ENCORE: Cruise Ship Wars | Mayday | 4

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0:16It's early 2002 in London, England. Carnival Cruise Line President Mickey Arison sits across from a Princess Cruises shareholder. Outside, icy rain pours down, and the cuffs of Arison's pants are still damp from his short walk from the cab to the restaurant door. But Arison's not letting his discomfort distract him. He's here in this cold, dark city on a mission. Look, I know that Richard Fane and other Royal Caribbean executives are out there saying that I'm a spoiler. The Carnival doesn't really want to buy Princess. We just want to prevent Royal Caribbean from buying it. But look, I can assure you that that's not the case.

0:55In late 2001, Mickey learned that Royal Caribbean CEO Richard Fane had made a deal to buy Princess Cruises. Now Mickey is doing everything he can to stop that deal from going through. And let's talk about Richard Fane. He swooped in and took over Royal Caribbean. Look, he's not a cruise man. He hires a bunch of Ivy League consultants to help him run the business. We've never had to do that at Carnival, because cruising is in our blood. My father practically invented this business. Has Princess ever needed to bring in consultants? I'm not sure. I doubt it. Now, let's look at what these Ivy League consultants brought to Royal Caribbean.

1:35Since Fane took over, Royal Caribbean has consistently underperformed compared to Carnival. And per the terms of the deal, he'd retained the top position once he acquired Princess. I don't think there's any reason to believe he'd do a better job overseeing a bigger company. The shareholder cuts into his stake. I understand what you're saying, and I don't completely disagree. But even if Carnival came in and made a better offer, we don't know if the regulators would approve it. We could be throwing away a perfectly good deal with Royal Caribbean for a deal that could get nixed. It's true, but you don't know that Royal Caribbean will get approval either.

2:13That's a gamble you'll have to take with either company. But what about the poison pill? When making the deal with Princess, Richard Fain insisted on a clause stating that if Carnival gains control of Princess before January 2003, then the equivalent of$500 million of Princess money will go to Royal Caribbean. Fane is counting on his belief that Carnival can't afford to pay$500 million on top of what they'll have to pay to buy Princess. Mickey takes a sip of his wine and gives the shareholder a sly grin. He's confident he and his team have come up with an ingenious way around the poison pill. So you and the other shareholders are set to vote in the Royal Caribbean deal in a few weeks, right?

2:58Mm-hmm. What if you just voted not to vote? What do you mean? Vote to adjourn the meeting. Don't make any decision regarding the Royal Caribbean offer. If you don't accept the offer, then the poison pill won't be activated. And Richard Fane's offer is binding for a year. He can't revoke it. That's plenty of time for us to know if the regulators will approve the sale to us. All you're doing is kicking the decision down the road until you have more information. No harm, no foul. The shareholder wrinkles his brow. It can't be that easy. Look, to be honest, I didn't think it could be true either, but our lawyers have been through this with a fine tooth comb.

3:37This is completely above board. And look, it's better for you as a shareholder if we can get into an open bidding war with Royal Caribbean and not have our hands tied by a poison pill. You'll likely make more money. The shareholder leans back in his chair. This is interesting. Mickey nods. A few months ago, he thought the odds were long that Carnival would be able to spoil Royal Caribbean's deal and buy Princess itself. But now, he's starting to think he has a real chance. And he's going to do everything he can to secure the deal. because if he does, Carnival will be uncatchable.

4:27I'm Raza Jaffrey, and in the new season of The Spy Who, we go back in time to meet Benedict Arnold, the spy who betrayed the American Revolution. As America fights for freedom from Britain, Arnold emerges as one of the rebels' greatest generals. But when his loyalty is pushed to the limit, he turns spy and devises a plot to shatter the rebellion and make George Washington a prisoner. Follow The Spy Who now, wherever you listen to podcasts. You can also listen to the full season of The Spy Who Betrayed the American Revolution early and ad-free on Audible. I heard a rumour that the CIA poisoned my grandad.

5:00Gordon Banks, the world's number one goalkeeper. It happened in Mexico, supposedly, at the World Cup in 1970. Sounds crazy? I'm an investigative journalist on the hunt for evidence. We needed to do some extraordinary things to counter the Soviets. This is Foul Play, an unbelievable tale of sports, spies and family secrets. Listen now wherever you get your podcasts or early and ad-free on Audible.

5:29From Wondery, I'm David Brown and this is Business Wars.

