.

- Solstice class: Celebrity Solstice, Celebrity Equinox, Celebrity Eclipse, Celebrity
Silhouette and Celebrity Reflection.

- Edge class: Celebrity Edge and Celebrity Apex.

- Expedition vessels : Celebrity Xpedition, Celebrity Xploration and Celebrity Flora.

Some of Celebrity Cruises future fleet includes Celebrity Beyond, which will be
delivered by Fall of 2021 and two more ships that will be ready by Fall 2024.

Azamara
Azamara Club Cruises is quite known for their offers of cruise itineraries ,ranging
from 3 up to 21 nights, that serves the up-market segment of the North American,
the United Kingdom, as well as the Australian markets.

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CARNIVAL CORPORATION & PLC

Carnival Corporation &plc is currently the most successful and prominent American
cruise line .Founded in 1972 by Ted Arison, an Israeli immigrant who after serving in
World War II. Arison took on the opportunity to run American International Travel
Service(AITS),a travel agency ,with his schoolmate Meshulam Riklis. Later on they
decided to create Carnival Cruise as a subsidiary of AITS. In 1974 Arison succeeded
in buying Rikli’s stakes in Carnival making him the sole owner of the company.
Carnival took on many challenges over the years but rose to the occasion, as in 2003
Carnival controlled more than 43 percent of the $11 billion cruise market. In 2005
the results were even more impressive the revenues were as high as $8,7 billion.
Currently, the company’s portfolio includes multiple brands : Carnival Cruise Line,
Princess Cruises, Holland America Line, Seabourn, P&O Cruises(Australia), Costa
Cruises, AIDA Cruises, P&O Cruises(UK) and Cunard. In addition, Carnival Corporation
also operates Holland America Princess Alaska Tours, the biggest tour company in
Alaska and the Canadian Yukon . As a whole these subsidiary branches constitute the
world’s largest cruise company with over 100 ships in fleet. As of 2019 Carnival has
succeeded in raising a revenue of $20.8 billion. They offer cruises all year long to the
Caribbean, but they also offer some seasonal options to places like Mexico, Europe,
Canada, Alaska and more.

COMPANY’S BRANDS

Carnival Cruise Line
Leading the Carnival Corporation empire, Carnival Cruises Line is one of the most
popular cruise lines consisting of 27 ships. In 2018, Carnival Cruise Line was voted
"Best Ocean Cruise Line" in USA Today's 10 Best Readers' Choice Awards. Also,
Carnival Cruise Line was named "America's Most Trusted Cruise Line" by Reader's
Digest for the fourth consecutive year.

Princess Cruises
Founded in 1965, Princess Cruises has 19 ships operating in more than 350 ports
around the world. Princess Cruises has won ‘Best Cruise Itineraries’ a whole of 11
times by the magazine Recommended.

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Holland American Line

Consisting of 14 ships, Holland America Lines has been operating for 145 years in
over 100 countries around the globe. Holland America Line was was chosen as the
top pick for Alaskan Cruises in the 2019 AFAR Travelers’ Choice Awards, which are
voted on by AFAR readers. Another achievement of Holland America Line, is winning
the favorite cruise line for sailings to Alaska in Cruise Critics’ 2019 Cruisers’ Choice
Destinations Awards.

Seabourn

Counting 5 ships in total, Seabourn is operating since 1988. Seabourn has
accumulated multiple awards throughout the years one being ‘Best Small-Ship Cruise
Line’ by Travel+Leisure and Conde Nast Traveler.Seabourn is currently available in
more than 400 destinations around the world, including Europe, Asia, Australia and
more.

Cunard
Founded in 1840 and having a total of 3 ships, Cunard has been one of the most
popular luxury cruise lines. Cunard is also renowned due to the fact that it
exclusively offers scheduled transatlantic service between New York and London on
a regular basis. Cunard has also won, among other awards, the one ‘Best Large Ship
Cruise Line in British Isles & Western Europe’ by Cruise Critic in 2019 Cruisers’ Choice
Destination Awards.

AIDA
Aida cruises was first established in 1996 and has 13 ships. For many years, AIDA has
been leading the German market and has won "Best Ocean Cruise Line" in USA
Today's 10 Best Readers' Choice Awards.

P&O Cruises (UK and Australia)

P&O Cruises is operating in both UK and Australia alike and has achieved to be the
top choice for each country. P&O Cruises in the UK has a total of 7 ships, but on the

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other hand P&O Australia has 4. P&O has been voted ‘Best Large Ships Cruise Line’
and ‘Best Family Cruise Line’ by British Travel Awards 2019.

