Q2 2020 Royal Caribbean Cruises Ltd Earnings Call
All participants are any listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
I'd now like to introduce Chief Financial Officer, Mr., Jason Liberty, Mr. Liberty the floor is yours.
Thank you Shelby.
Good morning, everyone and thank you for joining us today for our business update second quarter earnings call.
Joining me are what you've seen our chairman and Chief Executive Officer, Michael Bayley, President and CEO will come in international and call. It May go we need our vice president of Investor Relations.
During this call we will be referring to a few slides, which have been posted on our investor website Www Dot RCR, that's your dot com.
Before we get started I would like to refer you to warn notice about forward looking statements, which is on our first slide.
During this call will be making comments that are forward looking statements do not guarantee future performance and do involve risks and uncertainties.
Examples are described in our filings and other disclosures.
Please note that we do not undertake to update the information in our filings as circumstances change.
Also we will be discussing certain non-GAAP financial measures, which our adjusted as defined in a reconciliation of all non-GAAP historical items can be found on our website.
Richard will begin the call by providing a strategic overview of the business I.
I will then follow up with a recap our second quarter results.
Provide an update on our latest couldn't be action and then give an update on the booking environment and our outlook.
Well then open up the coal for your question.
Richard.
Thank you, Jason and good morning, everyone. Thank you for joining us this morning.
While it definitely seems like a maternity it's been five month since covert 19 offended our lives every one of those days, it's been a challenge to all of us on every level.
The impact on all Shlain individuals.
Families of business is probably most importantly, these communities have been profile.
Sometimes even homeland.
During these five months, we got to upgrade been group had been working on scenarios that work on imaginable for its just a while ago.
From a massive crew repatriations, a big capital raises to developing nuclear wide health and safety protocols.
All while working remotely.
It's been continues to be monumental effort.
But first and foremost I want to specially acknowledges the ship born in short time team suicide teams that have worked tirelessly on the unprecedented crude repatriation there for.
To date over 43000 or more.
Well more than 90% of our crew hailing from some 90 nations made it safely home to their families and their loved ones.
We continue to work with the governments of the restricted countries to resolve the last few of our crew with their family.
It was and still is a very complex inexpensive task.
Shifting regulations and restrictions across multiple countries.
Our teams were simply remarkable overcoming the multitude of challenges that came daily their way.
I, particularly want to tank car shipboard employees war and always have been the heart and soul of water operation.
There are patients and their understanding during this horrible Polish business has been extraordinary.
Well there are always exceptions.
Basketball of these people have been supportive and understanding during a really awful time for them and everyone else.
That's actually helped to accelerate taposh.
Lastly, going forward well lastly, looking forward as we get our crew home unsettled, we're thinking about the future.
Joke, but I, but by a joke that by the time, we get our last crew member home well have to start all over again.
Frankly, I can't wait to welcome them back one boy when the time is right.
In parallel are terrific financing legal teams have been working round the clock working together that's enough liquidity to get through these extraordinary times.
With our strong brands, great reputation solid balance sheet, we've been able to access the capital markets and to negotiate with governments vendors shipyard operators in others to improve our various financial terms.
Now well actually accessing capital in deferred debt payments are critical another important liquidity action. We can take is cash burn.
To this end our operating teams expect to have the whole please.
In their expected level of lay up by the end of this month.
Moreover, they are reviewing every single expense account to further improve our cash conservation goals.
On top of all these efforts most of our capital projects have been delayed or canceled because we don't know how long it will take to get beyond this epidemic.
These are painful but these are necessary decisions I have to say that these five months has been the longest five months any of us can remember.
No since the crisis began we extended our suspension of operations seven times now who October 31st the most voyages.
It's fair to say that there is still a lot of uncertainty.
Against this backdrop, we will not watch to returned to service until we are confident we've figured out the changes that we must make well for our guests and Crewe strong health and safety protocols, we see enjoyable experience that they rightly expect.
We believe that are healthy healthy returned to service program will help Kansas there.
As I've mentioned before this new program will focus on four key aspects.
Great and screening of gifts and crew prior to boarding.
Enhanced health Boston season protocols onboard.
Especially will focus on addressing the destination we visit.
And lastly procedures progressing and he reports as exceptions.
