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$2bn quarterly loss but Carnival's Q3 voyages were cash-flow positive

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Carnival Corp. & plc racked up another $2bn loss but said its third quarter voyages were cash-flow positive, which is expected to continue.

Though Q3 customer deposits increased, booking volumes were impacted by the Delta variant and slowed in August, so didn't they equal those of Q2 but surpassed Q1. However, CFO David Bernstein noted an uptick in booking volumes in recent weeks.

Record advance bookings

Bookings for the second half of 2022 are ahead of a very strong 2019.

'Our booked position for the second half of 2022 is at a new historical high, including our seasonally strong third quarter with all our ships planned to be in operation, despite reduced marketing spending,' President and CEO Arnold Donald said. 'The broader environment for travel, while choppy, has improved dramatically since last summer and we believe it should improve even further by next summer, if the current trend of vaccine roll outs and advancements in therapies continues. We have also opened bookings for further out cruises in 2023, with unprecedented early demand.'

Third quarter

Carnival's US GAAP net loss was $2.8bn and adjusted net loss $2bn.

Customer deposits increased $630m, marking the second consecutive quarter since March 2020 the company has seen higher customer deposits.

'Exceptionally strong' on-board revenue, occupancy builds to 54%

Revenue per passenger cruise day increased compared to a strong 2019, despite the current constraints on itinerary offerings, driven in part by 'exceptionally strong' on-board and other revenue.

Occupancy was 54%, building consistently month-to-month from 39% in June to 59% in August. Occupancy for North American brands (68%) reflects vaccination policies, which restricts the number of children carried, and for European brands (47%), reflects social-distancing requirements for the continental European brands and the 1,000-person cap for some UK sailings in the quarter.

Available lower berth days were 3.8m, which represents 17% of total fleet capacity. ALBDs are expected to be 10.3m for Q4, or 47% of total fleet capacity.

'Beyond the enthusiasm of our guests and crew and the unprecedented net promoter scores, it is difficult to demonstrate just how successful our restart effort has been because many cruises, while generating positive cash flow, were limited to scenic cruises without ports of call, and generally priced well below the attractive destination rich cruises we normally offer,' Donald said.

Carnival Cruise Line stands out

He noted Carnival Cruise Line resumed operations in July offering Caribbean and Alaska sailings somewhat comparable to prior years and achieved 20% higher revenue per passenger cruise day than 2019 peak levels, despite on-board credits from canceled cruises.

'Even with the unusually short booking window and capacity limitations, the brand achieved occupancy of approximately 70%, which speaks to the strong underlying demand for our core product,' Donald said.

Cash burn rate better than guidance

The company's monthly average cash burn rate was $510m, better than previous guidance and in line with the $500m monthly average cash burn rate for the first half.

As the company continues its return to service, it expects to continue incurring incremental restart-related spending, so it expects the Q4 monthly average cash burn rate to be higher than the prior 2021 quarters.

Liquidity

The quarter ended with $7.8bn of liquidity, which Carnival believes is sufficient to return to full cruise operations.

Through debt management efforts, future annual interest expense was reduced by over $250m per year and Carnival completed debt principal payment extensions of approximately $4bn, improving its future liquidity position.

Full fleet sailing by spring

As of Aug. 31 eight of the company's nine brands had resumed operation, accounting for 35% of Carnival capacity. The company already announced plans to resume operations with 50 ships, or 61% of its capacity, by Nov. 30, and 71 ships, or 75% of its capacity, by June 2022. More announcements for the remaining ships are forthcoming.

'Our protocols have been working well and are enabling us to build occupancy levels as we return more ships to service,' Donald said. 'Looking forward, we continue to work towards resuming full guest cruise operations by next spring, in time for our important summer season, where we make the bulk of our operating profit.'

 

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