Trump’s Cuban ban to hit cruise line revenues

2019-06-17T10:52:11+00:00 June 17th, 2019|Finance|

Both Royal Caribbean Cruises (RCCL) and Norwegian Cruise Line Holdings (NCLH) have both said that US President Trump’s ban on tourist travel to Cuba will hit their 2019 earnings per share.
RCCL said that the financial impact of the new regulation would mean a reduction to the adjusted EPS for 2019 of between $0.25 and $0.35 per share.
“While the affected sailings impact only 3% of our 2019 capacity, the extremely short notice period for this high yielding destination amplifies the earnings impact,”explained Jason Liberty, RCCL’s executive vice president and CFO.
He added that the policy change “has created a short-term impact to our guests, operations and earnings.”
NCLH said thatthe extremely short timeframe to modify itineraries to be in compliance with the new travel restrictions to Cuba has exacerbated the impact to the company’s earnings estimates.
The restrictions impact all three of the company’s cruise brands, with about 25% of the impacted capacity days attributable to the combined sailings on the Oceania Cruises and Regent Seven Seas Cruises brands, the majority of which were Cuba-intensive premium priced itineraries.
Cruises that included a Cuban port of call represented slightly more than 3% of the company’s remaining sailings in 2019 for all three brands.
The modification of these itineraries, the substantial discounts offered to guests for them to remain on their booked cruise, the accommodation of cancellations and changes to reservations, incremental marketing investment to support the compressed sales cycle for the modified voyages, along with the protection of travel agent commissions, will result in an estimated impact to adjusted EPS for full year 2019 of around $0.35 to $0.45.
On 4thJune, 2019, the Office of Foreign Assets Control of the US Department of the Treasury removed the authorisation for group people-to-people educational travel by US persons to Cuba.
Concurrently, the US Department of Commerce’s Bureau of Industry and Security removed the authorisation to travel for most non-commercial aircraft and all passenger and recreational vessels, including cruise ships, on temporary stay in Cuba.
Combined, these rulings, which took effect a day later, effectively eliminate the ability of cruise lines to offer cruise travel to Cuba, NCLH explained.
“Our three brands are working diligently to accommodate the needs of our guests and travel partners as we quickly modify itineraries to meet the new Cuba travel regulations,” said Frank Del Rio, NCLH president and CEO. “We share in the disappointment that comes with these changes especially on such short notice and sincerely appreciate the co-operation and understanding of our guests for this inconvenience. Our brands have put in place generous compensation programmes that offer guests and travel partners a compelling, value-packed alternative.”
In another move, Carnival Corp has asked a US court to dismiss lawsuits that claim the company profited from confiscated Cuban property.
This is the first case brought before the US Courts since the Trump administration agreed to allow them last month.
Two US citizens who claim to hold titles to the Havana and Santiago de Cuba ports that were nationalised by Fidel Castro’s Cuba after the 1959 revolution filed suits against Carnival in US District Court in Florida in early May for calling at the ports.
The Trump administration had announced that a long dormant and controversial section of the 1996 Helms-Burton Act would take effect on 2ndMay, allowing US citizens to sue Cuban entities and foreign firms over confiscated Cuban property, Reuters reported.
“Helms-Burton has no application here,” according to a filing in the case by Carnival. “First, by its own terms, trafficking under Helms-Burton does not include uses of property ‘incident to lawful travel to Cuba’.”
“The fulcrum for determining the outcome of all travel-related lawsuits will be whether there has been tourism,” said John Kavulich, president of the US-Cuba Trade and Economic Council.
Carnival also disputed the ownership of the two US citizens who are descendants of original owners.