Royal Caribbean Cruises Ltd posts $1.4bn Q1 loss

Royal Caribbean Cruises Ltd posts $1.4bn Q1 loss

Royal Caribbean Cruises Ltd has reported a net loss of US$1.4 billion for the first quarter of 2020.

The parent company of Royal Caribbean International, Celebrity Cruises, Azamara and Silversea paused all operations amid the global Covid-19 pandemic on March 13.

In a trading update today,  the company said the pandemic was expected to have hit production at shipyards, meaning delays to new-build Royal ships.

RCCL said the pandemic had led to the cancellation of 130 sailings, which equated to a 20% reduction on its planned sailings and was 17% down on last year’s programme.

The company posted a profit of $249.7 million in the first quarter of 2019 and said it expects to report an overall net loss in 2020.

RCCL withdrew its full-year trading guidance in March, and the update noted: “The magnitude, duration and speed of Covid-19 remain uncertain. As a consequence, the company cannot estimate the impact of Covid-19 on its business, financial condition or near or longer-term financial or operational results with reasonable certainty.”

It expects non-operating expenses of between $590 million and $610 million for the remainder of the year.

Bookings for the remainder of 2020 are “meaningfully lower” than 2019 with lower prices, RCCL reported but noted that before the pandemic took hold it was in “a strong booked position and at higher prices” than 2019.

Looking ahead, it said “the booked position for 2021 is within historical ranges when compared to the same time last year” with 2021 prices “up mid-single digits compared to 2020”. The company stressed it was “still early in the booking cycle”.

RCCL brands had offered customers booked on cancelled cruises either a cash refund or future cruise credit note and said that, as of April 30, 2020, approximately 45% of guests had requested cash refunds.

As of March 31, 2020, the company had $2.4 billion of cash in customer deposits.

RCCL estimates its cash burn to be, on average, in the range of approximately $250 million to $275 million per month while operations are suspended but noted it had “taken significant actions to enhance its liquidity, preserve cash and secure additional financing”. These included securing a $4 billion increase in financing and knocking $3 billion off its 2020 capital expenditure.

“We have taken swift and substantial actions to bolster our financial position by significantly reducing our operating and capital spend and leveraging our strong balance sheet to raise additional capital,” said Jason Liberty, executive vice president and chief financial officer.

As of April 30, 2020, the company had liquidity of approximately $2.3 billion all in the form of cash and cash equivalents, RCCL reported. And on May 19, 2020, it completed a $3.3 billion senior secured notes offering, improving its liquidity position by approximately $1 billion.

RCCL noted that as of May 19, 2020, the expected debt maturities for the remainder of 2020 and 2021, are $0.4 billion and $0.9 billion, respectively.

“Responding to the dramatic change in business conditions caused by COVID-19 has required focus, dedication, ingenuity and improvisation from all our people, and their efforts have been nonstop,” said chairman and chief executive Richard Fain. “We understand that when our ships return to service, they will be sailing in a changing world.  How well we anticipate and solve for this new environment will play a critical role in keeping our guests and crew safe and healthy, as well as position our business and that of our travel agent partners to return to growth.”

RCCL is due to complete its repatriation of crew members to their home countries, and said the company’s future focus now turns to four key principles:

• Ensuring the safety of guests and crew
• Proactively enhancing liquidity
• Protecting the Company’s brands, and
• Defining and preparing for a “new normal.”