Having generated revenues of approximately $6.4bn in 2019 (according to data from Statista) Norwegian’s stock price traded at nearly $60 at the end of December. In the six months that followed this value plunged dramatically, going as low as $10 per share in March and witnessing an over 80% fall since the beginning of the year. 

Among the reasons behind this drop - which similarly affected other cruise companies - was the US Centre for Disease Control and Prevention’s no-sail order, mounting cancellations and a freeze in bookings, as well as the cruise industry’s exclusion from President Donald Trump’s $2.3trn transport stimulus package.

To make matters even worse, GlobalData travel and tourism analyst Ben Cordwell believes that Norwegian was slower than its two major competitors when it came to securing cash reserves at the early stages of the outbreak.

“[Of the] big three operators Norwegian had the lowest amount of cash reserves when the Covid-19 outbreak started with around $225m,” he says. “I'm not too sure about what was going on internally, but it did seem that Norwegian was a bit slower to react than Carnival and Royal Caribbean.”

Norwegian has declined Future Cruise’s request for comment. 

As long months of inactivity went by, the situation continued to worsen for the operator, which prior to the pandemic had 2.7 million customers per year. It hit a particularly low point in early May when, during a filing with the Securities and Exchange Commission, Norwegian warned investors of potential bankruptcy, claiming there was “substantial doubt” it could continue to operate if lockdowns persisted. 

“I think that having these lower cash reserves initially made it really difficult for Norwegian because the financial impact has been so great, the costs of operating a cruise ship are enormous, and a lot of these costs and overheads have carried on,” comments Cordwell. “So [even now] it’s still paying a lot of these bills when it’s got pretty much no revenue coming in.”

Much like Carnival and Royal Caribbean, Norwegian came up with different solutions to secure cash during the months of inactivity. “All three cruise companies have done quite a lot to try and secure some finances,” explains Cordwell. “Norwegian amended its credit facilities for six of its ships and deferred the debt outstanding under the agreement.”

This move is estimated to have helped raise some $156m. “[Norwegian] also initiated debt relief terms and has a revolving credit facility of $675m and that's on top of an existing $875m,” he continues. “So, that would leave it with around $1.55bn.”

Yet, although both Royal Caribbean and Carnival reacted in similar ways - the former having reportedly agreed to a $2.2bn loan facility and the latter having raised some $7bn between debt and equity - Cordwell admits that these have been more of a “short-term fix” rather than a longer-term solution. “Every company has realised the importance of securing finance and trying to do that as soon as possible,” he says, “I wonder if Norwegian could have tried to do things sooner.” 

With time ticking away during the harshest months of lockdown and share prices falling rapidly, Norwegian found itself on the verge of financial collapse at the beginning of May. However, the day after warning it may have to file for bankruptcy, the company announced it had succeeded in raising $2.2bn from investors. Two ships and two islands were offered as collateral to obtain the funds. 

“A situation where [Norwegian] has to offer the ships and the islands as collateral shows the gravity of the situation, how serious it is and how essential and desperate companies are to raise finances,” comments Cordwell. This may have proved effective for immediate survival, he adds, but there is no way it can be sustainable in the months to come. 

A more long-term option could then be to follow Carnival's example and sell stakes in the company itself. “That's something that Norwegian could look at doing further down the line if it’s still struggling to generate finance,” he says.

Yet nothing will help Norwegian more than new bookings and a long-awaited end to the no-sail order. “The most effective way to raise money is by continuing cruises and getting customers to make bookings,” he argues. “That is essentially what it needs to do as a company, and it's what all cruise companies need to do at the moment. It won't survive long - none of them will - if it goes months and months without bookings.”

Achieving this will require copious investments in marketing and a revolutionised approach to health and safety protocols. “A lot of companies have been focusing all their money just purely on survival, but they need to think in the long term, they still need to get people back on board, so they need to invest in their own marketing, and make sure they're selling holidays as soon as possible,” says Cordwell.

For Norwegian, the task may prove challenging due to an ongoing investigation into its marketing strategies during the outbreak. Led by the Florida attorney general, the inquiry hinges on allegations that the operator downplayed the magnitude of the crisis to avoid booking cancellations.

Responding to the news in March, Norwegian said in a statement: "We remain committed to operating with integrity and providing our guests with the best possible vacation experiences across the globe. We are [...] looking into the matter." 

According to Cordwell, Florida’s “damaging” investigation is currently posing serious threats to the company’s future ability to attract customers. “Even if this investigation goes to show that [Norwegian] wasn’t doing too much wrong it's still out there in the media,” he says. “The entire cruise industry has been getting bad PR and cruise companies are in a position where they're going to be struggling to attract customers.”

Now that ships aren’t returning to the ocean for another few months, Cordwell says that Norwegian is at an even greater risk of bankruptcy - although its case is anything but unique. “This is the tourism industry at the moment, a lot of companies are in danger of going bust and I think the only thing that can ultimately save them in the long term is if customers start travelling again,” he continues.

The silver lining is that in some parts of the world, this is starting to happen again as countries in Europe and elsewhere reopen their borders for the holiday season. “The longer people aren't making bookings the harder it's going to be, but now we are starting to see a shift in attitudes and some restrictions are being lifted,” he says pointing at the examples of Spain, Italy and France. 

“That's all good news for cruises. But the industry is still a difficult one and it could be one of the last things to come back, and that’s a real risk for a lot of companies.”

Editors update: Following the publication of this article, Norwegian Cruise Line reached out to announce its financial results for its second 2020 quarter that ended 30 June 2020. It said that revenue had decreased to $16.9m compared to $1.7bn in 2019 due to the complete suspension of voyages in the quarter. However, the company says that total cruise operating expenses decreased by 68.5% in 2020 compared to 2019 and the company has "further strengthened its liquidity position with a highly successful $1.5bn triple-tranche capital raise".

Norwegian Cruise Line Holdings president and chief executive officer Frank Del Rio said: “Our guests continue to demonstrate their desire for cruise vacations in the future. Looking ahead, we made significant progress in our Roadmap to Relaunch with the formation of our Healthy Sail Panel, comprised of globally recognised public health experts, which is tasked with providing recommendations to advance our public health response to Covid-19 and inform us on the development of a science-backed plan for a safe and healthy return to cruising.”