Q1 2020 Earnings Call
[music].
Good morning, My name is Thea they will be your conference operator today at this time I would like to welcome everyone to Williams Caribbean Group business update in first quarter Twentytwenty earnings call. If he would like to ask a question you Me Press Star one to withdraw your question press the pound key I would now like to introduce.
Chief Financial Officer, Mr., Jason Liberty, Mr. Liberty the floor is yours.
Thank you operator.
Good morning, everyone and thank you for joining us today for our business update in first quarter earnings call.
Joining me virtually from their home offices, Richard feed our chairman and Chief Executive Officer, Michael Bayley, President and CEO Royal Caribbean International and Gorilla Michelini, our vice President of Investor Relations.
During this call we will be referring to a few slides, which had been posted on our investor website, Www Dot RCR investor Dot com.
Before we get started I would like to refer you to our notice about forward looking statements, which is on our first slide.
During this call we will be making comments about our forward looking these statements do not guarantee future performance and do involve risks and uncertainties.
Examples are described in our FCC filing and other disclosures. Please.
Please note that we do not undertake to update the information in our filings that circumstances change.
Also we will be discussing certain non-GAAP financial measures, which our adjusted as defined and a reconciliation of all non-GAAP historical items can be found on our website.
Unless we state otherwise all metrics are on a constant currency adjusted basis.
Richard will begin the call by providing a strict a strategic overview of the business.
I will then follow with an update of our liquidity actions, we have taken to date.
I will then provide an update on the booking environment and then I will provide a recap of our first quarter results.
He will then open up the call for your questions.
Richard.
Thanks, Jason and good morning, everyone I hope that everybody on this call is safe and healthy.
These a troubled times and we all need to take care of ourselves as well as remembering the first responders and others, who are working so hard to protect our communities.
Obviously, our industry and our company are undergoing unprecedented challenges and we are having to quickly adapt to this new and evolving.
Environment.
But our priorities are clear we will work to protect the safety of our guess crew, we will proactively enhance our liquidity, we will protect the company's brands and our travel partners and we will define and prepare for a new normal.
In the two months since we suspended operations, we've been working tirelessly to safely repatriate our guest and crew members to their homes.
Our crew come from more than 100 countries around the world with wildly different safety protocols and travel restrictions.
This is turned which should be a simple task into a monumental one.
It's really hard to convey the complexity of the process to somebody who used to making simple Trenton travel arrangements.
At our teams are working round the clock with the multitude of governing bodies to repeat your crews as soon as possible.
We've even gone to the extent of using our ships is transport vessels and currently have nine ships carrying more than 10000 crew members back to their home countries.
It's a complex and expensive way to do it but it's the most reliable way to get these men and women home to their families as quickly as possible and therefore, we've undertaken to do it this way.
We've also implemented actions to provide guests with some flexibility and peace of mind as they look forward to resuming their travel.
To this end we have implemented the cruise with confidence program. We guess has the flexibility to cancel their cruises up to 48 hours prior to sailing and receive a full credit.
On the crews there for a future cruise.
We recently enhanced this program.
With our lift and shift.
Program or lift and shift option, which gives I guess, even more comfort.
For the for the time ahead.
I will talk delighted to say that these programs have been very well received as a benefit both our guests and our liquidity pro crop.
In a few moments Jason will provide more details regarding our results during the first quarter and the proactive steps that we've been taking to address the current environment with a focus on cost reductions and on liquidity.
[noise], Bruce, though I'd like to talk about the future.
And the steps that we're taking to address that future.
It's useful it's useful to reflect on how quickly our world has changed and how quickly our understanding of this awful disease has evolved.
It's amazing to think it's only been two months since we suspended operations.
When I think back to how little we understood then about this disease it's remarkable.
Over the period, the pace of new information and understanding has been astounding.
Things that we were told we're right one week became unthinkable merely a week later.
The flow of information has been so fast it's been hard to assimilate.
Fortunately our level of understanding and that of governments around the world is beginning to stabilize it really seems to be we're all beginning to understand the doosan dose and the tight strictures are beginning to loose.
It's still very early days, but these are auspicious signs.
Obviously, the most immediate question that you would all like to know is when cruising will start.
And we'd like to know it too.
The World is clearly embarking on a program of gradually opening up.
That process is just beginning and it varies widely between geographical areas. It's also highly dependent on many different factors, including the availability of testing contact tracing therapeutics and ultimately vaccines.
Well, it's very difficult to have any certainty around the timing or shape of recovery, we do intend to make sure we're prepared for it and for the changes it will entail.
To this and we are focused on all aspects of our safe returned to service strategy with special emphasis on safety security and help.
We know that the public expects that we will elevate our health and safety protocols to a new level.
We are prepared to make sure that we meet and exceed those expectations.
We're trying to use this time wisely.
We have been and are working on ways to up our game in this field to ensure that we use our ingenuity, our passion and our innovation to rise to raise the bar to new Heights.
