Cruise lines’ new leaders have net-zero challenge on their mind

by admin March 29, 2023

Richard Tribou | (TNS) Orlando Sentinel

The powers that be for the big cruise lines have been handing off the reins since steering their companies through the pandemic with new CEOs in place, but while they are still chasing prepandemic profits, a future with net-zero emissions by 2050 remains a specter that doesn’t have an obvious solution, yet.

“After three very long years, it’s so great to be making money,” said Jason Liberty, who took over as President & CEO for Royal Caribbean Group when Richard Fain stepped down last year. “It’s been an incredible journey, last year to stand up our entire fleet, getting our occupancy back to where we are making money again.”

Liberty was among the leaders on stage for the State of the Global Cruise Industry presentation during the Seatrade Cruise Global conference held at the Broward County Convention Center in Fort Lauderdale, Florida, on Tuesday.

He was joined by conference newcomer Carnival Corp. President, CEO & Chief Climate Officer Josh Weinstein who took over the role for Arnold Donald.

“We’ve completed the world’s largest startup in history,” Weinstein said. “We got to make that statement and turn the corner and think, ‘How do we get this company back to strong profitability and really lean in.’”

Also on hand were MSC Group Executive Chairman for the cruise division Pierfrancesco Vago, Kelly Craighead, the president and CEO of Cruise Lines International Association (CLIA), and making his last appearance as head of Norwegian Cruise Line Holdings Ltd., President and CEO Frank Del Rio.

“I’m very happy there’s new leadership and young leadership because they understand … the future challenges,” Vago said.

Vago has a second role as chairman of CLIA Global and said 2023′s passenger outlook is expected to surpass the totals seen in 2019 with between 27 million and 33 million guests traveling worldwide before the end of the year. By 2026, he said that’s expected to grow to 39 million, which is 30% higher than 2019.

While every line is still focused on financial recovery, the future of the industry and a focus on net-zero emissions by 2050 had everyone on stage facing uncertainty.

“I think we’re caught up in the narrative the world wants to be green and blue,” said Del Rio. “We will do whatever the science and technology allows us to do. We are not laboratories. We’re not scientists.”

While not dismissing environmental concerns outright, he proffered a more standoffish take claiming the push for net-zero has hijacked the main driver of cruise business.

“No one has mentioned the C word,” he said, meaning “customer.” He said the industry should be pushing what the lines can offer their clientele, and the industry is losing out to what has become a more lucrative tourism sector on land.

“Our prices compared to land-based prices are low, too low, and over the last few years that gap has increased,” he said. “The land-based vacations are eating our lunch.”

While the others on stage took a more conservative approach to the carbon footprint limits facing the cruise industry, all agreed that they weren’t sure how they were going to get there.

Vago said the industry should be commended for the advances made in just the last decade, reducing carbon emissions in some cases by as much as 70%.

“We can only get to a certain level of improving our emission impact, our impact to the environment,” he said. “The remaining must come from the fuels.”

For now, Vago said 60% of new ships will rely on the cleaner burning liquefied natural gas with 38 vessels powered by LNG by 2028. The first LNG-powered ship to homeport in North America was Carnival’s Mardi Gras out of Port Canaveral, that port’s first ship to sail after the pandemic shutdown. Since then Disney Wish in Canaveral and Carnival Celebration in PortMiami have joined the LNG ranks.

But Vago said that fuel is just a stop-gap, and large-scale production of biofuels or more efficient synthetic fuel will need to be developed if the industry is going to hit the goals.

“We will never be completely zero. … We can only reach a certain level,” Vago said noting that shoreside power and fuel cells would also have to play a major game of catchup. “It’s got to be everywhere in big quantities, we will never accelerate the process.”

One of the driving factors to reach the emission goals is a formula called the Carbon Intensity Indicator put forth by the International Maritime Organization that is expected to track the shipping industry’s environmental impact as soon as 2026.

It weighs carbon dioxide emissions compared to a ship’s tonnage and how many nautical miles it travels in a year. It means ships with shorter itineraries and more stops where the ship has to stay in place on its own power will be outside the limits of the formula.

That could mean cruise lines will have to drop stops on some ship itineraries in the future, unless cruise lines and the maritime industry in general can figure out the math and come up with solution.

“We’re all moving in the right direction,” Weinstein said noting all the lines have spent millions on retrofitting engines and prepping to use shore power if it ever effectively comes. He’s often asked, “‘Are you going to get to net zero?’ Yup. ‘Do you know how you’re going to get there?’ No, because it doesn’t exist yet.”

“So the best thing we can do is plan to collaborate, keep chipping away … every single year,” he said.