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Cruising takes a hammering from Covid-19
ON returning at the weekend from a two-week holiday in Egypt, I was expecting to read lots of reports of how the Covid-19 was affecting shipping. But I was not prepared for just how badly the newly termed pandemic was affecting world trade.
As I started to write this column, a press release arrived which sets the tone for the rest of the year. Tanker and bulk liquid terminal owner Stolt-Nielsen "acting in response to uncertainties created by the ongoing coronavirus pandemic" has withdrawn its previously announced recommendation of a final dividend for 2019 of US$0.25 per common share, which was to be voted on at the company's April annual general meeting.
Its CEO Niels G Stolt-Nielsen, said: "Our earlier decision to recommend a final dividend for 2019, as announced on Feb 24, 2020, underscored the fundamentally solid position of the company, which at the end of the first quarter of 2020 had over US$500 million in available liquidity, and an increasingly promising market outlook for chemical tankers. However, while the novel coronavirus pandemic has had a modest impact on our markets to date, we believe this precautionary measure to cancel the final dividend for 2019 is a financially prudent decision, given current external circumstances."
Many other shipping companies may be looking enviously at Stolt-Nielsen. The cruise industry in particular is having a very bad time. Just over a week ago, I was finding out first-hand how Covid-19 can cause chaos. I spent a week on a Nile cruise ship. On the last full day of a seven-night cruise there was suddenly confusion as an excursion ashore was cancelled and everybody told to stay on board. As seems to have been the case elsewhere, nobody knew what was going on and contradictory rumours were soon circulating.
Gradually it emerged that a vessel moored ahead of us at Luxor was thought to have a virus case on board. We were then told that we were to be tested for the virus and the ship was quarantined. All passengers started to contemplate the prospect of 14 days confined to rather cramped cabins. Then suddenly all the officials who turned up at the dockside disappeared. There was to be no testing after all and we were no longer in quarantine.
The excursion planned for the lost day was rescheduled for the morning of our departure from the vessel. Everybody was up at four o'clock for an early start to the Valley of the Kings, only to be told that some passengers on the other vessel had tested positive for the virus. We were back in quarantine again. This time our enforced stay on board lasted until lunchtime when suddenly we were told we could leave the vessel and get on our coach to the resort town of Hurghada to finish our holiday as planned.
Now, of course the Nile cruise business is tiny compared to the ocean-going sector. Nevertheless it was clear that similar issues and fears were being raised. As in cases involving the big ships, there was confusion and a lack of information.
There was also a fear that the virus spelt disaster for an industry that directly and indirectly supported many families in a country still struggling to find enough jobs for its rapidly expanding population.
It now looks like those fears were well-founded. The flow of holiday makers from Europe has almost stopped. Airlines are grounding entire fleets.
The big players in the cruise industry are finding themselves in a similar position. Demand has fallen off a cliff. Following several high profile cases where passengers have contracted the virus on board and, as with the Diamond Princess, been quarantined on board, political pressure has been mounting on the industry.
Late last week the Cruise Lines International Association (CLIA) announced that its member lines would be "voluntarily and temporarily suspending cruise ship operations from US ports of call for 30 days as public health officials and the US government continue to address Covid-19".
CLIA CEO Kelly Craighead said: "This is an unprecedented situation. Our industry has taken responsibility for protecting public health for more than 50 years, working under the guidance of the US Centers for Disease Control and Prevention, and prides itself on its ability to deliver exceptional vacation experiences for guests, as well as meaningful employment opportunities for crew. This has been a challenging time, but we hope that this decision will enable us to focus on the future and a return to normal as soon as possible."
It would be very surprising if "as soon as possible" turns out to be after only 30 days. Elsewhere, the whole cruise industry is winding down less dramatically. Its customer base has disappeared over night.
In the longer term, it is a near certainty that cruising will bounce back. But the lines will need deep pockets to see themselves through the rest of this year.