Financial Times Europe - 20.02.2020

14 ★ FINANCIAL TIMES Thursday20 February 2020

COMPANIES

A L I C E H A N CO C K —LO N D O N

Dream holidays have become a night-
mare for cruise passengers caught in the
middle of China’s coronavirus outbreak.
About 3,700 peoplewere marooned
off the coast of Japan in quarantine for
two weeks on the Diamond Princess,
with more than 540 passengers showing
signs of infection. Another ship, the
Westerdam, is quarantined in Cambo-
dia after being repeatedly rerouted
across the South China Sea and denied
entry to five other countries.
Though instances of infection have
been limited to two ships so far, both
owned byCarnival Corporation, the
$45bn cruise industry faces a battle to
regain customer trust.
More than 50 cruises have been can-
celled, seven ports closed and thou-
sands of holidaymakers’ plansdis-
rupted as authorities scramble to pre-
vent the spread of thecoronavirus.
“If it dies down now then it’s probably
manageable,” said Alex Brignall, an ana-
lyst at Redburn covering the cruise
industry. “If it gets outside Asia on a
cruise ship, it will be very different.”
Shares in the three major cruise oper-
ators, Carnival,Royal Caribbean nda
Norwegian Cruise Line, are down
between 10 and 16 per centthis year as
investors register their concern.
Companies themselves have warned
that bookings for all regions have been
“soft” since the outbreak.
Royal Caribbean last week said that
cancellations, alongside a moratorium
on remaining sailings in Asia until the
end of April, would lead to a roughly 12
per cent fall in earnings this year. Carni-
val guided to a hit of roughly 14 per cent
a share should Asian itineraries be can-
celled until May.
Asia is a small but fast-growing mar-
ket for cruises. The number of Asian
passengers rose to about 4.2m in 2018,
up from 1.2m five years earlier, accord-

ing to industry group Cruise Lines Inter-

national Association. More than half of

those were Chinese.

According to the UN World Travel

Organisation, Chinese outbound travel-

lers spent $277bn in 2018, more than

any other nationality.

Costa, a Carnival brand and the first to

offer cruises around China, launched a

ship specifically for the Chinese market

in May 2019, complete with seven kara-

oke rooms and bigger casinos. Royal

Caribbean, the second-largest cruise

company, has two liners scheduled to

travel to China this year. No changes

have been made to those plans.

“We have already taken aggressive

steps to minimise risk through boarding

restrictions and itinerary changes,” said

Richard Fain, chief executive of Royal

Caribbeanlast week. The CLIA said that

cruise companies had been “agile and

responsive” to the situation.

The industry has faced crises before.

The sinking of theCosta Concordiain

2012 off the coast of Italy led to 32

deaths. A year later, 4,200 passengers

and crew were stranded on the Carnival

Triumph for nearly a week without

power after an engine room fire, while

norovirus outbreakshit the headlines.

But “crashing a cruise ship is not con-

tagious, nor is running out of electric-

ity”, said Mr Brignall, adding that with a

high number of older passengers and

enclosed conditions on board, “if some-

thing slips through the net, then the

impact can be huge”.

David Handley, a maritime lawyer at

Watson Farley & Williams in London,

said that the most pressing issue was

routing ships out of Asia. “How do

cruise lines deal with some very expen-

sive assets that were scheduled to be in

Asia and which now there’s no point

having in Asia because people just won’t

travel,” he said.

As operators wait for Asian sailings to

resume, the cruise industry has been

quick to highlight the stringency of its

regular sanitation procedures.

All cruise ships have a hospital room

and passengers are regularly encour-

aged to use hand sanitiser. Since the

coronavirus outbreak, larger cruise

companies have started operating man-

datory temperature scans before board-

ing and passengers from China have

been banned from sailing.

They have also paid out millions in

compensation. Based on an average

cabin price for next year, the cancella-

tion of a full capacity 12-day cruise on

Norwegian from Hong Kong would cost

in the region of £2.3m in refunds.

But while customers are compensated

for cancelled trips, most major cruise

lines do not have commercial insurance

to cover situations such as the coronavi-

rus outbreak because premiums are

punishingly high. Costs will have to be

absorbed or paid out from a mutual lia-

bility insurance available through a

group of shipowners clubs called the

International Group of P&I Clubs.

Claims in excess of the $10m retained

by individual member clubs are pooled

between the whole group.

Eric Chung, 68, who was aboard the

Diamond Princess with his family, said

thatpassengers had only been allowed

on deck if they were wearing masks and

rubber gloves. He brushed off the quar-

antine measures saying he would hap-

pily take another cruise, but next time

would book a cabin with windows.

One executivesaid: “The cost of a

screw up is huge. People have to be com-

fortable on board. Bad PR from cutting

any corners could be a business killer.”

Additional reporting by Nicolle Liu

Travel & leisure. oronavirusC

Outbreak leaves cruise industry floundering

Quarantined ships, cancelled

sailings and worries over

infection dent $45bn sector

Sources: CLIA; Refinitiv

Worldwide cruise passengers

from Asia

Customers (m)





      

Cruise operators hit

by coronavirus

Share prices rebased











Feb

Norwegian

Cruise

Royal

Caribbean

Carnival

Jan 

Carnival Corporation’s Westerdam cruise ship has been quarantined in Cambodia after being denied entry to five other countries —Heng Sinith/AP

FEBRUARY 20 2020 Section:Companies Time: 2/202019/ - 17:17 User:cathy.pryor Page Name:CONEWS3, Part,Page,Edition:USA, 14, 1