We recognize that this is extremely complex therefore, besides our.
Dedicated internal teams, we in cooperation with Norwegian cruise line have assembled the expert panel called the healthy sale panel, it's tasked to help us develop comprehensive and multi faceted set of enhanced health and safety protocols. We think they will address the key aspects of our returned to service program.
Given the challenges Cobiz Nike.
We've also recently created the position of global cheap public Health Officer, who will raise our standards.
For enhancing and implementing all the protocols and recommendations fleet wide.
As with all we do we want our measures to go above and beyond what's expected them.
As most of you know I should pass very special features and some of those they get more challenging but some of those provide real opportunities and so we're all looking at our ships and open mind set on the Badger <unk> core.
From the arrival at the terminal with contact less check in VR App to touch was a payment options. We're reviewing every step of the experience.
Example, we've developed a new innovative way to Buster, where our passengers will be able to view safety information on their outdoor interactive state when TV and then checking that their assembly station at their leisure no more crowds. This is one small parts of the enhancements, we're working on and we'll share many more when the time is right.
Now as we work in prepare to sale was the new protocols. You're also some other important positive signs on the horizon.
There were a noteworthy advances and treatments many new drugs are undergoing clinical trials testing and tracing or ramping up and vaccines seem to be making great progress.
Ever before has so much coordinated effort resources focused and technology lender then applied to solve such a problem.
Hello, Alcobras Nineteens impact is significant what hasn't changed is that people you or guest and our employees or at the heart of this cruise line.
We have in both homebuilding surprised with the amount of bookings machine for 2021 with literally no marketing efforts and frankly very little good news.
You've heard me say before that revenue management is more of an art and science and that is more true today than ever.
But the tone of our bookings, especially as we get into the second half of 2021.
It's been encouraging our guests want to come back families warm and needs. The vacation that is what makes sense innovated inspired and reason.
We are more determined than ever to come back strong with new ideas to make sure that I guess feel confident sake.
Choosing their vacation with us.
I cannot leave this call will not expressing my appreciation because the men and women will coordinate who continue to displays such loyalty under such trying circumstances.
This pandemic and the steps that have to be taken the control that are causing massive pain and suffering through up.
Oh, It our company.
Disrupting our lives in our way of life.
The impact on our society in a way of life is profile.
And that impact will last long after the corn crisis and.
We will get through this and we need to focus our attention and doing so and doing so in a manner. It preserves the amazing attributes of cruise.
My parents generation was indelibly imprinted with the experience of the Great Depression.
I think our current generations will be in printed with the many experiences that are affecting us today.
Our task will be to ensure that we are responding appropriately and innovative 'cause it demands in society as we emerge.
Based on the information available to us today I'm confident we're taking the right steps to do so.
Cruising has taken the economic impact of the acute phase of this pandemic as hard as Andy industry I can think of.
We are ready to rejoin the rest of society and the recovery.
In fact, once we get passed this acute phase the experience cruising offers has the potential for being one of the way Society comes back together.
Humans are social animals, and cruising will in the near future. He was the offer people a meaningful and enjoyable way that safely fulfill its basic human names.
People want to be together, and we will be ready to welcome aboard.
And our bookings for next year indicates that our guests feels the same.
With that I'll pass the microphone back to Jason Jason.
Thank you Richard.
Before I get started I I also like Richard what to think are incredible employees and stakeholders.
For the dedication and tireless efforts during the unprecedented times it is.
There's really all inspiring and im very appreciated.
So so now let's get into our results for the second quarter.
Second quarter results illustrate stunning impact of this pandemic on our business with all cruises for the quarter.
Being canceled.
You had reported an adjusted net loss of $1.3 billion.
The impact of Koby 19, also led to recording and noncash asset impairment.
I'm wondering is $6.5 million.
Now, having said that our total net cruise costs declined by more than 40% versus the previous quarter.
The decline was driven by the suspension of arc Harbor crews operation.
And also commitment reductions in our operating and marketing spend.
It's important to note that we continue to incur significant cost in the quarter released the repositioning of our fleet.
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Which included the housing.
Repatriation of our incredible crew.
Also we have some some revenue and cost for the quarter.
