The news, when it reached the Grand Princess early on March 4, barely registered at first. In a letter slipped under passenger cabin doors, Grant Tarling, Carnival Corp.’s chief medical officer, announced that the U.S. Centers for Disease Control had begun “investigating a small cluster” of Covid-19 cases in California that might have been linked to the ship. Thirteen days after leaving San Francisco for Hawaii, the vessel would be skipping a scheduled stop in Mexico on its return voyage and sailing back early to its Bay Area port.
That day, passengers noticed new hand sanitizer stations and crew members wearing gloves, but life on the Grand Princess, which advertises 1,301 cabins, 20 restaurants and lounges, about a dozen shops, and four freshwater swimming pools, otherwise went on as normal. Guests prepared for a ukulele concert, played bridge at shared tables, and took line-dancing classes. That night, Laurie Miller and her husband, John, attended True or Moo, a show featuring an emcee in a cow costume; the following morning, John joined about 200 other passengers in the ship’s Broadway-style theater for a lecture on Clint Eastwood movies. “I’m surprised they’re even letting this event happen,” he whispered to a nearby friend. “This is a big crowd.”
▲ Featured in Bloomberg Businessweek, April 20, 2020. Subscribe now.PHOTOGRAPHER: SAM HALL/BLOOMBERG
Around lunchtime on March 5, the ship’s captain, John Smith, announced a quarantine over the ship’s public address system. All 2,422 passengers needed to go to their cabins to shelter in place. Laurie Miller was in the Da Vinci dining room eating chocolate peanut butter ice cream. “Oh my God,” she remembers thinking. “This is real.” Then she ordered more ice cream.
Other passengers ambled to the ship’s stores and dining areas, too, to take advantage of the perks while they could. “Evvverrrybody went to the buffet,” recalls 61-year-old Debbi Loftus, who was traveling with her parents. “I just thought, Oh, crap, the ukulele concert is going to be canceled.” Crowds of elderly guests filed to their cabins through narrow hallways and down the stairs of the ship’s 17 decks. Sixty-nine-year-old Karen Dever tried an elevator only to find it packed with fellow passengers. “So much for social distancing!” she joked aloud.
As the lockdown progressed, the ship became a fixture on cable news and social media around the world, livestreamed by frustrated, scared passengers as if it were the Titanic of the TikTok age. Of the first 46 crew and passengers who were tested for the virus, 21 were positive. President Trump suggested they should be prevented from disembarking. At the time the number of confirmed cases in the U.S. was still low, and Trump implied that the vessel’s caseload would make it look like the U.S. was doing a poor job of handling the pandemic. “I don’t need to have the numbers double because of one ship,” he said.
But this wasn’t Carnival’s first outbreak, nor its last. In February, another of its ocean liners, the Diamond Princess, accounted for more confirmed Covid-19 infections than any nation except for China. Since then no cruise operator has been hit harder than Carnival. At least seven more of the company’s ships at sea have become virus hot spots, resulting in more than 1,500 positive infections and at least 39 fatalities. Carnival notes that “other cruise companies have been impacted.”
Carnival’s ships have become a floating testament to the viciousness of the new coronavirus and raised questions about corporate negligence and fleet safety. President and Chief Executive Officer Arnold Donald says his company’s response was reasonable under the circumstances. “This is a generational global event—it’s unprecedented,” he says. “Nothing’s perfect, OK? They will say, ‘Wow, these things Carnival did great. These things, 20/20 hindsight, they could’ve done better.’ ”
Donald says that if his company failed to prepare for the pandemic, it failed in the same way that many national and local governments failed, and should be judged accordingly. “Each ship is a mini-city,” he says, and Carnival’s response shouldn’t be condemned before “analyzing what New York did to deal with the crisis, what the vice president’s task force did, what the Italians, Chinese, South Koreans, and Japanese did. We’re a small part of the real story. We’re being pulled along by it.”
