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Share Name Share Symbol Market Type Share ISIN Share Description
Carnival Plc LSE:CCL London Ordinary Share GB0031215220 ORD USD 1.66
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  9.80 1.62% 614.80 610.40 612.60 657.40 582.20 602.00 5,319,322 16:35:04
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Travel & Leisure 16,109.7 2,367.1 335.7 1.7 963

Big Cruise-Ship Lines Wouldn't Qualify for Aid Under Stimulus Package -- 2nd Update

26/03/2020 11:32pm

Dow Jones News


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By Ted Mann, Brody Mullins and Dave Sebastian 

WASHINGTON -- A last-minute legislative change has shut major cruise ship lines out of the roughly $2 trillion coronavirus stimulus package headed for a House vote Friday, despite being one of the hard-hit industries President Trump has pledged to help.

The cruise industry was among the first to take a public hit from the virus, along with airlines and hotels, as vacationers canceled plans, local governments halted tourism and passengers on board fell ill, leading to entire vessels full of passengers being quarantined.

But the aid package approved by the Senate and now headed for the House limits aid to U.S.-incorporated companies with a majority of workers based in the U.S. -- two criteria that effectively exclude the major cruise-ship operators like Carnival Corp., Norwegian Cruise Line Holdings Ltd., and Royal Caribbean Cruises Ltd.

That is despite comments from Mr. Trump and Treasury Secretary Steven Mnuchin that the administration intended to help the industry, whose publicly traded major players have seen their stock prices crushed since the coronavirus crisis began.

At a press briefing Thursday, Mr. Trump said he would like to provide assistance to the cruise industry, which supports local economies in the U.S. But he conceded that it was "very tough to make a loan to company when they're based in a different country." He also said he liked the idea of having cruise companies register in the U.S. and pay federal taxes.

Anne Madison, a spokeswoman for Cruise Lines International Association, said the stimulus package would help small and medium-size businesses such as travel agents that support cruise companies.

"CLIA had not thought of bailout" for the cruise operators, Ms. Madison said, adding that the group's lobbying efforts have been geared toward helping those travel agents receive assistance.

The world's four biggest cruise lines, which include Swiss-based MSC Cruises, have suspended their sailings for about a month after coronavirus outbreaks aboard ships underscored the pathogen's easy spread in confined spaces and various governments imposed travel restrictions.

Earlier versions of the Senate bill that became the relief package didn't include the language that now stands between the cruise lines and a share of the federal aid. But late in the negotiations over the bill, a provision was added restricting aid to companies operating under U.S. laws -- a provision that congressional staffers of both parties said would effectively bar the foreign-incorporated cruise companies from getting federal aid.

In the final legislation, Mr. Mnuchin's powers to make investments and loans to help corporations were limited to those "that are created or organized in the United States or under the laws of the United States and that have significant operations in and a majority of its employees based in the United States."

Labor unions and Democrats in Congress were firmly opposed to including federal assistance to the cruise industry because they don't employ a unionized American workforce, and environmentalists accuse the companies of polluting U.S. waterways.

Still, the industry won small concessions that could open the door to federal help in the future.

A spokesman for Sen. Dan Sullivan (R., Alaska) said the senator supported the cruise-ship industry because of its contributions to small business in the state. "He'll continue to work to educate his colleagues on the importance of the cruise-ship industry for tourism in Alaska as well as other states," the spokesman said.

All the major cruise operators are incorporated outside the U.S. The companies don't pay U.S. federal income taxes, and most of their cleaning staff, restaurant servers, bartenders and other employees are foreign nationals.

Even the individual ships are typically owned by foreign LLCs and domiciled in low-tax countries such as the Bahamas, Bermuda and the Dominican Republic.

They do, however, pay state income taxes and port fees.

Share prices in the resort and cruise-ship industry, including major hotel chains, are down more than 51% overall this year, according to FactSet.

Shares of Carnival rose 14.6% as the Dow Jones Industrial Average re-entered the bull market Thursday. Royal Caribbean and Norwegian Cruise Line shares fell 4.2% and 7.4%, respectively.

The U.S. State Department has warned Americans not to travel on cruise ships because of the outbreak. The Centers for Disease Control and Prevention has specifically warned that cruise ships pose a "risk for rapid spread of disease beyond the voyage" and identified more than 800 cases of coronavirus infection linked to cruise ship voyages.

In the appropriations bill, the Senate allocated $7.5 million toward the Agency for Toxic Substances and Disease Registry's geospatial analysis and mapping of infectious disease hot spots, including cruise ships.

The bill offers to provide $500 billion in liquidity measures such as loans to local governments and businesses operating under U.S. laws that have incurred losses due to the pandemic.

"There's a risk that cruise ships are laid up for an extended period of time," Wedbush Securities Inc. analyst James Hardiman said. "They'll continue to burn cash without any revenue coming in the door."

In 2019, Carnival, incorporated in Panama and traded on exchanges in the U.S. and U.K., reported global income-tax expense of $71 million on revenue of $20.83 billion. Royal Caribbean, incorporated in Liberia, had $32.6 million in global income-tax expense on revenue of $10.95 billion.

Bermuda-incorporated Norwegian Cruise Line had a global income-tax benefit of $18.86 million on revenue of $6.46 billion. MSC Cruises is privately held.

Ms. Madison of the trade group said the cruise industry paid more than $23 billion in wages and salaries, including taxes, and contributed $53 billion to the U.S. economy in 2018. Nearly 40% of the jobs generated by the industry are U.S. jobs, she said.

Companies record tax expense as they earn income, and it doesn't necessarily reflect the cash taxes they pay during the period, though over time the measures largely match up.

Airlines, by comparison, recorded more income-tax expense. United Airlines Holdings Inc., for example, reported $905 million in global income-tax expense on revenue of $43.26 billion in 2019.

--Michael C. Bender contributed to this article.

Write to Ted Mann at ted.mann@wsj.com, Brody Mullins at brody.mullins@wsj.com and Dave Sebastian at dave.sebastian@wsj.com

 

(END) Dow Jones Newswires

March 26, 2020 19:17 ET (23:17 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.

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