That'd be limited silversneakers quarter lie.
When excluding onetime costs that impacted the quarter and silver she's quarter lag our net cruise costs actually declined by almost 60% versus last quarter.
We expect me to further decline as our ship settle to their various levels of layer.
All the relevant events that happened since our last call.
After July we announced that we purchased the remaining shares of silver C.
We believe the timing in value the deal was right.
It was structured in a way that did not impact on liquidity as the remaining one third state was paid in the form of 5.2 million shares.
This move will allow us to accelerate integration efforts and further position to oversee for long term stuff.
Now as Richard mentioned this morning, our top financial priority remains ensuring that we already strong liquidity position.
The same we continue to take decisive action to bolster our position.
We ended the quarter with $4.1 billion with liquidity.
The strength of our balance sheet our assets in our brands has been evident during this pandemic as we raised approximately six and a half billion dollars need liquidity since we announced the suspension of a global crews operations.
Moreover, during this quarter, we completed a 12 month that amortization holiday for all of our export credit back a financing an amended over $11 billion in commercial banking export credit facility.
On covenant waivers through the fourth quarter I'm 2021.
With these moves our upcoming maturities equal 300 million for the remainder of 20 21.3 billion for 2021.
As it pertains, where a monthly cash burn. This has also improved sequentially each month as our ships entered various levels of way up.
We estimate that the cash burn will be on average in the range of approximately 250 million to 290 million per month during a prolonged suspension of operation inclusive of I'll be increasing that that's attributed to the way the capital raises.
As you mentioned in the press release. This morning, just number excludes refunds of customer deposits scheduled debt maturities Commission as well as the cash inflows.
And Oh from new and existing bookings.
This range is lower than the second quarter actual as much of our he is now suddenly.
The various levels of layer.
It's worth noting that our teams are working around the clock to bring this number further down as reducing our cash burn is the most cost effective way to improve our liquidity position.
I will I would now like to provide an update on the business starting first with our capacity.
We have now suspended most of the wages through the end of October.
Today, we have cancelled 1545, sailing which represents a 65% reduction in our capacity for the year.
Regarding our new builds we initially expected to take delivery of shot five ships between July 2020 Nm 21.
But are now only expecting to take delivery of three chips during this period.
This includes the silver Moon, which is planned to be delivered in October.
Welcome to <unk> Odyssey of the C, which is now scheduled to be delivered in the first quarter 2021.
In silver Dawn scheduled to be delivered fourth quarter 2021.
All the remaining ships on order or suspected to be delayed by an average from 10 months.
Now I'll provide an update on what we are seeking the demand environment for 2021 sale.
Given the current global situation to uncertainty we've been both encouraged and humbled by the volume of bookings Weve been receiving for 2021.
Since our last earnings call booking have averaged more than double the level seen during the first eight week of the global crude suspension.
This is quite remarkable as Richard commented.
This is taking place with very limited to know marketing activity.
The cadence of demand has generally been determined by the news cycle.
Received higher levels of bookies prior to the news regarding a surge of Coburn 19 cases.
In a decline thereafter.
To this end bookings have been softer for the first quarter were quite strong for the summer in back half from 2021.
Highlighting the continued demand for cruising.
For our core destinations or the Caribbean Europe, Alaska in Bermuda.
It's important to note that the 2021 is benefiting from Rebooking activities from gap with future cruise credits along with those taking advantage of our popular lift and shift program.
That being said more than 60% of our bookings received since mid may have been new bookings.
As a result, our cumulative book load factor is still within historical ranges.
Pricey for 20, Twond pressing for 2021 bookings is about flat when including the negative yield impact a booking made but future crudes credits.
And it is slightly all year over year, when you exclude them.
Regarding our customer deposit.
Balance at the end of June was 1.8 billion.
But approximately 300 million associated to 2020 sailings.
Approximately 48% of our guest books.
Booked on canceled sailing have requested cash recon.
We expect our customer deposit balance to decline further.
During the third quarter as we continue to process refunds for me somebody suspended sale.
However, we expect the decrease to be smaller than it was in the second quarter.
In closing.
In order to kind of frame the third quarter outlook I'll, just remind everybody that we get cancelled all of our third quarter sales.
Having said that.