▲ CEO Arnold DonaldPHOTOGRAPHER: RICK WILKING/REUTERS
In the view of the CDC, however, Carnival helped fuel the crisis. “Maybe that excuse flies after the Diamond Princess, or maybe after the Grand Princess,” says Cindy Friedman, the experienced epidemiologist who leads the CDC’s cruise ship task force. “I have a hard time believing they’re just a victim of happenstance.” While it would have been tough to get everyone aboard the ships back to their home ports without infecting more people, Friedman says several of the plagued Carnival ships didn’t even begin their voyages until well after the company knew it was risky to do so. She says its actions created a “huge strain” on the country. “Nobody should be going on cruise ships during this pandemic, full stop,” she says.
Donald and his team say they’re making every effort to protect and treat their remaining passengers. The company has attempted to dock its fleet until the pandemic subsides. All but about 3,200 passengers and crew are back on shore.
Carnival’s future is less clear. Australian police have launched a criminal probe into whether the company’s Princess Cruises subsidiary misled authorities about an outbreak aboard a ship docked in Sydney, and its Costa Cruises subsidiary is facing multiple passenger lawsuits regarding its Covid-19 response. (Princess says it’s cooperating with the investigation, while Costa says: “We are prepared to vigorously defend ourselves.”) Carnival canceled all its cruises in mid-March, and the company’s share price has fallen sharply, along with the rest of the industry. (It’s down 75% so far this year.) Its executives speak about their next moves in militaristic terms. They’re setting up “situation rooms,” cutting through the “fog of war,” countering the virus on “the front lines.” Says John Padgett, Carnival’s chief experience and innovation officer: “The cruise space is as bad as it gets. It’s Armageddon.”
One side effect of an Armageddon is to render the recent past faintly ridiculous. Last September, in Brooklyn, Padgett boarded another docked ship to show off his company’s new MedallionClass badges. The electronic fobs were meant to double as cabin keys and credit cards, while also tracking passengers’ locations as they moved around the ship. The offering was part of a big digital overhaul to be introduced on at least six ships in 2020. “We’re trying to eliminate guest friction,” Padgett said.
Carnival’s business had experienced a remarkable turnaround after Donald became CEO in 2013. Over the next five years, the company’s market value roughly doubled, to $51 billion. In 2017, Donald invested in building a 180,000-ton megacruiser called the Mardi Gras, Carnival’s largest ship ever, which cost about $1 billion and is supposed to begin sailing in 2020 with the seas’ first onboard roller coaster. Before the Covid-19 crisis began, the company’s nine cruise brands employed 150,000 people.
Carnival was founded in 1972 by Ted Arison, an Israeli-American who wanted to transform the image of the cruise industry from stuffy ultraluxury to a middle-class splurge with a party atmosphere. Arison’s first ship, also named Mardi Gras, had only 300 passengers and got stuck 20 minutes after leaving Miami on a sandbar where it remained for 28 hours. In the 1980s and ’90s, Arison’s son Micky bought up a string of competitors, took the company public, and made his family one of the wealthiest in America. By the turn of the century, Carnival owned 36% of the North American market. Micky Arison bought the Miami Heat and became friendly with Donald Trump. (Carnival has sponsored The Celebrity Apprentice and hosted an Apprentice-themed cruise. On April 14, Trump named Arison as one of the several dozen business leaders advising him on how to reopen the economy.)
After the Great Recession crippled the cruise business, Arison began to look like a less capable steward. In 2012, Carnival’s Costa Concordia crashed into a rock formation and sank in the calm seas off Tuscany, killing 32 people, including a child, while the captain abandoned ship. The following year, a fire in the engine room of the Carnival Triumph, now better known as the “poop cruise,” left hundreds of guests stranded in the Gulf of Mexico without air conditioning or working toilets for several days. During both the Tuscany crash and the poop cruise, Arison was spotted at Heat games.
Arison was facing a shareholder revolt by the time he announced he was stepping down as CEO in favor of Donald, a board member and former Monsanto Co. executive. (Arison remains Carnival’s chairman.) Donald positioned himself as a reformer set on improving coordination between the company’s various management teams, but he didn’t manage to clean up its record. In 2017 the U.S. Department of Justice fined Carnival’s Princess line a record $40 million for dumping oil-contaminated waste at sea and falsifying official discharge records to cover it up. Last June, Donald himself entered a guilty plea on behalf of Carnival for violating the terms of its settlement after authorities discovered that its ships kept on dumping even after the 2017 ruling. “We acknowledge the shortcomings,” Donald told a Miami judge. “I am here today to formulate a plan to fix them.” He would head into 2020 committed, he said, to changing the company’s tendency to cut corners on safety.
