Q2 2020 Carnival Corp & Carnival PLC Earnings Call

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Please continue just kinda by your conference will begin momentarily we thank you for your patience.

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Good morning, everyone and welcome to our business update conference call I'm Arnold Donald rather than a feel Carnival Corporation and plc.

Today, I'm joined Telephonically by our Chairman Micky Arison.

Well that David Bernstein, our Chief Financial Officer, and Beth Roberts Senior Vice President Investor Relations. Thank.

Thank you all for joining us this morning.

Before I begin. Please note that some of my remarks on this call will be forward looking therefore, I must refer you to the cautionary statements in today's press release.

It is hard to believe that it's been just 720 days since we voluntarily pause operations across our global fleet.

And that relatively short time, we returned over 260000 guess home.

We've already repatriated 77000 include numbers and we'll repatriate.

The thousand until hopefully before the month is over.

We processed billions of dollars euro sterling of guests refund and billions of future crews credits in those currencies as well.

We move 53 shifts into full Paul status and with the remainder expected to be in a similar position within the next month.

We reached agreements for the disposition of nine vessels, while negotiating the delay in delivery of 16 ships on order.

We secured over $10 billion $10 billion in new capital, while working to extend debt maturity and secure covenant waivers with over 20 lenders and over 40 different agreements.

We've engaged with medical experts and scientists around the world to inform our development of returned accrues protocol.

And we are now preparing for the imminent return to cruising in Germany.

So we've come full circle from entering a voluntary pause planning a staggered resumption.

I couldn't be more proud of how collectively our team has handled this.

We look that there are good we looked after each other and the more than 700 places we go each year.

Weve honored where we stand for the company and we are well positioned for our existing shareholders to still experience attractive returns over time.

We will emerge a leaner more efficient company.

So thing.

Thanks crude will continue to a fee guest expectations through challenging circumstances, while taking care of each other taking care of our ships and protecting the environment.

Thanks to our suicide team members for working 24, seven to repatriate first our again.

Then our crew all while handling incredible unprecedented huge volumes of calls and inquiries from get support vendors travel professionals and other partners and while coordinating with a myriad of government authorities and agency globally.

All in the context of a constantly changing and evolving situation.

Thanks to our travel partners for their support and thanks to our guess, but countless number of heartfelt outreaches expressing support and concern viral crew our shore side personnel and the brands They love.

Thanks to those investors, who have expressed their confidence by staying with us and thanks to those who have expressed their confidence by becoming new investors.

Look.

These are truly unprecedented times for our industry.

They are clearly trying times for all of travel and tourism and the are extremely challenging times for the world at large.

I extend my personal.

Deepest sympathy so those around the globe with suffer directly themselves individually.

Whose loved ones have suffered with the virus.

Well company it has been not only challenging but frankly at times it has been painful.

We are aware that so many people depend on us for their livelihood and wellbeing not only our own employee with those and many other businesses around the world both small and large.

And we've been on a journey since Cobas began to manifest journey, we've aggressively manage through up.

Our highest responsibilities are has responsibility and therefore out top priorities are always compliance environmental protection and health safety and well being of our guess the communities, we touch and our Carnival family.

Our team members shipboard ensure side.

We initiated a voluntary pause in operations in the early days at this level pandemic, including being the first to halt sailings here in the U.S. and actually that was taken before Shelton placements implant in the U.S. and before the CDC No Florida was issued.

We recently extended our pause in the U.S. through late September which of course is well beyond the timeframe. The current CDC no sale order expiring July 24.

Again, our team worked tirelessly to return over 260000 guess safely home and then they focused on repatriating now more than 80000 ship for team members to their homes in over 130 different countries.

This was a daunting task given the limited availability of air the real barrier of close borders and a fluid constantly changing content that may planning and even execution extremely challenging.

And then we got the job done through chartering planes and in many cases, using our own vessels to transport our team safely home.

So far we sailed 50 ships.

Half our fleet and over 400000 nautical miles in this repatriation process.

We also quickly focused on securing sufficient capital to provide a financial runway to withstand an extended Paul.

That effort included cash preservation mode.

Motivating our guests around deposit retention.

And the wind down of our fleet.

Now David in our finance team with support from our legal team worked nonstop to secure funding to sustain our path forward in a prolonged Paul.

We were able to access the capital markets in the early days and in a meaningful way initially raising $6.6 billion of capital.

In doing so at a time when the capital markets were still close to many.

Well it was certainly financially painful for a company that it always managed to an investment grade credit rating.

Bearing the cost of the initial rate was prudent to ensure our long term viability.

Now because of our strong balance sheet, we were able to raise the majority of that $6.6 billion. The capital along with an additional $2.8 billion on a secured basis minimizing dilution.

Historically as you know, we've managed to strong balance sheet and an investment grade credit rating.

In the current environment, our national brands have been an additional advantage supplementing our access to liquidity across a number of countries at attractive rates.

So seth and maintaining a strong balance sheet and the strength of the national brands has been a differentiator, providing a soft Atlantic file company and our shareholders.

In fact, our overall blended interest rate is Jeff.

5%.

Fight the recent expansion of debt.

And we still retain meaningful flexibility going forward to manage further uncertainty.

Importantly, we have capacity issue additional debt.

Beyond that we are also evaluate potential to monetize noncore assets to provide additional liquidity are potentially reduce our debt burden overtime.

We are confident that we are prepared for a wide range of scenarios for the next 12 months.

Additional cash conservation efforts combined with future liquidity measures will enable us to sustain ourselves beyond 12 months in some late next year, even in a zero revenue scenario.

Concerning cash conservation, our workforce reductions, while painful when necessary to make it through to the other side of the impact of this global pandemic.

In the face of no meaningful revenue, we were able to forestall the financial impact on our employee.

They are faring employee actions beyond the timeframe of many others during that period.

Out compromising interest of our shareholders.

Honoring our fiscal responsibility.

We also of course significantly reduced non essential capital expenditures in excess of $2 billion and significantly reduced marketing costs as well.

While we continue to expect new ships that provide greater cash generation and high returns over time once we return to sailing. We've also worked to defer newbuild capex given the near term environment. In fact, we expect to reduce ship deliveries through the end of fiscal 2021 from.

Nothing as originally planned down to five.

To this fiscal year and three net.

The ferry over $3 billion of capital expenditures into fiscal 2022 and beyond.

To reduce our cash burn and have a more efficient fleet. Once we do reason cruising we have aggressively sheds less efficient ships.

Total of 13 shifts are expected to lead the fleet, representing a nearly 9% reduction in our current capacity.

We're also reorganizing the company to emerge stronger leaner and more efficient.

Even when we returned to full scale operations, we don't expect to return to the same safran requirements. As we are addressing our work streams to work in a more efficient manner.

At the same time, we're focused on developing new.

And enhanced protocols.

We dealt with many types of viruses in the past historically, we've had effective protocols in place onboard our ships, including screening measures medical centers, and sanitation procedures, which prevents and reduce the spread once brought onboard from land.

During this pandemic, we had less than our market share of incidents.

Again, we had less than our market share of incidents.

However, as is often the case being the largest in industry, we had a disproportionate amount of media attention.

Now having said that.

Evidenced by the global shutdown this virus is unique.

And the world's discovering together how to most effectively address.

We're working diligently to determine what enhancements to our existing protocols will this or the interest of public health.

Now our protocols have been informed by global learnings answer that in we are engaged with external advisors, which include world renowned epidemiologists and other medical experts and scientists utilizing their collective inputs.

Once people are gathering again, which just clearly happening on a country by country basis.

Body will determine the risk it is willing to accept going forward.

We're working so that our guest will not incur any greater risk versus engaging and similar experiences on land.

And of course, we're working to achieve less risk.

An exposure to similar shore side activities as we have often achieved in the past with prior health risks such elsewhere example, norm of ours.

But to be clear.

We will sale when we feel we will honor our commitment to operate in the best interests of public health.

In that regard we're in active discussions around the world would appropriate authorities and agencies.

In addition to Germany, Italy seems to be closest to resuming crudes at this time.

We're in very active dialogue with them as well as others Sarnia procedures based on the best available science, specifically address the risk associated with cold at 19.

Upon resuming service, we are well positioned to optimize the Leighton pent up demand by our leading brands around the world.

Having national brands as a portion of our portfolio at this moment as I've already mentioned is clearly an asset.

Nations reintroduce social gathering, including crews there are most likely initially to restrict reactivations to their own residents exclusively.

With brands like Aida that is roughly 95% German source.

Piano, UK, which is 98% grid as source.

Hi, So Europe, which is nearly 80% continental European source.

In Australia, which is more than 99%, Australia, New Zealand source.

And Carnival cruise line, which is 92% Usource, we are very well position.

Additionally, the fact that these brands are characterized by ready access would drive to market.

Any prevalence of shorter duration cruises strengthens the possibility for success in today's environment.

Clearly crews will not come back all at once.

We are demonstrating with a either we intend to resume operations with a small percentage of the fleet, which inherently will make us less reliant on new recruits in the early days.

Now with nearly two thirds of our guests globally that that's almost 8 million guess each year repeat cruisers.

And active database of nearly 40 million.

And frequency to repeat amongst cruises every two plus years on average we expect demand to be more than adequate to feel shift in a staggered restart again, we expect demand to be more than adequate to feel shifts in a staggered restarts.

Our overriding financial objective going forward is to maximize cash generation at the same time, we're focusing on staggering the reintroduction of capacity, which will help to manage deals now. This is even more relevant since historically, we've had only to leave us well little down cycle occupancy.

And rate.

In this environment, we will have a third capacity.

Capacity will be the third real time demand lever, we can leverage to produce the best short and long term outcomes.

Our long term prospects are especially bright given we've moderated our overall capacity.

We shed fishing vessels and lowered our overall cost base.

