RCCL expects a financial loss for 2020 but sees hope for 2021

Royal Caribbean Cruises Ltd. (RCCL) today said that it expects to take a loss for the 2020 fiscal year, the extent of which will depend on the extent of its operations suspension, but that its 2021 booked position is “within historical range” when compared with the same period last year.

RCCL, parent company to Royal Caribbean International, Celebrity Cruises, Azamara and Silversea, also said in a business update that less than half of guests are opting to take refunds for cruises canceled due to Covid-19 and that most are taking the option for a future cruise credit valued at 125% of the initial cruise fare. As of April 30, RCCL said, approximately 45% of the guests had requested cash refunds.  

The company said that booking volumes for the remainder of 2020 are “meaningfully lower than the same time last year at prices that are down low-single-digits” but that it continues to take future bookings for 2020, 2021 and 2022, and receive new customer deposits and final payments on these bookings.

“Travel restrictions and stay-at-home orders are important to slowing the spread of the virus, but they have severely impacted our operations,” said Richard Fain, RCCL CEO, in a statement. “We are taking decisive actions to prioritize the safety of our guests and crew while protecting our fleet and bolstering liquidity.”

RCCL said that while its fleet is idle, it has been developing “a comprehensive and multifaceted program” to address the public health challenges posed by Covid-19, such as “enhanced screening, upgraded cleaning and disinfection protocols and plans for social distancing.” 

Liquidity position

As of April 30 RCCL said that it has liquidity of approximately $2.3 billion, all in the form of cash and cash equivalents.  On May 4. it drew $150 million from a 364-day senior secured credit facility, further enhancing its liquidity profile.

CFO Jason Liberty said that since late January RCCL has “undertaken several proactive measures to mitigate the financial and operational impacts of covid-19.”

“Our focus is on bolstering liquidity through significant cost cutting, capital spend reductions and other cash conservation measures,” he said.

RCCL said it has reduced operating expenses during its cruise suspension by significantly reducing ship operating expenses, including crew payroll, food, fuel, insurance and port charges; eliminating or significantly reducing marketing and selling expenses for the remainder of 2020; reducing workforce by approximately 26% of more than 5,000 shoreside employees in the US; suspending travel for shoreside employees; and instituting a hiring freeze across the organization.

The company estimated that its average ongoing ship operating expenses and administrative expenses is approximately $150 million to $170 million per month during the suspension of operations. 

RCCL also identified approximately $3 billion and $1.4 billion of capital expenditure reductions or deferrals in 2020 and 2021, respectively. The 2020 reductions comprise $1.2 billion this related to non-newbuild, discretionary capital expenditures and $1.8 billion in reduced spend or deferred installment payments for newbuild-related payments, which the company is currently finalizing. 

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