We are calling our aspiration on program the healthy returned to service program.
Program, we'll have four main focuses upgraded screening prior to boarding enhanced processes and procedures on board special focus on addressing the destinations we visit procedures would for dealing with any reports of exceptions.
We recognize it this is an extremely complex area, we've assembled a blue ribbon team of experts to advise us on the right approach.
Our goal is to raise our standards to entirely new levels and we believe that the healthy returned to service program will help us get there.
We have the time.
We have the determination and we have the expertise.
He is tempting to start talking now about all the individual components of how things will change.
However, we still defining all those enhancements and we're still taking guidance from our expert advisors.
And this process will continue in keeping with our mantra of continuous improvement.
We are better prepared today than we were yesterday, and we will be better yet prepared tomorrow.
But the one thing that won't change is our determination that we will not start operations until we are fully ready to do so with all the hygiene and other health protocols solidly in place.
Besides addressing the scientific aspects of all things related to covert 19, we also need to restore the confidence as many being transparent in our actions and communicating extensively.
We will not rush this work, but it is not an exaggeration to say that we're working on it around the clock.
The other area I'd like to briefly discuss is our longer term strategy.
The reputation of our brands the strong relationships with our travel agent partners, a great customer base and our innovative and agile culture should all serve as an advantage. When this crude crisis is over.
Just a few weeks ago, we were set to enjoy the best year in our company's history fueled by a huge demand for our products that has not suddenly vanished.
We know that the basic human desire to explore and to travel will persist through the continued focus on seeking out experiences as opposed to things.
Our responsibility is to be in the best position possible when travel resumes.
And I really like to drawn analogy to 911, which I think is quite apropos.
I recall than in the aftermath of that horrible that lots of people said the travel and tourism were history people would never travel again, especially on airplanes.
The other hand [noise].
Soon after I heard people refer to the exact same situation and say that ultimately 911 had no impact on trial.
These people argued that that people were traveling more and they were traveling his own 911 never happened.
[noise] My view is that both comments are simply wrong, you use demonstrably and true that people stop traveling as a result of 911.
In fact after a period of adjustment traveled took off sorry for the pump.
On the other hand equally isn't true is that after the period of adjustment traveling reverted to the status quo anti.
In fact travels became very different from pre 911.
What happened was that we adjusted and all travel that took place in the post 911 World is really quite different from travel previously it's hard to remember that but that dynamic took place.
Travel Didnt simply revert to what he did then.
Rather travel adjusted to the new normal and it grew on that basis.
I believe personally with the same thing is going to happen in a post covert 19 world.
Travel and tourism will grow but not by reverting to what it was but by adjusting to a world where all activities everything we do in the world will have changed.
Our industry is resilient and we will come back strong, but we'll do so not by mimicking what we used to do but by innovating our product to meeting the exciting demands of the world as it is.
We've been proactive and taking the steps to reduce our costs to manage cash flow into senior liquidity to weather the storm and Jason can talk about that in a minute.
We're also actively focused on positioning our brands to emerge in the strong position as guess resume their travel over the coming months and beyond.
With that I'll try and the microphone back there Jason Jason.
Thank you Richard.
So I'd first like to thank our teams across the whole enterprise for their dedication and tireless efforts during these unprecedented times.
During the past few months since our pausing of operations, we have intently focused our efforts on preserving cash and enhancing our liquidity profile.
To keep investors and stakeholders up to date, we have provided several updates which detail our efforts through press releases and educators.
Since our last earnings call, we have focused on reducing our operating expenses.
Also reducing or deferring our capital expenditures, improving our debt maturity profile and securing additional capital.
We have significantly reduced our running expenses and the ships transition into various levels of way up.
We have eliminated or significantly reduced marketing and selling expenses during our out of service period, and we have taken painful, but swift actions to reduce DNA by reducing our teams or furloughing employees.
As it pertains to our capital expenditures our teams have done an exceptional job by reducing or deferring our 2020.
Capital need by more than 65%.
Our updated capital expenditures for 2020 are now approximately 1.7 billion. It's only 500 million that remains to be spent for the balance of the year.
Now shifting to our debt maturities, we had been able to obtain a 12 month that amortization holiday for most of our vessels.
Our payments, bringing our debt maturities down to 400 million for the remainder of 20 Twond.
And lastly, we have been very active in the capital markets raising almost 4 billion.
<unk>.
Additional liquidity since our last call.
Overall, we estimate our cash burn to be in the range of 250 million to 275 million per month during a prolonged suspension of operations.
This range includes ongoing ship operating expenses administrative expenses debt service hedging costs.
And expected necessary capex.
Excuse refunds of customer deposits as well as cash inflows from new and existing bookings.
For the 60% of this cash burn is related to operating expenses.
We expect to reduce further on came more prolonged out of service scenario.