At 11:12 p.m. Japan Standard Time on Feb. 1, more than a month before the outbreak on the Grand Princess, the Diamond Princess was skimming around Asia on a multiweek cruise. One of its sanitation vendors, Wallem Group, emailed an alert to the vessel’s chief administrative officer and a guest services inbox. A Wallem representative said a passenger was being treated for Covid-19 in Hong Kong. “Would kindly inform the ship related parties and do the necessary disinfection,” the alert read. Unfortunately, and somewhat inexplicably, according to Roger Frizzell, Carnival’s chief communications officer, nobody was monitoring those inboxes. He first says the messages hadn’t been read for “at least days,” then later emails that, actually, an employee had read them much sooner.
In Carnival’s latest version of the timeline, which it revised repeatedly during various interviews over the past several weeks, Nancy Chung, a Hong Kong-based director for the Princess line, learned of the positive test a few hours later, after seeing a report from Now News TV about a hospitalized coronavirus patient who was understood to have traveled to Hong Kong on a cruise. Chung texted an executive in California, who requested she connect Hong Kong health officials with Tarling, the company’s chief medical officer, according to screenshots of the messages viewed by Bloomberg Businessweek. The company says these messages show it acted promptly. But Carnival didn’t tell passengers they might have been exposed to the virus until the evening of Feb. 3, about 43 hours after the initial alert from Wallem was sent.
There are other inconsistencies that suggest Carnival wasn’t entirely on the ball. The Hong Kong health department put out a press release announcing the Covid-19 case late on Feb. 1, and at 11:33 a.m. on Feb. 2, Tarling sent an email to Hong Kong health authorities with the subject line “Confirmed Coronavirus Case” that included the passenger’s name, age, and ward location at Princess Margaret Hospital. But Carnival says this was a mistake. “The subject line should’ve had ‘question mark, question mark, question mark,’ because he was asking if it’s confirmed,” says Frizzell, the Carnival spokesman, adding that Tarling didn’t get official confirmation until 6:44 p.m. on Feb. 2. Tarling says he didn’t see the previous day’s press release. A spokesman for the Hong Kong health department notes that in addition to the press release, it immediately informed “the shipping agent in Hong Kong of the cruise concerned.”
Another 24 hours elapsed before Captain Gennaro Arma informed passengers and crew on the Diamond Princess of the Covid-19 case. In his announcement, at 6:33 p.m. on Feb. 3, he tried to project calm as the ship cruised toward Yokohama, Japan. The guest hadn’t reported feeling ill during his time on board, Arma said over the loudspeaker, but passengers should avoid close contact with anyone suffering respiratory illness, wash their hands for 20 seconds, and seek treatment from the ship’s nurses if they had fever, chills, or a cough. “Rest assured, there will be no charge for this service,” he said. Upon arrival in Yokohama that evening, Japanese health officials started medical screenings. Arma added: “The situation is under control, and therefore there are no reasons for concerns.”
Even after Carnival became aware of the potential coronavirus case, passengers say staff tried to keep the fun going. Guests continued eating and drinking at buffets and bars, hanging out in saunas, and attending shows, including an operatic performance called Bravo. Carnival distributed itineraries (known as “Princess Patter”) guiding guests to trivia contests and other group activities on Feb. 3. “They were encouraging us to mingle,” says Gay Courter, who, after getting her temperature taken by a Japanese official the next day, went for a walk on deck and saw tables of as many as 30 people playing mahjong. A Carnival spokesman says the staff discontinued “most” scheduled activities on Feb. 4, though Japanese officials didn’t institute a shipwide quarantine requiring passengers to stay in their cabins until Feb. 5.
