Cruise passengers sail despite Omicron


Despite a direct recommendation from the Centers for Disease Control and Prevention to avoid cruise travel, the industry is currently sailing as it tries to recover from the pandemic.

The same goes for cruise line stocks, which fell in the last days of 2021 but still held up relatively well in the second half of December.

“Investors are completely taking this in stride,” said Chris Woronka, an analyst at Deutsche Bank who covers cruise lines and other travel sectors. Barron the Saturday.

But the navigation was not smooth and there are still many obstacles to overcome.

On December 30, the CDC raised its Covid-19 travel health advisory from 3 to 4, the highest level, for cruise travel. The agency urged travelers to avoid cruises “regardless of their vaccination status.”

As of Saturday afternoon, no cruise cancellations were reported, although the Omicron variant reportedly forced cruise passengers to review their itineraries, including the ports they stop at.

Cruise company


Royal Caribbean Group

(ticker: RCL) said in a press release Thursday that the company “was experiencing service disruptions at some destinations” and had “canceled or significantly changed 16 of 331 destination calls.”

Patrick Scholes, travel and leisure analyst at Truist Securities, points out that CDC action comes at a particularly unfavorable time for cruise passengers.

“It’s a very inopportune time for that to happen because we are entering the big sales season,” said Scholes. “It will hurt, which we do not yet know the degree. But there is absolutely nothing good to come of this ad “by the CDC.

Still, Woronka says enthusiasm for cruising remains strong among travelers. The greatest number of cruise customers, he says, “will” go on a cruise.

For now, investors are following the CDC’s recommendation in stride, although stock prices fell in the final trading days of 2021.

For example, the actions of


Carnival

(CCL), the largest cruise line, fell about 5% from Dec. 23-31, compared with a nearly 1% gain for the S&P 500. From Dec. 17-31, however, the stock gained 10%, easily beating the 3% result of the S&P 500.

“The market says these disruptions are not going to cripple cruise lines,” Woronka said. “They have enough cash reserves to overcome this. The point is that the CDC doesn’t derail the second half of the 22-23 recovery. “

Royal Caribbean said in its statement Thursday that “none of the Omicron cases [aboard its ships] were severe ”or required hospitalization.

He added that “almost everyone on board” his ships has been vaccinated. The company, which resumed sailing in the United States in June, said it has carried 1.1 million guests on its ships since then, with 1,475 people testing positive, a rate of 0.02%.

Carnival and his peers had been barred from sailing in and out of US ports for about 15 months from March 2020 due to the pandemic.

Royal Caribbean’s load factors, primarily bookings, for crossings in the first half of this year are lower than historical levels but are within their historical ranges for the second half of 2022, the company said.

Woronka has Hold’em odds on Royal Caribbean, Carnival and


Norwegian Cruise Line Holdings

(NCLH).

Shares of all three companies have sold more than 10% since early November.

“Obviously, the market is still a bit apprehensive about how this plays out,” says Woronka. “The baseline scenario is that we have a strong recovery in the second half of 22 and 23, but there is a risk. We didn’t see Omicron coming. He just appeared one day, and now he’s here.

Royal Caribbean said in its statement that the travel industry had “suffered significant disruption from airlines and other service providers due to the spread of Omicron.”

As of mid-Saturday afternoon, there were about 2,500 cancellations of flights within, to or from the United States, according to FlightAware. A day earlier, on December 31, these cancellations totaled 1,625.


Delta Airlines

(DAL), for example, attributed its flight cancellations to winter conditions and the Omicron variant.

Write to Lawrence C. Strauss at [email protected]

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