What happened
Memo to the CDC: Could you please decide on a single message about COVID-19 and cruise tourism?
Because your advice has been kind of confusing lately.
Late last month, as you may recall, the U.S. Centers for Disease Control raised its risk assessment on cruise line services to its highest level, and issued this stark warning to would-be cruisers: "Avoid cruise travel, regardless of vaccination status."
Yesterday, however, in a move diametrically opposed to that warning the CDC said it will allow its Conditional Sailing Order, which was designed "to mitigate the COVID-19 risk to passengers and crew, prevent the further spread of COVID-19 from cruise ships into U.S. communities, and protect public health and safety," to lapse. Cruise line stocks are reacting positively to the news, with shares of Carnival (CCL -0.14%) and Norwegian Cruise Line Holdings (NCLH 1.18%) up 3% and 4.8%, respectively, as of 2:45 p.m. ET.
Similarly, Spirit Airlines (SAVE 0.12%) -- which as my fellow Fool Lou Whiteman pointed out today, does a good bit of business servicing vacation markets -- is up 5.8%.
Image source: Getty Images.
So what
To understand what's going on here, you need to travel back in time to Oct. 30 -- Halloween Eve -- 2020. In an effort to slow the spread of the coronavirus, the CDC had maintained an outright ban on cruising out of U.S. ports for months. But on Oct. 30, the CDC permitted cruising in certain conditions, under what it called a "framework" for a resumption of cruising.
Cruise companies were instructed to first get their ships battened down and new policies put in place to protect the health of passengers and crew during cruises. That accomplished, they could conduct "simulated voyages" without passengers, and finally apply for a "COVID-19 Conditional Sailing Certificate" that would permit them to resume crews with passengers.
And so the situation remained for more than a year. As COVID-19 stubbornly refused to go away, the CDC extended the duration of the Conditional Sailing Order, which is now set to expire on Jan. 15, 2022 (i.e., this Saturday).
Now what
That brings us up to date. Now here's the new news: At a U.S. Senate hearing on Tuesday, CDC director Dr. Rochelle Walensky advised that the CDC plans to let the Conditional Sailing Order expire Saturday, making compliance with its advice "voluntary" henceforth.
Suffice it to say this decision doesn't logically follow from the CDC's latest advice to "avoid cruise travel, regardless of vaccination status." Nor does it align well with Walensky's statement at the Senate hearing that "we've seen a 30-fold increase in cases on ships during this season because of omicron."
All that notwithstanding, Walensky did tell Congress this week that in her opinion "the industry has stepped up ... has undertaken extraordinary precautions ... to make sure that people are protected from this virus [and] is now ... exceeding ... the compliance with the sail order without the order even necessarily needing to be in place."
Is that good enough to justify letting the Conditional Sail Order lapse? The CDC seems to think so. Meanwhile, it's clearly very good news for cruise stocks that can only make revenue, cover their costs, and -- hopefully -- start earning profits again, if they are permitted to cruise. It's good news, too, for airlines that ferry customers to Florida (and elsewhere) to join those cruises.
And that, in a nutshell, is why these stocks are rising today.
