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The cruise industry has contingency plans for all sorts of potential disasters.
The cruise lines are ready to act when they deem that political unrest makes an area unsafe for passengers. That's why Royal Caribbean, Norwegian, MSC Cruises and some smaller cruise lines pulled out of Israel during the ongoing conflict.
They're also always ready for an outbreak of illness on their ships, even if they don't like to talk about the subject. They have a clear set of protocols to follow when that happens and know exactly how to minimize the spread.
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You may not hear them talk about it, but there's no scenario that you can plausibly imagine that major cruise lines have not game-planned for. That's what made the Covid pandemic so unimaginable.
Even as it happened, the cruise industry, and the world in general, could not see how long its impact would last. For months it always seemed as if something would happen to slow, then stop, the spread.
First, it was social distancing and then it was lockdowns. Nothing really worked (mostly because Americans never fully committed to any of the options) and the pandemic simply endured until vaccines were introduced.
For the cruise industry, it was a black swan event.
"A black swan event, a phrase commonly used in the world of finance, is an extremely negative event or occurrence that is impossibly difficult to predict. In other words, black swan events are events that are unexpected and unknowable," according to the Corporate Finance Institute.
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Image source: Helen H. Richardson/MediaNews Group/The Denver Post via Getty
Covid could not be predicted
Until Covid vaccines became available, the cruise industry had no way to operate. Socially distanced cruises made no sense financially and simply weren't that much fun.
The vaccines changed that and gave cruise lines a chance to return to normal operations. That was a gift, but it also showed just how vulnerable the cruise industry was.
And that's something you might think industry executives like Carnival Chief Executive Josh Weinstein would worry about. He addressed his fears, however, in response to a question from Morningstar's Jaime Katz during Carnival's second-quarter earnings call.
"Good morning. I have a quick question. Given that the environment has been so strong for you guys, what keeps you up at night? Is it regulatory risk? Is there some ESG risk? Is it nothing right now? Just curious to hear sort of the other side of the attack," he asked.
Weinstein's answer was surprisingly confident.
"Listen, we got through 2020, and I got three kids, so not much keeps me up at night. When it comes to this, I mean, anything within our control, I feel very comfortable that the team we can manage it all, frankly. And so I don't worry much about black swan because you really can't spend your life worried about black swan or you'll have a miserable life," he shared,
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Carnival plans to stay ready
While Weinstein said that he's not spending time worrying about the next black swan event, that does not mean Carnival isn't continuing to be as ready as possible for whatever might come next.
"So our attitude is we got to keep performing. We'll take what people throw at us and the world throws at us and we'll adapt and modify what we need to do as needed and move on," he said. "And the greatest part about this business from that perspective is we're mobile. And when you have that mobility, it gives you a lot of flexibility to figure things out."
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One of the biggest ways Carnival has been preparing for the future is by improving its balance sheet. Weinstein addressed that in response to a question about the impact of a potential interest cut.
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"But really, from a rate cut perspective, we're in an environment where for us, we're an improving credit profile. And hopefully, our interest rate, our future interest rates will come down not just because of rate cuts but because of the improving credit and the lower credit spreads. And on top of that, we would expect to do some refinancings. And those refinancings should drive our interest expense down," the CEO added.
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