Cruise Lines Left Out Of Coronavirus Stimulus & For Good Reason
As the government continues to work on a massive stimulus package because of the Covid-19 outbreak it appears one group is being left in the cold. It is clear that the travel industry has been ravaged by the virus outbreak. Cruise ships have been docked, planes have been grounded and hotels have been shuttered. The latter two will be getting some sort of assistance but not the former. Cruise lines have been left out of the coronavirus stimulus and it is for good reason.
Related: Why I Have Resisted Cruises My Entire Life
Why Are Cruise Lines Not Getting Assistance?
Cruise lines, even while having hundreds of thousands of US workers, have based their headquarters outside of the US. They are based in places like Panama and Bermuda. This is so that they can avoid paying almost all federal taxes. They also go this route so they can hire workers easier with less regulations.
As the old saying goes you need to pay to play. The new stimulus package still working its way through the voting process has the following terms per the Washington Post:
…companies must be certified as “created or organized in the United States or under the laws of the United States” as well as having “significant operations in” and a majority of employees based in the United States.
Final Thoughts
I don’t think you can purposefully dodge taxes and regulations and then expect a hand out after the fact. Even though they employ over 400,000 US citizens I would rather see the money go to the individual workers involved instead of the companies. I wouldn’t be surprised to see something happen in the future but I hope they stand firm on this. If a company dodges taxes they should not reap the benefits of that government.
What do you think? Should the cruise industry get a bailout like other travel related industries?
Source: Washington Post
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I’ve never taken a cruise or was a fan of the industry myself. However, while your post makes sense from a principle standpoint, it makes zero sense economically for the consequences of having 400,000 people out of jobs. If each one collects $1500 for at least 6 months that’s a real currency cost of $3.6B. Add up all the other stuff lost over the course of a year to get these people hired again and you’d have huge costs as well (e.g. the long term cost of 400,000 people without health and retirement benefits for months to years long). But I agree the govt loans should come with stricter terms.
Also, no one is handing out bailouts, it’s all loans with interest payments for us the taxpayers.
People who say let them fail and someone else will come: you do realize that new or expanding businesses require a ton of money to stand up as well right? Hiring and training costs alone is hundreds of billions of dollars and millions of productivity hours lost a year in this country. Then people dont also realize the other infrastructure setup costs and time to stand up a new org so we really need to stop with this whole let them fail crap.
Fair points but even if the cruise ships get the money I don’t see them funneling it to the employees anytime soon. Most workers are independent contractors and will simply be laid off. And I don’t see people running to get on a boat anytime soon. So the workers will be on unemployment whether they get a favorable loan or not. A loan that is coming from tax payers to a company that pays very little in taxes. I also find the 400K number to be suspicious and most likely highly inflated.
I don’t believe in bail outs for ANY business of any kind. Let them go out of business and create opportunity for someone new who can do a better job. Companies large and small will have to learn how to put money away for a rainy day if they want to stay in business. It can’t always be about squeezing every last penny out of their share price all the time!
The problem is that they are eventually going to get our taxpayer money, they just didn’t wamt to include it with this bill (source: Mitch McConnel’s office).
There should have been no bailout bill at all.
I do think they will end up working something out at some point. Hopefully it works out in our favor somehow if they do.
Excellent post.
Actually, I feel this is a more complex question.
There is a side of me that really believes none of these should be bailed out. Airlines have shown complete contempt towards consumers (any luck with refunds?), and some hotel chains (Bonvoy!) are not far behind. I truly do not believe they will be pouring the money into their payrolls.
The reality is that airlines have a strong lobby in DC, and cruise lines do not.
Airlines farm out many of their services to countries in which costs (and employee protections) are much lower.
I have cruised some, and every cruise line employee I ever encountered voiced gratitude for the opportunity to make a living while seeing the world in a way they would have never been able to do otherwise, often making much more than they would be making in their own country, supporting their family while only working half a year.
Furthermore, I discovered that many of them also had truly “The Calling of the Sea,” which is difficult to explain, but they are happiest when they are on the ships, and would talk about how they could hardly wait to go back out to the ocean after a period at home.
Mark, you have actually written about how growing up in Michigan, some of your happiest times were out on the water.
Wishing all of us stay healthy and get past this.
I think a lot of people are struggling with the bailouts Docntx, whether or not they should happen. It is a slippery slope for sure and the fact that airlines and others have been spending money instead of saving for a rainy day adds to the anger for sure. I think they end up doing it to subside the panic and stop the bleeding in the market. If you follow the true principals of business it shouldn’t ever happen. And it does send the wrong message, and leads to the same mistakes happening again in the future. I don’t know what the answer is or if this is really the best option or not but I for sure would have liked to see some regulations/consumer protections come along with these packages. It doesn’t seem like that will ever happen though.
Water is a very big part of Michigan life for sure. And I totally get where cruise employees are coming from. My entire family loves to be on or near the water :). Hopefully they are able to get back to it sooner than expected!
Thanks as always for the great comment
You can’t please everyone, but I agree that foreign companies cannot expect US taxpayer funds.
After they reorganize under bankruptcy they will start selling again, providing there is a vaccine for the coronavirus.
I agree I don’t think anything in the travel industry will get back to somewhat normal until their is a vaccine.