We reduce near term capacity and going forward, we introduced newer far more efficient vessels overtime in line with demand generation.

Based on the actions we've taken today, our fleet will not return to twinning 22nd quarter capacity levels until 2022 at the early.

And we'll be inherently more efficient with a roughly 10% larger average bird size and reduced average age.

In summary.

We have appropriately brought down our operating costs by over $7 billion on an annualized basis, and we've reduced capital expenditures by more than $5 billion over the next 18 months.

We transitioned the fleet into a prolonged pause and we right sized our shore side operations and we'll continue to do so.

We are aggressively shedding assets, while actively deferring new ship deliveries.

We have secured over $10 billion of additional liquidity to withstand another full year in a zero revenue scenario.

We are working aggressively on protocols with Germany set to resume cruising.

We will emerge a leaner more efficient company.

To optimize cast generation pay down debt and position us to return so strong investment grade credit rating overtime.

We're working hard to resume guess operations and we are working hard to ensure when we do resumed guess operations. We do so in a way that serves the best interests of public health.

In time, we expect to continue to deliver extraordinary vacation experiences to our guest.

And overtime strong returns to our shareholders.

With that I'll turn the call over to David.

Thank you I know, it's Arnold crack it is hard to spring.

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[laughter] Park gas crews operations across the globe.

We quickly recognized situation.

West Akshay.

Correct correct company.

Our work on coal.

Our financial action plan is to remain Pam.

Cash preservation by reducing.

Cash burn rate.

In improving our overall liquidity position.

I'll start today, we're going up or.

Full year 2021 booking trends.

Then I'll provide a summary of our retailers monthly average cash burn rate for the second half of 2020.

The new shop.

Insight into our current liquidity position.

Turning to our 2021 booking trends.

At this point in time, our cumulative dance booking for the full year 2021 remaining within historical ranges.

Prices that are down in the low to mid single digit ring.

Hurting the regular can yield impact.

He.

Go with credit Clive.

Our position is encouraging given that we have to potentially branded or advertising and promotional activity.

Particularly reassuring to see that approximately 45% after 2021 book position our gas that if you look at brand with the remaining 55% debt.

Brand loyalists, which is checked a little higher than the normal.

And it's also promising to see that 55% after 2021 booking volumes during the last two months.

Booking with the remainder being.

Okay.

Now, let's look at our marketing from average cash burn rate.

During the points in our guest operation on a monthly average cash burn rate.

Second half the 2020.

Estimated to be $650 million per month.

It's a pause can guess operations quick to continue into 2021.

Separately that there were opportunities to further lowered the monthly rate.

A monthly cash burn Mary.

For item.

First.

$216 million per month.

Ongoing ship operating and administrative expenses.

This monthly estimate is much lower than the second quarter actual which included returning gas to their home any significant portion of the cost shipped for team member repatriation.

In addition to second half monthly, yes commit benefits from the fact that we expect they actually all of our ship.

Each they're all cost status during the third quarter.

Furthermore, the second half will be lower than the second quarter because of the combination of lay off or alone reduced work.

Salary reductions generally implemented late in the second quarter or early in the third quarter across the company.

Finally, the monthly estimate will be further it too.

Bush shipped.

The Barclays.

Second interest expense is expected to be approximately $85 million per month.

Third capital expenditures are forecasted to be approximately 115 million per month read of export credit financing. This includes expectation to ship deliveries and their risks and other capital commitment contracted for prior to the pause.

Okay operation.

The fourth and final component.

Unusually high academic due to the timing of get screened chronic pain flowing through accounts payable.

It is expected to be approximately $200 million per month.

Well, we're back the increase in accounts payable.

Our rating completely reversed itself in the month of June.

At this point I would like to apologize.

GAAP, who had to wait because every time.

We had to address several hurdles to normal business operations, which included an unprecedented number get impacted by cancel calling it a.

The shift to work at home or call Center I'm, calling.

Kevin programs tenant.

So the volumes I mean to develop new procedures to ensure accurate processing car gap.

We have worked very hard hit all of our brands around the globe.

But I reflect process.

Limited exception, we got back to clean coal surface level.

Now I'll provide some insight on our overall liquidity position.

Our available liquidity.

The second quarter with 7.6 area, which includes 6.9 Galligan tower cash.

700 million dollar.

Government commercial paper program, we qualified for in the UK.

Added to that liquidity position like completing the offering I think first priority senior secured term loan on June 30, yet with net proceeds of approximately $2.6 billion.

Looking ahead, our European brands continue to work on government backed financing.

Our Germany and Italy.

We hope to complete over the coming month.

Looking beyond that we will continue to work fine extending 2021 maturity.

In addition, overtime, we will opportunistically look to further enhance our liquidity position.

We recently.

Our liquidity focus has begun to change.

Back in March and April.

I thought process with clean enough liquidity to gain the company during the pause in our guest operation, we'll get to the other side.

Now that I eat it has announced a resumption of gas crews operation.

We are looking at a variety of financial model, where we resumed operations in a manner with specific brands and ships returning to service overtime to provide our gas with enjoyable vacation experiences and our company with positive cash flow.

An additional liquidity.

So with plenty of available liquidity in hand to with standing impact I mean, no sailings going no revenue well into 2021.

Our focus has now shifted to projecting the additional liquidity that redemption of our guests operations well provide.

Now I'll turn the call back over to Arnold.

Thank you David Operator, please open the line now for questions.

Thank you.

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Our first question comes from Steve always Penske with Stifel. Please proceed.

Yeah, you guys good morning.

So I guess a bigger picture question here in it I guess, if we you know if we look out a couple of years down the road.

Whenever the business gets back to a so called normal operating level.

How do you think about the free cash flow potential of the business moving forward given the ongoing capex needs plus the much higher debt levels, you guys will be carried moving forward and.

Can you help us think about the excess free cash flow potential of the business and you know what it looks like down the road and maybe the path to get back to investment grade.

Good morning, Steven Thanks. So your question when I'm Gonna do as some kind of play quarterback 'cause where all in different locations, even though well on the phone together and I'll just refer the questions as they come up so David you might want to go ahead.

Yes, the cash flow sure. Good morning, Steve I'm. So you know Steve Arpus has tremendous cash flow generation potential issue now I mean is 29 came we generated 5.5 billion.

Of cash flow and what are the things hit Hornbills mentioned.

What's the fact that you know we were I had some ship deliveries to late and so over time when you start looking at the next few years or ship deliveries have been evened out here talk can we talk to this year three next year.

Three the hereafter and so with two to three ships delivery per year and by the way I'm encouraged to win I'm doing this I'm thinking about the fact that there are a couple of ships delivered in the last few weeks to the year and im sort of counting them. In next few years delivery. So with two to three ships a year over time and significant.

Cash flow generation I'm, we do we should have.

Excess cash flows that can go to pay down the debt and it may take a number of years, but.

So Arnold said, our target is to get back to investment grade credit rating.

Okay.

Gotcha.

And then second question would be around the booking patterns for for next year end.

I don't know if you can do this but maybe if you could break those bookings down a little bit and I guess, what I'm trying to get to your as you know our people booking across all brands any insight there I think could be pretty helpful. And you know obviously some of your brands encountered significant negative press earlier in Europe.

For example, like Princess I'm, just trying to figure out if you know if a brand like that is getting a you know was booked as well as the rest of your fleet and probably that makes sense.

Well I'll start and then I'll I'll, let David give more detail on on the talking about its first of all we're very encouraged by the booking patterns. We see right now let me very encouraged Oh, we have not only obviously a number of future crews credits where people at their veterinary scale, so, but they chose instead of a cash refund.

With us again, but we have substantial new bookings and we even have new to cruise bookings, which you know given the current state of the environment in a world is is.

Really of the Testament to how strong a vacation experience of value cruising really is.

Even with them I eat up you know we had one day so far as we prepare for an August resumption and the bookings in that one day, we got over a thousand bookings I'm, taking up a significant portion of the first failing or very short notice periods. So there's a lot of pent up demand a your reference to print.

Yes, and particularly O Princess.

Actually at this point in time is trending with all the other brands in the industry and not disproportionally. So in terms of consumer preference I attitude.

And none of the brands in the industry have reached the trough that was reached back in 2012 2013. When there was a plethora of and so does that made the media with industry, a number of which well relate it to to voyages and some of our brands and so none.

One of the brands any industry none of hours are others have gone to the low levels that we experienced at that time. So the trough in this period has been higher than than the trough in that period. So there's a lot of pent up demand a lot of latent demand you know that doesn't mean that we don't have work to do you know wants we.

You know start cruising with much larger volumes of capacity to attract new to cruise I'm of course, what I have work to do but right now on the brands or are stronger bookings are encouraging.

And with the stack. It start we're going to have a resumption of cruising a there should be plenty of pent up latent demand what previous crews scores to fill the ships, but David you might want to add a little additional color yeah. The only additional color you know when looking across the brands, which you were trying.

I'm trying to get up the only things that I would comment going is that probably I. You got 10 costs to Europe are probably a little bit ahead of some of the other brands on a relative basis, but that's probably has a lot to do with the current situation in Europe.

And the reason and the potential resumption of cruising I mean, we've already announced it in Germany, and so I know take mentioned were close in Italy.

The only other brand I'll call out is maybe cost the Asia and that's because the last minute bookings Guy trends you know, it's a very close trading booking cycle in China.

You know that typically a isn't the last few weeks so.

They they once we resumed cruising and try and I'm sure, we'll see those bookings, but Europe is ahead and China is probably a little bit behind everybody else's in a similar booked position.

Okay. Great. Thanks, guys. That's that's great color appreciate it best of luck.

Thank you.

Our next question comes from our Robin Farley with yes. Please proceed.

Thank you.