Through all these measures we had been able to improve the company's liquidity profile by approximately $12 billion for 2020 and 21 combined.
Having said this we continue to explore other opportunities to improve our liquidity profile given the magnitude.
And in certain duration of the cobot 19 impact.
[noise] I'll now update you on the business outlook as I know this is top of mind for many.
We began the year in a strong book position and experienced a record breaking start the way period, which resulting in a nice yield growth for January and February sales.
Then everything changed in October 19th spread beyond Asia and became a global pandemic.
On March 13th we announced that for the first time in our history. He would suspend crews operations for 30 days.
Since then we have extended the suspension further and in total we have cancelled 621 voyages and reduced our capacity for the year by approximately 25%.
From a demand standpoint, our bookings starting to deteriorate in mid February and then fell to level that will materially lower than prior year on the onset of the global crews suspension in mid March.
At the same time near term cancellations increase substantially all cancellations for 21 remain more typical levels.
While bookings still remains depressed they are better now than they were in mid April driven by improved trends for the fourth quarter of 2020 and 2021 sales.
For the remainder of 2020.
We are booked well behind same time last year and load factor with prices down low single digits.
It is still very early in the booking cycle for 2021, but at this point load factors are below same time last year, but our within historical ranges.
Prices for 21 book business are currently up in the mid single digit range.
Our current booking trends indicate that there is demand for cruising however, our guest now require more flexibility than ever.
And Sir.
To provide flexibility we have introduced to cruising we're confident each program.
Also we have provided guests who are booked on suspended sailings with the option of 125% future crew certificate and doing a cash refund.
To date, approximately 45% of the guests who are booked on one of these mortgages has requested a refund and the remainder are holding in FCC.
[noise] approximately 20% of the guests who have been issued fccs have already read books on future voyages.
Most rebooked on similar itineraries and many are you actually using 125% value to upgrade to a higher Stephen category.
As you may expect that our loyalty guests are redeeming the refugees at a much faster pace than non loyalty guests.
[noise] I will now shifting focus to our results for the first quarter of 2020. These results are summarized on slide two.
[noise] this quarter was really a tale of two quarters. During the first six weeks of the year booking trends were strong across all our major.
Geographies, except for Asia, with North American base salaries, trendy, particularly well.
While we were extremely pleased with booking trends for most itineraries you were particularly impressed with the prices we were achieving freestanding because any perfect. They took okay.
Particularly those on on our modernize ships.
[noise], even though we started campaign families and age at the end of January you were still booked at a strong load factor in prices.
And we're poised for another.
Our strong year over year of yield growth.
[noise] on March 13, we suspended our global operations.
This decision combined with the earlier cancellations in Asia resulted in a cancellation of 130 sailings during the first quarter a reduction in capacity of approximately 20% versus God.
The impact of Coven 19 also led to the recording I mean 1.1 billion dollar noncash asset impairment charge.
As a result.
We recorded a net loss on a U.S. GAAP basis, a 1.4 billion for $6, a 91 cents per share.
And then adjusted net loss of 310 million.
For a $1.48 per share maybe $1.40 appreciate.
A lot for the quarter was driven entirely by because of the 19 impact.
The timing and trajectory of a recovery remains uncertain. So we are unable to provide further guidance for the year.
However, the company does expect to incur a net loss.
On both a GAAP and adjusted basis for the second quarter and 2020 fiscal year.
The magnitude of the loss will depend on the timing and extent of our returned to service.
As I mentioned at the beginning of my remarks. These are extraordinary times.
We have made solid progress and mitigating the impact of coven 19 on our business and are prepared for the wide range of scenarios that could play out.
We feel confident that we will come through the successfully and can't wait this aren't delivery amazing vacations again.
With that I will ask the operator to open up the call for a question and answer session.
At this time, if he would like to ask a question. Please press star one on your telephone keypad now well pause for just a moment to compiled acuity roster.
The first question will come from Steve was Minsky with Stifel. Please go ahead.
Yeah, Hey, good morning, guys. Thanks for all the other details I was very helpful.
So Jason it's it's pretty clear that you guys are in up pretty good liquidity position right now, but I guess, if you remain in a zero revenue environment for an extended period of time can you help us think about what other options you have down the road to further increase liquidity I mean, we've seen your competitors go down.
The highly dilutive convert an equity path and just run wondering what's your appetite is for something like that.
Sure Steve compete for the comments you know so.
So this.
Yesterday, we closed on on our bond on that we launched last week and we were really happy with the additional liquidity, we were able to gain bye.
By raising that money, but the other thing that we're really happy about is that by raising that bond. It really provided a lot of flexibility.
For us to raise additional capital, especially cap debt.
So, there's a pretty significant basket and flexibility on our ability to raise additional debt, but and I would also that we believe that are returned to service plans.
As we consider them that we have adequate liquidity, but if those circumstances change.
And depending on how things play out we would certainly you need to consider all alternatives on that would be available to us.
