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Business News/ Companies / News/  Asia’s only sailing cruise line is fully booked — and in trouble
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Asia’s only sailing cruise line is fully booked — and in trouble

The cruise industry is among the hardest-hit by the global health crisis
  • Norwegian Cruise Line has raised about $3 billion after initially expressing concerns it may not survive in May
  • An internet show host poses in the swimming pool on the Explorer Dream cruise ship in Keelung, Taiwan (Reuters)Premium
    An internet show host poses in the swimming pool on the Explorer Dream cruise ship in Keelung, Taiwan (Reuters)

    The Hong Kong-based cruise operator that spooked creditors this week by suspending all payments is still sailing a fully booked ship despite the crippling pandemic, in what may be one bright spot for the beleaguered firm seeking to revamp debt and raise fresh capital.

    About a month ago, Genting Hong Kong Ltd. restarted two- and three-day excursions around Taiwan, exclusively for residents of the island that’s seen success in containing the coronavirus outbreak. Genting is the only liner to have resumed operations in Asia among members of the industry’s trade group, according to Cruise Lines International Association.

    Genting’s Dream Cruises said about 900 passengers are booked on each of its trips in July and August, hitting the 50% maximum capacity allowed for social distancing. This month, it announced its ship, Explorer Dream, is reopening the casino, which may help bring in much-needed revenue.

    “The Taiwan sailings prompt the investor or creditors to believe that Genting is still running the cruise business with open casino and this may be an important asset for the company to negotiate with creditors and investors for proper restructuring," said Banny Lam, head of research at CEB International Investment Corp. “Reopening helps boost sentiment and hope, but doesn’t solve the problems."

    Genting isn’t alone. The cruise industry is among the hardest-hit by the global health crisis, with many ports still closed to the luxury liners due to continued concern about Covid-19 infections while travel restrictions and curbs on flights have forced the industry to suspend operations. Controlled by Malaysian tycoon Lim Kok Thay, Genting now joins industry giants such as Carnival Corp. and Norwegian Cruise Line Holdings Ltd. in seeking capital to stay afloat.

    Norwegian, Carnival

    Norwegian Cruise Line has raised about $3 billion after initially expressing concerns it may not survive in May. Carnival, the industry’s biggest operator, has also raised almost $9 billion during the pandemic.

    This month, Genting warned it expects a net loss of at least $600 million for the first half of the year due to the suspension of operations across its cruise businesses. The company said it’s working with advisers to raise funds. News that the company has stopped payment to creditors sent shares tumbling 38% on Thursday in Hong Kong before a rebound of as much as 8.3% Friday.

    The single cruise and casino operations around Taiwan covers only a small revenue share of the entire company, Lam said.

    Genting’s Dream Cruises line made headlines when it resumed sailing July 26, becoming one of the few internationally to restart operations while most of the industry has pledged to suspend cruises until Oct. 31. Genting will continue the sailings, dubbed as “island-hopping" excursions, which were previously planned to continue through Oct. 16, according to a Dream Cruises representative.

    Kate Lee, a 33-year-old blogger from Taiwan and her husband, were paying guests on an Explorer Dream cruise earlier this month. They booked the last available room, after another trip they wanted was full, they said. Despite no buffets in the restaurants and wearing masks in public areas, the couple enjoyed their very first cruise on a half-empty ship with no lines at restaurants.

    “It was very comfortable, not odd," she said. “I liked the social distancing."

    Deep Scrub

    Before restarting its operations, the company said the ship underwent a deep cleaning. A slew of health measures were undertaken to prevent an outbreak, including a 14-day quarantine of crew before the voyage. The ship is equipped with 22 negative pressure rooms that can be used for quarantine, along with an emergency plan to deal with a Covid-19 outbreak, according to the company.

    Genting Hong Kong, formerly known as Star Cruises, operates the Star Cruises, Dream Cruises and Crystal Cruises lines as well as a casino in Manila and a shipyard in Germany -- businesses that have seen plummeting revenue during the pandemic due to halted or restricted operations, the company has said.

    “The COVID-19 pandemic has had and will continue to have a material impact on the financial position and results of operation of the Group," the company said Aug. 19 in a Hong Kong stock exchange filing.

    Chinese Tourists

    The company has been angling for Asia’s fast-growing and competitive cruise market, with Chinese tourists seen as a lucrative and emerging source of momentum. Plans for expansion included taking delivery of two gigantic so-called “global class" ships that were slated to launch next year. The Global Dream was billed to feature an amusement park and the largest cinema at sea.

    Those ambitions, and the pandemic, led to trouble.

    The company said its subsidiaries Dream Global One Ltd. and Dream Global Two Ltd. failed to pay fees of about 3.7 million euros ($4.4 million) on Aug. 17 related to the “financing of the construction of certain ships," and said the non-payment would constitute a default as per the units’ finance documents. Genting Hong Kong guarantees the payment of the fees.

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    This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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    Published: 21 Aug 2020, 12:36 PM IST
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