The CEO of Carnival Corporation -- the world's biggest cruise company -- on Friday revealed that its nine brands would remove 13 ships from their fleets in the coming months as they cut costs and reorganize in anticipation of a slow restart to cruising.
"To reduce our cash burn and have a more efficient fleet once we do resume cruising, we have aggressively shed less efficient ships," Carnival Corporation CEO Arnold Donald said during a conference call with Wall Street analysts to discuss quarterly earnings.
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Based in Miami, Carnival Corporation is the parent company of Carnival Cruise Line, Holland America, Princess Cruises, Seabourn and five other brands that went into the coronavirus crisis with a combined fleet of 104 ships.
Together, the nine brands account for about 45% of all cruises taken in the world, and Carnival Corporation is thus seen as a bellwether for the cruise industry.
All nine of the Carnival Corporation brands halted departures in mid-March due to the crisis, and many have canceled all sailings into September or October. It's a shutdown that is unprecedented in the history of modern cruising, and it's causing the company great financial hardship.
Just a few weeks ago, Carnival Corporation said in a regulatory filing that it would dispose of six ships within 90 days and maybe more. Friday's announcement more than doubles the confirmed number of vessels that will leave Carnival Corporation brands.
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The departure of 13 vessels at once is unprecedented in the company's history. Donald said it would amount to a nearly 9% reduction of capacity at the combined brands.
Donald didn't specify which ships would leave the company's fleets. But several of the vessels already are known. The company's U.K.-focused brand, P&O Cruises, announced this week that its 2,016-passenger Oceana would be departing. The news came just days after the company's Europe-focused Costa Cruises brand said its 1,928-passenger Costa Victoria had sailed its last voyage for the line.
Related: A major cruise line is scrapping a ship that's just 23 years old
The list also includes several ships that the company already had agreed to sell before the coronavirus crisis hit, including the 1,546-passenger Pacific Dawn and the 1,260-passenger Pacific Aria. Both ships currently sail for Carnival Corporation's P&O Cruises Australia brand.
Donald suggested the ships leaving the various fleets will be their older, less-efficient vessels, which is in keeping with recent speculation that such older ships as Costa Cruises' neoRomantica and Holland America's Maasdam could be on the shortlist for retirement.
TPG recently published a list of 23 ships that we thought were most likely to be laid-up, sold or scrapped in the wake of the coronavirus pandemic that included Costa Victoria, Pacific Dawn, Pacific Aria, neoRomantica and Maasdam as well as several ships from Carnival Corporation's Carnival Cruise Line and Princess Cruises brands.
Asked by an analyst whether the ships leaving the Carnival Corporation fleets would be scrapped or sold to entities that might reuse them, Donald suggested that most appeared headed for reuse, though a few would be "recycled."
Donald objected to the analyst's use of the word "scrapped," which is a common term used in the shipping industry for what happens when a ship is taken apart after its useful life.
In addition to shedding older ships, Donald said Carnival Corporation would add new ships at a slower pace over the next couple of years. The company has 16 vessels on order for its nine brands that it said would roll out more slowly than originally planned.
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Nine of the ships had been scheduled to start service by the end of 2021, but Donald said the company now would only take delivery of five of the vessels from shipyards by that date.
Donald said no ship orders have been or would be canceled. They'll just be delayed, on average by about five months. The company would rather keep the new ships and eliminate its older ships if it needs to cut capacity, he suggested.
"The new ships are just far more efficient," Donald said. "We would regulate (capacity) by disposing of less efficient ships rather than trying to avoid bringing on the new ships."
Earlier this week, the company's Carnival Cruise Line brand announced that the debut of its much-awaited, 180,000-ton Mardi Gras -- its biggest ship ever -- would push back until early next year. Also already officially delayed is a new ship from Princess Cruises, Enchanted Princess.
Donald said the company's ship capacity would not return to the levels of early this year until 2022 at the earliest.
Still, Donald said the company would return to growth mode soon enough. Cruisers, he noted, were itching to get back out on the water, and bookings for 2021 remained solid.
"Our long-term prospects are especially bright," Donald said. "We've shed less-efficient vessels and lowered our overall cost basis, we reduced near-term capacity, and going forward will introduce newer, far more efficient vessels over time in line with demand generation."
Additional resources for cruisers during the coronavirus outbreak:
- When will cruising resume? A line-by-line guide
- Why you shouldn't expect bargain-basement cruise deals anytime soon
- How to cancel or postpone a cruise due to coronavirus
- Expecting a refund for a canceled cruise? Here's how long it will take
- Some of the year's hottest new ships could be delayed
- Stream these 13 movies, television shows to get your cruise ship fix
