When Crystal Cruises went bust 10 days ago it was clear that there would be massive debts along the way even as passengers were assured that they’d receive refunds for their prematurely ending cruises.
Now the former CEO of Crystal Cruises Jack Anderson says that more than 100 Million US$ worth of deposits and final-(pre)payments by customers is now outstanding.
Just like when an airline collapses, funds that were previously deposited by the passengers undergo a different treatment depending on the payment source.
Travel experts have been preaching for years if not decades that customers should avoid paying for tickets in cash or cash-like transactions such as check, direct debit or money transfer.
Credit card companies usually hold a rather large amount of the payments submitted in trust to ensure they wouldn’t be left holding a bag of bad debt when a company with large incoming and outgoing sums falters. They are also insured against a big default of a major customer which enables them to provide service- and product guarantees as well as fraud protection to their cardholders
Bloomberg reports that cash-paying customers and those with cruise credits could now be once again the ones standing in the rain with no refunds of any sort while credit card customers will be able to file a chargeback.
Last week, the most-awarded luxury cruise line in the industry, Crystal Cruises, unceremoniously shuttered its doors, with not a word to consumers nor travel agents. Abandoned by its parent company Genting Hong Kong Ltd., it leaves a trail of debt—to travelers, who’d put down payments and deposits for sailings into 2024; to agents owed commissions; to employees in offices; to crew still on ships; and to unpaid vendors. Although $4.6 million in outstanding fuel bills were central to Crystal’s demise, the signs of trouble appeared weeks earlier in a string of dominoes triggered by the insolvency of a German shipyard. ….
“Genting HK effectively washed their hands of Crystal when they filed liquidation in Bermuda,” says Jack Anderson, who served as president of Crystal Cruises until the company dissolved its operations on Feb. 11. “At that point our relationship with Genting was effectively severed, and we were cut loose to fend for ourselves,” he tells Bloomberg. …
Consumers and travel agents are caught in the crosshairs. Crystal is currently responsible for more than $100 million in customer deposits and payments, all held in reserve accounts under the control of various credit card companies.
Most future itineraries were paid by credit card, which will make for easier refunds, says Anderson. Customers who paid in cash may not be as lucky, and those who had paid fully for sailings that were cancelled in 2020 or 2021 but rolled those funds into new bookings are completely out of luck; any credits are now worthless.
Beyond that, travel agents are owed 10% to 16% commissions on each itinerary they sold. The time spent untangling the logistical messes on behalf of their clients constitutes an additional cost they can never recoup. …
On Feb. 11, the last day the office was operational, Anderson says, none of it was in liquid cash that Crystal could use to keep operating. “Ultimately, we ended up with a bank account of zero.”
So Crystal cruises currently owe over 100 million dollars to guests in deposits and final payments. The majority of these payments will likely be returned to guests but they might need to file for a chargeback and the earlier the better. As always, those who paid for their upcoming cruises by credit card will be the lucky ones. According to the above-quoted Bloomberg article quoting former CEO Jack Anderson, the deposits are held by credit card companies in trust accounts and are eligible for refunds.
Mr. Anderson estimates 75% to 80% of customers paid for their cruises by credit card, meaning those customers would receive refunds.
Customers who were already on a cruise when the cruise line faltered and who have been unceremoniously let off the boat (after the ships fled an arrest order from Florida to the Bahamas) should also file for a chargeback as there won’t be any refunds coming automatically.
This situation was on the horizon for weeks yet travel agents kept selling Crystal Cruises like no tomorrow, eager to get the big commissions for the usually pretty expensive Crystal sailings. Genting MV the owner of Crystal has been teetering on the edge for a long time. Selling these voyages was irresponsible unless the customer really pushed for it after a stern warning. I’m not feeling all too bad for travel agents who are now missing out on their commission payments for the last 1-2 months after selling trips on a dicey line.
There are plenty of casualties of their bankruptcy including a Genting-owned shipyard in Germany that’s currently building the world’s second-largest cruise ship, the Global Dream for Genting The ship is 75% complete but first Genting ran out of money and now they filed for bankruptcy.
A few weeks ago the German Government refused a request by Genting to prop up the shipyard and construction of the ship with German taxpayer money to secure jobs at the shipyard MV Werften. The government declines, MV Werften went into insolvency and that was part of the trigger of further developments down the line including Genting Hong Kong and Crystal bankruptcy.
From a Billion-Dollar Company to zero within a few weeks. Ouch!
Conclusion
Crystal Cruises is toast and customers are now running after their money. Those who paid with credit cards (the vast majority) are likely to get their money back as it’s being held in trust by the big credit card companies. Customers who paid in cash, by check or wire transfer as well as with cruise credits stemming from previously canceled cruises are most likely SOL.
This is one of the reasons why I preached, again and again, to not accept future travel credits from companies during the Covid pandemic when eligible for a cash refund. Many people – be it cruise or airline customers- did so out of unfounded loyalty to a company that will screw them over in a heartbeat if it’s deemed commercially sensible. Others did it because getting a 20-50% bonus on their funds (depending on the company) sounded like a great deal for future travel. It’s a great deal IF the company is still around and IF the prices remain at pre-Covid levels.
Now would be a good time to ring your insurance or credit card company if you have money tied up with Crystal and get that claim started. The earlier the better!
