Even this week, deep into the global coronavirus pandemic, a few advertisements for glamorous-looking cruise holidays were still running on television.

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Promoting an image of ‘authentic travel’ where the experience was more than just being marooned on a big ship with 5,000 others, the ads were the last hangover from a cruise boom that has abruptly gone bust.

In the course of six weeks, the industry has been turned on its head.

From a period of record passenger numbers, new ship deliveries and earnings, the industry has effectively shut down. Earlier this week, Royal Caribbean, the second-largest cruiseship owner and operator, extended a month-long shutdown by another four weeks to mid-May.

It raises urgent questions about whether the cruise business can recover quickly, how it may be forced to change, and ultimately, whether all of the major players can survive.

Global spotlight

Cruise has been in the spotlight since the coronavirus took off in January. The saga of Carnival’s Diamond Princess and its enforced quarantine at Japan’s Yokohama port will be the subject of many enquiries.

Pictures were seen around the world of the ship’s isolated passengers, mixed with video messages from other angry passengers.

Concern turned to shock when passengers started dying. So far, there have been 10 deaths out of the 712 cases reported from the ship, according to John Hopkins University coronavirus database. Some 587 have recovered.

The Diamond Princess was followed by other incidents in South East Asia, Australia, Europe and the Americas.

As the crisis escalated, the world’s three biggest brands, Carnival, Royal Caribbean and Norwegian Cruise Line, started to shut down.

Even private equity-funded Virgin Voyages — fronted by British entrepreneur Sir Richard Branson — rescheduled the debut of its $500m new ship Scarlet Lady until August.

Currently, about 250 ships from Carnival, Royal Caribbean and Norwegian Cruise Line are out of action for the next month at least. The lockdown triggered a collapse in the price of the companies’ shares of up to 75%, profit warnings and a flurry of new borrowing.

Humbled

Some in other parts of shipping, could be forgiven for feeling a touch of schadenfreude in seeing the cruise business humbled. Cruise as an industry has always sold itself both to customers and investors as something other than anything so grubby as shipping.

Yet, in recent years, it has been shipping risk that has presented the biggest challenges to the industry. The sinking of Carnival’s Costa Concordia in 2012 — with the death of 32 aboard — was very much a shipping accident.

Then there has been the rolling crisis of norovirus, or winter vomiting bug, which has become an unappealing staple of social media posts from passengers from many different lines.

Now we have cruise owners facing an even bigger shipping industry crunch: how to fund huge newbuilding commitments just as their markets seize up.

Carnival has about 18 vessels on order, including four 184,000-gt ships with 5,200 berths due this year and 2022 from Meyer Turku and Meyer Werft, two for Carnival Cruise Lines and two for P&O Cruises.

Royal Caribbean has 15 on order including a 5,714-berth behemoth of 231,000 gt being built at Chantiers de l'Atlantique in France for delivery in 2023.

Carnival has already drawn down a $3bn credit facility in recent weeks, in addition to $3bn of cash it had on hand. It also has $2.8bn in export credit in place for vessels due for delivery this year and a further $5.9bn for 2021 and beyond.

Royal Caribbean this week borrowed $2.2bn from Morgan Stanley for working capital at Libor plus 2.25%, rising to 2.75% by the end of the year. Entities affiliated with two directors of the company, Eyal Ofer and Arne Alexander Wilhelmsen, each contributed $100m to the loan deals.

Many other shipowners would welcome such immediate largesse from their bankers and shareholders in a crisis. But as everyone in shipping knows, it is one thing to borrow money, but quite another to be in a position to make repayments.

It now appears the coronavirus pandemic is spreading rapidly in the US, catching up with the high rates of infection in Europe. Even in Asia where the peak appears to have past, many countries remain in lockdown and the end of travel restrictions are many months away.

No one should expect the cruise industry to kick into top gear again for at least another six months. Surviving until then will burn through a mountain of cash.