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Carnival signals $2.4bn Q2 loss, 2021 bookings in historical range at lower rates, six ships to exit soon

CRUISE Carnival Corp. logo.jpg
Carnival Corp. & plc expects a second quarter loss of $2.4bn, or $3.30 per share, on revenues of $0.7bn, down from $4.8bn in the prior year.

$2bn non-cash impairment

On a US GAAP basis, the net loss is projected as $4.4bn, or $6.07 per share, including $2bn of non-cash impairment charges.

In reporting preliminary earnings today, Carnival shared color on its refund rate, 2021 bookings, liquidity, monthly cash burn, crew repatriation and plans to reduce capacity, including by accelerated ship sales.

Six ships expected to exit in next 90 days

The company is accelerating the removal of ships in fiscal 2020 that were previously planned to be sold in future years. Carnival said it has preliminary agreements for the disposal of six ships that are expected to exit in the next 90 days, and the company is working on additional sales.

2021 bookings

Advance bookings for 2021 capacity currently available for sale are 'within historical ranges at prices that are down in the low to mid-single digits range including the negative yield impact of [future cruise credits] and on-board credits applied, on a comparable basis.'

For full year 2021, booking volumes for the six weeks ending May 31, 2020, were running 'meaningfully behind the prior year.' However, this was an improvement in booking volumes compared to six weeks before May 31.

$7.6bn liquidity with plans to further enhance

The company ended the quarter with $7.6bn of available liquidity and expects to further enhance liquidity, including through refinancing scheduled debt maturities. In addition, Carnival has $8.8bn of committed export credit facilities that are available to fund ship deliveries originally planned through 2023.

The total customer deposits balance at May 31 was $2.9bn, including $475m related to cruises during the second half.

Monthly cash burn estimated at $650m

During the pause in operations, the monthly average cash burn rate for the second half of 2020 is estimated at approximately $650m. This includes ongoing ship operating and administrative expenses, committed capital expenditures, net of committed export credit facilities and interest expense, and excludes changes in customer deposits and scheduled debt maturities.

The company expects to refinance approximately $2.4bn of debt maturities coming due over the next 12 months, half of which mature in the second half of 2020.

Carnival previously had four ships scheduled for delivery between May and October this year, however COVID-19 has impacted shipyard operations and this will result in delivery delays.

Half of customers seek refunds, new cash business coming in for 2021

As of May 31, approximately half of customers on canceled sailings had requested cash refunds. Despite substantially reduced marketing and selling spend, new bookings for 2021 are growing. For the six weeks ending May 31, approximately two-thirds of 2021 bookings were new; the rest resulted from travelers applying their FCCs to specific future cruises.

At May 31, the current portion of customer deposits was $2.6bn with $121m relating to third quarter sailings and $353m to fourth quarter sailings. The company expects any decline in the customer deposits balance in the second half of 2020, all of which is expected to occur in the third quarter, to be significantly less than the Q2 decline.

Crew repatriation

When the pandemic hit, Carnival returned more than 260,000 passengers to their homes, coordinating with a large number of countries around the globe. The company chartered aircraft, used commercial flights and its ships to sail home travelers who could not fly.

Work with various local governmental authorities to repatriate shipboard crew continues. Forty-nine ships have traveled more than 400,000 nautical miles and the company has chartered hundreds of planes to repatriate approximately 60,000 crew to more than 130 countries. Carnival expects substantially all of the approximately 21,000 remaining crew to be able to return home by the end of June. The safe-manning team members will remain on board.

For those crew having extended stays on the shps, most are provided with single-occupancy cabins, many with a window or balcony. Crew have access to fresh air and other areas of the ship, movies and Internet, and counseling is available.

SG&A expenses will be $250m/month when all are paused

Carnival estimated its ongoing ship operating and administrative expenses will be approximately $250m per month once all ships are in paused status.

62 ships in paused locations

Currently 62 ships are in their final expected pause location. The company expects substantially all of its ships to reach their full pause status during Q3.