For the first time in living memory,Titanic like pictures in real life are on the television. A luxury liner Costa Concordia has capsized off the coast of Isola del Giglio, Italy, resulting in the evacuation of almost 4,000 people. As of this writing three passengers are dead, 14 are injured and 41 are still missing.
Ironically the name Concordia was picked to mean peace between European nations
The ship is owned by Miami based Carnival (CCL).
The pictures are jarring. Even avid cruiser takers are likely to pause before booking their next trip.
The conventional wisdom is transportation accidents have very little long term effect. When an airliner goes down, people do not stop flying.
There are key differences here that may make the aftermath of this accident different from the conventional wisdom. First cruise takers had come to a universal belief that cruises are safe. This accident may change that perception. Second cruising is not a necessity like flying. Only time will tell if bookings will slow.
It would appear that, at a minimum, the growth rate of the industry will decelerate. According to the Cruise Lines International Association (CLIA), in 2011 more than 16 million passengers were expected with about 15 million in 2010 among its members. The group has 26 members including Carnival. According to CLIA its members have experienced an average annual growth of more than 7% since 1980.
Carnival may face some liabilities. The extent of liabilities may be determined from the voyage data recorder. The recorder will give a glimpse of what occurred just before the accident. According to some reports the ship was recklessly maneuvered too close to the island. There is also the question of why a mayday call was not given earlier.
A quick review of filings by Carnival shows that the company is selfinsured for a large amount of damages, couples with policies with high deductibles.
The stock of Carnival closed at $35.14 on the New York Stock Exchange, compared to a 52 week high of $48.13.
From an investment perspective, there is likely to be a shorting opportunity in the shares of Carnival and its competitor Royal Caribbean Cruises (RCL). People may shift their vacation plans to destinations like Disney Land. Even though Disney (DIS) is in the cruise business it may benefit. Six Flags (SIX) which owns theme parks may also benefit. In the longer term, after an initial downdraft, buying opportunities may develop in bother Carnival and Royal Caribbean.
About Me: I am an engineer and nuclear physicist by background, have founded two Inc. 500 fastest growing companies and have been involved in over 50 entrepreneurial ventures. I am the chief investment officer at The Arora Report which publishes four newsletters to help investors profit from change. Please feel free to write me atNigam@TheAroraReport.com.
No comments:
Post a Comment