                     NORWEGIAN CRUISE LINE HOLDINGS

Norwegian Cruise Line Holdings is the third largest cruise line company, followed by
previously mentioned Carnival Corporation & plc and Royal Caribbean Cruises Ltd.
Founded in 2011, NCLH is a holding organization that is domiciled in Bermuda and
situated in the United States. At that time, Norwegian Cruise Line was owned by a
consortium of Getting Hong Kong, Apollo Management and TPG Capital .Following
the consummation of the IPO in 2013 and its introduction on the NASDAQ ( Nasdaq
Stock Market ) , Norwegian Cruise Line and NCLH underwent a rearrangement that
gave them a full ownership of Norwegian Cruise Line. NCLH has complete ownership
of three auxiliary journey lines : Norwegian Cruise Line, Oceania Cruises and Regent
Seven Seas Cruises.

Norwegian Cruise Lines
Widely known as Norwegian, Norwegian Cruise Line was founded in 1966 by Ted
Arison and Knut Kloster. As of 2018, Norwegian has managed to dominate 8,7% of
the cruise market by passengers in 2018. NCL currently has a total of 17 cruise ships,
with an additional 6 on order.

Oceania Cruises
Also a subsidiary of NCLH, Oceania Cruises was founded in 2002 and it is based in
Florida and has three classes of ships. First, there is the Regatta class, which consists
of four ships built between 1998-2000. Then there is the Oceania class having two
ships, with a capacity of 1.250 passengers. Finally, Allura class which is estimated to
have two ships by the end of 2025.

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Regent Seven Seas Cruises

With its formal name Radisson Seven Seas Cruises, Regent Seven Seas has made a
name of itself with its luxurious cruises. RSSC was established in 1992 ans has
managed to own nine ships. Currently it has 5 ships but has ordered another one,
which is estimated to arrive late 2023.

AWARDS

Norwegian has managed to win many awards throughout the years, some of the
latest ones are: Europe’s Leading Cruise Line(2007-2019), Caribbean’s Leading
Cruise Line(2013-2019) , World’s Leading Cruise Line(2016-2017) and World’s
Leading Large Ship Cruise Line(2012-2017).

                           FINANCING IN GENERAL

In our days the global market is daily faced with a constant uncertainty about the
future. With the consistent changes in the market and the permanent pressure from
their market competitors, companies are always in search of new ways to fund
themselves. Most businesses need some type of funding, in order to cover some
short-term but also some long-term expenses, which cannot always be fulfilled with
the in time being revenue of the company. Funding , is the process of financing
business activities, making purchases, but also investments. In the case of the cruise
companies, every single year cruise lines are eager to buy many new big and
luxurious cruise ships. In order for the companies to be able to afford such purchases
they need some kind of funding, as it is very difficult to get this type of money solely
from the revenue of the company. Currently there is no company that can afford by
itself the construction or even purchase of a new cruise ship, as they are the most
expensive ships to build, with the cost reaching up to $1.3 billion.

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METHODS OF FINANCING

PRIVATE FUNDS
OWN FUNDS

Own funds are a very sure and stable source of funding, as there is no kind of
obligation to get them repaid. Private funds consist of the equity provided by the
owner of the company or private investors, most of the times with the repercussion
of percentage of the shares held from the business.

PRIVATE INVESTMENT

A private investment is the purchase of a specific capital asset that will produce
some kind of profit and is going to be high in value. Private investments in turn, they
do not involve third party members, instead the investment is arranged by family
members or trusted high net worth individuals.

BANKS FINANCING

MORTGAGE BACKED LOAN

Essentially, a mortgage is loan that a company can use in order to buy ships, land or
any other property. It is a term loan, that is provided by a bank, and if the loan that
needs to be taken is too large, then the company combine mortgage loans from
multiple banks. When a company invests in a MBS, it has the right to get the value of
a heap of mortgages, including monthly payments and also the repayment of the
principal.

CORPORATE LOAN

Corporate loan, or business loan , is the loan that is given specifically in a company to
meet their day-to-day expenses, for funding or expanding etc. The corporate loan is
secured against the company’s balance sheet, which portrays the company’s assets,
the owner’s net worth, etc. The financial statement of the company is comprised of ,
the balance sheet , the income statement and the cash flow . They are two

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categories of corporate loans, the first one being bilateral loans and the second one
syndicated loans. The biggest difference between the two of them is that syndicated
loans have a big number of lenders, whereas bilateral has only one.