But that to add on that to add onto that the equity flash convert would be your.
Last option that you would want to do.
I would say that where we are very sensitive to dilution and I buy but but overall.
You know I think that we we purposely made sure we had maximum flexibility on the on the on the debt side.
Okay, Great and then second question would be around.
You know how do you see a return to service for your ships around the rest of the World seems like you know everybody right now so focused on the CDC and.
No what they're telling you to do here in the U.S., but given your strong position in China on your JV with two we couldn't you guys start operations around the rest of the world sooner than than here in the U.S. and I guess did that answer is a yes do you fear there could be some potential negative pushback from the CDC or the U.S. government.
Hi.
Steve It's Michael Interestingly yesterday I was on the CLIA European Executive Committee cool.
Well, we had a pretty an extensive update from all of the national directors into various European countries, and I would say that.
From the feedback from from not cool yesterday, and then the discussion.
We've had with China team in Shanghai. It is very different story by region and by country and I think.
It's highly likely that are either the Asian markets in China for example for the European region could come back early it because of course they went through this experience a year and that's particularly true of China.
So were very.
Aware of these different landscapes and I think.
We're also.
[music].
Relatively pleased to have this global infrastructure that we can leverage to utilize that opportunity if it does materialize.
I think with your comments about the CDC obviously, we.
Highly focused on ensuring its rich it started this whole cool with ensuring the safety and a healthy return to service so.
However, we returned to service, we're only going to return to service regardless of regional market. When we believe that we'd have a healthy return to service plan. That's the deemed as the right way full what and I guess will become for that by that plant. So.
It's interesting I think we will see different markets come back at a different pace and I think our global infrastructure in the strength of our brands is really going to power Congress through those opportunities.
Okay, great. Thanks, guys really appreciate it.
The next question will come from leasing in Texas Barclays. Please go ahead.
Hi, Thanks, so much and good morning, and cheese and just getting back to the liquidity question. It seems like so many companies across different sectors not not just curious are asked to access.
Hi, upsetting a and the market as much as they can given that the window is open now says some may view your decision Kelly as risky. So I'm just wondering should we read into that fact that you haven't secured any incremental liquidity on top of like you've already done that you feel more optimal.
Stick then others regarding the recovery on and then also can you just help us understand how you're thinking about your roll up on your matching that you didn't mention that you're starting to see demand for fourth quarter. So just wondering how it should think about the amount of capacity that show roll out at the industry open.
Yeah, So I'll take the first one.
I think the way that you would you would read it is I don't think if you are overly optimistic I think these are being good.
You know looking at the reality of the situation and when we did kind of evaluate our different returned to service plans and different scenarios.
That was the impetus for us raising the capital that we did this sub this past week so.
I think we have to see how things play out.
And Ah I think that we have a lot of when quality brands quality assets.
And I think that we would evaluate the market that we see circumstances change.
Change outside of a different scenarios that were evaluating on so I wouldn't read into it at all that we're optimistic I think I would read into it that that that we think we've taken the actions on the capital raising side based on what we won't be currently thank and we also think that there's more opportunity.
For us to do on on the on the cost and capital side to further reduce our burn rate.
And Ah Felicia this is Richard and I'll just comment on the process of returning to service.
I think.
We don't expect it this is going to be that someday somebody blows a horn and all the shift start operating right away.
The the.
We think that it'll be a gradual start a little bit like societies in opening up a little is opening up gradually and so we would imagine that we would start with a smaller with fewer ships and.
More likely to be more drive markets in the in the beginning.
And it would then evolve and grow from there.
I also think coming back to the earlier question there's such.
Big differences between what's happening in different countries, a what's happening in the local society with different mix of where the ships are and where they're going. So I also think that you'll see that high degree of variability depending on what area of the world you're talking about.
To answer your second question, we see that is a slow gradual thing not suddenly a lot of ships coming back in the market.
Thanks, and then I'm kicked Jason just strictly a follow up on on your answer Tonight.
The first question just when you talk you said in several of your filings that you continue to look at Lucky thing I know you know the cash burn on the cost and capital side I'm. Just wondering is one of those options it would be to transition more to more cold lay up among your fleet. It just from a language that's been in your fine.
Thanks.
It seems that you have much more of your shit in warm lay out versus where your competitors are.
Yeah.
That's one Avenue I mean, our teams have done an exceptional job of of really beginning the operating costs why the ships are not operating.
And you know there is opportunity need to move that some of them into a cooler pipe lay up but you know I think even if you look at our our lay up costs on a per berth basis. You. We found creative ways to how the Simpsons, maybe of a warmer lay up with really do cost differential being being very small so that.
That's one of.
I think many levers under evaluation to take further reduce the burn rate.
Oh bunker.
Thanks Moshe.
The next question is from James Hardiman with Wedbush Securities. Please go ahead.
