Last week, All Leisure group in the UK that owns three niche cruise brands and four ships, said it would book an £6.7 million impairment charge against the 1972 built cruise ship Discovery.
“The market value of mature cruise ships has reduced significantly in the last 12 months and it has been decided that the loss-making mv Discovery will be disposed of at the end of this summer,” All Leisure said in a trading statement issued prior to the release of its 2013 results, which is due on 24 February.
What makes the statement of importance is that despite the fact that several first generation cruise ships, such as Discovery, have been sold for scrap in recent times, many remain in service.
Fred. Olsen Cruise Lines, another UK company, has two units of the long since defunct Royal Viking Line’s 1972-73 original trio, while Phoenix Seereisen in Germany operates the third ship, on charter. Other German and also British tour operators employ several further mature ships.
Another question is that what exactly does the term refer to? If it means ships beyond the age of 30 years, the period in which the asset is expected to be depreciated when ordered, then it also applies to several second generation ships built in the 1980s.
Indeed, in not too distant future, it will also embrace the third generation ships of the late 1980s and early 1990s, much bigger at some 70,000 gross tons or so than the second generation ships of about 40,000 gross tons .
It is interesting to note that excluding intra-group transfers by Carnival and Royal Caribbean, not a single third generation ship has changed hands as yet.
It lies very much in the interest of the cruise shipping industry’s leading players that no such transaction will take at low values: should this happen, then the valuation of similar vessels in the fleets of these companies would probably have to be reviewed as a result.