The president of Carnival’s Princess Cruises division, Jan Swartz, says the company was deferring to Japanese health officials. She says the crew followed government guidelines, delivering the passengers food and prescription refills as the quarantine at Yokohama’s port wore on. Carnival CEO Donald says he was aware of the situation but didn’t personally take control of the response efforts until Feb. 5. “We have a nice chain of command,” he says. “As it became a bigger issue, I’m dialing into the situation updates.”
It was an increasingly chaotic period for Carnival. Shortly before the Diamond Princess problem, there had been a coronavirus scare aboard one of its ships near Italy, and a second in mid-February on another Carnival cruise in Asia. (Carnival says these were false alarms.) Countries around the world began refusing to allow the company’s boats to dock, fearing they’d spread the virus, creating novel challenges for Donald and his team. “It wasn’t like there were protocols, and that this was established. You’re at sea, you’re moving people around, and the rules are changing as you go,” he says. He adds that by early March, when the virus hit the Grand Princess, Carnival had systems in place to take better care of its guests. Some Grand Princess passengers had to fill out a questionnaire asking if they’d recently been to China, though there were no questions about whether they had symptoms consistent with Covid-19.
On March 5, after the ship’s crew canceled the ukulele concert and any further games of True or Moo, the Grand Princess went into a holding pattern off the San Francisco coast while the White House and state and local officials figured out what to do. Passengers were stuck in their cabins for almost two weeks as helicopters delivered provisions and test kits.
The Grand Princess pulled into port on March 9 in Oakland, Calif., where the CDC mostly took over. Like those aboard the Diamond Princess, the passengers endured an additional 14-day quarantine after disembarking before being allowed to travel home. Between the Diamond Princess and Grand Princess, 850 people tested positive for Covid-19 and 14 have died. More would follow from outbreaks on other ships.
Asked why Carnival didn’t act sooner to initiate stringent shipwide quarantines, and why so many passengers reported being able to stroll about the ships following alerts of possibly deadly infections, Swartz says the company was following the direction of health authorities. “It’s very easy and Monday morning, you know, 20/20 hindsight, to say what’s the view of what should have been occurring,” she says. “We did our best to take care of people.”
Carnival executives say they’re proud of how they served the customers aboard these cruises. They refunded everyone’s tickets and onboard purchases, provided free internet access during the quarantines, and assisted with post-cruise travel accommodations. Swartz, who notes she’s had “many tours of duty in crisis management” during her 20 years at Carnival, says she expects the experience to make customers more likely to cruise with the company, not less. “There are many loyal Princess guests who have told us that this has actually cemented Princess as their No. 1 vacation choice,” she says.
During Bloomberg Businessweek’s March 27 phone interview with Swartz, reports surfaced that four more people had died and at least 138 passengers were sick aboard another Carnival ship, the Zaandam, part of its Holland America line. Over the following days, the ship lingered near the coast of Fort Lauderdale waiting for government permission to dock at Port Everglades, Fla. Yadira Garza, who embarked on the Zaandam for her honeymoon, says from the ship that she and her husband are terrified. “The crew are sick and getting sicker. It’s a matter of time before it gets to us and we’re infected,” she says. “For some people, it will be the last trip of their lives.”
As of early April, Carnival still had passengers at sea, nearly a month after the CDC issued a March 8 public advisory to “defer all cruise ship travel worldwide.” Spokesperson Frizzell says Carnival wasn’t under any legal obligation to follow the CDC’s advice. “The advisory is not an edict,” he says.
Donald and Swartz say there’s nothing they could’ve done to halt further infections in February, when, they say, the world still didn’t grasp how much the virus was spreading outside China. But the U.S. declared a public health emergency and restricted travel to China on Jan. 31, even as Carnival ships continued to sail around Asia. There were other early warnings: Padgett, the innovation chief, says that in January—after he’d communicated with a manufacturer in Wuhan, the origin of the pandemic, about making batteries for the digital badge system—the leadership, including Arnold Donald, all knew about the scale of the coronavirus outbreak. Padgett says he became aware of the problem’s magnitude on Jan. 25—he remembers the exact date because it was the day before Kobe Bryant died. “The biggest thing about that—it’s a learning I don’t think I’ll ever forget, and we shared it with Arnold when we were talking—is that we actually had insight into the global situation much earlier than most,” Padgett says. Carnival canceled cruises set to embark from mainland Chinese ports, but these measures don’t appear to have altered anything for ships making midcruise stops around Hong Kong or other parts of Asia.
