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UBS tallies significant one-time costs for cruise ship restarts

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Citing the 'significant difference in cost to prepare a ship to re-enter service compared to the lower cost of keeping the ship in layup,' UBS believes cruise lines may have a hefty one-time cost to restart that may not be factored into cash burn estimates.

Based on figures obtained from a leading cruise ship management company and the brokerage's own assumptions, UBS estimated that restart costs including drydocks could be at least $595m for Carnival Corp. & plc, $335m for Royal Caribbean Group and $180m for Norwegian Cruise Line Holdings.

Cold layup

UBS said cold layup may cost roughly $250,000 to $500,000 per month for a 2,000-passenger ship that is alongside. For bigger ships and large fleets, many vessels are at anchor offshore, doubling the marine costs and requiring more hotel crew and having to sail at low speeds at times.

Warm layup

According to UBS research, warm layup for a 2,000-passenger ship could be roughly $700,000 to $1m per month at dock, higher at anchor. A 2,000-berth ship in warm layup would likely cost $4m to $6m to put back into service. If a drydock is needed, that could go to as much as $8m or $10m.

UBS noted cruise ships typically need drydocking every 2.5 years, so perhaps 25% of a fleet may have to be docked. Some drydock work is happening now.

The first vessels put into service would likely be ones that don't require drydock spending, UBS said. The brokerage estimated a 2,000-berth ship in cold layup could cost $10m to $12m to put into service, and up to $14m to $16m if drydocking is needed.

Time to enter service

UBS said ships in warm layup could go back into service in six weeks, longer than pre-COVID because all crew now have to be quarantined for two weeks and travel to get them to the vessels can take longer. In addition to seafarers, entertainers and concessionaires also have to be mobilized.

Coming out of cold layup could take closer to 16 weeks, the brokerage estimated.  

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