How Carnival Corporation is staying tenacious in testing times

Arnold Donald explains to Rebecca Gibson how Carnival Corporation and its brands are working hard to emerge from the Covid-19 crisis stronger than ever before

How Carnival Corporation is staying tenacious in testing times
Arnold Donald is optimistic that ships will be back in service by the end of 2021 or the beginning of 2022

Like many others, Arnold Donald is missing cruises.

“I’ll be on the first cruise ship I can get on as soon as restrictions lift!” says the Carnival Corporation president and CEO. “I can’t wait to feel the sea breeze and catch up with our amazing crew members to let them know how grateful we are for everything they have done, and continue to do, for our business and for our guests. I’m also excited to meet our guests and see the happy expressions on their faces as they enjoy our innovative ships and delight in the life-changing experiences we offer.”

It’s been a year since Donald was forced to halt all cruise operations across Carnival Corporation’s AIDA Cruises, Carnival Cruise Line, Costa Cruises, Cunard, Holland America Line, P&O Cruises, P&O Australia, Princess Cruises and Seabourn brands due to the global Covid-19 pandemic in March 2020. Neither Donald nor anyone else in the cruise industry expected the virus to still be ravaging countries around the world after 12 months.

“Unfortunately, when a ‘stealth virus’ like Covid-19 is circulating in so many countries worldwide, no one can ever guarantee with absolute certainty that their business will remain virus-free, regardless of which industry they operate in,” says Donald. “However, we can effectively minimise the risk of it coming onboard our vessels by implementing layers of strict health and safety protocols.”

Noting that the cruise industry is acutely aware of how quickly illnesses can spread in confined spaces, Donald says: “We’ve successfully dealt with the threats posed by serious contagious diseases, such as Middle East Respiratory Syndrome and Ebola, in the past. Consequently, we’ve had a raft of health and safety measures, sanitation practices and onboard medical teams in place for many years and this gave us a solid foundation on which to build our Covid-19 protocols.”

Carnival Corporation devised its own enhanced protocols with the help of some of the “best minds in medical science, public health and infectious disease control”. It has also adopted six mandatory measures set out by Cruise Lines International Association (CLIA). One of the core protocols is that all guests and crew members will be required to test negative for Covid-19 before embarkation.

“First we test the crew members in their home country, next they are tested and quarantined in the country of embarkation prior to boarding, and we continue to routinely test them while they’re working on the ships,” says Donald. “Of course, we recognise that this is time consuming and restrictive for the crew, so we’re very grateful that they all understand the importance of these measures and are willing to comply to help protect themselves, their colleagues, our guests and the communities we visit. Guests will be tested before boarding and retested if they present symptoms during their cruise. We’ll encourage them to quickly report any possible symptoms to our onboard medical teams – even if it’s just a runny nose they think might be caused by an allergy.”

Social distancing measures will be enforced in cruise terminals, in public spaces on ships, on private islands and during shore excursions. Masks are also mandatory for everyone (except the medically exempt) onboard the vessels and during shore excursions whenever physical distancing cannot be safely maintained. In addition, Carnival Corporation will only authorise shore excursions offered by providers that operate tours and activities according to its protocols. Any guests who do not comply will be unable to reboard and complete their cruise.

Changes have been made to Carnival Corporation’s air management and ventilation strategies too.

“Although research seems to indicate that Covid-19 doesn’t transmit extensively through the air handling systems, we’ve enhanced filters and integrated other technologies to increase fresh air onboard,” says Donald. “We want guests and crew to know that we’re going above and beyond to keep them safe. We’ve also increased our cleaning and sanitation procedures across the ship because studies show that the virus is relatively easy to kill on hard surfaces.”

Carnival Corporation’s brands have also developed risk-based response plans for each individual ship to ensure they can react rapidly if someone does test positive for Covid-19.

“We will continually monitor the health of guests and crew throughout each cruise, which will allow us to quickly detect cases, quarantine and treat the patients, and then trace and test everyone they have been in contact with to prevent the virus from spreading further,” says Donald. “As part of this, we’ve upgraded our medical facilities, enhanced staff training and created dedicated isolation cabins. In addition, we’ve signed agreements with private providers to ensure we can transport patients off the ship and into shoreside medical facilities and quarantine if necessary.”

