Following the news that Royal Caribbean has agreed a $2.2bn loan facility with banks to shore up cash flows as the coronavirus (COVID-19) pandemic hits travel companies;

Ben Cordwell, Travel & Tourism Analyst at GlobalData, a leading data and analytics company, offers his view on the situation:

“Given that cruise operations could be restricted for months; it is crucial that businesses secure finance to ensure they can navigate a period of great uncertainty.

“A look at ‘cash and cash equivalents’ between the three biggest cruise operators found that Royal Caribbean had US$243.7m, Norwegian US$225m and Carnival US$518m. Although this gives companies a certain degree of security, the costs of running a cruise line are enormous and these outgoings will begin to take their toll.

“One serious problem that cruise companies will need to address is their importance to economies. The aviation industry, railways, car manufacturers and banks generally contribute more to a nation’s economy than the cruise sector. This may lead to governments prioritizing these industries, meaning that cruises are offered less in terms of financial support.

“This makes it even more important for cruise businesses to secure finance rather than expect to be helped by governments if the need arises. It will not come as a surprise to see more companies following the lead of Royal Caribbean and borrow large amounts to further bolster their liquidity.”