PRIVATE PLACEMENT

A private placement is the sale of shares or bonds, to investment institutions or
private investors that have been previously selected by the company. Some
companies choose private placement as an alternative to public offering, which will
be mentioned below, in order to raise funds. In this type of agreement there are few
regulatory requirements, as the sale doesn’t have to be registered with the SEC ( US
Securities and Exchange Commission ).

CAPITAL MARKETS

PUBLIC OFFERING

Public offering is the sale of the equity-shares to the public, so the company can
raise funds. If the future buyers exceed the number of 35 people, is indeed a public
offering, and therefore needs registration statements from the authorities needed. I
In this type of financing, new shares are sold to raise additional cash for the
company. It may also be a secondary offering, where the existing shareholders
decide to cash in by selling part of their holdings.

BOND ISSUE

Bond issue is a dept instrument that is issued by the government agencies to raise
money. The bond issuer is the borrower, in this case the company, and the
bondholder is the lender. The bond issuer, is obliged to pay a certain amount of
money each year until the dept reaches its maturity date. They are seven main kinds
of bonds : municipal bonds, foreign bonds, treasury bonds, mortgage backed bonds,
US government bonds, investment-grade corporate bonds and high-yield corporate
bonds.

SPECIAL PURPOSE VEHICLES

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SPECIAL PURPOSE COMPANY OR SPAC

The purpose of a special purpose company, or ‘black check companies’, is to help
companies to develop, by raising capital through an initial public offering. Special
purpose companies have been around for many years, but in recent years there have
been more exposed, making them more known for what they are doing. The shares
can be only sold by companies that are part of the stock exchange. In 2019 they
have managed to raise a record amount of initial public offerings, making them more
famous to bigger investors. The money that the SPACs make from the IPOs are
secured in an interest- bearing trust account, and they cannot be touched, unless the
SPAC has to pay an investor or they need to complete an acquisition.

LIMITED PARTNERSHIP

A limited partnership, is a subcategory of an investment partnership, were they are
used as a vehicle for the investment in many sectors as real estate. Also known as LP,
is usually owned by a limited amount of partners, and have also a limited amount of
investors, that do not make any operational decisions or carry any personal liability
for any amount of company dept.

SECURITIZATION

Securitization is the process of binding a number of future cash flows into a single
security. One of the biggest advantages of securitization, is that it distributes the risk
of the loans widely and, due to the fact that the package can be traded, investors are
not obliged to hold it to maturity. A phrase that has been widely connected with the
term securitization is, ‘securitization food chain’ known by the film ‘Inside job’, a
popular movie describing the 2008 financial crisis, analyzes to process of turning
illiquid assets into a form, making them suitable for sale to investors.

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FINANCING IN ROYAL CARIBBEAN CRUISES LTD.

Royal Caribbean, as well as many other cruise companies, earns their main revenue
from their ticket sales. Other ways are also onboard revenue, which includes extra
drinks, food and other amenities the passengers may buy, sponsorships, etc. To try
to affect positively the EPS ( Earnings per share), to managers try to step up their
game on the marketing sector of the company every single year. The constant
investigation and research to what the customer truly wants, makes it easier for the
company to understand what the customer is willing to pay for the service that they
provide. Another way RCL tries to approach the customers is through their
employees. Nor the managers or the higher executives, have any interaction with
the customers, that’s why they count on their employees to do so. This way they
know the dos and donts and the likings of every customer making their sales go up.
This goes to show how committed Royal is to reach its revenue limit and their
growth maturity.

TICKET SALES

 Royal Caribbean’s main source of revenue comes straight from their ticket sales. In
2017 the total revenue from their ticket sales was $8.778 billion. In 2018 there was a
8.16% increase in the revenue, making the sales $9.49 billion , a pretty big increase
from the previous year. The year of 2019, the numbers improved even more making
a total of $10.951 billion a 15.34% increase from 2018. Approaching the year of
2020,up until the 30th of June, the revenue was also pretty high, talking about $7.913
billion . After that, for the quarter ending of 30th June 2020, there was a drop, $0.176
billion, a 93.74% decline year-over-year. Coming up to the year of 2021, the CFO of
Royal Caribbean said on a conference call that more than 60% of their bookings are
new bookings, whereas the rest of 40% are the ones that were cancelled back in
spring. Also, as far as the shares concerned, back in March their price was $19.25 per
share but as of the month of August, they have reached the price of $57, which goes
to show that the cruise industry is back on track. The highest point of the shares the
year was in January, with the price of $135.32 per share.