Protocols will continue to evolve alongside the science. “When Covid-19 first emerged, no one knew exactly what the symptoms were, how it was transmitted, how to detect it, how best to treat it, who was most at risk, why patients had such different reactions or the most effective ways to stop it spreading,” says Donald. “After 12 months of intense research and trials by scientists and medical professionals, we’ve got answers to many of these questions, as well as widespread testing, better treatments, enhanced health and safety measures across society, and several vaccines that seem to be working well. However, there are still many unanswered questions. As society’s understanding of Covid-19 improves and the situation evolves worldwide, we’ll continue to adapt our own protocols to ensure we’re doing everything we can to protect our guests, crew and the communities we visit. This may or may not involve making vaccinations mandatory for guests and crew.”   

Costa and AIDA both implemented all these protocols when they successfully resumed a small number of cruises with a limited number of guests in Italy in September and October, respectively. “Despite the additional medical screenings and new restrictions that make the onboard and onshore experience different to the past, both brands have achieved high net promoter score rankings since resuming operations,” says Donald. “This shows that our guests were very satisfied with their experience and their feedback suggests that they felt very safe, comfortable and relaxed throughout their cruise. This, combined with the fact many said they had enjoyed their cruise, makes us very proud as we strive to exceed guest expectations in everything we do.”

To resume sailing in the USA, Carnival Corporation must follow the Framework for Conditional Sailing Order set out by the US Centers for Disease Control and Prevention (CDC). The company has already completed the first phase, which involved demonstrating adherence to testing, quarantine and social distancing requirements, and establishing laboratory capacity for testing. “Now we need to run test sailings with volunteers and if these are successful, we can apply for a conditional sailing certificate 60 days before we start our planned voyages,” says Donald. “We’re still awaiting more information from the CDC before we can move to this stage.”

Another major priority for Donald and his team was to find a way to conserve cash and raise capital. In 2019, Carnival Corporation generated $20.8 billion in revenue, an increase from $18.9 billion the previous year. However, with almost all cruise activities paused in 2020, revenue dropped 74 per cent to $5.6 billion and the company recorded net losses of $10.2 billion. Between March and the end of August, the company recorded an average monthly cash burn rate of $770 million, but this had reduced to $500 million per month after limited cruise operations resumed in Europe in the fourth financial quarter.

“Our main priority has been to find ways to weather the financial storm to ensure that we survive long enough to come out the other side,” says Donald. “Most of our brands have had no revenue for a year, but we must still remunerate employees, keep ships running while they’re laid up, and continue paying other expenses. Consequently, we’ve come up with numerous ways to raise a lot of capital. It’s been challenging, but we now have the liquidity in place to sustain ourselves throughout 2021, even if we’re unable to resume operations and bring in revenue.”

One of Carnival Corporation’s cash conservation strategies was to sell a total of 19 ships from across the Carnival Cruise Line, Costa Cruises, Holland America Line, Princess Cruises, P&O Australia and P&O Cruises fleets. Some were bought by other operators and investors, while the rest have been scrapped.

“We were planning to retire these ships over time anyway because they were older and less efficient than many of our other vessels and, despite representing 13 per cent of our overall capacity, they only accounted for three per cent of our operating income,” says Donald. “As they were already laid up and no longer generating any revenue, we decided to accelerate their exit from the fleet.”

Selling these ships will improve Carnival Corporation’s fuel and operating costs by one and two per cent respectively. In addition, the sales are being offset by several new vessels that joined various brands in 2020. They included Princess Cruises’ Enchanted Princess in September, P&O Cruises’ Iona in October, and Carnival Cruise Line’s Mardi Gras and Costa Cruises’ Costa Firenze, both in December. Holland America Line is also scheduled to take delivery of the new Rotterdam in summer 2021. “These new vessels – and several others that are still under construction or on order – are much more efficient and have advanced green technologies to help us achieve our environmental sustainability goals,” says Donald. “Mardi Gras and Iona are powered by LNG. All four newbuilds have also provided each brand with an ideal opportunity to elevate their signature cruise experience with various innovative onboard features, such as the Bolt roller coaster on Mardi Gras and the Sky Dome on Iona.”

