Cruise Stocks Fall as Oil Rebound Raises Fuel Cost Concerns
Royal Caribbean entered Thursday up nine percent for the year with a 77.67 billion dollar market value; Norwegian began down 22 percent.
Shares of the three largest publicly traded cruise operators fell Thursday as higher crude prices renewed concern about fuel costs and operating margins. By midday, Norwegian Cruise Line Holdings was down 5% to $16.50, Carnival Corporation fell 4% to $25.65 and Royal Caribbean Group declined 3% to $290.76.
None of the companies released company-specific news Thursday. Oil prices and interest rates remained the principal common factors behind the sectorwide move.
Oil rebound raises fuel-cost pressure
West Texas Intermediate crude stood at $86.58 on Tuesday, 2% higher than a week earlier and up 3.7% over the previous month. The benchmark had recovered from an early-August low near $76 and was approaching mid-summer levels above $93.
Fuel is a direct operating expense for cruise ships, and bunker prices move with the wider oil market. Because fares and itineraries are generally established months before departure, a rapid increase in fuel expense can narrow the economics of existing bookings unless operators have other cost protections in place.
Debt adds a second source of pressure
Higher long-term interest rates accompanied the rise in fuel costs. The 10-year Treasury yield closed Tuesday at 4.71%, near multi-decade highs and in the 98th percentile of its range over the previous year.
The three operators continue to carry substantial debt accumulated during the pandemic shutdown. At their 2024 fiscal year-end reporting dates, Carnival had $27.4 billion in total debt, Royal Caribbean had about $20.6 billion and Norwegian had $13.1 billion. Norwegian reported that 94% of its debt was fixed-rate and 6% was variable-rate. Those balances leave refinancing costs exposed to the interest-rate environment as debt matures.
Royal Caribbean retains its performance lead
Royal Caribbean entered Thursday with a 9% year-to-date gain and a market capitalization of $77.67 billion. Norwegian began the session down 22% for the year with a market value of $7.59 billion, while Carnival was down 11% year to date.
