PortMiami working to redrawn agreements with multi-billion impact
Two months after cruise lines ceased operations worldwide, the “Cruise Capital of the World” and its industry partners are in talks to redraw details in their long-term agreements to adjust to post-coronavirus expectations.
How those talks will affect four massive terminal deals PortMiami struck with Carnival Cruise Line, MSC Cruises, Norwegian Cruise Line and Virgin Voyage late last year remains to be seen, but port Director Juan Kuryla said Tuesday that all parties “continue to be optimistic.”
Those deals, plus another with cargo company Terminal Link, were projected in September to have a $7.8 billion impact here while creating 27,500 direct and indirect jobs.
Now, PortMiami and the cruise lines have exchanged force majeure letters, calling upon contractual clauses that free both parties from liabilities and obligations due to unforeseen circumstance.
The port also waived lay berth fees through Tuesday to help the companies shoulder costs.
“We’re working hand-in-hand with them, as we always do, to come up with solutions to these challenges,” Mr. Kuryla told Miami Today. “It does us no good to be in a situation where we’re fighting over [minimum annual guarantees], knowing what the situation in the world is right now.”
In a May 4 report, Miami-Dade Mayor Carlos Giménez said PortMiami will have lost $54 million “should the cruise lines begin operating at 50% capacity by Aug. 1.”
To offset that shortfall, the report said, the port froze hiring, stopped overtime, deferred marketing efforts, stalled nonessential capital improvements and cut back on other unneeded expenditures.
“These efforts, as well as the decrease of budgeted interest on its variable debt, are anticipated to yield a savings of approximately $38 million through the end of [fiscal 2020],” the report said, adding that the remaining $16 million outstanding will be covered in part by $11 million from the port’s unrestricted reserve.
The Aug. 1 date is aspirational. No ships can set sail until the Centers for Disease Control and Prevention finish reviewing cruise lines’ startup plans, give recommendations and drop a no-sail order that’s been in effect since mid-March.
But it’s the date Carnival targeted in a May 4 press release, which includes plans to resume operations with three ships in Miami, two in Port Canaveral and three in Galveston.
In just days three days after Carnival sent out the release, cruise bookings in South Florida doubled compared to the year prior, American Express travel franchise Cruise Planners said.
Carnival in September extended its long-held preferential berthing rights at PortMiami’s Terminals D, E and F for 20 years, plus two seven-year renewal options.
Should Carnival exercise both renewals, the county expected to receive $921.4 million in gross revenues while spending up to $115 million to upgrade Terminal F. Additional upgrades to Terminals D and E would allow Carnival to begin homeporting 6,500-passenger “XL Class” ships at the port by Oct. 1, 2026.
Norwegian’s new 30-year deal with the county, which included a new, $239 million Terminal B, was five years longer than one both parties signed a year before but was projected to generate 9 million more passenger movements and $326 million in additional revenue for the county.
Plantation-based Virgin Voyages agreed to make PortMiami’s planned Cruise Terminal V its exclusive Florida homeport for the next decade and its only homeport on Florida’s East Coast through 2051.
Over the term of the deal, the county projected it would receive $697 million in cruise-related revenue and capital recovery surcharges, plus another $315 million if Virgin exercises two renewal options.
MSC, which first signed a berthing agreement with the county in 2012, agreed to stay for another 62 years, over which time the county projected to receive $2.03 billion in what Mr. Kuryla at the time called “probably the longest-term deal we’re aware of in the history of a port and a cruise line.”
The deal includes provisions for two new terminals, Terminals AA and AAA, that once build will be able to handle two 7,000-passenger ships at a time.
Across all four deals, PortMiami committed to spending roughly $1.1 billion on upfront costs, though much of those costs were to have been reimbursed over time by the cruise lines.
On the cargo side, the port has remained open, though sea freight has dipped amid current conditions. For all of March, the port saw a 15.5% decrease in cargo volumes, a drop the mayor’s report attributed largely to reduced container traffic from Asia.
“It is anticipated this trend will continue through … April and May, then gradually increase as markets throughout the US start to reopen,” the report said.
The numbers from April aren’t yet in, Mr. Kuryla said, but the port likely had another cargo dip as a result of lessened traffic from the Caribbean and Central America, where governments have shut down factories. Perishable goods moving through the port, he said, are still strong.
“We anticipate it’s about another 10% to 15% compared to April 2019,” he said. “But we are seeing a steady flow in and out of the port.”