Come into that 21 bookings are in line with historical percentages and used the phrase has capacity that's available for sale I. Just wanted to clarify is that everything except those ships that are going to be sold or is there are you holding back capacity for sale set just trying to think about that.

Since looks for next year.

Go ahead.

Yeah. So it wasn't the exception.

The ships being sold because those in most cases.

Having been announced yet except for two and so that's that will occur very shortly but he currently available for sale just refer to.

Few cruises Satcom, we had because if I temporary changes that can be a great example, I had the majestic Princess.

Given its high tender change it wasn't currently available for sale in the systems.

And you probably saw the recent announcement, where majestic princess would be going to Alaska.

So there's a few nuances so of course to lawyers had this puts to put that in to make sure everybody completely understood.

But it's really just thinking.

So you're talking about 90 plus ships are included in that whats event Oh, yeah. Okay. No. That's yes I was just Marlin now do you I wasn't sure if that when she has some very limited amount to know that does not.

And then my other question is [noise].

Our money you talked a lot at the beginning about discussions with various countries.

He has already put out some very clear guidelines and suggestions are your discussions with the CDC.

Along similar lines to what the new is suggesting or are you seeing at the big difference there.

At this point this conversations with the C.D.C. as all data around the current pause and the handling of the ships during the pause switch it has exclusively crew onboard the shifts.

We have not actually.

Gotten so the point of serious you know resumption of crews discussions with the C.D.C., but of course, that's coming so in terms of the E U.

While there is a you had a general thing that's out there each nations is going to do what it thinks it needs to do and so there you have to go country by country as well and and that's why in in our case when L. I had to do in Germany.

The German authorities, but because the ships. So some of the ships world like state with Italy, we have to deal with L., even for the German situation and so that's just the nature of the business. So well have to deal and are dealing with various authorities everywhere even with the CDC. You know you have individual communities and individual reports.

And the way this is going to work is I'm still port cities and destination cities all have to.

The alliance a that's number one or two they will be inform bio influenced by you know CDC and other.

A relevant authorities, depending where those destination cities are around the world and.

And so on and then it's going to be informed by our own degree of confidence that we're actually in the best interest So public health and that's why we've engaged.

Catherine of medical experts, so scientists around the world that informed US all we're about to do a without either for example wish we feel.

Very good about the protocols there and that has all been works out again, what the ports there and the overall governing authorities in Germany.

And and that's the process. So it's a very involved process a lot of detail.

Lot of different constituencies.

But yes, we are in conversations you know, what's the CDC as the entire industry. The industry is in conversations with each others because no one wants to compete on health or safety, our environment or anything like that and I'm. We're all working collectively and I think the most important thing Robin is.

First the terminal.

His societies willingness to gathers so as social gathering and so what you're seeing the for example in Germany, where their community spread has become relatively low on a incidents you know level basis society is willing to socially gathers and that.

As the foundation of supposed to be able to do things and theirs and more information about the virus that our understanding of what to do or whatnot to do.

And so all of that together makes it possible so with confidence begins to the sale again, we're not quite at that point, obviously here in the U.S., what they're still surge of some different portions of the country in terms of exodus of saw us but were working on it and so along with the rest of them.

Great. Thank you very much for that.

Sterling answer I Wonder if I could squeeze and just one tiny clarification Pandora Ravi This [laughter] David you in your remarks, you use it the expression like I think about accounts payable reversing itself I guess I just want to clarify are you, saying then that.

As of now has over the course of June to now that you are now bringing in more new deposits than what you are refunding in the last besides what that referred to.

Net [noise].

No that's not exactly what that referred to.

But I will answer the second part and what's your question is there. So what I was referring to is once we process the customer deposits and I'll give you a high level answer so customer deposits went down roughly $2 billion in second quarter, but all the cash didn't go out the door.

We actually paid about a billion and the other bailing any wound up because he ended the quarter in a peak 'cause it's no longer a customer deposit and then we were able to process that billion dollars in the month of June 18th came down.

But to answer your question relative to customer deposits.

I think we had said in an 8-K, we filed but then a month ago that we did expect to see a decline in customer deposits during the third quarter, but that it was where actually we set the back half of the year, but we expected it all to occur in the third quarter and that's a decline in the third quarter would be.

Significantly less than the decline in the second quarter, so probably by the time, we get to the end of the third quarter, we should be in a balanced position.

Exactly what he has a week or month that occurs is somewhat dependent to little bit on the timing of extending the pause if that if and when that occurs as we move forward.

Perfect. Thank you very much thanks.

Thank you rather.

Our next question comes from Jamie Katz with Morningstar. Please proceed.

Hi, Good morning question on either need a launch on it looks like in yesterday's press release and the original launch of the credit is well, having adjusting passenger capacity and some of your competitors are close in the financial times yesterday, saying that constraint capacity look really put a crane on I'm proud.

The ability so I'm curious.

What that restrained Pasadena looks like kicking off and how you're thinking about that practically.

Yeah. So first of all the them pardon the aspect of this to focus on is the proper social distancing within what I'm the particular.

Country Society as determine at this point in time for them is what they're comfortable with and then the social this unseen occurs in the public venues on the ship or if you're on your cabin your nationally socially distance from the other cabins, so as to actually the public venues to restaurants that theaters the.

Et cetera, and there's also a lot outdoor spaces on Ownerships, which again this requires a slightly different understanding of social definitely seen then in close places like certain restaurants. So that's the context in a framework to begin with given that you know we're looking at a different ways to manage the.

Flow, which we do all the time on the ships.

To ensure that we don't have congregations that what compromise the social doesn't know, saying I'm requirements at the time or in its I've been requirements as more preferences.

Right now as I'm, one of the half meters and in Germany for example, okay.

And so that can then drives dependent how you plan to manage the flaw in the ship that can drive what you ultimately might do what I can see along with the fact that you want to reserve. So it's an area on the ship any that anyone else coal that or there are cases of coal with that you can isolate those individuals.

Comfortable situation. So that you can mitigate any possible spread on the ship. So that those are the dynamics of all so then a straight answer to your question is we're gonna start slow of course, because were starting out we have that people have to be trains we have to see how people's behavior is really our we've got lots of ways. So set.

The social definitely seen us on a so we're gonna start with were lower occupancy, but then will ramp up to higher occupancy you know I'm as long as what we're doing is proven to be working and so that's that's kind of the flow in terms of profitability. You know, we can be less than 50%.

Let's see and still generate significant positive cash flow.

Initially, we'll probably start at less than 50% you know occupancy is we work out the details see whether choke points are and so on and so forth and get experience with it but now will ramp up you know above that level of occupancy hopefully in a relatively short period of time away, we'll have to see how it goes but but even that lesson.

50% occupancy we can generate a on the ships that are either putting a service right now substantial positive cash flow.

Yes, I wonder what I'm going and then.

Glad clubs is going to add a little bit too I'm.

Just to kind of frame the overall picture generally speaking.

The breakeven point in terms of occupancy for cash flow generation at the ship level is probably somewhere in that 30% to 50% range.

Depending on the size of the ship so as Arnold said you know if we start a little below 50 is we've worked our way up those initial ships are probably at that lower and get that scale them, we will be generating positive cash flow, but they didn't want to try to give you a little bit of it example.

The power, if I think cash flow generation of our business.

And well I don't have a forecast.

Her 2020, it and I can't provide your guidance.

Let me try to use that 2019 actuals to kind of.

Help you understand what cotton.

<unk> situation, where it so if I look at to 29, King actuals and they say how many ships, which we have had to operate to have a cash flow breakeven.

The numbers about 15 chip the top 15 ships, probably generate about 30, 31% of our cash flow.

And of course, I guess, if I have to account because the fact that we have shipped the rest city ships would be and caused status.

Maybe I've got to operate 25, two ships and our fleet.

To generate you know a little over 40% of arc cash flow in order to cover the pause costs caused a direct and the fleet and all of our shore side, SGN AG and we would still be cash flow breakeven and by the way if we were only operating.

25, Shep I don't think we'd be spending as much as we did in 29 canine SGN <unk> and when they did these calculations I just assume the 2019 SGN eight was flat. So it gives you a bit of contact the power of cash flow generation in our business.

Thank you that's really helpful.

Certainly help I think the other thing that might get you back to that at that age that seems to be ever covering a lot faster and I believe gang, it's going to start selling at the end of the Montana. So is there any timeline that you guys had sorted out.

Outlined and to get back into that region that you'd be willing to share. Thanks.

You bet no, we we never try to predict regulatory.

Well, because you've got to you can't.

So obviously, we are working closely, especially what our JV partners and and China or two.

See when we can start selling again, but at this point, we don't have a date certain or even probable or for that but like you said you know this virus has moved from east to west and so like you were cautiously optimistic.

You know we will then in due time here I'd be in a position to.

Reintroduce cruising and the Asian market as well.

Thank you.

Thank you.

Our next question comes from Tim Conder with Wells Fargo. Please proceed.

Gentlemen, thank you for the color a very helpful wanted to continue a a David on on your example that you just a went through keep benchmarking offers 19, given you know the ships that you're divesting.

And given you said there'll be a or Arnold or you feel referred to that there'll be cost, obviously that will not come back into the equation shore side, and so forth what would be a rough guess demand at this point, where your cost per lbd ex fuel should be relative to 19 or just.

Just any any color you could give us there.

Well, David Yeah, Tim that's really very difficult at this point you know you keep in mind as Arnold and I. Both said, it's been 120 days and that long list of things that we've done.

So it's very difficult you know we're gonna have we have a lot of work to do we've started that work on the initial like either cruises, but I'd be hesitant to extrapolate that across the whole fleet at this point, so and that would be providing some sort of cadence. So I mean as Arnold.

We're going to come back leaner and more efficient so I would expect some cost efficiencies versus prior year numbers, but that's the best I can do at this point given the short period of time, we've had.

