Royal Caribbean expects to continue phased approach to cruising

Royal Caribbean expects to continue phased approach to cruising

NEWS: Royal Caribbean Group reported its financial results for the fiscal year of 2020 and commented on its phased approach to cruising.

“The COVID-19 pandemic is having a painful and profound impact on our world and our business; unquestionably, this crisis is the most difficult in the Company’s history. But we have been impressed and grateful for the resourcefulness and agility of our team in responding to these unprecedented challenges. More importantly, we remain confident about the ability of our Company to recover and return to the positive trajectory we were on previously,” said Richard D. Fain, Chairman and CEO. “We are encouraged to see the sharp decline in cases and the growing availability of vaccines. We can’t wait to get back to the business of showing people the world and making great memories.”

As part of the global containment effort resulting from the COVID-19 pandemic, the Company implemented a voluntary suspension of its cruise operations beginning March 13, 2020, which has been extended for most ships through to at least April 30, 2021.

Royal Caribbean Oasis Labadee Haiti

For the full year, the Company reported US GAAP Net Loss of $(5.8) billion or $(27.05) per share compared to US GAAP Net Income of $1.9 billion or $8.95 per share in the prior year.

“These results reflect the staggering impact that the pandemic brought to our Company and the whole industry during 2020,” said Jason T. Liberty, executive vice president and CFO. “I want to thank all our teams who have risen to the occasion, managing through the toughest year in Royal Caribbean’s history.”

royal caribbean symphony of the seas exterior

Health and Safety Protocols

The Company continues to work and collaborate with the Healthy Sail Panel, epidemiologists, health authorities and various governments around the globe to ensure a healthy and safe return to cruising for guests, crew and the communities visited. While the situation remains highly fluid, knowledge of the virus and how it spreads continues to improve.

The Company has already begun some limited operations. For example, in December, Quantum of the Seas started operating out of Singapore. In addition, the TUI Cruises affiliate has had three vessels operating in the Canary Islands since November.

Royal Caribbean Harmony of the Seas

“Guests are sharing very positive reviews and we are also seeing a higher proportion of first-time cruisers than expected. We believe that these cruises, even before the availability of vaccines, are helping us learn and demonstrate to others how we can operate successfully under the current COVID-19 environment,” noted Mr. Fain.

The Company also continues to prepare and develop its plan to meet the Framework for Conditional Sailing Order issued by the U.S. Centers for Disease Control and Prevention (CDC) for US sailings. While the framework represents an important step to return to service, many uncertainties remain as to the specifics, timing, and cost of implementing its requirements.

RCCL Oasis of the Seas renovation aft

Overall, and due to the challenges posed by the pandemic, the Company expects to re-start its global cruise operation in a phased manner with the initial cruises having reduced guest occupancy, modified itineraries and enhanced health and safety protocols.

On January 29, 2021, the Company announced it had entered into a definitive agreement to sell its Azamara brand in an all-cash transaction for $201 million. The deal includes Azamara’s three-ship fleet and associated intellectual property.

Royal Caribbean Harmony of the seas interior balcony cabins

Given the current environment, the Company continues to work to bolster its liquidity, so it is well positioned for recovery. Among its latest efforts, the Company highlighted the following:

The Company estimates its cash burn to be, on average, in the range of approximately $250 million to $290 million per month during a prolonged suspension of operations.

Royal Caribbean Perfect Day Coco Cay Devil tower and balloon

This range includes all interest expenses, ongoing ship operating expenses, administrative expenses, hedging costs, expected necessary capital expenditures (net of committed financings in the case of newbuilds) and excludes changes in customer deposits, commissions, principal repayments, and fees and collateral postings related to financing and hedging activities.

As the Company starts returning its fleet into service, it has (with respect to existing operations) and will incur incremental spend as it brings the ships out of their various levels of layup, returns the crew to the vessels, takes the necessary steps to ensure compliance with the recommended protocols and gears up its sales and marketing activities.

Royal Caribbean Cruises Harmony of the Seas cruise ship ziplining

Liquidity and Financing Arrangements

As of December 31, 2020, the Company had liquidity of approximately $4.4 billion, including $3.7 billion in cash and cash equivalents and a $0.7 billion commitment from a 364-day facility.

“We remain focused on improving our liquidity position, managing our operating expenditures and ensuring that our family of brands is ready for the return to service,” noted Mr. Liberty. “We are well positioned to emerge competitively stronger and are eager to start delivering world class vacations – which we expect will lead back to compelling returns and a strong balance sheet.”

royal caribbean cruises royal suite

The expected capital expenditures for 2021 are $2.1 billion. These expenditures are mainly driven by the newbuild projects which have committed financing.

During 2021, the Company expects the delivery of Odyssey of the Seas and Silver Dawn during the first and fourth quarters, respectively.

As it relates to 2022, the Company has two ship deliveries scheduled, both with committed financing: Wonder of the Seas and Celebrity Beyond.

RoyalCaribbean Perfect Day Coco Cay Panorama view

Excluding the newbuild deliveries, the capital expenditures for 2022 will depend on the Company’s schedule to return to service.

Since the suspension of operations and during 2020, the Company divested three ships from its fleet: Celebrity Xperience, Majesty of the Seas and Empress of the Seas.

The Company also divested three ships being used by its Pullmantur affiliate.

Additionally, the Company announced it entered into a definite agreement to sell its Azamara brand which includes three vessels: Azamara Journey, Azamara Quest and Azamara Pursuit. .

Royal Caribbean cruises from New York and Boston

Update on Bookings

Booking activity for the second half of 2021 is aligned with the Company’s anticipated resumption of cruising. Pricing on these bookings is higher than 2019 both including and excluding the dilutive impact of future cruise credits (FCCs).

Cumulative advance bookings for the first half of 2022 are within historical ranges and at higher prices. This was achieved with minimal sales and marketing spend which the Company believes highlights a strong long-term demand for cruising.

Since the last business update, approximately 75% of bookings made for 2021 are new and 25% are due to the redemption of FCCs and the “Lift & Shift” program.

The Company continues to provide guests on suspended sailings with the option to request a refund, to receive an FCC, or to “lift & shift” their booking to the following year.

As of December 31, 2020, the Company had $1.8 billion in customer deposits of which 50% are related to FCCs. Since the suspension of operations, approximately 53% of the guests booked on cancelled sailings have requested cash refunds.

Source: Royal Caribbean