[noise]. Good morning, Thanks for taking my call. So I've a difficult question, but I think it's a fair one I wanted to ask about that but the fourth component that you delineated with your your healthy returned to service program.
Specifically what happens in the unfortunate event, where somebody actually contracts the virus onboard obviously, there's a lot it's going to go into preventing that from happen happening.
But as potential customers are thinking about how that would go I guess, a how do you ensure that it you don't end up in an outbreak scenario and then B. How do you ensure that you know the Sip doesn't ultimately get stranded I think that was one of the the striking parts of what we saw over you know marks in early April worship that just.
Had no home and the ports weren't allowing them to to return. So how do you gives consumers the comfort that they're not going to be in one of those scenarios as you reopened but there is ultimately no vaccine.
Yeah.
So I think what we're looking at as you mentioned is all four of those.
Situations and the fourth one is very much a part of it we think it is premature to come out we're working with.
Series of of experts on the topic of where we're obviously very conscious of the issue.
I think it's premature for us to go through.
The thoughts we have on any of the for.
Most because we keep getting better but also knowledge of and Ah knowledge of the virus from knowledge of what we can do want one can do with it.
Keeps changing so oh.
Before we come to service that will be one of the questions that we have to address forthright way and as I say its both coming out with a.
Proper way to handle it and it's important to be transparent about how that will operate and or as we approach are safe returned to service and healthy returned to service Oh, we will we will be providing more information on that.
Okay fair enough and I won't ask the next correctly I was going to ask but maybe can you help us as we think about you've got customer outflows in the in the form of refunds and inflows in the form of deposits.
Can you maybe help us size is a ladder.
In any way you.
You deem appropriate.
And maybe any idea when you think the two will essentially balance balance each other out I mean, I'm I'm assuming that at this point, it's a net cash outflow to customers, but when do you think that might even out.
Yeah, Hey, James So.
First the way that I would frame it is theres a difference between scaling that your canceling.
It's obviously, we've talked about the got about 45% of our gas asked for their cash back.
And then and then B b be kind of ebbs and flows of customers that are booking further out in terms of past to cancel tailings. So that so obviously the ones when we cancel failing there's a lot of outflow that occurs for those 45% more or less than we've been saying.
But but when you look at into Q fuel Q4 would you look out into next year, you look at that kind of period of time.
Yes, you do see more inflow than you see outflow occurring when you look at kind of Q4 and beyond.
And it's really where do you see most of the outflow occurring is when you're canceling sailings and the gas is considering whether or not they're going to.
Put onto an FCC or get reimbursed and I think as we get to the point, where we're not canceling sailings.
That's where I think you begin to see not that bad that inflection point and also as you begin to focus the customer more and more on booking into 21.
Okay. So, but just to clarify you think that as we get into maybe July August timeframe. We shipped the resuming you think those two could potentially offset one another.
Well I think I think once you get to where you're you're you're back up and operating I think you will you will see cancellations you move too much more of a typical love it.
Which obviously, especially when you're canceling sailings, they're gonna be elevated and of course, when when everybody has been and stay at home order you would expect it to be elevated.
But when you look at you know you look at 2021 as an example cancellation rates are more at very typical levels.
Got it and if you're not altogether.
One other point I would add to our crews have confidence programs and so forth have really been very well accepted.
By the trade embody our guests.
And I'll, just and I like as I made my comments, our loyalty guests have really just been absolutely incredible and their support and you can really see their local cruising as they begin to want to focus further out.
Yeah and James.
Michael I'd like to add a little bit of color to Jason's comments I think.
We've really seen surprising demand from a loyalty members and remember we've got close to 20 million loyalty members.
And their response to various promotions that we put into the market just to understand what the demand looks like as being surprisingly positive. So as we move into Q4 and into 21 weeping.
Honestly surprised in terms of the demand that we've seen coming in particularly from a loyalty gift.
Perfect I appreciate it guys.
Thanks James.
Ladies and gentlemen, if he could please limit yourself to one question and one follow up. The next question will come from Tim Conder with Wells Fargo Securities. Please go ahead.
Good morning, whatever Karen calling in for Ken.
Jason just the first question following your latest mountain Amazing Keith just maybe quantify remind us what is your remaining unencumbered assets, including books vessels them or the other assets as well.
Okay, well I'm sure I, killing you some better than Kim So [laughter].
[laughter], so oh in terms of the unencumbered assets that we basically encumbered about $12 billion of our balance sheet and so you've got the balance of that that is.
That does not encumbered.
And not all that would be available.
For example, with an opco type of structure, but a very large percentage of the balance would be available on if we were to choose to raise additional liquidity I'd be a debt.
Okay, great and giving our latest pricing on the other at that that was issue is there any reason or circumstance that you would at this point college or something in a quarter services line.
Well I think it I think at this point cash is king.