Okay and.

So many variables with.

How quickly we ramped up back with ships come in which itineraries are they on you know on it on it on and so there's like a day variables there, but what we do know is we're gonna be back later.

Okay, Okay and on the ships that you're divesting.

Any any commentary that you can give to us as to whether the ultimate buyer will the majority of those be outright scrapped or or will some of those ships stay in the global industry fleet.

Well first of all we don't scrap ships, we recycle them. So the first.

[laughter] any shifts that already sold into a or a market that doesn't directly interfere with our existing markets, which is what we would do you know our sales are basically a into uses that are are different than then you are uses for the ships.

On the markets that that we're in a then yeah those with well go for for recycling, David I don't know if you want any additional color.

Yeah. The 13, it's just a few that are recycled. The majority are probably you know the intention I'm. We're told is to use them for a variety of purposes, just a few recycled at this point.

So on recycle just to be clear or should we view it as let me rephrase that maybe those that would transport customers for crews related services or hotel related services versus a washing machines.

Yes [laughter].

[laughter], Okay. Okay. Okay, and then lastly, if I may or you when you're referring to historical bookings in pricing just the definition of historic are we talking the last three years five years, just to just to make sure we're thinking about the definition correctly there.

Thank you spoke about primarily talking and pretty cold that versus not but go ahead, David yeah.

Yeah.

Tim I'm, assuming you're referring to the historical.

Range on bookings continue when you said what range I think we went back to like 2011 on that.

Okay. Okay.

Thank you gentlemen.

Okay. Thank you.

Our next question comes from Jamie Rollo with Morgan Stanley. Please proceed.

Yes. Thank you muscles question is just on the order book Tunis It doesn't sound like it but do you plumbing.

Any cancellations or what sort of water or is it just a delay to the order book. Thank you.

I didn't quite hear the question David If you did please go ahead, yeah. It sounded like I I cut out Jamie we're talking about Hum any cancellations on the order book persist delay.

There were no cancellations, what we were just talking about a you know for the each ship was a delay.

On average you're probably talking about five months delay for around each of the 14 chips plus the two seaborne expedition chipset around order.

The most important thing there is you know going down to five versus nine between now and 22, though liquid you had a follow on Jamie go ahead.

Well it was the same question, where they just just wondering if you'll planning it becomes nations I mean, nothing say solved but are you in discussions with the yards about I kind of slowing NDRC shifts.

No we're not in discussions about canceling shifts where it and discussions with the yours, you know about no timing of deliveries or whatnot, but but not in canceled shifts again, you know where we're far enough out what we've talked about already that hopefully by then.

You know what we're planning.

To be Directionally back at at the capacity or that we would have available at that point in time actually being deployed globally.

And at that point again, the new ships or.

Just far more efficient.

We wouldn't regulate what with demand by again disposing of less efficient ships or rather than trying to avoid you know bringing on.

The new ships the timing of that is important to us, but but we would like to have the new ships.

Jamie in terms of timing building await Arnold Hussein.

You know essentially I think Arnold had indicated in his prepared remarks that given the they ship that we're leaving the fleet as well as the new build schedule. It would be 2022 before we got back to the capacity that we had in the second quarter up from 2020.

At the earliest store at the earliest correct.

Thank you and then all the other question just on a net which I think David you said you expect to touch investment grades at some point I think market expectations. So that's a debt to catch about 20 billion or bit more over the next six nine months.

<unk> points is that sort of too much that can you might need to raise equity to bring that number town.

So you know I would just venture to say that.

You know going back to some of my other remarks that you know our cash flow generation is tremendous and with the new build schedule stretched out we have the ability to pay down debt overtime, I I will point out that.

2 billion of that that is converts and I do hope that those converts over time, you know converted equity since the conversion price is only about $10 a share.

So you know we.

Constantly take a look at our position on our debt to cap ratio at the end of the second quarter was 50%.

You know, even if I add in the hot.

2.6 billion, we raised in June that only puts us at 53%. So I think were in a reasonably good position in with great cash flow generation. My expectation is we'll pay down the debt overtime.

[noise] Coms Carlson, what you said to an earlier question I think you said that you need about 20 slice the sense, so shifts to breakeven including the.

Losses after the ships and cold lay out is that they saw many no occupancy will yield numbers based on the 29 Cheadle was that just on the 2019 indefinitely, but that's it I kept the number markedly different did you get if you're thinking.

Another large type stuff.

[laughter] agreed I was just giving you because I instead of giving you guidance I was giving you 20 commencing 25% to is 25 ships.

Which I guess in our case is close to 25%.

But I was just using that 2019 actuals as they exist by ship and as a whole company could give you some framework to do your modeling and yes, obviously those ships did family at 100% occupancy, but also keep in mind you know.

When I did this math I didn't adjust the SGN, a either which would be considerably lower for 25 ships and for a freed up over 100 chip. So again. It was just to provide you an estimation to help you model not to provide any guidance.

And in that theoretical modeling you know 25 ships would be at full occupancy has got plenty plenty of demand to fill you know that that level of.

Oh volume once things are resumed and so that's not going to be.

A major issue it at that level for a certain.

Gotcha. Okay. Thank you good luck guys Becky and thank you James appreciate it.

[noise]. Our next question comes from my Brandt Montour with JP Morgan. Please proceed.

Hey, good morning, everyone. Thanks for taking my questions.

So so ticket prices have held up better than other industries and hospitality will travel and I was just wondering what kind of dynamics you expect to play out.

As operation started to resume and marketing engine start back up in the industry level.

Well, what well have to see but but again because of the nature and as I said in her remarks that we have the third lever of capacity just the nature of the restart so it's going to almost be country by country in.

Destination by destination.

There's going to be pent up demand that you know, we will not as an industry be able to schools in the early going.

And so that obviously creates a positive environment you know for for yield.

What would access demand over the supply available.

There's a good chance you know that will persist you know for some time as you know the world Kinda comes back into as I say I'm not sure side, you know social gathering because that's the the critical thing for US even begin to talk about you know I'm cruising again as is the case that's already happening.

Armenian looks like it it may happen in Italy. So so with those dynamics you know the you know it's a good environment field and of course, we're gonna be paying close attention, obviously, our number one financial consideration.

Is generating cash and and a positive cash flow, but we think we have the opportunity with the environment.

That should exist at the time to and the fact that we can you know direct the capacity.

And and manage their capacity.

Introduction that we can keep it in line with demand, where we have a good yield environment as well.

David any other that's helpful.

No I think tech that pretty well covers it.

Thank you. Okay. That's helpful guys. Thank you and that and then just it just a question on your bookings commentary and it's great to see that you're seeing new cruisers booking, but just you know.

Since you're seeing most of your brands booking in similar ranges that might imply that you're not seeing demand differences between older versus the younger cruisers. So just wondering if you could maybe cut the data by by age cohort for us if you're seeing a differentiation there.

Yeah, we're actually not seen a big differentiation there except for one general trend, which is longer cruisers. So obviously you know world cruises 21 day crews is that sort of that its not booking as well, obviously, a shorter cruises given the environment at the time, though.

<unk> those who is the school a lots of different places.

Where potentially people say well, what's the probably I'm going to be able to gold all those places given the current situation.

With community spread et cetera, and so you know in Bath the difference, but most of our brands on average where for the bulk of the brands. We had about a 45 age a median age kind of of our average age Oh demand, especially carnival cost.

I either.

So those brands.

And so and then even with the others, we haven't seen a booking pattern change between those 65 and older or those under 65 itself for the dynamic of the longer cruisers, which appropriately or not booking that says the same rate at this point in time.

Hopefully that answered your question.

That's an excellent color thanks, very much and good luck.

Hey, Thank you.

Our next question comes from my Patrick Shoals with Suntrust. Please proceed.

Hi, good morning.

Quick question, let's say hypothetically the C.D.C. This afternoon said, you're free to sale out of Miami realistically.

How many week do you think it would.

[laughter] review this set your per ship out.

At that point.

I think again it depends when that happens, but but generally speaking I'd say within 30 days.

We would be able to sale.

Oh again we've.

Bunch of dynamics here and there are a lot of other countries involved. So you know we have right now we're going to minimum Manning and on the ships in terms of crude.

No that keep our ongoing cost now we have to keep the ships operating a there and what we call warm lay Oh, we have people that way, but that's where the minimum crew. So we have to get crew back depending on the circumstances on what the protocols are you know that could be a shorter or longer period of time. If we're you know quarantining crew fluff.

At a time before they go back on board, which could be the case.

Cetera, you know that required more time, but I would say in a lot of different scenarios within 30 days or knowing when.

So knowing when we took crews we would be at a position to be prepared to.

Yes so.

Kind of.

Okay Holmdale.

Okay very good thank you much.

Thank you one last question operator.

Our next question comes from my Felicia Hendrix with Barclays. Please proceed.

Hi, there. Thank you I, probably can't Hi, [laughter] first I I just want to thank you offer that tremendous on par in detail on this on this problem in the keeling that prepared remarks and Super helpful. You know very cloud each time.

And with that and as a team Arnold I know at this point, it probably really difficult theater, Oh, PPI and if you can actually sale in the U.S. as of mid September So I'm not going to ask do that but I am just wondering you know at what point in time due to delays in starting up start to back 20.

21 booking curve and just on the booking curve just the language in your release seems to have changed it. It's had so I'm just wondering if I'm reading too much into that before you were saying that at almost two thirds instant book Easter 2021, where cash look even now that.

Languages game, and it's almost 60%.

Okay, I'll, let David at some some details to a good but just in general again, we are encouraged you know or by the bookings, but but the 21 booking curve has already been impacted you know with with just the the circumstances. Obviously at this point in time this.

