Norwegian Cruise Line, the number three power in the cruise world after Carnival Corp. and Royal Caribbean, has warned that it is in deep trouble because it has not found emergency funding and therefore has "substantial doubt about the company’s ability to continue as a going concern, as the company does not have sufficient liquidity to meet its obligations over the next 12 months."
While much of the spotlight on financial troubles of travel companies has focused on airlines and their grounded fleets, the cruise industry may be taking an even harder hit, coming to a full stop after years of rapid expansion, and with a couple of black marks on its reputation for its slow and dangerous response to the crisis, with hundreds trapped on board and many dying.
Unlike U.S. airlines, which have had access to U.S. bailout funds and European airlines that are getting some degree of government support, no one really has an open wallet for the cruise lines, which, despite names like Norwegian, Holland-America, Cunard and more that conjure up European associations, nearly all are registered in countries that are tax havens and often slack labor laws. And those countries, such as Bahamas, have no ability, or much incentive, to bail out cruise lines.
Norwegian may be only the first to skid so close to the edge; the other Big Two and a host of smaller operators have been rapidly expanding their fleets, with revenue from current cruises pledged to pay for future ships, numbers of which are now likely to be canceled, but not without penalty.
Whether the cruise lines do survive will depend on three factors: Will cruising resume before the cash runs out? Will the lines be able to raise additional capital from investors or lenders, and, most importantly, will the passengers flock back to the ships...
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