And of course, if we were to raise additional debt like the at this point in time that wouldn't be at a higher rate than the silversea. So I I don't think at this point, we have any specific plans on but we are evaluating all different alternatives to a you know two square up our capital structure.
[laughter] and lastly, just for clarification on your booking commentary.
Could you maybe you can find what historical means for you and can you comment that got 2021 pricing or.
Ah up mid single digits is that relative to that's I look at the 2020, but whereas in relation to historical or or 19.
Yes, well what I would say is typical levels is kind of looking back over the past several years.
It is lower than our 19 levels, but it's not a much lower than what we've seen calling over the past three to five years on on on in terms of that that typical average.
But the only thing I would say on on the on the.
On the rate side as you know we are we are rates are at mid single digits today that is versus 2020.
And and I think that you do you have that number will will fluctuate up and down depending on load factor for next year and also will will be depending on <unk> as our guests continue to apply the the fccs.
That will that will weigh a little bit on that rate, but overall, what we're seeing.
Is that is that we are you'll see strong demand for 21.
The the volumes are typical levels rates are up up up a little bit and those trends continue to support that and as I commented in my remarks over the past four weeks, maybe you know we've seen you even better demand trends for a back half of this year and 2021.
Okay, I'm, sorry, one more follow up to that what do you feel that and the last four weeks that would be your bookings or is it rebooking.
Can't we're selling.
No I would say, it's it's much more new bookings. So you know I'm of the FCC that we that we have out there you know about 20% of them have been applied but it's a very small percentage of the forward or the forward booking period. So our commentary about the booking environment really relates to our new bookings.
Okay perfect. Thanks, so much.
Thank you.
The next question will come from Janney Katz with Morningstar. Please go ahead.
Hi, Good morning, I have just one quick question I'm curious if you'd hoped but parse out Howard that really I'm, sorry, I actually see if I'm looking I'm across the income demographics, I think Lin glad to have got back I'm more entered our customers are taking kinda can wear out our bucks and I'm curious if you're seeing.
Similar trends.
That sounds receivers for Royal Caribbean, I see I, if you're willing to break that out thanks.
[noise] the color that I would give an overall we've been relatively I'm impressed with the numbers that are taking the FTC and also the utilization of the fccs utilization and those taking fccs or more skewed towards our loyalty members.
But what you would see is younger cruisers, and I'm really talking to millennials or younger part of the millennials are typically I'm looking more for their cashback, while families and and and baby Boomers are ours are likely to take the FCC.
And utilizing.
Okay. Thank you Thats helpful.
Got it.
The next question is from Brandt Montour with JPM. Please go ahead.
Good morning, everyone. Thanks for taking my question.
Good morning, just quickly Jim good morning quickly.
Jason just wondering you know for for the system that large well see you needing to do in terms of how many ships you need to have sailing to reach breakeven on company EBITDA and what does that assume for load factor.
Yeah, it's almost impossible question to answer because it's just a political situation I when I would say is that what we what we find is you know for our newer ships you.
You need about 30% load factors.
To kind of breakeven on an EBITDA basis, and maybe they may skew to about 50%.
Our load factor on onto our older ships. So it's it's its I would kind of if you wanted to kind of build the model I would think about it that way, but we've done a lot to rightsize our cost we've done a lot to minimize our capital I'm. So it as we returned to service you certainly do not need the entire fleet.
Operating at full levels to all you know to breakeven and you don't need load factors to be exceptionally high either I think we just do a slow returned to service.
You'll get us back to a breakeven EBITDA or would you know balance will be I'm short period of time.
Okay. That's that's helpful. Thank you and then I was just curious what your thoughts were on the Industrys appetite to scrap ships here and then and then you're you know yourselves, specifically as well if if you know under certain scenarios, where where things were suspended.
For for a prolonged period of time.
Yeah, well I think there's I think there's a lot of opportunity that you'll you'll see here on the capacity side I I I do think that you will see ships that are retired at a much higher pay some are we have seen in the past with really hasn't been that Muslims scrapping side.
I think the combination of what's happening with coated and then the IMO regulations. Your you'll you'll see Oh, yeah interest in somebody older vessels for possible sale.
And then there is just the reality that the newbuilding programs for Austin I'd, probably for the industry will will will slow and they'll slow because you know the yards themselves are but not really operating either they are just beginning to think about getting back up and running on the supply chain has been impacted and.
So it will take time, and so you're going to see a permanent shift in delay of Newbuildings for some time, which is going away on capacity growth numbers, yeah for the foreseeable future because you know these be especially on the newbuilding find its not a you know a shifting catch up and say what's likely to be a very permanent shift.
Thanks for the comments good luck with everything.
Thanks Brent.
The next question will come from Stephen Grambling with Goldman Sachs. Please go ahead.
[noise]. Thanks for taking the questions couple of quick follow ups. One can you just confirm what percentage of the fleet is currently receiving bookings on for 2021, and whether future crews credits can still be redeemed for cash and that had a bigger picture level, you mentioned assets to other slums illustrated age, but how do you think about the right that level for the company both near term.