The timing introductory every other recovery still remains uncertain.
Therefore, unable to provide further guidance for the year.
We do expect however to incur a net loss on both the U.S. GAAP and adjusted basis for the third quarter.
And and for 2020 fiscal year.
The magnitude of the loss will depend on the timing and extends our returned to service.
Lastly, I will highlight the by raising cash early.
In aggressively managing costs, you're prepared to navigate a choppy in volatile period.
Moreover, our people are working around the clock planning, a comprehensive and turn to service strategy.
Taking care the financial health of the company.
I'm confident that we will emerge from this crisis of the stronger more resilient company.
With that I'll ask our operator to open the call for a question answer session.
As a reminder, if he would like to ask your question. Please press star followed by the number one on your telephone keypad. That's star one we ask that you limit yourself to one question and one follow up.
Your first question comes from Robin Farley of Ya.
Great. Thanks, very much I wanted to ask some other lines that you know source primarily in Europe are restarting and wanted to just think about sort of Royal Caribbean, whether your research date would really be just the CDC increase inside of the U.S. or would it be potentially something in China or or something.
I'll say that I'm not thinking of and then my other question related to that kind of part two of that question is some of the protocols that cruise lines in Europe has put out there is one cruise line, saying that they will test guess before boarding and some other lines that haven't said that I'm just wanted to get your take on you know whether that.
It's something that can reasonably be done for U.S. passengers boarded because that is that kind of reasonable protocol for U.S. restart. Thanks.
Hi, Robyn it's Michael.
As you know we've we've suspended all.
Dealings until the end of October with two exceptions, one of them is the the China operations and also Australia.
We we it may well be possible that will resume operations in China, and potentially Australia it'd be cool the end of October, but it's uncertain and I'm not making any statements that that's going to happen, but because there's some possibility.
So so that's a that's a possibility that that may occur.
As it relates to the protocols I think.
You know what we've seen what we're seeing in Europe is Europe isn't it.
Shouldn't be a different environment as it relates to how people a few kogan and what's occurring with cobot.
True clearly Europe for sometime now there's been a series of interactions in discussions with both the European Union, but at the end of July issued.
Died lines for the cruise industry in terms of returning to the two sailing.
And as being individual discussions between national governments and cruise companies, which has resulted in what we've seen in terms of.
Miscellaneous.
Cruise companies for tuning to operations, obviously through a crusading Association in Europe were very engaged in well watch what's happening and we're obviously receiving a lot of feedback it's a great learning experience for for the industry in terms of what's occurring.
With regards to the protocols I think.
Certainly testing seems to be.
Very relevant and discussions are underway as Richard mentioned earlier, we has a degree of confidence in the panel that weve.
And and all of our protocols are currently under review with the panel I'm. So testing is part of the thinking but we have not yet reached to a point cannot protocols will that ready to publishing and really school for the discussion.
But it's very likely the testing will occur. We're also seeing in discussions with multiple destinations around the world, which is another component of the returned to service.
Particularly as it relates to Caribbean that testing is very much at the front of how people are thinking about protocols for located.
Okay, Great that's very helpful.
Very helpful. Thank you.
Your next question is from Stephen Lozinski at Stifel.
Hey, guys good morning.
Jason you wouldn't you indicated that 60, 60% of 21 bookings are newer unique since may.
And you expect that net outflow ratio deposits versus refunds are still going to be negative in the third quarter can you help us think about when that ratio would go.
You know more breakeven ish or even positive.
Yeah sure sure Steven and good morning. So first you know obviously when you're in a period of time, when your and your canceling tailings and for us.
A little under half of our guests are asking for their cash back.
Those are times, where you have more significant outflows.
When you step back and you look at our cats are cancellation rate form for our active sailings are only a tad higher than they typically are actually for 2021, they're actually lower.
Then what we have historically seen and so when you're in that type of situation.
For for active sailings, what's your what's you're seeing isn't that we're obviously taking in more than than is going out and so I think it's just getting to a period of time, where we're not yeah. We're not canceled sailings and of course, you only yeah, we only have little under 300 million.
Oh customer deposits for the balance of your and as we get further and now into the back half of your focus on 21 begins to ramp up more and more and so my commentary around what we're seeing around bookings per 21, what was seen in the cancellation rates I think is encouraging for batteries show.