5:59On our last episode, Carnival Cruise Line was the first cruise company to go public, and it used its newfound war chest to acquire other cruise lines. But when they attempted to take over their biggest rival, Royal Caribbean, CEO Richard Fane was able to stave them off. For years, both companies continued to grow through acquisition. Carnival maintained its lead as the most successful cruise company, but Royal Caribbean was nipping at their heels. Now, whoever wins the fight to acquire Princess will be the undisputed cruising leader. But a bigger threat to the entire industry looms in the future.

6:41This is Episode 4, Mayday.

6:50It's Valentine's Day 2002 in London, England. Princess Cruise Line shareholder meeting. Mickey Arison walks into a packed ballroom in the Royal Lancaster Hotel. He's flanked by 14 other executives from Carnival. Each one of them has bought a single share of princess stock in order to be allowed entry into the meeting. Arison and his team make their way to the front row of seats. Several of the shareholders glare at them. One man dressed in a tweed jacket and a bow tie hisses at the carnival folks. Get the hell out of here! Arison ignores him. The carnival team knew they would face a hostile crowd.

7:30Many are private princess shareholders. They are largely British. and have no interest in the company being sold to the crass Americans of Carnival. Arison is counting on the institutional investors, those representing pension plans and index funds, to be his allies. They don't have nationalist tendencies, and are primarily motivated by financial interests. Arison settles into his seat. The prince's board looms above the ballroom floor on a makeshift stage. Arison whispers to Carnival Vice Chair Howard Frank sitting next to him. It kind of feels like we're on trial rather than attending a shareholders meeting, right?

8:09Frank nods. But before he can say anything, the chair of the princess board pounds his small gavel. Thank you all for being here. I call this meeting to order. Behind Arison, a man in a black suit stands up. Arison recognizes him as a representative of a retirement fund. I move to adjourn the meeting. A wave of grumbles and protests rises up from the private shareholders. The chair leans forward. There has been a movement to adjourn. We will now take comments on the proposal. Private shareholders swarm to the microphones that have been set up on either side of the room. One woman approaches the mic and grabs it with two hands.

8:50I want to keep things in England and keep England strong. A man follows her. Carnival is crude and opportunistic. They'll ruin the Princess Brand. The comments continue for hours. Arison sits there, listening as more and more people disparage Carnival. Finally, the line of private shareholders comes to an end. From up on the dais, the chair gestures toward Arison. Mr. Arison, is there anything you'd like to say in response? Arison's mouth goes dry. He's gotten much better at public speaking, but at his core, he's still a shy introvert. He has nothing prepared, but Frank nudges Arison with his elbow and gives him an emphatic nod.

9:33Arison has to speak. The chair offers Arison his own mic, so Arison clambers onto the stage. Carnival is a brand builder, not a brand destroyer. We've taken over several cruise lines at this point, and I would argue that all of them have thrived under our leadership. A man yells from the back. Don't listen to him. Carnival's just trying to spoil this deal. Arison feels his patience snap. He whips his head to address the man who spoke. If I weren't committed to seeing this deal through, would I have spent the past three weeks meeting with shareholder after shareholder and enduring your horrendous weather?

10:09From the front row, Carnival Vice Chair Howard Frank jumps to his feet. All we are asking is to adjourn the meeting. Give yourself time to consider both deals on equal footing. See what the regulators decide before you make a decision. You are out of order, sir. Frank sits, and Harrison steps down from the stage, returning to his seat. This period for comments is over. It is now time to vote on whether to adjourn the meeting. Assistants pass out ballots to the hundreds of gathered shareholders. But as Harrison looks around the room, he realizes that it's going to take hours to count all these votes.

10:46He checks his watch. It's late afternoon. He scrunches down into his chair, trying to get comfortable. He has a feeling he's going to be here late into the night. Arison's right. The counting extends through the evening. The board arranges dinner to be brought in for the gathered shareholders. Meanwhile, the counting continues. Most people leave. Only a few diehards remain. Finally, at 4.30 in the morning, the chair makes an announcement. The shareholders have voted to adjourn. Arison leaves the room with a grin. Fifteen years ago, Richard Fane helped outmaneuver Arison and prevented Carnival from taking over Royal Caribbean.

