By Theo Miller

Staff Writer

Cruise lines are in trouble. The news broke on April 3 that Royal Caribbean has exhausted its two primary credit lines, totalling $3.48 billion. This was in addition to a $2.2 billion loan announced on March 23 and adds to the company’s pre-existing $11 billion of debt. That is a total of $16.7 billion of debt for the world’s second largest cruise line. Their stock is down 80% since January 1. 

Cruise ships are a funny business. They print money for their owners, and they maximize profits through shrewd, if ethically gray, business decisions. Because ships spend most of their time in international waters, they fly what are known as ‘flags of convenience’. Essentially, whatever country a ship is registered in, those are the laws on board the ship. Most bean-counter executives would like to get away with paying their employees as little as possible. Legally, if a hypothetical ship is registered in Panama instead of the US, a cruise line could legally pay $1.22 per hour instead of $7 or upwards of $15. They also get massive tax breaks from their host countries, and owe no federal tax because they aren’t US companies. Ships are staffed by contract workers from Eastern Europe, India, and the Philippines primarily, where $2 per hour could be well paying for some. 

The penny-pinching does not stop. Passengers are charged fare, tips, port charges, and amenity charges on top of shore excursions, drinks, on board activities, and ‘premium dining’ which comes from the same kitchen. Cheaper, dirtier fuel is used in international waters, which contributes to the emission of 10x more sulfur oxide than all the cars in Europe by Carnival’s ships alone. 

Time for some math. Using the data given to us by Carnival and Norwegian, average ticket price is $1,060 per passenger and the average on board spending is another $650 per passenger. At an average of 4,000 passengers for a modern Caribbean-bound ship, a single cruise ship stands to make around $7 million for a seven-day voyage, at a roughly 20% profit margin. 

But that is the rub. A cruise ship, much like an airplane, has to keep operating in order to keep making money, and especially on a ship where thousands of crew live for months at a time. Costs stay more or less the same, even on empty ships. Insurance. Payment. Crew contracts. Those are all static costs. Passenger revenue is not. An empty ship sitting in Miami, of which there were roughly 15 rotating through the eight-ish berths at the port, still has to power itself. The Port of Miami does not offer shore power, meaning ships have to burn fuel for their generators even when docked. This comes at great cost, both environmentally and economically. 

Now, in the midst of a pandemic, every major cruise line has suspended operations, and their fleets are either in transit to drop off crew at their countries of origin, or parking their ships just off coasts and waiting for this to all be over, burning money all the while. Richard Branson was even slated to launch a new cruise line in April under the moniker ‘Virgin Voyages’. Now his first ship, the Scarlet Lady, sits alone in unincorporated Bahamian waters, awaiting her now-postponed maiden voyage. 

Questions remain about the safety of passengers and crew trapped on board ships without access to COVID-19 test kits, the last ‘death ships’ that were stuck at sea as their lines announced closures. The Holland America Zaandam is the most notorious of these, barred from it’s planned disembarkation in Buenos Aires, and denied entry at all ports up and down the South American coasts. It eventually transited through the Panama Canal and docked at Port Everglades on April 2. Four deaths occured in the additional 2 weeks it took to find a suitable docking point for the ship. Crew are also extremely vulnerable on ships, sharing kitchens and bedrooms. They had to interact with every passenger, especially if they were confined to their rooms. The Zaandam reported approximately 14% of their crew was out of commission with flu-like symptoms. 

In conclusion, buckle up, ladies and gents. Pour yourself a glass of something cold. Big Cruise’s extensive network of loopholes accrued over the decades has backfired, and now has been denied access to funds from the US federal government’s bailout. Take a seat and watch carefully, because we may be witnessing the death of an industry as we know it.