Okay, Gotcha, and second question I'd, probably be for Michael but the healthy sell plan. It seems like you guys are pretty close to wrapping up that study and somebody get to the the CDC and I guess the question is around what the timeframe looks like once you submit that plan to them and then when you expect to hear back from them.
Because I think they can still take public comments still mid September if I've read that right.
Yes Stephen.
The the CDC request, the public comment and the that this final take for public comment is.
September 21st a panel is.
Working through through the month of August we're hoping that towards the end of the month that we'll have a final position that signed off on bio panel and we feel is the right plan to return.
So the timing kind of starts to come together with with all of the public comment concluding towards the end of September.
Look concluding towards the end of August we think that that there's some good opportunity in terms of how that comes together, but I think it's important to two you know note that is as we know there's just a huge amount of uncertainty with with how this will play out and obviously one of the biggest diner.
That makes is is what's occurring with cobot itself. So we.
We certainly seen in Europe that as Toby decreased and particularly for example in Germany, Germany was one of the surplus countries to open up to be flexible in terms of opening up the cruising because it reflected how people were seeing what was occurring with cobot. So if if were fortunate and everything comes together at the same.
Time, Ben and were hopeful that will be entering into some meaningful dialogue.
Towards the.
End of September.
Okay, great. Thanks, I appreciate how.
Steve.
As to amplify on that there is almost a sense you sometimes get that there's a date tended that's all happen and then no protocols and new procedures will call out of that that's the end of that and we'll move on.
I think one of the things we have seen about cobiz in about the kinds of protocols that you have this this is an ongoing.
Process.
And there'll be some things that are coming out this fall and then there'll be more more knowledge about prevalence in society and about treatments and about vaccines and so.
I think we view this more as a demo rather than a light switch.
And we think that well start out as Michael says, we'll start to see some things early call.
But then there will be changes and I think this will be a continual process you know our mantra is continuous improvement and so I think.
The mistake to think that.
It's all ends at one point in time.
Okay, Great appreciate that guys. Thanks.
Your next question is from Felicia Hendrix of Barclays.
Hi, there and so like Michael maybe you can tell us.
Booking for 2021, maybe the complexion of the of your crews or is it I mean everyone's kind of talked about the loyalty, but is that just your loyal guest visit millennials are the generation ERP can just kind of tell us who booking and then on Jason regarding your bookings commentary on that the pricing was flat.
Year over year can you have to help us understand how that compares to 29 team. Thanks.
Hi, Felicia.
I think I think Jason in his opening comments mentioned that.
Certainly when when anxiety is is relatively high because of cobot then bookings.
The decrease in relation to how anxiety is tightening.
We think conducting consumer research since March so we've got a really good sense of how the customer is thinking about cruising vacations different different opportunities and then how they're viewing all with that and what we see is the direct correlation between what's occurring in the state that they live in.
And then how optimistic they are than that of course translates into how we see the bookings.
Coming in.
So that's one thing that we've seen the other thing is that.
We didn't see that younger customers.
More inclined to be bookings, but we also saw a huge response from a loyalty customers.
So its across the board and of course different brands have a different kind of response from customers, but I would say that the key cool for bookings at the moment is loyalty cruises people, who understand what cruising is they feel confident and comfortable that once we start getting this be.
And does that everything will will return and the very anxious to go on vacation.
Oh, the observation, which is which is which is really my observation is that.
I'm kinda hopeful that we're going to see a lot of pent up demand and certainly when you look at all bookings by quarter in 21.
So a lot of activity as we move into the summer and I think a lot of people have written off this summer they've decided that there's not going to be a big summer vacation for all of the reasons that we know but people certainly want to have a vacation next year and I I'm kind of hopeful that we're going to see a nice bump into any one because people want to go and have a great.
Vacation. So it's certainly when you look it up bookings for 21, the summer summer seems to be felt pretty popular.
Thank you.
Thanks, Michael.
On your second point, which a foothold to start off and say I'm looking forward to a vacation. This summer so [laughter] I'd be get away from all these children, but [laughter], but.
On the pricing side or are our commentary on pricing.
