By Ted Mann, Brody Mullins and Dave Sebastian
WASHINGTON -- A last-minute legislative change has shut major
cruise ship lines out of the roughly $2 trillion coronavirus
stimulus package headed for a House vote Friday, despite being one
of the hard-hit industries President Trump has pledged to help.
The cruise industry was among the first to take a public hit
from the virus, along with airlines and hotels, as vacationers
canceled plans, local governments halted tourism and passengers on
board fell ill, leading to entire vessels full of passengers being
quarantined.
But the aid package approved by the Senate and now headed for
the House limits aid to U.S.-incorporated companies with a majority
of workers based in the U.S. -- two criteria that effectively
exclude the major cruise-ship operators like Carnival Corp.,
Norwegian Cruise Line Holdings Ltd., and Royal Caribbean Cruises
Ltd.
That is despite comments from Mr. Trump and Treasury Secretary
Steven Mnuchin that the administration intended to help the
industry, whose publicly traded major players have seen their stock
prices crushed since the coronavirus crisis began.
At a press briefing Thursday, Mr. Trump said he would like to
provide assistance to the cruise industry, which supports local
economies in the U.S. But he conceded that it was "very tough to
make a loan to company when they're based in a different country."
He also said he liked the idea of having cruise companies register
in the U.S. and pay federal taxes.
Anne Madison, a spokeswoman for Cruise Lines International
Association, said the stimulus package would help small and
medium-size businesses such as travel agents that support cruise
companies.
"CLIA had not thought of bailout" for the cruise operators, Ms.
Madison said, adding that the group's lobbying efforts have been
geared toward helping those travel agents receive assistance.
The world's four biggest cruise lines, which include Swiss-based
MSC Cruises, have suspended their sailings for about a month after
coronavirus outbreaks aboard ships underscored the pathogen's easy
spread in confined spaces and various governments imposed travel
restrictions.
Earlier versions of the Senate bill that became the relief
package didn't include the language that now stands between the
cruise lines and a share of the federal aid. But late in the
negotiations over the bill, a provision was added restricting aid
to companies operating under U.S. laws -- a provision that
congressional staffers of both parties said would effectively bar
the foreign-incorporated cruise companies from getting federal
aid.
In the final legislation, Mr. Mnuchin's powers to make
investments and loans to help corporations were limited to those
"that are created or organized in the United States or under the
laws of the United States and that have significant operations in
and a majority of its employees based in the United States."
Labor unions and Democrats in Congress were firmly opposed to
including federal assistance to the cruise industry because they
don't employ a unionized American workforce, and environmentalists
accuse the companies of polluting U.S. waterways.
Still, the industry won small concessions that could open the
door to federal help in the future.
A spokesman for Sen. Dan Sullivan (R., Alaska) said the senator
supported the cruise-ship industry because of its contributions to
small business in the state. "He'll continue to work to educate his
colleagues on the importance of the cruise-ship industry for
tourism in Alaska as well as other states," the spokesman said.
All the major cruise operators are incorporated outside the U.S.
The companies don't pay U.S. federal income taxes, and most of
their cleaning staff, restaurant servers, bartenders and other
employees are foreign nationals.
Even the individual ships are typically owned by foreign LLCs
and domiciled in low-tax countries such as the Bahamas, Bermuda and
the Dominican Republic.
They do, however, pay state income taxes and port fees.
Share prices in the resort and cruise-ship industry, including
major hotel chains, are down more than 51% overall this year,
according to FactSet.
Shares of Carnival rose 14.6% as the Dow Jones Industrial
Average re-entered the bull market Thursday. Royal Caribbean and
Norwegian Cruise Line shares fell 4.2% and 7.4%, respectively.
The U.S. State Department has warned Americans not to travel on
cruise ships because of the outbreak. The Centers for Disease
Control and Prevention has specifically warned that cruise ships
pose a "risk for rapid spread of disease beyond the voyage" and
identified more than 800 cases of coronavirus infection linked to
cruise ship voyages.
In the appropriations bill, the Senate allocated $7.5 million
toward the Agency for Toxic Substances and Disease Registry's
geospatial analysis and mapping of infectious disease hot spots,
including cruise ships.
The bill offers to provide $500 billion in liquidity measures
such as loans to local governments and businesses operating under
U.S. laws that have incurred losses due to the pandemic.
"There's a risk that cruise ships are laid up for an extended
period of time," Wedbush Securities Inc. analyst James Hardiman
said. "They'll continue to burn cash without any revenue coming in
the door."
In 2019, Carnival, incorporated in Panama and traded on
exchanges in the U.S. and U.K., reported global income-tax expense
of $71 million on revenue of $20.83 billion. Royal Caribbean,
incorporated in Liberia, had $32.6 million in global income-tax
expense on revenue of $10.95 billion.
Bermuda-incorporated Norwegian Cruise Line had a global
income-tax benefit of $18.86 million on revenue of $6.46 billion.
MSC Cruises is privately held.
Ms. Madison of the trade group said the cruise industry paid
more than $23 billion in wages and salaries, including taxes, and
contributed $53 billion to the U.S. economy in 2018. Nearly 40% of
the jobs generated by the industry are U.S. jobs, she said.
Companies record tax expense as they earn income, and it doesn't
necessarily reflect the cash taxes they pay during the period,
though over time the measures largely match up.
Airlines, by comparison, recorded more income-tax expense.
United Airlines Holdings Inc., for example, reported $905 million
in global income-tax expense on revenue of $43.26 billion in
2019.
--Michael C. Bender contributed to this article.
Write to Ted Mann at ted.mann@wsj.com, Brody Mullins at
brody.mullins@wsj.com and Dave Sebastian at
dave.sebastian@wsj.com
(END) Dow Jones Newswires
March 26, 2020 19:17 ET (23:17 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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