Cruise lines not just avoid taxes, they neglect their workers and are very bad for the environment. If they stop to exist in their current form, it will a net positive for the planet and the society.
Cruise lines shouldn’t be bailed out as they are not based in the US and are not essential to commerce as are airlines and other forms of transportation. Cruise lines are a luxury not a necessity. As some one who lives in Alaska many of the towns villages in this state would not exist without the essential air program that is in place which is heavily subsidized.
Great point Cmorgan. The airlines have a lot more skin in the game vs the cruise industry that is all leisure.
Shouldn’t bail out cruise lines but this reason isn’t it. These are mostly US corporations. That the ships aren’t US flagged is no different from a US hotel chain having foreign properties or airlines owning planes in Europe.
Cruise lines shouldn’t be bailed out because they aren’t essential and this pandemic will likely result in a permanent dropoff in business with or without a bailout. It would be like bailing out the airship industry after the Hindenburg.
The reason the ships aren’t flagged in the US is to avoid US corporate taxes and US labor laws. I also agree that they are non-essential. Also, they are not going to disappear. If they don’t make it through this crisis, either someone else will buy their assets at pennies on the dollar or they will reorganize in bankruptcy.
My wife and I do like to go on cruises and we like to travel in many other ways too. It is pretty rare to find someone from the USA actually working on a ship, other than entertainer. Ships are flagged in other countries so they do not have to meet many of the laws in the USA. Have a legal problem on a ship and you have essentially no rights.
I do feel bad for the travel agents, port people, and the many support services that support the cruise industry here in the US. I hope some of the Care Act money goes in their pockets.
I wonder if they are including travel agents etc. in that total. Didn’t seem accurate to me either.
Most major cruise lines are based in the USA. American Cruise Lines, Azamara, Carnival, Celebrity, Crystal, Disney, Holland America, Norweigian, Oceania, Paul Gauguin, Princess, Regent, Royal Caribbean, Seabourn, Uncruise, Seabourne, Viking and Windstar besides some smaller niche lines are all USA based companies. While Carnival does split part of the company with the UK and Cunard lines there. I think what you are referring to is foreign flagged ships. The vast majority of ships, regardless of owners are flagged in foreign countries to avoid draconian taxes. Even private yacht owners do this. RV owners also do this sort of thing by tagging RV’s in certain states like North Dakota.
While I agree that they should change their ways (as President Trump has pushed for this week with cruise lines) they are a huge contributor to the travel industry. As a side job I work as a travel agent and taking cruise ships away from the travel market would wipe out 90% of agents. Many of these are small business owners. In addition the cruise lines drive tons of air travel all over the world which is a large part of air travel demand and money for that industry. Then you have hotels which also take advantage of tax loopholes, not all are USA owned and many properties depend on the cruise lines for a big chunk of business. Without even getting into the many indirect jobs like taxi, uber, porters, cruise terminals, parking vendors, etc. this is far from a black and white issue as you suggest.
I think that congress could help the cruise industry by doing away with the passenger component of the Jones act which requires a foreign port stop and also prevents having an all USA itinerary for most ships. They could provide financial aid to cruise lines that agree to reflag ships but also provide a labor protection for wages paid on ships. Many of the cruise line employees are from 3rd world countries where they have little to no chance a good paying job like the cruise lines provide. Entire families depend on each of those jobs for the most part.
I would be okay for them working out something if they reflag etc. I think that is where it will likely end up going. Some type of deal will be made in order to release funds.
None of these cruise lines are based in the US. Carnival is incorporated in Panama, Disney in Bahamas, Royal Caribbean in Liberia, Norwegian Cruise Line in Bermuda, and privately held MSC Cruises in Switzerland. They are foreign companies selling to American citizens.
I think the US government should help the cruise lines in exchange for two things: All ships to be permanently reflagged to the USA with all applicable laws to be followed and a shipping equivalent of EU261. Cruise lines are normally immensely profitable and this would lower the vast amount of profits a bit by requiring higher standards for climate, labor laws, and general accountability. It’s a win/win/win situation.
Wikipedia: The US entity Carnival Corporation is incorporated in Panama,[7] and its operational headquarters are located in the city of Doral, Florida.
Well Said. My thoughts exactly.
100%. You can’t expect to save revenue by cutting legal loopholes and registering your businesses outside of the USA.. then expect a bailout from the USA. Smart move by the government.. for once!
They are registered in Panama, Liberia or Norway so they cannot expect to get anything from us. They pay taxes to foreign governments. So let’s see if Panama and Liberia give them a bailout.
NO SYMPATHY.
100% agree Mario
I agree but there’s more to it than just taxes. Cruise companies do support a lot of jobs, but there’s no question they are less important to the overall economy than say airlines. If the cruise industry ceased to exist, it’s very different than if the airlines all went under. And cruise companies (with their arguably lax practices) were at least somewhat culpable in the spread of the pandemic, arguably much more culpable than airlines.
Agree with everything except culpability – airlines definitely spread most of it. Cruise just made the headlines since they had more time to check on board.
I agree I think airlines are important for travel, business and moving goods and supplies around the world. Cruise ships are simply entertainment and leisure so the need is not the same.
With that kind of logic we should use US tax dollars to bail out Etihad, Lufthansa, and other foreign airlines. They all support jobs in the US.
I also 100% agree with this move.
Great news, I 100% agree.