RE: Sudden drop?21 May 2020 11:33
The Easy Jet announcement today is a positive step because without air traffic cruises cannot operate, CUK cannot survive on just Southampton turnarounds. It is true that CUK has laid up the fleet and anticipation and planning is for no business this year and costs are being managed to pause through that period as Carnival Corp had $8 billion in the war chest as of last month but it's costing $1 billion a moth to sustain 109 ships standing idle with some crew still onboard and office staff.
CUK filed 509 redundancies on the 11th May with the UK government which after a cull of ftc's means it has effectively cut it's UK office costs in half and the remaining staff have taken a 20% pay cut for a few months.
I believe that cruising will start again sooner and the ships are in warm layup meaning most can be up and running in less than a week. However, CUK's main market is those over 70 so a mix of lack of insurance available for these people who have medical issues, and the fact some will now not want to cruise means that CUK will have to attract a younger market which it's rivals in the UK RC and MSC are miles ahead as not one CUK vessel has a water slide or any other family activities other than the children's clubs which only take a comparatively small number of kids, average 60 which with a passenger capacity on average of 3000 means they will struggle to rely on past travellers (Mainly elderly) and new business. They will now have to invest in refits to change the dynamic of the current fleet to cater more for families and elderly guests. Savers outnumber borrowers 7 to 1 in the UK so people have money but it's whether you will now get them on a cruise ship that's in doubt and the younger families will be hit now by a recession and will tighten their belts.
The Saudi investment fund has bought in for near $500 million and the finance pushed through to raise the $8 billion is why the share will hold at £8 for a long while yet though obviously when cruising does restart the share will rise. As some have indicated it is a risky share, the ships and assets are now all mortgaged to the hilt and if cruising doesn't resume in the New Year, or it does with 1000's of empty cabins with fully crewed ships then this will also kill the company. The newbuild ship Iona is waiting for payment in Germany which is near £1 billion and this is just CUK and 2 others were on the way too.
The other global brands such as Carnival itself, Aida and Costa will fair better as they already target the younger dynamic but CUK will struggle and were warned for years they relied too much on the elderly market. So one has to look at this globally for Carnival not just Plc and they should pull through this but will be selling at negative yields for a long time and the debt needs repaying but can be renegotiated.
I am not allowed to advise whether to buy or sell but for my own devices, I am buying what I can afford to lose and no more than that..
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