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Cruising through climate damage and tax avoidance

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As cruise ships return to the seas following the pandemic and Venice decides to ban large ships, Simon Basketter explores how the cruise industry works
Issue 2766
The weight of a large cruise ship is around 200,000 gross tons, powering these vessels uses huge amounts of fossil fuels.
The weight of a large cruise ship is around 200,000 gross tons, powering these vessels uses huge amounts of fossil fuels.

Cruise ships are “monsters” of the sea. The Royal Caribbean’s Symphony of the Seas is longer than 12 blue whales and it is five times the size of the Titanic.

It can hold 6,680 passengers and 2,200 crew members. Two cruise ships that will hold 9,000 passengers each are being built.

Cruises were the fastest ­growing sector of the travel industry. In the five years before the pandemic, demand increased by 20.5 percent.

Some 29 million people went on a cruise in 2018. The world cruise industry is worth about £110 billion.

Companies use loopholes to avoid taxes. They’ve gone to great lengths to bypass employment laws and health and safety rules.

There are over 50 cruise lines and more than 270 ships. But three main players—Carnival Corporation & PLC, Royal Caribbean Cruises LTD, and Norwegian Cruise Line HLD—control roughly 75 percent of the revenue. And they have 80 percent of passengers.


They fly “flags of convenience”—and avoid coughing up tax. Sailing commercial ships under foreign flags is common today, but it was a cruise industry invention. During Prohibition, a US cruise company wanted to serve alcohol so it registered vessels in Panama.

Carnival is incorporated in Panama and flies the flags of Panama and the Bahamas. Norwegian is incorporated in, and flies the flag of, the Bahamas. Royal Caribbean has been incorporated in Liberia since 1985, and flies the flags of the Bahamas and Malta.

These impoverished countries often compete with each other to offer cruise lines the cheapest services. The cruise lines pay an ­average tax rate of 0.8 percent.

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Cruise ships make money through ticket sales and onboard purchases—drinks, gambling, spa treatments, art auctions, and shore excursions.

They promise a boost to the ­economies where they visit.

But by controlling where the passengers go the companies rake in up to 70 percent of the onshore revenue.

Cruise lines enjoy net profit margins of around 18 percent—nearly double that of equivalent large hotel chains.

On average, a passenger will spend £109 a day on a ticket and £66 a day on onboard purchases. After costs, a ship will get roughly £211 in net profit per passenger, per cruise.

That means that at full capacity, a single ship such as Royal Caribbean’s Symphony of the Seas might make £1.25 million profit during a ­seven-day trip. Or £173,000 in profit per day at sea.

Registering ships abroad shelters cruise companies from employment and safety laws. The standard contract for a crew member requires 308 hours per month—at roughly £2 per hour.

Environmental violations sees toxic waste dumped

Cruise ships have often been described as floating cities and if anything they are more, not less, polluting.

The German watchdog Nabu surveyed 77 cruise ships and found that all but one used toxic heavy fuel oil that the group described as the “dirtiest of all fuels”.

Standing on the deck of a cruise ship is similar to being in one of the world’s most polluted cities.

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On top of the pollution caused by their exhaust fumes, cruise ships have been caught discarding trash, fuel, and sewage directly into the ocean.

Many ships now have scrubbers, which have been called “emission cheat” systems. These scrubbers wash cheap fuel in order to meet environmental standards, but then discharge the pollutants collected directly into the ocean.

As shipping analyst Ned Molloy explains, “This is sulphurous waste going into the sea. It would be illegal to just dump this anywhere on land except in specialist facilities.”

In 2016, the US government levied a £29 million penalty against Princess Cruises—owned by Carnival.

It intentionally and illegally dumped oily waste into the ocean on several occasions using what was cited in the Department of Justice findings as a “magic pipe”. This bypassed equipment meant to detect pollution.

Princess Cruises had to pay an additional £15 million in 2019 for a series of violations including more dumping and falsifying records. As well as asking if the Coast Guard could redefine the terms of their environmental compliance plan.

The Carnival subsidiary Holland America leaked 22,500 gallons of untreated greywater into Glacier Bay National Park. A number of whales have been killed when the cruise ships pass through the bay.

Swimming in virus profits

Cruise ships are adept at spreading illnesses and have been hit especially hard by coronavirus.

Some cruise lines attempted to weather the storm by selling tickets at all costs.

Salespeople at Norwegian were instructed to respond to coronavirus-inquiring customers with, “The only thing you need to worry about for your cruise is do you have enough sunscreen?”

At one company’s booking hotline, a salesperson said coronavirus doesn’t exist in tropical climates.

Customers clamoured to cancel their trips during the pandemic and many cruise stocks fell by up to 60 percent.

But happily for the bosses, by the end of 2020 Carnival reported that, while it had lost £7.5 billion, it had raised £14 billion in new investment, ending the year with £8 billion in cash.

In a report to investors, Carnival said it could survive 2021 without sailing a single ship. It restarted cruises to Alaska this month.

Venice says arrivederci to cruise ships

Italy has banned cruise ships from the Venice lagoon.

United Nations agency Unesco had threatened to put Venice on its endangered list. Italy banned cruise ship vessels weighing more than 25,000 tonnes from docking in the world heritage site from 1 August.

However the industrial port of Marghera on the mainland is being repurposed for passenger use. The government is fast tracking the build to get it done in less than six months.

The plan is to build a terminal equipped to take ships weighing more than 40,000 tonnes.

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