We have there been though code that we'd be talking about you know different kinds of of booking numbers, but David you might want to <unk>. The question yeah. So it just different time period.

And and so there was a time period and remember I remember the two thirds distinctly I you know excuse me I can't remember the exact time carried referred to but to 60% was more current.

And as opposed to that the two thirds.

You know one of the things keep in mind when you think about on this.

In terms that it's not shocking that this is going to change overtime because people get their fccs.

Many of them or not turning around and immediately rebooking, we have quite a number of Hep C sees that are still yet applied and and the reason for that if you think about it you know if your crews was cancelled in April may or June.

Do you still have to like reorganized with your family you have to plan vacation and do a lot of different things before you rebook your crews so logically overtime.

We'll see the remainder of those Fccs booked and we do have quite a few in fact, the majority of the overwhelming majority have yet to read book and that is not in the bookings statistics that we have provided.

Yeah that makes it makes a lot. It on thanks, and then just and that kind of gets me on your customer deposits 20, when you gave us a lot of good color.

And sticks money on you'll have you.

Can you give us the complexity of your 21 deposits what did they paid into cancellations or any <unk> in there and David also well I have you just housekeeping I'm just wondering if you can issue more secured debt.

I'm sure so 21 deposits.

So you know the overwhelming majority I think we had indicated that it was about 500 million of deposits of 475 million relating to cruises in the back half of 2020 and so the overwhelming majority of the 2.9 billion was 21.

Posit generally speaking I mean, occasionally we get at somebody, causing and does it cancellation operate 20 went deposit but you know those are pretty normal people occasionally get sick plans change things happen, that's under normal course, and we haven't seen any.

Hi, dramatic changes in that environment and as far as the additional secured debt a we do have some additional capacity on a second lien basis I could you additional secured debt.

Okay. Thank you.

Great. Thank you all right every one robin U.S. The early on question, but all of you I'd like to invite all of you.

Or July 28.

You can go to the following sites are registered as coal that science summit Dot com hold its size summit dot com.

We're producing a for the W. TTC, that's the world travel and tourism console.

Gathering of well Renault scientists to.

To give or the current state of understanding and knowledge about cobot 19, everything from the epidemiology to transmission to detection prevention treatment and practically giving where society is today you know what seems to be the best knowledge.

Oh around you know how society can.

Effectively manage through the virus so to be yeah. As you know this information is constantly changing in terms of knowledge around cobot 19.

But it'll be at that point in time some of the best mines in the world.

Sharing their perspective, so youre welcome to a tennis is free and open to the public and this jointly hosted by ourselves a Carnival Corporation and W. TTC.

With that thank you for your time today, we really appreciate your interest in the questions. We're very much looking forward to.

To resuming in Germany, and eventually everywhere around the world and again I couldn't be more proud of our entire team managing through what has been a a very challenging time, but also a time that that were using ticket leaner installer and come out.

I'm, even more powerful than we were before.

So thank you all for your attention. Thank you operator.

[noise] that does conclude the conference call for today, we thank you for your participation and I such please disconnect your lines have a great to everyone.

[music].

[music].

[music].

Good morning, everyone and welcome to our business uptake.

Hi, Mark.

Field or the incorporation of plc.

Today, I'm joined Telephonically by our Chairman Micky Arison.

Well that David Bernstein, our Chief Financial Officer, and Beth Roberts Senior Vice President Investor Relations. Thank.

Thank you all for joining us this morning.

Before I begin. Please note that some of my remarks on this call will be forward looking therefore, I must refer you to the cautionary statement in today's press release.

It is hard to believe that it's been Jeff <unk> hundred 20 days since we voluntarily pause operations across our global fleet.

And that relatively short time, we returned over 260000 gets home we've already repatriated 77000 crew members and we'll repatriate well with 80000 into hopefully before the month is over.

Process.

Tons of dollars Euro Sterling, I guess refund and billions of future crews credits and those currencies as well.

We move 53 shifts in the full Paul status.

And with the remainder expected to be in a similar position within the next month.

We've reached agreements for the disposition of nine vessels, while negotiating the delay in delivery of 16 ships on order.

We secured.

$10 billion $10 billion and new capital.

While working to extend debt maturity and secure covenant waivers with over 20 lenders and over 40 different agreement.

We've engaged with medical experts and sciences around the world to inform our development of return to crews protocol.

And we're now preparing for the imminent returned to cruising in Germany.

So we come full circle from entering a voluntary pause.

Planning a staggered resumption.

I couldn't be more proud of how collectively our team has handled this.

We looked at there are good we looked after each other and the more than 700 places we go each year.

Weve honored where we stand for the company and we are well positioned for existing shareholders to still experience attractive returns overtime.

We will emerge a leaner more efficient company.

So thanks.

Thanks to our crude so continue to a fee guest expectations through challenging circumstances, while taking care of each other taking care of our ships and protecting the environment.

Thanks, our short side team members for working 24, seven to repatriate first our guest.

Then our crew.

All while handling incredible unprecedented huge volumes of calls and inquiries from guests support vendors travel professionals and other partners and while coordinating with a myriad of government Bharti and agency globally.

All in the context of a constantly changing and evolving situation.

Thanks to our travel partners for their support.

Thanks to our guess.

Countless momo heartfelt outreaches expressing support and concern file crew hours shore side personnel and the brands They love.

Thanks to those investors, who have expressed their confidence by staying with us and thanks to those who have expressed their confidence by becoming new investors.

Look these are truly unprecedented times for our industry.

They are clearly trying times for all of travel and tourism and they are extremely challenging time for the world at large.

I extend my personal.

Deepest sympathy so those around the globe with suffered directly themselves individually.

Loved ones have suffered with the virus.

Well company it has been not only challenging but frankly at times it has been painful.

We are aware that so many people depend on us for their livelihood and wellbeing not only our own employees with those and many other businesses around the world both small and large.

And we've been on a journey since Cobas began to manifest a journey, we've aggressively manage through up.

Our highest responsibilities as responsibility and therefore out top priorities are always compliance environmental protection.

And the health safety and well being of our guess the communities, we touch and our Carnival family.

Our team members shipboard ensure side.

We initiated a voluntary pause in operations in the early days at this level pandemic, including being the first to halt sailings here in the U.S.

And actually that was taken before Shelton placements implant in the U.S. and before the CDC No Florida was issued.

We recently extended our pause in the U.S. late September which of course as well beyond the timeframe or the current CDC note sale order expiring July 24.

Again, our team worked tirelessly to return over 260000.

Safely home and then they focused on repatriating now more than 80000 ship for team members to their homes in over 130 different countries.

This was a daunting task given the limited availability of air the real barrier of close borders and a fluid.

And we changing content that may planning and even execution extremely challenging.

And then we got the job done through chartering planes and in many cases use around vessels transport our team safely home.

So far we sailed 50 ships at nearly half our fleet and over 400000 nautical miles in this repatriation process.

We also quickly focused on securing sufficient capital to provide a financial runway to withstand an extended Paul.

That effort included cash preservation.

Motivating our guests around deposit retention and the wind down of our fleet.

Now David in our finance team with support from our legal team worked nonstop to secure funding.

Again, our path forward in a prolonged call.

We were able to access the capital markets in the early days and in a meaningful way.

Actually raising six point.

$1 of capital.

And doing so at a time when the capital markets were still close to many.

And while it was certainly financially painful for a company that it always managed to an investment grade credit rating.

Bearing the cost of the initial rate was prudent.

Sure our long term viability.

Now because of our strong balance sheet, we were able to raise the majority of that $6.6 billion the capital along with an additional $2.8 billion on a secured basis.

Minimizing dilution.

Historically as you know, we've managed to strong balance sheet and an investment grade credit rating.

In the current environment, our national brands have been an additional advantage supplementing our access to liquidity across a number of countries at attractive rates.

So seth and maintaining a strong balance sheet and the strength of the national brands has been a differentiator.

Providing a soft Atlantic for our company and our shareholders.

In fact, our overall blended interest rate is Jeff.

5%.

By the recent expansion of debt.

And we still retain meaningful flexibility going forward to manage further uncertainty.

Importantly, we have capacity issue additional debt.

On that we're also evaluating the potential to monetize noncore assets to provide additional liquidity are potentially reduce our debt burden overtime.

We are confident that we're prepared for a wide range of scenarios for the next 12 months.

Additional cash conservation efforts combined with future liquidity measures will enable us to sustain ourselves beyond 12 months into late next year, even in a zero revenue scenario.

Concerning cash conservation, our workforce reductions, while painful when necessary to make it through to the other side of the impact of this global pandemic.

In the face of no meaningful revenue, we were able to forestall the financial impact on our employees.

Merian employee actions beyond the timeframe of many others during that period.

Without compromising interests of our shareholders.

Honoring our fiscal responsibility.

We also of course significantly reduced non essential capital expenditures in excess of $2 billion and significantly reduce marketing costs as well.

While we continue to expect new ships that provide greater cash generation and higher returns over time. Once we return to sailing we have also works at the for Newbuild Capex given the near term environment. In fact, we expect to reduce ship deliveries through the end of fiscal 2021 from.

As originally planned down supply.

To this fiscal year in three net.

The faring over $3 billion of capital expenditures into fiscal 2022 and beyond.

To reduce our cash burn and have a more efficient fleet. Once we do reason cruising we have aggressively sheds less efficient ships.

Total of 13 shifts are expected to leave the fleet, representing nearly 9% reduction in our current capacity.

We're also reorganizing the company to emerge stronger leaner and more efficient.

Even when we returned to full scale operations, we don't expect to return to the same safran requirements. As we are addressing our work streams to work in a more efficient manner.

At the same time, we're focused on developing new.

And in hand.

The call.

We've dealt with many types of viruses in the past historically, we've had effective protocols in place onboard our ships, including screening measures medical centers and sanitation procedures, which prevent and reduce the spread was brought onboard from land.

