Cruise industry bailout? Maybe, say Florida leaders, but with hefty conditions
As legislators battle over a potential bailout for the U.S. Postal Service — which is facing a $13 billion deficit and the loss of 600,000 jobs in light of the coronavirus pandemic — internationally-based Carnival Cruises just scored a reported $6 billion courtesy of bold new commitment from the Federal Reserve.
Keeping cruise lines afloat may appeal to the tens of thousands of Floridians who rely either directly or indirectly on the cruise industry for work, but Vermont Sen. Bernie Sanders, for one, is not happy about it.
“How in the hell does Carnival, a cruise ship company that pays virtually no federal income taxes, receive a bailout, but the Postal Service, the most popular government agency in America, does not?” he tweeted on Monday.
Sanders’ dismay centers largely on the fact that the three biggest cruise lines — Carnival, Norwegian, and Royal Caribbean — are registered as foreign corporations. As such, while each has domestic offices, they are not subject to the standard 21% U.S. corporate tax rate.
So how did Carnival, which is registered in Panama, end up with billions of U.S dollars?
Cruise lines were excluded from the March 27 CARES Act stimulus package. But after the Federal Reserve announced plans to buy “unlimited” bonds to free up capital for lenders to invest in companies crumbling under corporate debt, Carnival swooped in to take advantage of the unprecedented move by issuing a combination of bonds and equity that would have previously lacked buyers.
The cruise line, which reported hemorrhaging $1 billion a month after coronavirus docked their 28-ship fleet on March 13, subsequently announced plans to return to the high seas on June 27.
Now, as Congress strategizes a third stimulus package, the question of whether to include international cruise lines — which support 421,000 U.S. jobs — must once again be addressed.
Florida greatly impacted
The decision could have tremendous implications for the Sunshine State’s ability to bounce back from the coronavirus-induced economic meltdown that has left an estimated 1 million Floridians, many in the hospitality sector, unemployed.
The cruise industry accounts for $8.5 billion in annual revenue to Florida, as well as 154,646 direct, indirect, and induced local jobs, statistics from the Cruise Lines International Association show.
President Donald Trump on March 26 said he liked the idea of bailing out the cruise ship industry if it would entice them to register in America.
U.S. Rep. Ted Deutch (D-Boca Raton) agreed, adding that it shouldn’t take a pandemic for the government to make sure every company, international or domestic, is paying its fair share of taxes.
“Right now, we need to figure out steps that we can take to help American workers, and especially small businesses, who have been devastated by this pandemic,” Deutch said. “It's important that we use this opportunity to go back and look at every business and the tax treatment of those businesses.”
Deutch’s district includes Port Everglades in Fort Lauderdale — a bustling hub for cruise ships heading to the Caribbean, Mexico and South America. On any given night before the coronavirus pandemic, surrounding hotels, bars, restaurants and shops were packed with spendthrifts laying over either before or after a cruise. But no more.
“It’s not until an industry goes down that you think about the ripple effect that it has,” said Wendi Walsh, secretary and treasurer for the Unite Here! Local 355 union. “Since mid-March, we have watched nearly 100% of our workers be laid off.”
Unite Here! represents 32,000 food service, transportation, laundry and airline industries workers, many with jobs ancillary to the cruise industry.
While it may seem like Unite Here! would be first in line to support a bailout to get the hospitality industry back to work, Walsh said her organization would need solid assurance that foreign ships won’t sail off into the sunset with any stimulus money.
“The cruise industry is not known for putting their employees first, and there's a huge problem of low wages and wage theft among the cruise lines,” she said. “I would be extremely concerned if the cruise industry were given a bailout that didn’t have incredibly strict restrictions on how those funds should be used.”
Walsh said many domestic companies that rely wholly or in part on the cruise industry are already eligible for stimulus funds through the CARES Act, and giving unregulated money to foreign cruise lines would not guarantee reinstatement of a single U.S. job.
“The focus needs to be on continuing wages and benefits of employees here in the U.S., rather than to service debt or to go into the bank accounts of their investors,” she said.
Carnival, Norwegian and Royal Caribbean did not respond to interview requests for this story.
Deutch says mandating that cruise lines register domestically is a step in the right direction, particularly since they are such an integral part of Florida’s economy.
“There are those who argue that the cruise industry shouldn’t be eligible for a dollar of relief, notwithstanding the impact that the cruise industry has on business and families and small business throughout South Florida,” said Deutch. “But you cannot divorce the two.”
The debate over a bailout of the cruise industry involves more than corporate tax rates. Despite the international coronavirus pandemic and large-scale lockdowns, some ships continued to sail well into March — with deadly consequences.
Seared into the minds of many are images of the sick and dead being carried out on stretchers from cruise ships ravaged with COVID-19 until the government forced them ashore — several docking in Florida.
Even then, reports of passengers who might have been exposed to COVID-19 checking into hotels and jumping in taxis and onto planes infuriated local communities struggling to mitigate the spread of the virus.
Now, after the deaths of passengers and crew members, coupled with the fact that the stranded ships are foreign and operate purely for leisure, the idea of a bailout is even less palatable.
“I’m absolutely opposed to a corporate bailout of Carnival and the other cruise ship companies,” said Don Marcus, president of the International Organization of Masters, Mates and Pilots. “The U.S. maritime industry is far more worthy of support because they are supporting the U.S. economy and supply chain.”
Marcus’ organization represents 5,000 members who work on container ships, tankers, tugboats, barges, cargo ships and ferries tasked with delivering essential workers and supplies to both civilian and military operations.
“We’re keeping the economy going just like truck drivers or other essential workers,” he said.
Public transportation boats like the Staten Island Ferry and San Francisco Bay Ferry are struggling worse than some other maritime sectors, he said, despite the fact that they are the primary source of transportation for many essential workers and medical personnel.
“All ocean carriers are going to need support, but particularly right now, domestically, the tourist trade is in need of assistance,” he said. “It’s our position that stimulus money should go to those who operate U.S. flag vessels, pay U.S. taxes and employ U.S. workers.”
This story originally published to palmbeachpost.com, and was shared to other Florida newspapers in the USA TODAY Network - Florida.