Royal Caribbean Group (RCL) has reported a US GAAP net loss of $1.3 bill or minus $6.29 per share for the third quarter of this year, compared to a net income of $883.2 mill or $4.20 per share in 3Q20.
RCL also revealed an adjusted net loss of $1.2 bill or minus $5.62 per share for the period, compared to a net income of $896.8 mill and $4.27 per share for same quarter of 2019.
The losses for the quarter were down to the impact of the COVID-19 pandemic on the business, RCL said.
In an update, the company said that it continued to work with government and health authorities worldwide to address the public health challenges posed by COVID-19 and expects to re-start its global cruise operation in a phased manner.
Recently, the company received an approval to sail from the Singaporean Government. As a result, it is anticipated that ’Quantum of the Seas’ will resume cruising from Singapore in December, 2020.
These initial cruises will most likely take place with reduced guest occupancy, modified itineraries and enhanced health protocols developed in collaboration with governments and health authorities.
In June, 2020, RCL together with Norwegian Cruise Line Holdings (NCLH) formed a panel of medical and scientific experts named the Healthy Sail Panel (HSP). HSP has spent the last months studying how to better protect the health and safety of guests and crew on board cruise ships, as well as the communities they serve.
Through research and its relevant experience, HSP concluded that cruising can resume operations in a measured and controlled manner even during the pandemic with a robust set of science-backed protocols. The panellists identified 74 recommendations across five focus areas.
On 21st September, 2020, the HSP submitted its recommendations to the US Centres for Disease Control and Prevention (CDC) in response to a CDC request for public comment that will be used to form future public health guidance and preventative measures relating to travel on cruise ships.
“The work of the Healthy Sail Panel has been thorough and comprehensive. We are grateful for its enormous dedication and passion, which has resulted in what has quickly become the seminal document in this arena. We are also grateful for the time the CDC and their observers have spent on this important topic with the Healthy Sail Panel,” said Richard Fain, RCL Chairman and CEO. “We understand the importance of getting this right and are preparing to put these plans to the test with a gradual and methodical return to service in the near future.”
Given the current environment, RCL said that it continued to prioritise and boost its liquidity, working to ensure it is well positioned for recovery.
Since the last earnings call, the company has taken further actions to enhance its liquidity, preserve cash and obtain additional financing. Among these latest efforts, RCL highlighted a $700 mill increase in liquidity through a 12-month commitment for a senior guaranteed 364-day facility and an around $1.15 bill increase in liquidity through a combination of a convertible bond issuance and a common stock public offering.
The company estimated its cash burn to be, on average, in the range of about $250 – $290 mill per month during the prolonged suspension of operations.
These outgoings include all interest expenses, ongoing ship operating costs, administrative expenses, hedging costs, expected necessary capital expenditures (net of committed financings in the case of newbuildings) but excludes cash refunds of customer deposits, commissions, debt obligations and cash inflows from new and existing bookings.
When RCL starts to resume cruise operations, it will incur incremental costs, 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 restarts its sales and marketing activities.
“We continue to aggressively manage our spend and take opportunistic actions to bolster our financial position,” said Jason Liberty, Executive Vice President and CFO. “Moreover, we are optimistic that with the gradual resumption of cruise operations, our cash flow from operations will sequentially improve, driven by an increase in the inflow of customer deposits.”
As of 30th September, 2020, RCL had liquidity of around $3.7 bill, including $3 bill in cash and cash equivalents and a $0.7 bill commitment from the 364-day facility, compared to $4.1 bill as of 30th June, 2020.
This month, the company raised a further $1.15 bill through a combination of convertible notes and a public offering of common stock, further improving its liquidity position.
The total cash spend for the third quarter was about $1.1 bill, mainly driven by ship operating expenses. These expenses sequentially declined each month within the quarter, as the fleet achieved the desired levels of layup by the end of August.
RCL also revealed that as of 30th September, 2020, the scheduled debt maturities for the remainder of 2020 and 2021, were $0.3 bill and $1.3 bill, respectively.
The expected capital expenditures for 4Q20 and full year 2021 are $0.5 bill and $2.1 bill, respectively. These costs are mostly related to newbuilding projects, which have committed financing.
COVID-19 has also impacted shipyard operations, which has resulted in newbuilding delivery delays. The exact duration of the ship delivery delays is currently under discussion with the yards involved.
As for the outlook, RCL’s operation is still subject to the impact of COVID-19. Consequently, the company said that it could not estimate its near or longer-term financial or operational results with reasonable certainty. However, the company said that it expected to incur a net loss on both a US GAAP and adjusted basis for the 4Q20 and the fiscal year, the extent of which will depend on the timing and extent of the return to service.
Booking activity for the first half of 2021 is aligned with the company’s anticipated staggered resumption of cruises, it claimed. The cumulative booked position for sailings in the second half of 2021 is within historical ranges with prices that are down slightly year-over-year when including the negative yield impact of bookings made with future cruise credits (FCCs) and about flat when excluding them.
Since RCL’s last business update, more than 65% of the 2021 bookings were new and the rest were due to the redemption of FCCs and the ‘Lift & Shift’ programme. RCL said that it continued to provide guests who were booked on a suspended sailing with the option to request a refund, to receive an FCC, or to ‘lift and shift’ their bookings to the following year.
As of 30th September, the company had $1.8 bill in customer deposits of which about 50% are FCCs and $180 mill correspond to 4Q20 sailings. Around 50% of the guests booked on cancelled sailings have requested cash refunds.
RCL resumed limited cruise operations outside of the US in July with three TUI cruise vessels and two vessels from Hapag Lloyd, and in September, for a limited period, with one Silversea ship.
However, recent pandemic linked events in Germany may impact on the resumption.