During this pandemic, we had less than our market share of incident.

Again, we had less than our market share of incidents. However, this often the case being the largest in industry, we had a disproportionate amount of media attention.

Now having said that.

Evidenced by the global shutdown this virus is unique.

And the world's discovering together how to most effectively address.

We're working diligently to determine what enhancements to our existing protocols will this or the interest of public health.

Now protocols are being informed by global learnings answer that in we are engaged with external advisors, which include world renowned epidemiologists and other medical experts in sciences utilizing their collective inputs.

Once people are gathering again, which is clearly happening on a country by country basis.

Sidey will determine the risk it is willing to itself going forward.

And we're working so that our guest will not incur any greater risk versus engaging and similar experiences on land.

And of course, we're working to achieve less risk.

And exposure to similar shore side activities as we have often achieved in the past with prior health risks such as for example, norm of ours.

But to be clear.

We will sail when we feel we will honor our commitment to operate in the best interest of public health.

In that regard we're in active discussions around the world would appropriate authorities and agencies.

In addition to Germany, Italy seems to be closes so resuming crews at this time.

We're in very active dialogue with them as well as others concerning procedures based on the best available science.

Lastly address the risk.

Shaded with cold at 19.

Upon resuming service, we are well positioned to optimize the Leighton pent up demand by our leading brands around the world.

Having national brands as a portion of our portfolio at this moment as I've already mentioned is literally in assets.

As nations reintroduce social gathering including group. They are most likely initially to restrict reactivations to their own residents exclusively.

With brands like Aida that is roughly 95% German source.

UK, which is 98% grid is source.

So Europe, which is nearly 80% continental European source.

In Australia, which is more than 99%, Australia, New Zealand source.

Dan Carnival cruise line, which is 92% Usource, we are very well position.

Finally, the fact that these brands are characterized by ready access would drive to market and a prevalence of shorter duration cruises strengthens the possibility for success.

In today's environment.

Clearly crews will not come back all that one.

As we are demonstrating with either we intend to resume operations with a small percentage of the fleet, which inherently will make us less reliant on new to crews in the early days.

Now with nearly two thirds of our guess globally that that's almost 8 million guess.

Each year repeat cruisers.

In active database of nearly $40 million.

And frequency to repeat amongst cruises every two plus years on average we expect demand to be more than adequate to feel shifts in a staggered restart again, we expect demand to be more than adequate to fill ships in a staggered resource.

Our overriding financial objective going forward is to maximize cash generation at the same time, we're focusing on staggering the reintroduction of capacity, which will help to manage year.

This is even more relevant since historically, we've had only to leave us well than the down cycle.

Occupancy and rate.

In this environment, we will have a third capacity.

Capacity will be the third real time demand lever, we can leverage to produce the best short and long term outcome.

Our long term prospects are.

Actually bright given we've moderated our overall capacity.

We shed.

And vessels and lowered our overall cost base.

Reduce near term capacity and going forward, we introduced newer far more efficient vessels over time and in line with demand generation.

Based on the actions we've taken today, our fleet will not return to 2022nd quarter capacity levels until 2022 at the early.

And we'll be inherently more efficient with a roughly 10% larger average bird size and reduced average age.

In summary.

We have appropriately brought down our operating costs by over $7 billion on an annualized basis, and we reduced capital expenditures by more than $5 billion over the next 18 months.

We've transitioned the fleet into a prolonged pause and we right sized our shore side operations and we'll continue to do so.

We are aggressively shedding assets, while actively deferring new ship deliveries.

We have secured over $10 billion of additional liquidity to withstand another full year.

Zero revenue scenario.

We are working aggressively on protocols with Germany set to resume cruising.

We will emerge a leaner more efficient company.

To optimize cash generation pay down debt and position us to return so strong investment grade credit rating overtime.

We're working hard to resume guess operations and we are working hard to ensure when we do resumed guess operations. We do so in a way that serves the best interest of public health.

In time, we expect to continue to deliver extraordinary vacation experiences to our guest.

And over time strong returns to our shareholders.

With that I'll turn the call over to David.

Thank you or no.

Excellent Okay, it's hard to ring.

Hi, good morning.

Hi gas crews operations across the globe.

We quickly and recognized situation, Okay Swift action.

Correct car company.

Okay colder.

Our financial action plan is to maintain.

Cash preservation by reducing.

Cash burn rate.

Improving our overall liquidity position.

I'll start today, we're going up.

And our full year 2021 booking trends.

Then I'll provide a summary of our return.

Average cash burn rate.

Half of 2000 Corning.

Okay finish cap.

Insight into our improved liquidity position.

Turning to our 2021 booking trends.

At this point in time, our cumulative Dan booking for the full year 2021 remaining within historical ranges.

At prices that are going down in a low single culture.

Kurt and Greg Greg It into New York impact.

C and ongoing credit decline.

Our book position is encouraging given that we haven't actually good or advertising and promotional activity.

Particularly reassuring to see that approximately 45% after 2021 book position, our GAAP better brand the current raining, 55%.

Brandon Roy list, which is check a little higher than the norm.

And across our products increasing.

5% after 2021 booking volumes during the last two months.

New bookings with the remainder being.

Okay.

Now let.

Average cash burn rate.

During the clients Antarctica operation.

On a monthly average cash burn rate.

Second half of 2020.

I made it could be $650 million per month.

It's surprising guest operations quick to continue into 2021.

Bundling that there were opportunities to further lowered the monthly rate.

Our monthly cash burn include four items.

First.

$260 million per month.

Ongoing ship operating and administrative expenses.

This monthly estimate and much lower than the second quarter actual which included returning cash to their home.

African portion of the cost ship for team member repatriation.

In addition to second half my goodness benefits from the fact that we expect financially all of our ship.

Reached all cost status during the third quarter.

Furthermore, the second half will be lower than the second quarter.

The combination.

Rail or alone.

New store.

Salary reductions generally implemented late in the second quarter or early in the third quarter across the company.

Finally, the monthly Ethernet further it too.

Question on ship LIVAR clean.

Second interest expense is expected to be approximately $85 million per month.

Third.

Capital expenditures are forecasted to be approximately 114 million per month.

Of export credit financings and this includes expectation.

Ship deliveries and there is.

Other capital commitment contracted for prior to the pause.

Ratio.

The fourth and final component.

Usually high.

Due to the timing of gas screen parking and growing core accounts payable.

It is expected to be approximately $200 million per month.

In fact, the increase in accounts payable has already been completely reversed itself in the month of June.

At this point I would like to apologize.

GAAP, who had to win because every time.

To address several hurdle to normal business operations.

Included in our unprecedented number get impacted by can fluctuate.

A shift to work at home or call Center I'm, calling.

Kevin program.

I'll hand over volume.

To develop.

Injury to ensure accurate processing or gap.

We have worked very hard at all of our brands around the globe expedite a refund processing.

Limited exception, we are back to pre cohorts service level.

Now I'll provide some insight on our overall liquidity position.

Our available liquidity.

Second quarter.

<unk> 0.6 area, which includes 6.9 billion tower cash and 700 million dollar.

Government commercial paper program, we qualify for in the UK.

Added to that liquidity position by completing the offering I think first priority senior secured term loan cringing encouraging yet.

Of approximately $2.6 billion.

Looking ahead, our European brands will continue to work on government backed financing.

In Germany and Italy.

We hope to come clean over the coming back.

Looking beyond that we will continue to work fine Thank goodness 2021 maturity.

In addition, overtime, we will opportunistically look to further enhance our liquidity position.

In recent weeks.

Our liquidity focus has begun to change.

Back in March and April.

Process.

Okay and enough liquidity to go in the company's hearing the pause in our guest operation.

Get to the other side.

Now that has announced a resumption of guests crews operation.

We are looking at a variety of financial model, where we resumed.

Operations in a manner.

Specific brands and ship returning to service over time to provide our gas with enjoyable vacation experiences and our company with positive cash flow and an additional liquidity.

So with plenty of available liquidity in hand to with Sandy impact no sailings no revenue well into 2021.

Ill focus has now shifted to projecting the additional liquidity.

Redemption of our guest operations will provide.

And now I'll turn the call back over to Arnold.

Thank you David Operator, please open the line now for questions.

Thank you.

If you would like to registry question. Please press star one fall by the four on your telephone you will hear a three teleprompter acknowledge your request.

To your question has been answered annual like to withdraw your registration. Please press to one call by midstream one moment. Please for the first question.

Our first question comes from Steve always Penske with Stifel. Please proceed.

Hey, guys good morning.

So I guess, a bigger picture question here and I guess, if we if we look out a couple of years down the road.

Whenever the business gets back to a so called normal operating level.

How do you think about the free cash flow potential of the business moving forward given.

The ongoing capex needs plus the much higher debt levels, you guys will be carried moving forward and.

Can you help us think about the excess free cash flow potential of the business you know what it looks like down the road and maybe the path to get back to investment grade.

Good morning, Steven Thanks, So your question, what I'm going to do is.

Kind of play quarterback has where all in different locations, even though well on the phone together and then I'll just refer the questions.

As they come up so David you might want to go ahead.

Just to cash flow.

Sure good morning cities.

So Steve Arpus has tremendous cash flow generation potential issue now I mean is 29 keenly generated 5.5 billion.

Of cash flow.

And what are the things hit harder with mentioned.

What is the fact that you know we were at some ship deliveries delayed and so over time when you start looking at the next few years or ship deliveries have been Ethan doubt here talk can we talk to this year three next year.

During the year after and so with two to three ships delivery per year and by the way I am encouraged to win them doing that thinking about the fact that there are a couple of ships delivered in the last few weeks to the year here and im sort of counting them in next year's proliferate.

So with two to three ships the year over time and significant cash flow generation I'm, we do we should have.

