Royal Caribbean losses mount – limited cruising resumed

2021-02-26T20:58:46+00:00 February 26th, 2021|Finance|

Royal Caribbean Group suffered a US GAAP net loss of $5.8 bill or a negative $27.05 per share for last year, compared to an income of $1.9 bill or $8.95 per share in 2019.

The company also reported an adjusted net loss of $3.9 bill or a negative $18.31 per share for 2020, compared to an income of $2 bill or $9.54 per share in 2019.

US GAAP net loss for the fourth quarter of 2020 was $1.4 bill or a negative $6.09 per share, while the adjusted net loss was $1.1 bill or a negative $5.02 per share. By comparison, for 4Q19, the US GAAP net income was $273.1 mill or $1.30 per share, and adjusted net income was $297.4 mill or $1.42 per share.

The company explained that the losses for the fourth quarter and full year were the result of the impact of the COVID-19 pandemic on the business.

As part of the global containment effort, the company implemented a voluntary suspension of its cruise operations beginning 13th March, 2020, which has been extended for most ships through at least 30th April, 2021.

“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 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.”

Royal Caribbean also revealed that its estimated cash burn was, on average, in the range of about $250 mill to $290 mill per month during the prolonged suspension of operations.

“These results reflect the staggering impact that the pandemic brought to our company and the whole industry during 2020,” said Jason 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 said that it continued to work and collaborate with the Healthy Sail Panel, epidemiologists, health authorities and various governments worldwide 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.

Limited operations have already resumed. For example, in December, ‘Quantum of the Seas’ (pictured) started operating out of Singapore. In addition, affiliate TUI Cruises has been operating three vessels in the Canary Islands since November.

The company said that it was also continuing to prepare and develop its plan to meet the Framework for Conditional Sailing Order issued by the US Centres 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. Overall, and due to the challenges posed by the pandemic, the company expected 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, Royal Caribbean said.

Since the cruise operation suspension, the company claimed to have taken aggressive actions to enhance its liquidity through significant cost and capital reductions, cash preservation measures and by obtaining additional financing. For example, during 2020, the company raised around $9.3 bill of new capital through a combination of bond issuances, common stock public offerings and other loan facilities.

As of 31st December, 2020, the company had liquidity of about $4.4 bill, including $3.7 bill in cash and cash equivalents and a $0.7 bill 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,” Liberty added. “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.”

Booking activity for the second half of 2021 was in line with Royal Caribbean’s predictions, including and excluding the dilutive impact of future cruise credits (FCCs).

While the brands were still in the process of opening sales for the remainder of their 2022/2023 seasons, first and second quarter 2022 sailings have been open for some time. 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 highlighting a strong long-term demand for cruising, the company claimed.

Since the last business update, around 75% of bookings made for 2021 were new and 25% were due to the redemption of FCCs and the ‘Lift & Shift’ programme.

As at the end of last year, Royal Caribbean had $1.8 bill in customer deposits of which 50% were related to FCCs. Since the suspension of operations, around 53% of the guests booked on cancelled sailings have requested cash refunds.