On 1 August, Princess Cruises completed its first voyage after a long disruption to its operations due to the pandemic. Could this be a hint of a post-pandemic recovery ahead for the Carnival (LSE: CCL) share price?
Carnival, the parent company of Princess Cruises as well as Cunard and P&O, was one of the companies to feel the devastating effects of Covid-19 on the travel industry. So, is it now a good time to invest in Carnival as its ships begin to set sail again?
Road to recovery
Things looked very bad for the Carnival share price back in March 2020, when Princess Cruises ship Diamond Princess became the breeding ground for a virus outbreak. In total there were 2,600 passengers on board, just under a third of them contracted the virus and devastatingly, one man died on board.
Not surprisingly, the share price took a colossal hit. Trading on 14 February 2020 at £3,906 it dropped by 84% to £614.80 by 3 April 2020.
Now, almost a year-and-a-half away from the events that took place on the Diamond Princess, the Majestic Princess has returned to Seattle successfully after completing a seven-day cruise.
Princess Cruises will also be sailing from St Lauderdale, Los Angeles and San Francisco. There are plans in September and November for ships to be sailing to the Caribbean, Hawaii, Mexico, the Panama Canal and the California coast. All passengers need to have had their final vaccine 14 days before their cruise sets sail.
Further, Carnival reported in its 2021 Q2 business update that booking volumes for future cruises are 45% higher than the previous quarter, and that it will be operating at 50% of the company’s capacity by 30 November.
It seems to me, that Carnival’s recovery plan has seen fairly smooth sailing so far and there are positive signs for the Carnival share price. However, I still have my concerns on adding the British-American business right away to my portfolio.
Could there be more troubled times ahead?
Despite Carnival implementing anti-infection strategies such as requiring passengers and staff to be fully vaccinated, reducing capacity, and providing Covid-19 tests for passengers, safety is still not wholly guaranteed.
With the increasing infection rate caused by the Delta variant of Covid-19, and its apparent greater resistance to the vaccine, some passengers may feel apprehensive about stepping on board. That’s especially due to the fact that cruise ships were hotspots for the spread of Covid-19.
If the Delta variant proves resilient or even worse, another outbreak were to happen on one of these ships, I believe the effects on the Carnival share price would be catastrophic. Considering that Carnival reported a net loss of $2bn for Q2 2021, a further delay would only increase pressure on the company.
Should I step on board Carnival?
Personally, I won’t be adding Carnival to my portfolio just yet. While I do value the improvements in the company’s operations, I would rather wait to see if any issues arrive in the months ahead before making an investment.