Turning to ensure you still invest appropriately and a recovery, but then also longer term based on experience that you kind of less than buying it.
[noise] [noise].
So I'll take the second one Steve I'm, just real quick in terms of you yeah, our ultimate goal or Kigo here, which we've been very consistent.
Is to being investment grade credit and so obviously when we are evaluating additional capital sources, you're working tittering leverage we're considering the negative carry associated with that leverage and then I'm looking at how do we get ourselves on a path here in order to.
Ah you can get back to our investment grade metrics as soon as possible as we as you look to return to service.
I.
Can you just repeat the first question real quick.
Sorry about that had a little bit of an intruder there, but can you can you just confirm what percentage of the fleet is currently getting bookings on for 2021, and whether future crews credits can still be redeemed for cash.
[laughter].
Okay.
<unk>.
Well hedges.
I don't know took I go ahead.
So currently or we have really two programs in place one is cruise with confidence which.
We launched really as a way to give an immense flexibility to existing customers and to customers who are considering sailings because the key really a cruise with confidence is.
Even within final penalty and with full payment you can basically cancel you'll say anything within 48 hours. His departure and then you can receive a FCC for 100% to the value, which you can then utilize at any point up until.
The early 2022, so that's an FCC that is really utilized heavily because there is no refund cash refund option that comes with with crews with confidence it's basically the ability to simply move your booking whenever you feel comfortable to two sale.
And then the other FCC auction is provided when we suspended sailings and then we give the gas basically two choices either one.
You can have a cash refund of course, or secondly will provide you with a future crews get credit for 125%, which I think as Jason It's already mentioned about 45%.
The customers that taking the refund and 55% or holding the future crews credit or to be able to utilize on a future sailing.
And we've also introduced with with with these programs something called lift and shift which allows guests to simply lift up that booking and move it to a future bookings whenever they choose.
I'm not sure if I answered your question, but I think I'm a man I answer that.
Yeah.
And just to just add onto it currently our entire sleep.
And brands are available for sale for 2021.
Got it helpful. Thanks for the the in putting patients.
Thank you.
The next question will come from Robin Farley with you Yes. Please go ahead.
Great. Thank you I eluded to <unk> get a sense of media operating expense burn rate you talked about that the 150 170 million I think it's what you said before.
Did you mention your ships or maybe in sort of various stages of lay up. So just wondering how much that 150 to 170 in operating expense per month could come down when you're when you have everything laid up as much do you expect it today.
Yeah. So it's.
As I can give you an exact and work with some of it just has to do with there's the way up costs and then also.
The the the of the movement of the crew and so forth, but there's definitely opportunity in that 150 to 175, I mean, typically when we're laying up a shift if it's in a caught a cold state. It's about you know I'm sure in a million inability to half a month.
During a warm and a warm lay up at somewhere between two to two and a half million them up. So there you know there's the opportunity to me more of those into a cooler lay up the thing that we also have to think about is as we bring them back out the cooler you make them more cost due to bring them from a cool lay up into a our payout.
Hot space to be able to operate so what some of it is just you're looking at your return to service plans and and and it'd be thoughtful about which shifts are going to come up first as Richard commented, it's not a lytswitch, it's more of a demo that as we bring us we back on.
And so that's one of the things that's kinda into consideration, but there's definitely opportunity there.
Yeah, it's it's not going to be zero, but yeah, but certainly can be better than 150, Mike.
Uh huh.
That's helpful. Thanks, and then.
Clarification, you talked about the number [laughter] taking cash.
And he noted in the release lives as of April Thirtyth I'm, just wondering if in the last thing weve seen an increasingly internet or not I'm going to give it. Another cruise line has talked about an increasing rate people take care of future crease credit. So I'm wondering if you're seeing that same thing. Thanks.
Hi, I'm on a stock comp.
Yes, so so.
Overall, I mean, what we're seeing average why is about 45% I'm mistaken there has been a little bit of an increase on relative to what we're experiencing previously.
In the in the rate of guests that are taking.
The cash versus the FCC, but most of that has to do with the mix of the guests and so the more you as you start getting to be a little bit more internationally sourced on some things what we're finding is guests from other parts of the world more often not choose cash versus the FCC.
Which is a different pattern than what we've seen.
In markets like North America.
Okay, great. Thanks very much.
Thanks Robert.
The next question will come from Sharon, It's actually with William Blair. Please go ahead.
Hi, good morning.
Thanks, Tom that kind of this morning, I guess, one thing that would be helpful to understand is kind of your ability to scale the cost on the shift as you read them operations are typically you know we thought as other steps is fairly fixed cost and I don't know you know watch here, though it is.
As to you know skilled labor to initial load or how is it about that I'm going forward [noise].
[laughter].
Great incurring in current states like like like this.