It is actually higher than 2019 level. So the same time last year is actually a record high.
So were in line with a record high and if you exclude the future Christopher kits, which were issued at 125%.
We're actually above those those record levels.
Okay. That's helpful. And then just Jason on the on the balance sheet can you look you guys gave us all the details on your liquidity, which gets you through to almost the end of next year, depending on which ended the range you want to look at and you know there have been news articles about you looking at raised some more debt. So just being if you.
They tell us what your balance sheet capacity is both in terms of secured and unsecured perspective.
Sure sure I I assume you articles as well I'm not quite sure. The sources on the article been seen them [laughter].
So were you were obviously be situation.
About returned to service remains fluid.
We continue to look internally at cost internally at capital I'm looking at other ways, even in the non capital market Bank World to further bolster our liquidity and by that what I need is looking at you know support from.
Different government agencies that we do business, where which had been incredibly supportive.
And then we look on the capital market side on the debt side, we've got about $3 billion of debt that we're able to issue and we still have about $700 million opco guarantee that is available to us.
If we chose to do something on on on the debt side in the balance of that would be unsecured.
Of course, we also have other assets new ships that are coming online.
That we would be able to potentially put some some leverage on or security on as well as as they as those ships come online and then of course, you know there's other avenues that that could be considered we're really focused not only just getting onto the other side of this crater, but also making sure that reduce.
I mean, our financial health.
And.
See metrics and and leverage that looks like pre called the bubble. So a lot of focus on that has just a general construct on the balance sheet.
Great. Thank you very much.
Your next question is from a CEO George <unk> of Infiniti research.
Good morning, guys to Jason you mentioned, the changes to capacity and the delay to Newbuilding deliveries can you expand a little bit possible ships sales of it sounds gilder vessels, whether a the market is there for those handle.
Secondly, when you come hopefully come back into service in early November.
No that's would be it a limited capacity I assume can you give us a sort of a quantitative figure as to what number of ships you imagine will start sailing initially is it 10 or is there.
30.
Hi, Austria and good morning. So we've we've been really I think unfortunate over the years of though you are being able to to sell ships and and and typically our March our philosophy on it.
Yes, if we don't think we have a good plan for that shift more to be generating sizable returns or it's difficult to make it a strategic fit.
To our brand by modernizing and so forth we have looked to give to you have to sell the ships and we typically have averaged one or two ships. Your you're certainly and this time you know we are evaluating opportunities.
To sell ships or to take other actions with ships.
And I would say as as a as that information comes like we would of course.
Update the the investment community on that were there's already three shifts three ships everything its upon them for that are currently in the and the scrapping process.
And and so we're evaluating all all options, but of course, we want to be Riva, because a lot of money internships. These ships to its exceptionally well.
And so it's a it's a it's typically a difficult decision to department to ship because they generate so much so much cash.
The one comment I would just make in terms of the ramp up and you I know I know I'm sure everybody is eager to hear as they're gonna be <unk>.
X ships why ships whatever it is I think as Richard pointed out.
A few minutes ago is that it's going to it's not going to be on light switch a man, it's not going to be lytswitch, because it's like starting any type of operation. We've got a ramp ourselves back, though and I think base awful what we see in terms of yeah.
Demand than protocols, and so forth will will be the determinant on how many ships come back, though I'm on day, one, but our goal is to bring them back up in and move that dinner.
As quickly as we possibly can you get our fleet fully back up and running and under the the safety and health at all and protocols that everybody, but it starts to be doing.
Good day, it seems that you have almost the entire fleet available for bookings. So I imagine some of those bookings may be shifted somewhat similar to NURI <unk> on a similar data is that fair.
It's certainly possible off yet again, I think that as as we get more visibility.
By market byproducts in terms of what's going to come on line and when you will evaluate.
If it changes and we get me, whether it's two itineraries, whether it's too to shifts or whether it's to or you've got so much concern.
Thank you Jason good luck to everyone.
Thanks I appreciate it.
Your next question from James Hardiman of Wedbush.
Hi, good morning, Thanks for taking my questions.
So briefly Jason is there anyway, you could help us break down that to 50 to 90 of monthly cash burn in terms of sort of what ship cost, what's the new sort of interest run rate, what's capex et cetera.