Carnival Corporation has also taken advantage of the unprecedented pause in operations to identify new opportunities for optimising the way the corporation and its nine brands work. “We regularly evaluate our processes so we can continually improve them but being forced to scale back various areas of our businesses has allowed us to consider new ways of working,” says Donald. “We’ve analysed every area of the business and decided that we don’t want to automatically revert back to what we were doing before.

Carnival Corporation is a federation of nine brands and each one is more successful as part of the whole than it would be if it was operating on its own. We’re exploring how we can leverage the skills and competencies of each brand to create shared services that will benefit everyone when we resume sailing.”

Operating as a federation of nine brands targeted at different source markets will also be beneficial when it comes to restarting cruises, predicts Donald.

“We were never going to be able to suddenly resume operations on all of our ships and sail itineraries to all 700 of our regular ports of call at the same time,” he says. “Countries worldwide are still struggling to contain the transmission of the virus and strict travel restrictions are still firmly in place in many of our source markets and the destinations we visit. However, as we saw in Europe and the Mediterranean in summer 2020, some destinations have been able to safely open up to limited numbers of cruise guests. The only reason we were able to capitalise on these regions opening up was because AIDA and Costa primarily serve the local drive-to-cruise markets, so guests didn’t need to travel to/from another country to embark on their ship.”

Donald is hopeful that the advances in Covid-19 treatments, the increased availability of low-cost and accurate testing, and the global roll-out of multiple vaccines have taken the cruise industry one step closer to resuming operations.

“Although we’re looking at a staggered resumption, I’m optimistic that most, if not all, of our vessels will be back in service by the end of 2021 or early 2022,” he says. “However, while we’re eager to welcome our guests back to our ships, we won’t act prematurely and will only resume services when the time is right in conjunction with advice from the CDC and others. 

“The long-term future of the cruise industry won’t be determined by whether we restart by those dates, but rather whether we can successfully survive the financial impact of the crisis to resume sailing in a way that allows us to keep everyone safe while continuing to deliver cruise experiences that exceed our guests’ expectations.”

Donald’s confident and optimistic projections put him at odds with industry critics who have suggested that many travellers will no longer trust the cruise sector to provide safe vacations. While he concedes that some people may be anxious, Donald also points out that none of Carnival Corporation’s nine brands have recorded a drop in bookings. In fact, they have remained robust throughout the pandemic.

“Feedback from many past cruisers shows they’re confident in our ability to deliver safe and enjoyable holidays,” says Donald. “They know we’ve always followed strict health and safety protocols and that our ships regularly undergo independent hygiene inspections. Plus, we have dedicated medical centres onboard our vessels, so they’re reassured that our trained medical professionals would be able to quickly help them if they do fall ill. These factors make many people feel more comfortable taking a cruise than any other type of holiday.”

Donald predicts that the cruise industry’s rapid, diligent and collaborative approach to overcoming the challenges of the past 12 months will make the sector just as strong, if not stronger, than it was prior to the pandemic.

“People have endured lockdowns, quarantines, isolation from family and friends, and various other restrictions, so many are frustrated and desperate to get back to ‘normal’ and explore,” explains Donald. “There’s a lot of pent-up demand for travel and we expect that as soon as restrictions ease and countries start to safely reopen borders, huge numbers of people will be booking holidays. Collectively, our brands have a base of eight million repeat guests who were forced to cancel their regular cruises and we know from our conversations with them that they’re very keen to get back onboard.”

Carnival Corporation is also expecting to see a rise in demand from first-time cruisers. “People are realising that not only is cruising the safest way to holiday, but it also offers great value for money and the unique chance to wake up with a view of the ocean and explore a new destination every day,” says Donald. “Cruising brings together people from all walks of life and allows them to discover new cultures, cuisines and more – it’s a great human spirit experience.

“Just before the pandemic, my wife and I took 105 family members on a cruise and together we enjoyed incomparable experiences that have left us all with lots of happy memories to last a lifetime. I’m looking forward to the day that Carnival Corporation and its brands are able to get back doing the same for our guests – I truly believe that when the time is right, our industry will embark on a journey to a very bright long-term future.”

This article was first published in the Spring/Summer 2021 issue of Cruise & Ferry Review. All information was correct at the time of printing, but may since have changed.

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Rebecca Gibson
By Rebecca Gibson
26 March 2021

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