We have much more variability.
Our own them each opportunity on your cost and that's because as you know what's your load factors are are going to be or you think they're going to be.
Then then you were able to bring the crew on on and off the ship.
Any more flexible manner, which is where a lot of your you're on your fixed cost. Our so I think that we see more variability than what we have historically see as as a as our ships returned to service I'm going along that will be also deployment base.
And Jason I Might've missed aspect of your indicate any kind of range as to what initial American might look like.
Oh, we have not yet you did not with insurance.
What would you like to give us any kind of estimate that.
I I would not a I think a lot of it will will be determined based off of.
The the dialogues, we're having with a different regulators and the CDC and so forth.
That that would that will be more of the out there will be more recalibrates, our thinking around load factor.
The next question will come from Asia, Georgia for with Infinity Research. Please go ahead.
Good morning, and thank you for taking my question.
Given the fact that the pretty much Oh carnival brands have extended their positive operations sort of much longer period than you had anticipated than just a couple of hours to go you may have.
You probably sizing it we can also extended.
Their Pos are you considering cancelling for their voyages June 12 seems to be only three weeks away.
And maybe a little too soon have I missed a further extension.
Oh, Hi, Asia, It's Michael Interestingly, our plan is a soft the new will be advancing a third of suspension.
Which is until the end of July until July 31st I'm. The only exception to this expansion will be a China operations.
Thank you Michael a that makes a lot of sense in the separately on the logistics find it seems that ports, allowing whether on vacation to syndication points, where Oh boy such a visit allowing ships to entered their communities might be a big Cardinal is that some.
That's the please go to the thinking as to what you do nice would open up outside of Asia.
Yeah, It's a great point and the interestingly, we are already in dialogue with over 40 different books and destinations around the world in terms of plans and a return to service and it's surprising how many paulson destinations are very interested in.
I kinda lost to the there, but I think you mentioned perfect day would be available to open up a lot sooner and that makes perfect sense of I didn't mean that oh, they perfect sense.
But it works I guess.
Seems to be a and since you were on the call yesterday with the.
Members of <unk> and European Nations, and that's probably other sports in the Caribbean might be a lot more willing and interested in opening up sooner as opposed to European imports. Despite the fact that Europe is probably further along the curve that we're on.
Is that fair assessment.
Well you know, it's very the too.
Thank you can generalize one over the other I think it's very you know, it's a big story I think I think.
You know in many ways every region every country is on their own journey and I. I think is maybe you can generalize to say that certainly China and Asia went through this good. So it's just logical that there are emerging from this first I think that's the same thing with Europe and of course with with everything.
In the U.S. in the Caribbean. So there's a kind of a logical relationship with how people first went into this was the society in how people are thinking about coming out of it.
That makes sense, if I can sneak one last one in here, Jason you mentioned that the newer larger vessels.
Well get to EBITDA breakeven at about 30% of Docie policy. They also provides an opportunity for a better social distancing just make more sense to actually go with those muscles first as opposed to smaller vessels.
Oh, Yeah. So can you point out here <unk>, So first I would say yeah.
Sure.
Factors can be lower because they had great economies of scale there are extremely fuel efficient.
Okay, and the cotton candy category.
But you really more broadly within we or we do very.
Probably space for Burger [laughter], Walmart is very good but certainly the newer ships have any I'm more public space per passenger them.
And what would be you have one consideration.
For you fill returned to service as well as other ships that we've monetized.
Good news all too.
The picture.
The next question comes from Vincent Fitel. Your line is open.
Hi, Thanks for taking my question.
A variety of folks and the travel industry keep mentioning the assets are endless nature.
Yes, falloff in demand and how that later when you look at your 21 pricing it actually sounds quite healthy can you compare what you think way industry like doing what you're doing with pricing for another 612 18 months out.
Relative to kind of what happened in the O. eight or nine timeframe because it seems like people are kind of holding the line and a stronger manner.
Oh bar to Chile, yes, so I'm, sorry, I'm, sorry for all the all the background or them I'm not quite sure.
What line is that what line is open.
But oh, you ask the operator, because it's not one of our lines.
So I was so I think that to your 0.1 of the thing that we've generally been saying is is that the I think all the after the around price integrity that I know we've done I think I think others in the industry have done what we've seen is is that your people being much more measured into in terms of taking pricing.
Jim you see more packaging more promotional activity, but but you we are seeing your pricing.
You'll stay relatively stable.
And of course, <unk>, even likelihood that there's going to be some lower load factors for a period of time will also help help Bob support that that pricing you're going into a reporting next year.
[noise] [noise] so.
Thank you for your sitting today for you all with the call today, and we think all of you for your participation and interest in the company.
Well there will be available for any follow up are you might have and from our homes. We wish you all the way it really oh, great day in and take care be thing.
Ladies and gentlemen, thank you for participating in today's conference call you may now disconnect.
Hi.
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