I'm sure.
I'll break it down this way you somewhere to before we got said 250 to 219 is the overall the burn rate. If you consider running in SG. They is somewhere around the 150 to 170 rate per month.
Our brand I mean, I you I have really done I'm, an incredible job.
We continue to find creative ways to.
Further reduce the cash burn I'm on the on our ships and its and and doing it in a way that no way minimizes our ability to get the ship stack up and running in the time way.
And so yes, I think we still see opportunity I'm pretty sure in these numbers, but essentially you wanting industry may is about that as about that range and.
About half of the 150 to 170 is running and the other half and investors.
Okay very helpful and then Michael or Richard Whoever wants to take this I, obviously, there's a lot of discussion about the approval process with the CBC.
But as I think about handicapping that October 31st date, there's a lot you can control. There's a lot you can't obviously the big thing you can't control is it sort of where the viruses maybe speak to what you're healthy failed panel is recommending from up from a virus perspective, do we need I'm, assuming we need to get the virus in much better control by.
October 31st versus where we are today, but.
How do I think through that do we need to get the virus to levels that we're seeing in Europe for you guys to recommend that that things are in fact safe.
Should we be focusing specifically on the state of Florida, how should we think through all those pieces.
Yeah, it's a.
It's a real as you pointed out it's a real puzzle and there's so many.
Variables to consider.
It it's certainly a component of the thinking as it relates to the protocols is healthy return.
Take into account the prevalence of cobot.
Not only in the origination but also in the destination. So as you can imagine one of the one of the projects that were working on now is a dialogue with all of the destinations for example in the Caribbean South Central America.
We formed a tough sportswear literally all of the tours and ministers in many prime Minister's from these countries the participating.
With.
With the FCC, a which is really caught a CLIA just stop thinking through how we're going to safety review operations. So yes. The components of this is obviously going to be the prevalence of cobot in the in the origination and the destination and I think just you know commonsense tells you.
Good.
If if if the prevalence is exceptionally high in the origination market then that's going to two to hinder a resumption of operations, but I think it's worth pointing out.
That certainly for the Royal you know, we the market is the United States sure there in certain states that have higher density of customers, but we do draw from the from the entire country and of course, we have a extensive international footprint as well, but but it is a component of it.
The panel is you know they really are.
Experts in that field and they are reviewing step by step point by point every single protocol. That's that's placed in front of them by a.
Team of experts so it's a it's a kind of an ongoing process, but the key points I think is the prevalence of coal goodwill, we'll have a determination on on the returned to service.
Very helpful. Thank you.
Okay.
Thanks, two questions from Tim Condor Wells Fargo.
Thank you didn't think a gentleman for older color and Jason and Michael totally agree with the pent up demand Oh, there's probably some good a cruise lines as well as the places with a private island. So that they can accommodate that some of those needs.
Ill move on to some or just sort of following on some of the questions. When we get back to normal let's just call coal at that how should we think about Jason some of the structural cost here both on the crews operating side and the S. DNA relative to maybe levels that we saw in 17 18.
18.
[noise], yes, well I think in terms of.
On a structural standpoint, we've obviously, we've taken some gene a actions that we think.
Arnie I'll be permanent.
Changes in our cost structure on the running expense side, we continue to identify way too to save money, but of course, you know the product will scale won't accordingly.
Based off of the load factors and so forth over time, we're going back to the dimmer exam.
There will also be and of course, we don't know exactly what does that number is going to be there. There's gonna be additional cost that would lead to some of these protocols.
Which you know some of it will be temporary and some of that might be for a more sustainable period of time.
That will be out there, but our goal is ER is to make sure we're delivering the very best vacations in the world.
Continue to have have strong net promoter scores, but trying to do all of that while you're getting ourselves back to two pre coded margins but.
Okay is there any way Jason we can sort of think about some of those costs that could be structural weather me, which over those years are the best a benchmark off of.
As we go forward and then maybe in 21, if your let's assume you're ramping up throughout the year would would Ah we expect to be obviously below what we're seeing and 20 on it and then ltd basis, but still above that that 17, 18 19 on an L.P.D. basis.
Well I, yeah, I know it would if and when the time as right. Tim we will be we'll look to try to provide.
