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The Delta variant of the COIVD-19 virus has created complications for cruise companies like Carnival Corporation, the world's biggest cruise operator. As virus cases plummeted in the US during the first half of this year, it appeared the country could return to pre-pandemic life by the summer or fall.
But Delta variant and the threat of other COVID-19 variants that could evade vaccines have created more uncertainty about the speed with which Carnival will be able to return its full fleet to service, and whether further safety measures might be necessary. Already, the company — which resumed cruises in the US, its biggest market, in July — has experienced a COVID-19 outbreak on one of its ships, the Carnival Vista, after which a passenger died (Carnival told The New York Times it believed that passenger didn't contract the disease on the Vista).
"With all of the variants, it certainly casts some doubt into how long it's going to take before they're back at full strength," Wedbush Securities analyst James Hardiman told Insider.
The good news for Carnival is that the demand for cruises is strong. The company expects its full fleet to be in service by the spring of 2022.
"We are scheduled to have 65% of our overall capacity sailing by year end," a Carnival spokesperson told Insider. "There is a pent-up demand for cruising, especially among past guests that are anxious to sail again."
If things don't get worse than they are now, the company, and the cruise industry as a whole, look primed for a strong recovery, Ivan Feinseth, the chief investment officer at Tigress Financial Partners, told Insider. "I think all is good for the industry," he said.
But the uncertain trajectory of COVID-19 variants raises the possibility that the world could be faced with a public-health crisis for years to come, with a significant percentage of the population unvaccinated and new variants that could potentially outrun existing vaccines. Such a scenario would not put Carnival out of business, Hardiman said, but it would place the company in a financial bind.
Carnival has spent the past year replacing older ships with new, more efficient, and higher-capacity vessels, a move that should lower its costs, Hardiman said. But in a world where COVID-19 variants flare indefinitely and countries don't have the tools to contain them, Carnival might not be able to operate its ships at full capacity, which would eliminate some of the financial benefits of its fleet upgrade. Carnival's future profits "rely on a certain amount of utilization," CFRA Research analyst Andrew Tam told Insider.
Carnival has proven resilient in the face of a historic challenge, but more bad news on the COVID front could delay its return to full strength.