11:33But this time, Arison has won. Princess is going to be his. Over the next year, the Royal Caribbean offer expires, and with it, the poison pill. Carnival outbids Royal Caribbean and offers$7.3 billion to buy Princess. In April 2003, Princess shareholders vote to accept Carnival's offer. With the addition of Princess's fleet, Carnival controls over 50 % of the cruise market. It's a big blow to Richard Fane and Royal Caribbean. Over the next decade, the passenger count for cruises steadily rises. Cruise lines expand their sailing routes beyond the traditional departure points of Miami and San Diego, now including cities like Baltimore, Galveston, and Seattle.

12:26In 2013, Norwegian Cruise Line finally goes public. Its IPO had been delayed twice before due to downturns in the market. It's a successful debut, raising nearly$500 million for the company. With its new capital, Norwegian buys two smaller cruise companies, solidifying themselves in third place. Carnival is still the behemoth, dominating the seas. But in the 2010s, the industry leader will face choppy waters. In 2012, a ship owned by Carnival subsidiary Costa Concordia hits a rock formation off the coast of Italy. 32 people on board die in the crash. A subsequent investigation reveals that the captain of the ship had deviated from the approved course and came too close to the shore.

13:19He's found guilty of manslaughter and sentenced to 16 years in prison. A year later, a generator catches fire on board the Carnival ship Triumph, knocking out the ship's power. The ship drifts in the Gulf of Mexico for four days, unable to steer. Their fear and frustration is coming out in phone calls and texts sent back to loved ones here at home. Pipes are busting. I know the sewer is backing up and, like, water is in the cabins, and it's just a nightmare. For those four days, the ship lacks air conditioning, lights, water, food, and a working sewage system. Human waste backs up and floods the ship, even running down the walls.

14:02It earns it the nickname the Poop Cruise on social media. Journalists uncover numerous reports flagging that the faulty generator was overdue for maintenance. Following the Triumph debacle, two other Carnival ships suffer from mechanical problems. Carnival has to cancel stops on the cruises, and in one case, fly passengers home. Mickey Arison increasingly comes under pressure.

14:33It's an early evening in June 2013 in Miami, Florida. Mickey Arison bustles around his office in Carnival headquarters. There's a knock on the door. Mickey flings it open. Standing outside is the president of Carnival's board. Oh, hi, you just caught me. About to head out. You have a minute to talk? Arison glances at the time. Sure, but just a minute. I gotta get to the game. Along with running Carnival, Arison owns the Miami Heat basketball team who are currently playing in the NBA Finals. Right, well, I'll get right to it. It's been a hard year for the company, some problems out of our control, but there were some unforced errors.

15:15Arison grunts noncommittedly. He doesn't say anything, but he's pretty sure the president is referring to Arison's choice to attend a Heat game while the Triumph was adrift at sea without power. Arison took a beating in the press for that decision. The president continues. And the chickens are coming home to roost. Bookings are down, stock prices are down. Arison sets down his briefcase, suddenly understanding where this conversation is going. We've had a lot of discussions about secession and when exactly I would step aside. I take it the board has made a decision about that. The president nods.

15:50We think we need a reset. Show the public and our shareholders that we take all of the incidents that have occurred this year seriously. But I want to be clear. We're only talking about you stepping away as CEO. You'd still be chair of the board. Arison is quiet for a moment. He's been in charge of Carnival for over 30 years, and before that, it was his father's company. It's hard to imagine Carnival without an Arison at the helm. But he knows he can't stay CEO forever. I've always wanted to take up golf. The president sticks out his hand. We'll make sure the landing is soft. Arison looks at his watch.

16:33He has to hustle if he's going to make it to the arena by tip-off. At the end of June 2013, Carnival announces that Mickey Arison will step down as CEO and longtime Carnival board member Arnold Donald will be taking over. Carnival stock rallies in response to the change. Scandals continue to plague Carnival after Arison's departure, however. In 2016, Princess, now a subsidiary of Carnival, is slapped with$40 million in fines after pleading guilty to seven felony counts for illegally dumping waste into the seas. In 2019, they're hit with an additional$20 million in fines for more illegal dumping.

17:16The judge reprimands Carnival for continually flouting environmental law. But despite all the bad publicity, cruising overall continues to grow throughout the 2010s, and Carnival remains the top dog. And by January 2020, industry analysts predict the coming year will be cruising's biggest yet. They anticipate that 32 million people will cruise in 2020, up from 30 million the year before. But soon, everything changes.

