The Cruise Industry Absolutely Does Not Deserve A Bailout

Ordinary people, airlines, the retail industry, hotels, even casinos—they all need help right now. But what about the cruise industry? Odds are you haven’t thought much about that unless you work for Carnival or Royal Caribbean or something.

Evidently this is on President Donald Trump’s mind because the matter arose during his White House briefing last night:

"Look at the cruise lines. That’s a big—that’s a tremendous business, a big business. Very important to Florida. And it’s unthinkable, a month ago. A month—just unthinkable. They were setting all sorts of records. They were—they’re building new ships. We can’t let the cruise lines go out of business. I mean, that would be massive numbers of jobs for our country and, actually, for the world."

Actually, this is a simple one. I’ll make it easy for the president here. The cruise industry does not deserve a bailout, or an economic stimulus package, or massive tax breaks, or whatever else their lobbying arm has in mind. 

Cruise lines are hurting, no doubt. Shares of companies like Carnival, Norwegian and Royal Caribbean are down by more than half since the beginning of this year; in terms of dollars, they're down some $750 million and counting. 

But this may be a great opportunity to let the cruise industry die, or at least shrink to a level where we’re all better off. It is arguably the least-deserving of any industry seeking federal assistance right now—though I’d say casinos are a close second. We don’t need the cruise business, and it sure as hell doesn’t need taxpayer money to stay afloat, pardon the pun.

It is here I will pause to say that while The Drive is primarily a news website for car enthusiasts who care about the future of technology, we do concern ourselves with all forms of transportation, and I have long believed that boats are merely large (or small) cars that go on water instead of land. Try and prove me wrong. You cannot.

And if you know the world of cars, you’re likely well-versed in the subject of bailouts. A little over a decade ago now, American taxpayers bailed out General Motors and Chrysler to the tune of about $80 billion. The move did indeed save those corporations, but it’s still debated today whether it was the “right” thing to do. The automakers survived but have since closed American plants, sent jobs offshore and struggled to convince investors they’re truly ready for our electrified future.

All of this is to say that a bailout (or aid package, whatever you want to call it) of the industries seeking them now in 2020 will have ripple effects to be felt for decades to come. With the auto industry in 2009 and the airlines in 2020, you’re talking about a crucial sector of the economy that’s deeply tied to other industries and have millions of American jobs hanging in the balance.

Cruises? Not so much, and that’s why they don’t deserve a dime. Let’s examine why.

Granted, so do lots of businesses. (Looking at you, Amazon.) But while companies like Carnival, Norwegian Cruise Line and Royal Caribbean are indeed based in Florida, they are incorporated in countries like Panama and Liberia. And they use an Internal Revenue Code exemption meant to promote international trade to dodge a significant amount of U.S. taxes.

Here’s an explainer from taxation expert Alex M. Parker at Law360 to elaborate:

All three companies have reported low or zero taxation in recent years, which they mainly attribute to the exemption. Carnival Corp and Norwegian both posted negative income tax expenses — that is, they received more in refunds or deductions than they paid or set aside for taxes — with Carnival reporting an income tax expense of $71 million and Norwegian reporting an $18.9 million tax benefit.

Royal Caribbean told shareholders its total income tax expense for 2019 was $32.6 million, on a total income of $1.9 billion.

Because of these relatively low payments, analysts wonder whether a tax deferral, one of the options considered by the Trump administration, would give the industry any help. “It’s difficult to see how these companies could be afforded any sort of meaningful tax relief,” said Robert Willens, a tax and accounting analyst in New York. “Some sort of direct subsidy or refundable tax credit mechanism would probably have to be devised to actually put money into their pockets.”

Not only that, the cruise lines generally use this exemption to avoid U.S. labor and safety regulations, which make them difficult to sue and terrible as far as consumer protections go.

The auto industry is one of the biggest and most visible targets to environmentalists seeking to reverse the tide of climate change. And rightfully so—the car business isn’t nearly where it needs to be on that front. But it is working on it. Spurred by tightening regulations and the demands of the ever-important Chinese market, nearly all automakers are footing an expensive bill to pivot to electrification. Electric vehicles are the future and hybrid cars are increasingly the present. It’s getting there. It’s trying.

We cannot say the same of the cruise business. The car industry’s emissions are a drop in the bucket by comparison. Here’s a revealing article from the Financial Times just last year: 

Cruise brands run by Carnival Corporation emitted 10 times more cancer-causing gases in Europe than all of the continent’s passenger vehicles combined, according to data released on Wednesday.

A study of 203 cruise ships at sail in Europe in 2017, carried out by the European think-tank Transport & Environment, found that of the 20 most polluting cruise ship lines, seven were operated by Carnival-owned brands. In total cruise lines emitted more than 60 kilotonnes of sulphur dioxide, a cause of acid rain and lung cancer.

[...] Sulphur dioxide emissions from cars was 3.2m kt versus 62m kt from cruise ships, with Carnival accounting for half that, the study found.

To recap: the amount of pollution created by the ships from just one cruise company dwarfs that of an entire continent’s fleet of passenger cars. Which is easier for the world to give up? At least you can argue that people depend on their cars to get around. And though they too are serial offenders on the emissions front, airlines are essential for transportation and commerce.

Cruises, meanwhile, exist solely for people to sail off to Bermuda or whatever destination on the cheap and indulge while doing so. It’s not a business worth bailing out.

Long derided as "floating petri dishes," we cannot ignore the role of cruise ships in our current pandemic. 

The Diamond Princess cruise ship had to be quarantined at a Japanese port after early warnings about a coronavirus outbreak within fell on deaf ears. Nearly 2,000 more passengers on another ship had to be quarantined on U.S. military bases over another infection. And yet major cruise lines only halted their new voyages in mid-March. And even pre-coronavirus, considerable amounts of state and federal resources have had to be spent dealing with outbreaks on pleasure ships.

All of this begs the question: What are we trying to save with a bailout? What are we trying to protect? It's an employer, sure, but not a vital industry. It's not a particularly worthwhile one. It contributes very little to the country it may soon be seeking money from. It hasn't shown any real interest in corporate accountability or environmental protection. The world will go on just fine if, at the end of this, no one will be able to take a Carnival Cruise ever again. There are so many safer, better, more educational and more economically effective ways to take a vacation. 

Lest you think this is merely an angry, left-wing screed against corporate welfare being the only acceptable form of welfare in America, here is the conservative National Review in agreement that the cruise industry doesn’t add nearly enough to our economy and infrastructure to deserve a taxpayer-funded bailout:

What message would it send to Americans being furloughed from their jobs to see the government issuing interest-free loans to ensure that 180,000-ton pleasure palaces stay afloat? Before Congress rushes to save any corporation that comes begging, it should consider if it’s right to bail out companies while Americans will be still expected to pay their mortgages, car loans, and credit-card debt. It’s looking increasingly likely that Americans may get a check in the mail, but that’s hardly the same as a loan to cover all their debts. Why should corporations get different treatment?

Thus, you may be wondering about the cruise line workers themselves. According to that Law360 piece, we’re supposedly talking about more than 420,000 U.S. employees alone. If that’s truly our priority, then let’s talk about ways a federal aid package can help ordinary people more directly. Extending unemployment benefits, offering monthly stipends for families and suspending debt payments until the viral crisis blows over would be a lot more effective than giving away millions of dollars to disease-ridden, money hemorrhaging pollution-yachts.

If we are headed for hard times long-term, then some businesses are going to sink. The world won't be any worse off if the cruise lines are among them.