October 3, 2022

The Carnival Vista will set sail from Galveston, Texas on Saturday afternoon, marking Carnival Cruise Line’s first U.S. cruise since the pandemic ceased operations.

The week-long cruise goes to Roatan, Belize and Cozumel. Passengers on board must provide proof of vaccination or obtain an exemption from Carnival, which follows strict guidelines.

The next day the ship will leave Carnival Horizon Miami.

The cruise industry is among the last sectors to return to pre-pandemic operations. The Centers for Disease Control and Prevention recently allowed them to sail again with strict safety protocols to prevent the spread of Covid-19 on board. When the pandemic started, there had been several high-profile outbreaks on ships.

Royal Caribbean Cruises became the first cruise operator to sail a ship from a U.S. port since the pandemic began when its Celebrity Edge ship left Miami last Saturday.

Carnival’s next cruise from any US port is the Carnival Breeze, which is scheduled to depart Galveston on July 15.

But the industry is still on guard. The highly contagious Delta variant is leading to new bans in other countries where vaccination rates are still low. Even in the United States, where more than half the population is vaccinated, Delta is fast becoming the most prominent strain of coronavirus. New Covid cases have been on the decline for weeks, but this highly contagious variant is starting to reverse the trend.

Australia provides another example. It had kept Covid cases under control for months, but the country is now seeing new cases flare up in several regions. To contain the spread, new restrictions are being introduced. As a result, Carnival has canceled its Princess Cruises to and from Australia until December 19, citing the ongoing uncertainty about resumption of cruises in the region for its decision.

Royal Caribbean changed its vaccination guidelines for all cruises except those departing from Florida earlier this week. The company had two unvaccinated guests under the age of 16 tested positive for Covid. Now it wants all unvaccinated guests departing from Florida ports to have travel insurance.

Industry analysts anticipate a slow recovery path for cruise companies and several difficulties due to the international nature of cruises.

Carnival’s stock is up more than 20% this year and has a market cap of just over $ 30 billion. However, the stock lost ground in recent trading. It closed at $ 26.06 on Friday, about 17% below its 52-week high of $ 31.52 that it hit on June 8.

“We believe the cruise industry will be one of the slowest subsectors to recover from Covid-19. Cruises not only need international travel to return, they also need ports to reopen, authorities to authorize cruises and the return of customer confidence, “customer Morgan Stanley analyst Jamie Rollo said in a research note Thursday. “The risk increases that further travel restrictions will be imposed as the delta variant spreads and we approach the winter flu season.”

Rollo reiterated its underweight position in the stock and lowered its guidance for this year and next due to a slower-than-expected cruise resumption and expectations of higher cash and fuel costs, minus refinancing and stock swap benefits.

As for future cruise bookings, while Carnival says prices are strong in its second quarter results, it is currently only selling a portion of 2022 that Rollo predicts to be around 25%. The analysts also estimate that around half of bookings in 2022 will come from guests who rebook canceled cruises and use their credit.

“There is therefore a fair amount left to sell by 2022 and it could be misleading to extrapolate from the small amount of cash bookings that have been made to date,” said Rollo. “Also, the initial provision of cruises is mostly domestic and of short duration, which is less profitable itineraries than the more exotic / international cruises that take longer to recover.”

Because of the slower-than-expected rate of return, Carnival could burn cash through the third quarter of 2022, he said. Rollo therefore estimates that Carnival will only have 18% occupancy in the third quarter of this year and 45% in the fourth quarter of this year.

Argus, on the other hand, maintains a buy rating on the stock as the company plans to resume operations in July. Small losses and rising bookings, reflecting strong pent-up demand for cruises, also add to the rating, analyst John Staszak said in a statement released on Tuesday.

Staszak said the booking pace is ahead of bookings for 2019 despite limited advertising and marketing.

“In accordance with the cruise resumption plans, Carnival expects all ships to be operational by spring 2022. As the number of COVID cases continues to decline, we are optimistic that management’s goals are achievable, ”said Staszak.