45BloombergBusinessweek April 20, 2020
Everglades,Fla.YadiraGarza,whoembarkedontheZaandam
forherhoneymoon,saysfromtheshipthatsheandherhus-
bandareterrified.“Thecrewaresickandgettingsicker.It’sa
matteroftimebeforeit getstousandwe’reinfected,”shesays.
“Forsomepeople,it willbethelasttripoftheirlives.”
AsofearlyApril,Carnivalstillhadpassengersatsea,nearlya
monthaftertheCDCissueda March8 publicadvisoryto“defer
allcruiseshiptravelworldwide.”SpokespersonFrizzellsays
Carnivalwasn’tunderanylegalobligationtofollowtheCDC’s
advice.“Theadvisoryis notanedict,”hesays.
DonaldandSwartzsaythere’snothingtheycould’vedone
tohaltfurtherinfectionsinFebruary,when,theysay,theworld
stilldidn’tgrasphowmuchtheviruswasspreadingoutside
China.ButtheU.S.declareda publichealthemergencyand
restrictedtraveltoChinaonJan.31,evenasCarnivalshipscon-
tinuedtosailaroundAsia.Therewereotherearlywarnings:
Padgett,theinnovationchief,saysthatinJanuary—afterhe’d
communicatedwitha manufacturerinWuhan,theoriginof
thepandemic,aboutmakingbatteriesforthedigitalbadgesys-
tem—theleadership,includingArnoldDonald,allknewabout
thescaleofthecoronavirusoutbreak.Padgettsayshebecame
awareoftheproblem’smagnitudeonJan.25—heremembersthe
exactdatebecauseit wasthedaybeforeKobeBryantdied.“The
biggestthingaboutthat—it’sa learningI don’tthinkI’llever
forget,andwesharedit withArnoldwhenweweretalking—
is thatweactuallyhadinsightintotheglobalsituationmuch
earlierthanmost,”Padgettsays.Carnivalcanceledcruisesset
toembarkfrommainlandChineseports,butthesemeasures
don’tappeartohavealteredanythingforshipsmakingmid-
cruisestopsaroundHongKongorotherpartsofAsia.
Carnivalexecutivesalsomakethehighlyquestionableasser-
tionthatcruiseshipsdon’tspreaddiseasemoreeasilythanit
wouldspreadelsewhere.“Nothingtodowithcruiseships,”
Donaldsays.Covid-19spreadsthesamein“anairportter-
minal,a subwaystation,a restaurant,a theater,a stadium.”
That’smisleading,saysFriedman,fromtheCDC’scruiseship
taskforce.Herteamhasseencoronavirusinfectionrates
approaching20%ontwoofCarnival’sships,shesays,much
higherthanthespreadina supermarketorsubway.Partof
theproblem,shesays,is thatcruisesareoftenpopulatedwith
peopleatgreater-than-averageriskforthedisease.(Morethan
two-thirdsoftheZaandam’s passengersareolderthan65,she
says.)Crewmemberssleepinbunkbedsandusuallysharebath-
rooms.“Iftheseshipshadstoppedsailing,ourlargeteamcould
allbeworkingonhelpingstatesandlocalpublichealthauthor-
itieswiththeircommunityoutbreaks,”shesays.Inapparent
responsetothesediscrepancies,FrizzellemailsaBuzzFeedarti-
clereportingthatmultiplepeoplehaddiedfroma Covid-19out-
breakata familyburialservice—his point being that viruses
spread on Carnival’s ships just as they do at funerals.
Since 2016 the company has failed 3% of CDC ship health
inspections—three times worse than rival Royal Caribbean
Cruises Ltd., which fails 1% of inspections. In an interview,
these statistics seem to surprise Donald. “What? We fail health
inspections?” he says when asked about them. After gathering
his thoughts, he adds, “I would say, though, that we do not have
a record in any shape, form, or fashion of being unhealthy, of
guests on our ships being more ill than in other travel venues,
period, let alone other cruises.”
Why didn’t Carnival simply dock every ship immediately
after their initial crises? “In effect, that’s what people have
been trying to do. But what happened was, ports close, airports
close, borders close, and even now, we have tens of thousands
of crew on our ships that we can’t get home,” Donald says. “It’s
not because we want them all on the ships. It’s because things
close down and we couldn’t get them off.”As of publication, Carnival had two of its 100 ships still at sea.
Donald, who’s working remotely from his home in Florida, says
he’s under constant stress from nonstop conference calls. “The
days go by so quickly,” he says. “Sometimes it’s hard to leave
the bedroom, because the calls start so early you haven’t gotten
dressed or showered yet, and then you’re waiting for a break
in the calls so you can do that. It’s so crazy.”
Along with overseeing the fleet, he’s been working the
phones to raise money, including a fresh $575 million in equity
for a bargain $8 a share. He says these funds will give Carnival
enough liquidity to survive an extended pause in its operations.
“Obviously, we’re hurting,” he says. “If we don’t bring capital
in, we wouldn’t have a company.”
Although Arison has spoken with Trump during the cri-
sis, Carnival and its rivals were left out of a federal bailout
of U.S. businesses, in part because they aren’t, legally speaking,
U.S. businesses. Carnival paid $71 million in taxes on $208 bil-
lion in revenue last year to Panama, where it’s technically
incorporated. “There was very strong bipartisan opposition
to a cruise industry bailout, and there will continue to be,” says
Democratic Senator Richard Blumenthal of Connecticut. “They
have flown under international flags, and abated or skirted
taxes, with a record of predatory conduct. They need to prove
that they’re going to follow American norms and laws.”
Donald acknowledges that his company doesn’t pay the IRS
like a typical company. “It’s true that as a corporation, we don’t
pay income tax,” he says. But he says Americans benefit from
the port and harbor fees that Carnival pays in accordance with
the demands of the maritime industry. While the fleet is out of
service, Padgett is continuing to invest in technology upgrades,
and Swartz says she’s working to “dramatically improve our san-
itation protocols.” Donald says it will take some time for all the
“negative noise” about cruising to go away, but there are indi-
cations people still want to cruise.
On that point, he may be right. According to a recent Carnival
filing with the U.S. Securities and Exchange Commission, half
of customers who sought cancellations between March 2 and
March 15 for upcoming bookings opted to take credit for future
cruises instead of a full refund. Almost all the passengers inter-
viewed for this story say they’d cruise with the company again.
After all, Carnival offered many of them free vouchers for future
trips. “The more you travel with them, the more goodies they
give you,” says Courter, a survivor of the Diamond Princess.
“It’s like rats and cocaine.” <BW> �With Jonathan Levin, Michael
Smith, and K. Oanh Ha