17:52It's February 3rd, 2020. Captain Gennaro Arma stands on the bridge of the Diamond Princess. The ship is heading toward Yokohama Port in Japan on day 13 of a 16-day cruise. The ship has made stops in Hong Kong, Vietnam, and Taiwan, in addition to Japan. It's all gone smoothly, despite increasing reports of a novel virus spreading in China. The satellite phone rings and a crew member answers. After a moment, he turns to the captain, extending the handset. It's someone from the Hong Kong Health Authority. He says it's urgent. The captain takes the handset. Captain Armour speaking. I'm calling from the Hong Kong Health Authority.

18:35You had a passenger disembark here on January 25th? Okay. I'm calling to let you know that he has tested positive for coronavirus. Other passengers and crew on your ship have likely been exposed. But you said he disembarked on the 25th. That was nine days ago. How do you know he didn't contract the virus in Hong Kong after leaving the ship? Well, he reported that he started exhibiting symptoms on January 19th, one day before he boarded the ship. The captain hangs up the phone and doesn't say a word. But deep inside, he knows that his ship is now a viral hot zone.

19:17I'm Raza Jaffray, and in the new season of The Spy Who, we open the file on Benedict Arnold, the spy who betrayed the American Revolution. America is fighting to free itself from the British Empire, and one of its foremost generals is Benedict Arnold. He's a smuggler turned battlefield hero and admired for his aggressive tactics. But when a war wound, a new wife, debts and politics test his loyalty to the Max, he turns spy and devises a plot to shatter the revolution and help Britain capture rebel commander-in-chief General George Washington. And that plot would make him the most infamous traitor in US history.

20:01Follow the Spy Who now, wherever you listen to podcasts. You can also listen to the full season of The Spy Who Betrayed the American Revolution early and ad-free on Audible.

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21:32It's February 4th, 2020. A member of the Japanese Health Ministry follows a crew member down a corridor of the Diamond Princess. He wears gloves, goggles, and an N95 mask. Over his shoulder is a medical bag with digital thermometers and nasal swabs to collect samples to test for COVID-19. He and the other members of his team have been sent on board to interview passengers and test for the new coronavirus. The health ministry officer clears his throat. I know that passengers have been advised to stay in their rooms and you've canceled all scheduled activities, but what precautions are being taken below decks?

22:08What do you mean? Are there any protocols being taken to stop the spread of the virus amongst the crew? Well, we're washing our hands more. You don't have masks? I think the crew members working in the medical wing have some. And you eat communally? Yeah, in the cafeteria, and we pretty much sleep communally. For many of us, we share cabins, bathrooms, and everything. The health officer nods. This does not bode well. He hopes that somehow no one else got infected on this ship. Otherwise, he worries that they could have a major outbreak on their hands. They reach the end of the corridor. The crew member knocks on the door of the farthest cabin.

22:50A man who looks to be in his 60s answers the door. He's pale and sweaty, and he seems out of breath just from walking from his bed to the door. Behind him, his wife sits in a chair, her body racked by a dry, hacking cough. Any hope the health officer had that this ship had escaped infection is quickly fading. He pulls out one of his thermometers. I need to take your temperature. The passenger nods. The health officer holds the thermometer to the passenger's forehead. After a few seconds, it beeps. 102.2. You have a fever. The health officer looks past the man to his wife. Ma 'am, you have a cough?

23:30The woman nods. I'm going to collect nasal swabs from each of you, and we'll test it for the COVID-19 virus. Both the man and the woman nod, clearly exhausted. The health officer takes swabs from each of them, carefully labeling and securing the samples. Thank you for your time. We'll be in touch with the results. As he and the crew member leave the room, the health officer hears a different crew member knocking on the door down the hall. He looks down and sees the crew member delivering room service to a cabin. She's not wearing any protective gear. A chill goes through the health officer. The more he learns about how a cruise ship operates, the more it seems like the perfect incubator for a virus.

24:14He feels fairly certain that there's already a major outbreak of COVID-19 on board. He pinches his mask tighter and knocks on the next door. Ten people initially test positive for COVID-19 on board the Diamond Princess. The ship is ordered into a 14-day quarantine with passengers confined to their rooms. Eventually, more than 700 people are confirmed as having the virus, and 13 people die as a result of the disease. It's the largest outbreak outside China, where the virus originated. But soon, there are more outbreaks of influenza-like illness on board other cruise ships, including ones that were not sailing in Asia, implying that the virus is spreading rapidly around the globe and that cruise ships themselves are particularly vulnerable to outbreaks.

25:08Cruise company executives scramble to figure out ways to make cruising safe and to convince the government to allow them to keep sailing.