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Justia Lawyer Rating for Glenn J. Holzberg

BREXIT: Cruising in Europe?

Posted by HolzbergLegal | June 28, 2016

To the average American the words Brexit and the European Union meant very little until last Thursday. Anyone who follows the stock market and basic news now at least understands what Brexit meant not only for British citizens, but potentially to the US and global economy.

For those who follow the cruise industry, these are uncertain times as well. As the major cruise lines, Carnival, Royal Caribbean, NCL and their related brands build bigger and more ships, deploying newer and older ships to Europe, China and even Cuba, global economic uncertainty cannot be ignored. Carnival stock, ticker symbol, CCL, has fallen since the British people elected to exit the European Union on 6/23/16 (expalining the name, “Brexit”).

Since the close of business Thursday Carnival stock has fallen approximately 12% per share. How much of this is Brexit, and how much of this is quarterly reported earnings (lower than projected) is for another article and other commentators. However,Carnival’s concerns about Brexit and its effect on the company’s near to midterm financial outlook going forward are reflected in the follwing:

“The British pound accounts for 30% of the company’s currency exposure, something that could impact earnings if its valuation stays depressed. Factoring in all currencies, Carnival expects a full-year impact of 27 cents a share for a 10% change in all currencies relative to the U.S. dollar. Carnival says that customers booking months in advance should help some of the current market volatility due to Brexit”.

Of concern to cruise travelers should be how European cruising will be affected by renegotiation of European Union agreements regarding port fees, taxes, baggage handling and things that matter to cruise passengers. International regulations such as GATT, are already complicated and extensive. To further complicate international laws, treaties and tariffs is another uncertainty customers in the market does not need, yet another unanticipated consequence of Brexit.

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