SHIPS SOLD

For years Royal Caribbean has being following the strategy of selling their ships to
smaller companies or scrapyards, so that they can buy new ships themselves and
have some backup money for any upgrades or in times of need. According to an

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article, on the online blog ‘ Cruising isn’t just for old people ‘ , Royal Caribbean is
planning on selling at least seven of its ships some point in the year of 2020. The first
being the ‘Grandeur of The Seas’, which RCL was planning on selling to Pullmantur,
back instead sold it on a scrapyard. Another two ships, from the Vision Class Ships,
have been sold to Marella, a smaller cruise company, who renamed them to Marella
Discovery and Marella Discovery Two and rumor has it that they will not be only
ones sold from this class. Last but not least, there has been some talk about
‘Enchantment of The Seas’ being sold this year, as a similar ship was seen on a
website. The author of the article personally contacted Royal Caribbean about it, and
they said no, but no company would say otherwise because they wouldn’t sell any
itineraries. In addition to the ships named before, ‘Rhapsody of the Seas’ was also
seen to the website YachtWorld.com selling for $150 million, according to the site
‘Cruzely’.

BANK LOANS

A big thing in the cruise industry are bank loans, which the companies take for
multiple reasons, such as the construction or purchase of a new one. Such as many
other cruise line Royal Caribbean has taken plenty of bank loans, with the big profit
in the longterm. An example of such action was back in 2018, were RCL signed with
STX France for the delivery of four ships by 2018. The financial support was secured
by COFACE.

           FINANCING IN CARNIVAL CORPORATION & PLC

Carnival is the second biggest cruise company globally, with a fleet over 100 vessels
and holding over 48% of the market share in the industry. Carnival is the only
company that is successfully included in both New York and London Stock
Exchanges, but this doesn’t grant its success, as Carnival has also to find finance

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sources. Carnival has many ways of financing, due to their many years of
experience, some of them are :

PUBLIC OFFERING

In 2020, Carnival Corporation made an agreement with US Securities and Exchange
Commission, in which Carnival offers their common stock to the public. This action
will be available through their trained Sales agents, having a total contribution of up
to $1 billion, in specific time periods, through an ‘at-the-market’, an equity offering
program. Some of the sale agents under the ATM Offering are, Golden Sachs &
Co.LLC, J.P. Morgan Securities LLC and 13 more.

SALE OF SHIPS

As many other companies, Carnival Corp also sells their older and not so efficient
ships from time to time. In 2020, Carnival had to let go 11 of their ships, and more
will follow by the end of 2020. This decision was taken, evaluated by their senior
management, considering their efficiency and the future cash flows that they can
provide.

LONG-TERM DEPT AND SHORT-TERM BORROWINGS

In 2014, Carnival has taken approximately a total of $8.5 billion in long-term dept.
The biggest part of it belongs to export credit facilities with $4.638 billion, next is
publicity-traded notes with $2.219 billion, next general bank loans $1.914 billion,
next private placement notes with $310 million and finally other activities with
$27million. Also in 2014, their short-term borrowing are summing up to $666
million. One part of it is the euro bank loans, with $13 million and US dollar-
denominated commercial paper with $653 million.

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FINANCING IN NORWEGIAN CRUISE LINE HOLDINGS

Norwegian Cruise Line Holdings Ltd. is the third largest cruise line in the world
following previously mentioned, Royal Caribbean and Carnival Corporations plc. In
the past NCL used lead arrangers like DNB, HSBC and Deutsche Schiffsbank to
finance the building of new vessels in accordance with OECD rules concerning ship
finance. For example in 2010 NCL arranged to build two new vessels with a contract
price of approximately 1.2 billion US $ . These two vessels would be built in Germany
at the famous Meyer Werft shipyard , which is the most up-to-date shipyard building
highly innovative cruise vessels for their worldwide customers . This year , being an
extremely difficult year for the cruising industry , NCL raised more than 2 Billion US $
in a mix of stock and debt in order to ensure its survival during the pandemic with
possibly no revenue at all! The company announced that it looked like it would be
impossible to get through this year if this funding was not arranged. This fresh new
capital would offer liquidity to the company and would give enough cash to the
company in order to get through these 12 months of voyage suspensions.

BANK LOANS

The most common way of financing in NCL is the process of taking long –term loans.
An example of that was in 2014, where Norwegian took part into the € 666 million
Seahawk 1 term loan, but also the € 666 million Seahawk 2 term loan, in order to pay
the 80% of the price, of two Breakaway Plus Class Ships. Another example of such
action was when NCL and Star Cruises came together, to make a deal with KfW IPEX-
Bank, with the goal of financing a new cruise ship in Germany. KfW IPEX-Bank did its
part and with the help of Crédit Agricole Corporate, Investment Bank and Singapore
branch of DNB Bank ASA, they provided them with € 600 million.

