Cruise stocks rose Friday after the Centers for Disease Control and Prevention announced it will replace its nearly 8-month old no-sail order with a less restrictive “Conditional Sailing Order.”
The no-sail order expires Saturday.The new conditional order will remain in effect until either Nov. 1, 2021, the expiration of the Department of Health and Human Services’ declaration of a public health emergency or when CDC Director Dr. Robert Redfield decides to end it.
Shares of the largest cruise company in the world, Carnival, soared more than 11% on the news in afternoon trading Friday, before levelling off and closing more than 5% higher. Shares of Norwegian Cruise Line also finished the day more than 5% higher and Royal Caribbean stock closed up almost 5%.
The CDC change doesn’t mean cruising in the U.S. will resume next week, or potentially anytime soon, especially as new cases of the coronavirus continue to spike.
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The new order establishes a framework that will help the industry implement safety measures that will enable it to resume operations in U.S. waters in a phased approach, the CDC said in a statement. Before restarting passenger operations in any commercial form, the companies will face tests from the CDC on how safe their protocols are, the agency said.
“This framework provides a pathway to resume safe and responsible sailing,” Redfield said in a statement. “It will mitigate the risk of COVID-19 outbreaks on ships and prevent passengers and crew from seeding outbreaks at ports and in the communities where they live.”
The CDC originally issued a no-sail order for cruise ships in U.S. waters on March 14 after hundreds of coronavirus infections and several Covid-19 deaths were reported onboard ships with outbreaks across the world. The CDC previously said “that cruise ship travel exacerbates the global spread of Covid-19” in justifying the order.
While most industries have suffered from the pandemic, the cruise industry is among the hardest hit. Shares of Royal, Carnival and Norwegian are down at least 50% from Jan. 1. However, all three have outpaced broader market gains since hitting their lows in mid-March. Shares of Norwegian, for example, are down nearly 70% since Jan. 1, but have clawed back some gains since hitting a 52-week low on March 18. The stock is up more than 100% since then.
Last month, Redfield pushed to extend the order until February 2021, according to Axios, which cited two people familiar with the matter. Axios reported that Vice President Mike Pence overruled Redfield to extend the ban until Oct. 31.
The CDC’s announcement Friday comes after Royal and Norwegian teamed up to hire a handful of top epidemiologists and former U.S. health officials to craft a public health proposal for the CDC that would let them resume sailing.
President Donald Trump’s Former Food and Drug Administration Commissioner, Dr. Scott Gottlieb, and former Utah Gov. Mike Leavitt, who also served as HHS Secretary under President George W. Bush, co-chair the panel of experts.
“CDC and the cruise industry have the same goal: A return to passenger sailing, but only when its safe,” Leavitt said in a statement. “Under the CDC’s Framework for Conditional Sailing Order, cruise lines have been given a way to systematically demonstrate their ability to sail while keeping passengers, crew and their destination ports safe and healthy.”
The CDC said companies will need to “demonstrate adherence to testing, quarantine and isolation, and social distancing requirements” before moving forward in the restart framework. The companies are also expected to build their own lab capacity to conduct testing of crew members and eventually passengers, the CDC said.
The agency said it will help ships prepare for a return to sailing by establishing a laboratory team dedicated to cruise ships, updating its technical instructions and preparing to collect data from ships for surveillance of passengers.
“We look forward to reviewing the new Order and are optimistic that it is an important step toward returning our ships to service from U.S. ports,” said Kelly Craighead, CEO of Cruise Lines International Association, a trade association that represents the world’s largest cruise lines.
Disclosure: Dr. Scott Gottlieb is a CNBC contributor and is a member of the boards of Pfizer, genetic-testing start-upTempus and biotech company Illumina. He also serves as co-chair of Norwegian Cruise Line Holdings′ and Royal Caribbean’s Healthy Sail Panel.
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