With COVID-19, modern cruising faces the biggest crisis in its history, which will also heavily impact the cruise ship builders. According to Meyer Werft Managing Director Thomas Weigend, difficult measures need to be taken to deal with massive overcapacity and no new orders coming in.
Right now, almost all cruise ships are laid up. The US Centers for Disease Control and Prevention (CDC) has extended its no sail order for cruise ships in US waters until 23 July. It is expected that some 50 to 75 per cent of the cruise ships will be sailing again by the end of 2020, resulting in enormous losses for the cruise liner companies for this year, comments Weigend in a video message that can be viewed below.
New orders come to a standstill for years to come
The shipping companies may break even in 2021 and make a profit again in 2022 after which the debts incurred during the crisis will have to be paid off. ‘This means that no new orders for cruise ships are expected until 2023 and 2024,’ explains Weigend.
There is also the risk of shipping companies going into insolvency, which would flood the market with cheap second-hand ships. Meyer adds: ‘If this were the case, new orders would probably come to a standstill for much longer.’
Weigend: ‘In the short term, the shipping companies cannot use any new buildings at all. In the medium term, they will try to postpone delivery dates and will not execute options. In the long term, and thus for years to come, shipping companies will not order any new cruise ships.’
As a private shipyard, Meyer Werft also has to deal with the fact that 70 per cent of the shipyard capacity for cruise ships worldwide is state-owned, which means it has to ‘hold its own against state competition.’
Meyer Werft seeks to stretch construction
In the best case scenario, Meyer Werft will have to adjust its capacity in Papenburg from two large and one small ship per year to one large and one small ship. ‘Since we cannot expect any new building orders until 2023/24, we will try to stretch the current order book at all locations.’ The company is already in talks with its customers to this end. The result would be a cut of work performance by about 40 per cent.
According to Bernard Meyer, Meyer Werft’s other Managing Director in the same video message, his shipyard has to adapt to a completely new situation. As a result, investments have been reduced, there are no new hires or contract awards, negotiations have started with the Works Council about short-time work, there is no overtime or weekend work anymore, and the number of subcontracted employees is being reduced. Eventually, there will also be job cuts throughout the Meyer Group.
Meyer: ‘Yes, we have contracts until 2023 and in Turku even until 2024, but these contracts have been made on completely different terms. We are in a great crisis. One of our customers has said that he doesn’t really need our ships anymore. He’ll be happy to just be able to use the existing fleet again. So we have to sit down with our customers and try to find a solution that is bearable for both sides. And that’s why we are thinking about stretching our construction programme so we don’t get any cancellations of orders. This is a tough task.’
Recovery not before 2030
He adds everyone will be affected: in the project area, in the design offices, in production and in subsidiary companies. ‘We have to think about job cuts. We simply do not need so many cruise ships any more. Unfortunately, we have to go back in all companies and in all areas and consider how we can restructure our work.’
Considering the oil crisis took twenty years to fully recover from, Meyer is convinced the cruise shipbuilding market will take a long time to recover: ‘Only in 2030 will we have the situation we had last year.
He ends his message with a small positive note. ‘We need to have many new ideas. This is the chance of a private shipyard compared to the state-owned shipyards. Only together, with joined forces, will we succeed. And I am sure that we will make it!’
Picture: Meyer Werft’s Managing Director Thomas Weigend addresses the consequences of the corona crisis in a video message on the Meyer Werft website.