TICKET

Like most of the cruise companies, NCL earns most of its profits from their ticket
sales. In 2016, they had a revenue of $4.87 billion according to statistics. Due to the
coronavirus ,Norwegian had reportedly a total revenue of $16.93 million for the

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second quarter of the year of 2020, which means a huge downhill from last year’s
revenue of $1.67 billion during the same period.

Undoubtedly the pandemic has brought the cruising industry to a standstill
worldwide. With this financing the company issued $400 million in fresh stock and
about $1.43 billion in two debt offerings. This will enable the company to avoid
seeking bankruptcy protection. In addition with all of the cruises being cancelled ,
clients seem to prefer the refund to a future credit with the company. As it is
impossible to predict when the ships will be able to sail again , the company had to
cut capital expenditure by $ 515 million and also had to furlough 20% of its shoreside
staff. These are definitely difficult measures to take but in times when your life is at
stake it is equally important to utilise the financing means ,that you used in the past
to expand your company by buying or building new ships , in order to survive and
make it to the next day.

                         THE IMPACT OF CORONAVIRUS

Coronavirus has inevitably affected all sorts of businesses, including the cruise
market. There are many versions to what will happen to the cruise industry in the
next couple of years. The Conversation, a online magazine, published in April 14th of
2020 an article about the affect of coronavirus to the cruise world, named “This
could be the end of the line for cruise ships”. The author of the article, Freya Higgins-
Desbiolles, reports the current state of the cruise world. She supports that
coronavirus has inhabited many cruise ships, making them very dangerous as the
passengers can get infected very easily. That can be the end of the cruise industry as
there are many more things going wrong like the water pollution and overtourism in
places like Barcelona, Venice, Dubrovnik and Reykjavik. Another case of Covid-19
repressing a cruise company is the case of Carnival Corporation & plc. In this
instance, Gwyn Topham, the author of this specific article, stated that Carnival has
lost over $4 billion over the span of three months. The usual revenue for the months
of March and May were $4.8 billion, whereas this year the revenue dropped at $700
million. He also refers to the huge problem of their cruise ships not being able to

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reach the dock, because of the severe measurements many governments take in
order to protect their country. Lastly, its being noted that Carnival as it is unsure
about the future of the cruise industry has decided to sell six of their ships, in order
to come through with this pandemic. To sum up on a bright note, Fran Golden has
published an article on the Bloomberg, referring to the future of cruises. In this
article, he analyzes the changes that will be done in order for the passengers to have
a safe and comfortable trip. One big change is going to be the destinations, which
are intended on being pretty close to the home port. The huge variety of activities
will be minimized according to the health instruction provided by the government.
For example the buffets, which are a huge part of a cruise, will be out and also there
will be limited-capacity shore excursions. Now as far as it concerns the cleaning and
safety of the passengers, all of them will be tested before boarding in the ship and
additional measures will be taken. Some companies are the considering on buying
electrostatic and UV disinfection systems that will help crews sanitize public spaces
hourly, to have the best results possible. Genting Cruise Lines, has announced that
they will install fever screening and sanitizing fogging protocols, this way entire
rooms will be sprayed with disinfecting mists. Unfortunately, the swaying at the
economy of Covid-19 is unavoidable, but with some smart but also innovative ideas
the future of the cruise industry seems bright.

                                    CONCLUSION

These days, you can pretty much go whenever, anywhere you want in the world on a
cruise. The ships have become more innovative, so that even the largest of ships can
successfully travel to most ports, without restrictions. That is a result of the high
level of tries, from the companies, in order to always experiment and shout for the
best possible result. In an ideal world, cruise companies would always have enough
money coming from their sales and other activities, to pay for daily operations or
expenses. A business has many calls on its cash on a day to day basis, even the
biggest of companies are having trouble coming through with their liabilities, and
need some kind of funding to cover some short-term, but also some long-term
expenses. As we all know the cruise industry is really active for some months, but
the rest of the year they need to make ends, in order to get through the slower
times. Financing, is where cruise companies ‘seek rescue’, so that they can come
through with their responsibilities. There are multiple ways to do so, by private

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funds, banks financing, capital markets and special purpose vehicles, and every
company has to select the one that is more suitable for their daily needs.

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https://www.miamiherald.com/news/business/tourism-cruises/article244769022.html

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