Excess cash flows that can go to pay down debt and it may take a number of years, but Tom.

So Arnold said, our target is to get back to investment grade credit rating.

Okay.

Gotcha.

And then second question would be around the booking patterns for for next year end.

I don't know if you can do this but maybe if you could break those bookings down a little bit.

And I guess, what I'm trying to get to your as you know our people booking across.

All brands any insight there I think you'd be pretty helpful and.

Obviously some of your brands encountered significant negative press early on ERP don't just for example, like Princess.

Just trying to figure out if you know if a brand like that is getting.

Booked as well as the rest of your fleet and hopefully that makes sense.

Well I'll start and then though I'll, let David give more detail on on the volume as first of all we're very encouraged by the booking patterns. We see right know me very encouraged.

We have not only obviously a number of future crews credits where people at their veterinary scale, so, but they chose sort of a cash refunds book with US again, but we have substantial new bookings and we even have new to cruise bookings, which given the current state of the environment in a world is.

As you know really of the Testament to how strong of vacation experience of value cruising really is and then even with a my Ido. We had one day so far as we prepare for the August resumption and the bookings in that one day, we got over a thousand bookings.

Take it up a significant portion of the first sailing very short notice periods. So there's a lot of pent up demand.

Your reference to process, particularly O Princess.

Actually at this point in time is trending with all the other brands in the industry and not disproportionally. So in terms of consumer preference so attitude.

And none of the brands in the industry have reached the trough that was reached back in 2012 2013. When there was a plethora of so does that made the media with industry, a number of which what related to voyages and some of our brands and so none.

The brands any industry, none of hours are others have gone to the low levels that we experis at that time. So the trough in this period has been higher than than the trough in that period. So there's a lot of pent up demand a lot of latent demand.

So that doesn't mean that we don't have work to do you know ones.

We start cruising with much larger volumes of capacity to attract new to cruise.

Of course, what I have work to do but.

Right now on the brands or are stronger bookings are encouraging.

And with a staggered start we're going to have.

Resumption of cruising.

There should be plenty of pent up latent demand what previous crews course to fill the ships, but David you might want to add a little additional color.

The only additional color you know when looking across the brands, which you were trying trying to get out the only thing said I would comment on.

That probably I do that and cost to Europe are probably a little bit ahead of how many other brands on a relative basis, but that's probably has a lot to do with the current situation in Europe and there was that has a potential resumption of cruising I mean, we've already announced it in Germany.

And so I know Kate mentioned, where close in Italy.

The only other brand I'll call out is maybe cost the Asia and that's because the last minute bookings trend.

It's a very close trading booking cycle in China.

You know that typically isn't the last few weeks so.

They once we resumed cruising and try and I'm sure, we'll see those bookings, but Europe is ahead and China is probably a little bit behind everybody else's in a similar book position.

Okay. Great. Thanks, guys. That's that's great color appreciate it best of luck.

Thank you.

Our next question comes from our Robin Farley with yes. Please proceed.

Great. Thank you you commented that 21 bookings are in line with historical percentages.

Used the phrase test capacity that's available for sale I just wanted to clarify that everything except those ships that are going to be sold or is there are you holding back capacity for sale set just trying to think about that that person for next year.

Go ahead.

Yes so.

It wasn't the exception.

The ships being sold because those in most cases.

Having been announced shed except for too.

And so is that that will occur very shortly but.

Currently available for sale Chester for too.

A few crews is that.

We had because suffice temporary changes can be a great example, I had the majestic Princess.

Given its itinerary change it wasnt currently available for sale in the systems and you probably saw the recent announcements were suggested princess would be going to Alaska.

There's a few nuances so of course to lawyers head is put.

But that is to make sure everybody completely understood.

But it's really testing new ones.

So you're talking about 90 plus ships are included in that what's available Oh, yes, Okay. No. That's yes, I just marlin now I.

I wasn't sure if that with some very limited amounts are now that that's coming out of it.

My other question is.

Our lender you talked a lot at the beginning about discussions with various countries.

He has already put out some very clear guidelines and suggestions are your discussions with the CDC.

Similar lines.

Are you, suggesting or are you seeing that big difference there.

No at this point this conversations with the CDC evolves that our own.

The current pause and the handling of the ships during the pause which has exclusively through onboard the shifts Oh, we have not actually.

Gotten so the point of serious resumption of crews discussions with the CDC, but of course, that's coming.

So in terms of the you while there is a you kind of general thing Thats out there each nations is going to do whatever thanks, it needs to do and so there you have to go country by country as oil and and that's why and then our case when Ela had to do.

In Germany.

The German authorities, but because the ships some of the ships world like state with Italy, we have to deal with L., even for the German situation and so thats just the nature of the business. So we'll have to deal and are dealing with.

Yes authorities everywhere and even with the CDC.

I have individual communities and individual reports and the way. This has got a work is port cities and destination cities all have to be.

The aligned.

Thats number one but to say we'll be in farm buyout influenced by.

CDC and others.

Relevant authorities depend on where those destination cities are around the world.

And so on.

And then it's going to be informed by our own degree of confidence that we're actually in the best interest So public health and that's why we've engaged.

Lathrop of medical experts and scientists around the world that informed us all we're about to do.

Without either for example wish we feel.

Very good about the protocols there is that if all of them works out again with the ports there and the overall governing authorities in Germany.

And thats the process, so as a very involved process.

Got a detail.

Lot of different constituencies.

But yes, we are in conversations with the CDC as the entire industry. The industry is in conversations with each others because no one wants to compete on health or safety, our environment or anything like that and I'm. We're all working collectively and I think the most important say robin is.

First the terminal.

His societies willingness to gather.

So as social gathering and so what you're seeing the for example in Germany, where the community spread has become relatively low on it. So this level basis.

Society as willingness socially gather and that lays the foundation philosophy of those new thing.

And there's and more information about the virus better understanding of what to do or whatnot to do and so all of that together makes it possible so with confidence begins to sale again.

Not quite at that point, obviously here in the U.S., where they're still serves us on different portions of the country in terms of exodus and saw us but were working on it and along with the rest of them.

Great. Thank you very much.

Pastoral answer I wonder if I could squeeze and just one tiny clarification outdoor Robert Davis.

David you in your remarks.

Expression like I think the accounts payable reversing itself I guess I just want to clarify.

Are you, saying then that.

As of now has over the course of June in to now that you are now bringing in more new deposits than what you are responding in the last.

With that referred to.

No.

No that's not exactly whatever occur too.

But I will answer the second part of what's your question is fair. So what I was referring to is once we process. The customer deposits are now can be up high level answer so customer deposits went down roughly $2 billion in second quarter, but all the cash they can go out the door.

We actually can you get back a billion and the other bailing any wound got ended the quarter in a peak 'cause it's no longer a customer deposit and then we were able to process that billion dollars in the month kind of June So 80 came down.

To answer your question relative to customer deposits.

I think we had said in an 8-K, we filed about a month ago that we did expect to see a decline in customer deposits during the third quarter, but that it was.

Actually we set the back after the year, but we expected it all to occur in the third quarter and that's it declined in the third quarter would be significantly less than the decline in the second quarter. So probably by the time, we get to the end of the third quarter, we should DNA sauflon position.

Exactly what.

He has a week or month that occurs is somewhat dependent a little bit on the timing of extending the pause if that if and when that occurs as we move forward.

Perfect. Thank you very much thanks.

Thank you Rob.

Our next question comes from Jamie Katz with Morningstar. Please proceed.

Hi, good morning.

And my question on the Ada launch on it looks like in yesterday's press release.

Breaking the launch of the Craig well, having adjusting passenger capacity and some of your competitors are collagen financial times yesterday, saying that constrained capacity, but really quick occurring on unprofitability Sun curious.

That restrained Pasadena looks like kicking off and how you're thinking about that Frac fleet.

Yes, so first of all the them pardon the aspect of this to focus on is.

Proper social distancing within what.

The particular.

Country Society as determined.

At this point in time for them is what they're comfortable with and then the social distancing occurs in the public venues on the ship.

Sure on your cabin your nationally socially distance from the other cabins, so as to actually the public venues to restaurants that theaters, the et cetera, and there's also a lot outdoor spaces on all our ships.

Which again this requires.

Slightly different understanding of social Doesnt have seen then and close places like certain restaurants, so thats the context and a framework to begin with given that we're looking at different ways to manage the flow, which we do all the time on the ships to ensure that we don't have congregations that what copper.

Was the social dismissing requirements at the time or in a safe at requirements just more preferences.

Right now is one of the half meters and in Germany for example, okay.

And so that can drive dependent you plan to manage the flaw in the ship that can drive what you ultimately might do what I can see along with the fact that you want to reserve. So from an area on the ship any that anyone has covert or there are cases of coal with that you can isolate those individuals.

A couple situation.

So that you can mitigate any possible spread on the ship. So that those are the dynamics of all so then a straight answer to your question is we're going to start slow of course, because were starting out we ask that people have to be trains we have to see how people's behavior is really our we've got lots of ways. So set up the social definitely seen us on a so we're gonna.

Start with were lower occupancy, but then will ramp up to higher occupancy.

As long as what we're doing is proven to be working and so that's that's kind of the flow in terms of profitability. You know, we can be less than 50% occupancy and still generate significant positive cash flow. Initially, we'll probably start at less than 50% occupied.

I see us.

We work out the details see whether choke points are and so on and so forth and get experience with it but now will ramp up above that level of occupancy.

Hopefully in a relatively short period of time away, we'll have to see how it goes but but even at less than 50% occupancy we can generate.

The ships that are you do a footnote service right now substantial positive cash flow.

Yes.

And then.

Glad clubs is going to add a little bit to.

Just to kind of frame the overall picture generally speaking.

