Why Cruise Lines Should Be At The End Of The Bailout Line

Contributor: Irene S. Levine

Americans loved the romance of cruising and its convenience: Pack and unpack only once. No need to arrange accommodations, restaurants or local transportation. Visit other countries and continents while floating from place to place.

Cruise ships were especially appealing to older Americans with more time and resources to travel. It is estimated that about 1 in 7 cruise passengers were over the age of 70. And with ships constantly growing in size and types of amenities, their appeal began to broaden to younger people and families.

But the glamour of cruising was eviscerated—almost overnight—as Internet and TV viewers witnessed dramatic news reports of large ships with sick and quarantined passengers and crew, adrift at sea with diminishing food supplies. The CDC and other health experts weighed in, cautioning U.S. citizens, especially older ones, not to cruise.

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Cruise ships were compared to Petri dishes because their contained quarters were conducive to the growth of unchecked infections. A current warning from the U.S. Department of State urges U.S. citizens, particularly travelers with underlying health conditions, not to travel by cruise ship.

Ports were closed to some returning ships as COVID-19 and associated panic spread across the globe. Most passengers, but still not all, eventually disembarked on American shores with some quarantined at U.S. military bases.

Hard choices

As the numbers of persons diagnosed with COVID-19 in the U.S. continue to grow, so have demands for masks, respirators, beds and doctors. The frightening prognosis: The U.S. health system will soon be so strained (like those of Italy and Spain) that gatekeepers will be forced to make life and death choices.

Simultaneously, lawmakers on Capitol Hill are wrangling with a nearly $2 trillion economic stimulus package, having to make tough decisions about which of America’s industries require (and deserve) a lifeline, and which will be left to succumb to a changed marketplace.

Most people agree that support of public health has to be our nation’s first priority but the type and timing of decisions needed to restart the economy are far more nuanced. Businesses, large and small, that employ workers are standing on the proverbial breadline awaiting emergency aid to keep afloat.

“No component of the economy will be left untouched by the virus, leaving policymakers to perform triage on a litany of groups lining up for help,” wrote economist Megan Greene, a senior fellow at Harvard Kennedy School, in an opinion piece published in The Washington Post.

Hopes were raised that the U.S. government would provide assistance to the cruise industry when President Trump stated, “We are working closely with the cruise line industry, very very closely...we will be helping them through the patch.”

Does the cruise industry deserve a bailout?
With travel bans and trip cancellations, the travel industry overall (e.g., airlines, hotels, OTAs and cruise lines) has been brought to its knees by COVID-19 but many believe that government subsidies to industries should support workers and the general public, not corporations.

“One might make the argument that airlines are essential to the functioning of the country,” says Robert Cole, Senior Research Analyst for Lodging and Leisure Travel for Phocuswright, a travel industry research group. “But the cruise industry would be pretty challenged to make that case. They don’t carry cargo and they’re not part of the transportation or logistics supply chain,” he says.

Economist Greene agrees that compared to other sectors of the travel industry, airlines and hotels rank higher in terms of need. “Not that I have anything against cruising, per se, but of all the big industries lining up, I would think that the cruise industry should be one of the last in line for a federal bailout or subsidy,” she says. She notes that most cruise ships, although headquartered in the U.S., are registered abroad and don’t pay U.S. taxes. The lines are also exempt from many U.S. labor and safety regulations.

Law360, a legal news services, notes that a tax deferral wouldn’t even be of much benefit to the industry because all three major cruise lines (Carnival Corporation & plc, Royal Caribbean Cruises Ltd., and Norwegian Cruise Line Holdings) “received more in refunds or deductions than they paid or set aside for taxes.”

“Admittedly, the cruise industry has been hit especially hard because it’s basically been taken totally “off-line” by the virus,” says analyst Cole. “But these are non-essential recreational resources.”

A report in the Miami Herald points to the significance of the cruise industry to the economy of some geographic areas. It estimates that the industry’s annual economic impact in South Florida (where three major cruise lines are based) is nearly $9 billion.

Cruise Lines International Association (CLIA), the cruise industry trade association, estimates that the industry supports 421,000 American jobs, and nearly 40 percent of the 1.17 million industry-supported jobs globally are based in the U.S.

But so far, it appears as though the cruise industry isn’t even asking for assistance. “As it relates to the rescue package, the cruise lines are not lobbying for a bailout,” says Bari Golin-Blaugrund, spokesperson for CLIA. “CLIA and our members agree that the most important stimulus the government can provide on behalf of the wider cruise community in the United States is help for small- and medium-size businesses, including a vast network of travel agencies, tour operators and suppliers, with a presence in all 50 states.”

An uncertain future
Perhaps more fundamental to whether a bailout or subsidy is merited is the question of whether passengers ever want to cruise again? “The world has changed and we can’t even foresee exactly how things will turn out,” says Greene. “Now being stuck in a closed, crowded place like a cruise ship may be someone’s worst nightmare,” she says.

Adding to the uncertainty of the nearly $53 billion cruise industry is our inability to predict when the COVID-19 curve will flatten and whether it will rear up again. “It’s not just containing the virus, it’s finding a way to rebuild trust,” she adds.

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