Carnival’s Plagued Ships
Carnival executives also make the highly questionable assertion that cruise ships don’t spread disease more easily than it would spread elsewhere. “Nothing to do with cruise ships,” Donald says. Covid-19 spreads the same in “an airport terminal, a subway station, a restaurant, a theater, a stadium.” That’s misleading, says Friedman, from the CDC’s cruise ship task force. Her team has seen coronavirus infection rates approaching 20% on two of Carnival’s ships, she says, much higher than the spread in a supermarket or subway. Part of the problem, she says, is that cruises are often populated with people at greater-than-average risk for the disease. (More than two-thirds of the Zaandam’s passengers are older than 65, she says.) Crew members sleep in bunk beds and usually share bathrooms. “If these ships had stopped sailing, our large team could all be working on helping states and local public health authorities with their community outbreaks,” she says. In apparent response to these discrepancies, Frizzell emails a BuzzFeed article reporting that multiple people had died from a Covid-19 outbreak at a family burial service—his point being that viruses spread on Carnival’s ships just as they do at funerals.
Since 2016 the company has failed 3% of CDC ship health inspections—three times worse than rival Royal Caribbean Cruises Ltd., which fails 1% of inspections. In an interview, these statistics seem to surprise Donald. “What? We fail health inspections?” he says when asked about them. After gathering his thoughts, he adds, “I would say, though, that we do not have a record in any shape, form, or fashion of being unhealthy, of guests on our ships being more ill than in other travel venues, period, let alone other cruises.”
Why didn’t Carnival simply dock every ship immediately after their initial crises? “In effect, that’s what people have been trying to do. But what happened was, ports close, airports close, borders close, and even now, we have tens of thousands of crew on our ships that we can’t get home,” Donald says. “It’s not because we want them all on the ships. It’s because things close down and we couldn’t get them off.”
As of publication, Carnival had two of its 100 ships still at sea. Donald, who’s working remotely from his home in Florida, says he’s under constant stress from nonstop conference calls. “The days go by so quickly,” he says. “Sometimes it’s hard to leave the bedroom, because the calls start so early you haven’t gotten dressed or showered yet, and then you’re waiting for a break in the calls so you can do that. It’s so crazy.”
Along with overseeing the fleet, he’s been working the phones to raise money, including a fresh $575 million in equity for a bargain $8 a share. He says these funds will give Carnival enough liquidity to survive an extended pause in its operations. “Obviously, we’re hurting,” he says. “If we don’t bring capital in, we wouldn’t have a company.”
Although Arison has spoken with Trump during the crisis, Carnival and its rivals were left out of a federal bailout of U.S. businesses, in part because they aren’t, legally speaking, U.S. businesses. Carnival paid $71 million in taxes on $20.8 billion in revenue last year to Panama, where it’s technically incorporated. “There was very strong bipartisan opposition to a cruise industry bailout, and there will continue to be,” says Democratic Senator Richard Blumenthal of Connecticut. “They have flown under international flags, and abated or skirted taxes, with a record of predatory conduct. They need to prove that they’re going to follow American norms and laws.”
Donald acknowledges that his company doesn’t pay the IRS like a typical company. “It’s true that as a corporation, we don’t pay income tax,” he says. But he says Americans benefit from the port and harbor fees that Carnival pays in accordance with the demands of the maritime industry. While the fleet is out of service, Padgett is continuing to invest in technology upgrades, and Swartz says she’s working to “dramatically improve our sanitation protocols.” Donald says it will take some time for all the “negative noise” about cruising to go away, but there are indications people still want to cruise.
On that point, he may be right. According to a recent Carnival filing with the U.S. Securities and Exchange Commission, half of customers who sought cancellations between March 2 and March 15 for upcoming bookings opted to take credit for future cruises instead of a full refund. Almost all the passengers interviewed for this story say they’d cruise with the company again. After all, Carnival offered many of them free vouchers for future trips.