The breakeven point in terms of occupancy for cash flow generation to ship level is probably somewhere in that 30% to 50% range.

Pending on the size of the ship so as Arnold said.

We started a little below 50, as we work our way up.

His initial ships are probably at that lower and get that scale them, we will be generating positive cash flow, but but I want to try to give you a little bit of an example of the power if I think cash flow generation of our business.

And quite like going have a forecast for 2020, it and I can't provide your guidance.

Let me try to use that 2019 actuals to kind of.

Help you understand what cotton.

Situation, where it so if I look at to 29, King actuals and they say how many ships, which we have had to operate to have a cash flow breakeven.

The number is about 15 chip the top 15 ships, probably generate about 30, 31% of our cash flow.

And of course, I guess, if I have to account because the fact that we have shipped the rest of ships would be and caused status.

Maybe I've got to operate 25 to ship Sandra clean.

To generate.

A little over 40% of arc cash flow in order to cover the pause caused caught a direct and the fleet and all of our shore side SGN AG.

And we would still be cash flow breakeven and by the way. If we were only operating 25 Shep I don't think we'd be spending as much as we did in 29 keen on SGN AG and when they get these calculations.

Just assume the 2019 SGN eight with flat. So it gives you a bit.

Context.

Tower cash flow generation in our business.

Thank you that's fairly how comp.

Certainly help I think the other thing that might get you back to that Asia in keeping a recovering a lot faster and I believe gang, it's going to start selling at the end of the month and so is there any timeline that you guys had sort it out.

Outlined.

You get back into that region you'd be willing to share. Thanks.

You bet no we never try to predict regulatory.

Because you've got to UK out and so obviously, we are working closely, especially what our JV partners and in China.

Two.

See when we can start sailing again.

But at this point, we don't have a date certain or even probable for that but like you said. This virus has moved from east to west.

And so like you were cautiously optimistic that you know we will then in due time here.

In a position to.

Reintroduce cruising and the Asian market as well.

Thank you.

Thank you.

Our next question comes from Tim Conder with Wells Fargo. Please proceed.

Gentlemen, thank you for the color a very helpful.

Wanted to continue David on your example that you just went through benchmarking off as 19, given the ships that you're divesting and given you said there will be our Arnold the ill refer to that there will be cost, obviously that will not come back into the equation.

Sure side and so forth.

It would be a rough guess demand at this point, where your cost per AOL BD ex fuel should be relative to 19.

Just just any any color you could give us there.

Go David.

Yeah Tim.

It's really very difficult at this point you know.

Keep in mind as Donald and I. Both said, it's been 120 days and that long list of things that Weve gone.

So it's very difficult you know we're gonna have we have a lot of work to do.

We started that work on the initial like either cruises, but I'd be hesitant to extrapolate that across the whole fleet at this point, so and that would be providing some sort of guidance. So.

As Arnold said, we're going to come back leaner and more efficient. So I would expect some cost efficiencies versus prior year numbers, but that's the best I can do at this point given the short period of time, we've had.

Okay and so.

So many variables with.

How quickly we ramped up back with ships come in which itineraries are they on you know on it on it on and so there's a goes and variables there, but what we do know is we're going to be back later.

Okay, Okay and on the ships that you're divesting.

Any any commentary that you can give to us as to whether the ultimate buyer will the majority of those be outright scrapped or or will some of those ships stay in the global industry fleet.

Well first of all we don't scrap ships, we recycle them. So the first.

Any shifts that already sold into a.

As a market that doesn't directly interfere with our existing markets, which is what we would do you know our sales are basically.

And to uses that are are different than than you are uses for the ships in the markets.

That we're in.

Yeah. Those would look go for for recycling, David I don't know if you want any additional color yeah. The 13, it's just a few that are recycled the majority or property now at the intention I'm. We're told is to use them for a variety of purposes.

Just a few recycled at this point.

So on recycling just to be clear.

Should we view it as let me rephrase that maybe those that would transport customers for crews related services or hotel related services versus washing machines.

Yes [laughter].

[laughter] okay. Okay.

Okay.

And then lastly, if I may.

When you're referring to historical bookings in pricing just the definition of historic are we talking the last three years five years, just to just to make sure we're thinking about the definition correctly there.

Thank you spoke about primarily talking pretty cove, it versus now but go ahead David.

Well what your.

Tim I'm, assuming you're referring to the historical.

Hi range on bookings, telling you when you said what range I think we went back to like 2011 on that.

Okay. Okay. Thank you gentlemen.

Hey, Thank you.

Our next question comes from Jamie Rollo with Morgan Stanley. Please proceed.

Yes. Thank you must my first question is just on the order book today It sound like you plumbing.

Any cancellations or what sort of what was it just a delay to the order book. Thank you.

I didn't quite hear the question David If you did please go ahead, yeah. It sounded like I cut out the Jamie we're talking about Hum.

Cancellations on the order book persist delay.

There were no cancellations, what we were just talking about.

For the each ship was a delay on average you're probably talking about five months delay for around each of the 14 ships plus.

Two seaborne expedition chipset around order.

The most important thing there is going down to five versus nine between now and 22, though like where you had a follow on Jamie go ahead.

Well. It was the same question really just just wondering if youre planning it becomes nations I mean, nothing say solved but are you in discussions with the yards.

Hi, counseling NDRC shifts.

No we're not in discussions about counselling ships with and discussions with the yours.

About timing of deliveries or whatnot, but but not in canceled shifts again.

So we're we're far enough out with what we've talked about already that hopefully by then what we're planning.

To be Directionally back at at the capacity.

That we would have available at that point in time actually being deployed globally.

And at that point again, the new shifts or.

Just far more efficient.

We wouldn't regulate.

But with demand by again disposing of less efficient ships.

Rather than trying to avoid bringing on.

The new ships the timing of that is important to us, but but we would like to have.

The new ships.

Jamie in terms of timing building await Arnold Hussein Hum.

Entry I think Cardinal data indicated in his prepared remarks that given the.

Ships that were leaving the fleet as well as the new build schedule here quick B 2022, before we got back to the capacity that we had in the second quarter.

2020.

At the earlier so at the earliest correct.

Thank you and then all the other question is just on a net which I think David you said you expect to touch investment grades at some point I think market expectations. So that's a debt gets about 20 billion or bit more over the next six nine months.

Points is that sort of too much that you might need to raise equity to bring that number town.

So you know I would just venture to say that.

Going back to some other remarks that you know our cash flow generation is tremendous and what can you build schedule.

Stretched out.

We have the ability to pay down debt over time.

I will point out that.

2 billion of that that is convert.

And I do hope that those converts over time.

You know converted equity since the conversion price is only $10 a share.

So you know we.

Constantly take a look at our position on our debt to cap ratio at the end of the second quarter was 50%.

You know, even if I add in the hot.

2.6 billion, we raised in June that only puts us at 53%.

So I think were in a reasonably good position and with great cash flow generation.

My expectation is we'll pay down the debt overtime.

Okay.

Cons costs, while what you said to an earlier question I think you said that.

You need about.

Any slice the sense that's a ships.

To breakeven, including the.

The losses after the ships and cold lay off.

Is that based on any lower occupancy will yield numbers based on the 2019 or was that just over 2019 Iden network. That's exactly the number might be six different if you if you think Ken.

Another large success.

[laughter] agreed I was just giving you because I instead of giving you guidance how is giving you 20 commencing 25% to is 25 ship.

Which I guess in our case is close to 25%.

But I was just using that 2019 actuals as they exist by ship and as a whole company.

Give you some framework to do your modeling.

And yes, obviously those ships did sale at a 100% occupancy, but also keep in mind.

You know when I did this math I didn't adjust the SG DNA either.

Which would be considerably lower for 25 ships and for freed up over 100 chips. So again. It was just to provide you an estimation to help you model not to provide any guidance.

And then that theoretical modeling you know 25 ships would be at full occupancy.

Plenty plenty of demand to fill that that level of.

Oh volume once things are resumed and so that's not going to be.

No major issue it at that level course, Sir.

Gotcha. Okay. Thank you good luck guys. Thank you.

Thank you John appreciate it.

Our next question comes from our brand on tour with JP Morgan. Please proceed.

Hey, good morning, everyone. Thanks for taking my questions.

So so ticket prices have held up better than other industries in hospitality travel and I was just wondering what kind of dynamics you expect to play out.

Operations start to resume and marketing engine start back up in the industry level.

Well, what well have to see but but again because of the nature and as I said in her remarks that we have the third lever of capacity just the nature of the restart since going to almost be country by country and destination by destination.

There's got to be pent up demand that you know, we will not as an industry be able to soles and early going.

And so that obviously creates a positive environment you know for for yield.

What excess demand over the supply available.

There's a good chance you know that will persist ill for some time as you know the world when it comes back into as I said on shore side, you know social gathering because that's the critical thing for us even begun the talk about.

Cruising again as is the case this already happened in Germany and looks like it it may have an evolution.

So with those dynamics.

It's a good environment feel then of course, we're going to be paying close attention obviously.

Number one financial consideration is generating cash and and positive cash flow, but we think we have the opportunity what their environment.

That should exist at the time.

To and the fact that weekend.

Correct that capacity.

And manage the capacity.

Introduction.

We can keep it in line with demand, where we have a good yield environment as well.

David any other that's helpful.

No I think that pretty well covered.

Thank you. Okay. That's helpful guys. Thank you and that and then just just a question on your bookings commentary and it's great to see that you're seeing new cruisers booking.

But just you know.

Since you're seeing most of your brands booking in similar ranges that might imply that you're not seeing demand differences between older versus the younger cruisers. So just wondering if you could maybe cut the data by by age cohort for us if you're seeing differentiation there.

Yeah, we're actually not seen a big differentiation there except for one general trend, which is longer cruisers. So obviously, you know where all cruises 20.