Guidance on on how we see our cost structure to by helping I would take my comments earlier about returning to financial health and getting back to kind of pre code levels as the need for us to two to find ways to become more and more efficient.
Here over time, but I think it's too early to to communicate exactly what that would be.
And of course, you on a load factor basis and and and.
It's it's going to its going to be a ramp up I am sure people like to have a specific number but again I think we look at until we have better visibility.
No I'm a bit won't be a little bit of time your before we start kind of guiding on on the volumes and how those volumes the way too.
You know staffing levels and protocols that will will be necessary in the early days.
Okay fair, Thank you gentlemen.
Thanks.
We're trying [laughter].
Your next question is from Brandt Montour of JP Morgan.
Good morning, everyone. Thanks for taking my questions and Ah. Thanks for all the details today.
Just curious as you look at next year from marketing perspective, I know, there's a lot of moving pieces, but assuming that you do get a list of the no sale order in 2020, how do you spoke that your strategy for sort of wave season marketing could change.
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Versus prior years and prior year strategies. Thank you.
Hi, Brent.
Yes, I think.
It's it's it's been interesting the ironically, how well we'd be doing with our bookings with.
Almost.
No marketing spend so that's caused a lot of anxiety with a CMO and our marketing organization, because the bookings being good without without much investment.
I think the answer really is going to be a but kind of a natural relationship between the momentum investment in marketing when we return to service.
And the pace so to the census, so.
You know back to boats, Jason and Richard's point that this won't be a light switch this will be a phased in approach and I think a marketing will phase in over what I hope will be a relatively short period of time, but I think once we get a real sense of how we're going to be returning to say.
So in terms of the phasing then I'll plans will reflect a sent a against my previous coin I'm also a believer that there's pent up demand. So you know we were feeling quite optimistic about how that may play out.
Thank you for that and then just a follow up I say you guys looking at any contingency plans are sort of under a scenario, where we get to prime booking season for summer 2021, and let's say Americans aren't willing to get out and Trans Atlantic flight maybe talk.
About the depth and breadth of your European local marketing arm and if you think you could or would.
Plan European only sailings.
Yes, Great question, we we literally have worked through multiple scenarios on possible outcomes applying.
Difference in multiple assumptions to these different scenarios. So it's a it's it's a possibility we hope that doesn't play out but we have built.
Plan School, what you've just asked about than other types of possible outcomes.
Right. Thanks, all and good luck.
Thank you.
Your next question is from Jamie Katz of Morningstar.
Hi, Good morning, Thanks for taking my question I'm curious if you have any color on the resumption of creeping with Chile I think they started.
There may be two weeks ago and has there been any feedback since that process that's right here.
Yeah sure.
Good morning, Jamie.
It's actually are both our to rebrand as well as hop on Lloyd have have resumed in both cases.
Protocols that have been employed.
Have a one being well received.
And also seem to be managing the how aspect of this and so so reports have been very good I think the thing that has been hum.
One of the better outcome.
Customer surveys and net promoter scores and so forth had been a relatively high here.
And so so while we've been installed some more protocols social distancing.
And so forth what we have seen is that we've been able to put on an experience a vacation that is resonating very well with our our German customers.
So you know it's still early days and the product is building up more and more and they haven't stopped anywhere yet, but they they we've been able to put on great vacation experiences they've been able to see beautiful thing beyond the fresh share.
And that has Ah. That's that's resulted in very positive feedback from our customers.
Okay. Thanks.
Thank God I think I would just had one thing.
It's important to understand.
We're also learning about.
Covidien came in the implications and so the opportunity to see what does happen I'm under certain circumstances is really helpful to all of us as we're going through this process.
Okay.
And then be impairment I don't think delineated what that is allocated to last quarter I think the impairment cry all three brands.
Or sorry.
Yes, celgar theme that.
Oversee again this quarter or was there something else.
No. This you. Besides this had more to do.
With with Goldman tours.
Well some of it was pullmantur related.
As that business is under under.
Being restructured there's also a we had some shifts that you know that we believe you relative to the number of years. They have lucky enough to recover their asset levels. There were some impairment there and then you know there was something just you know that that had.
But also kind of flushed through another joint ventures that we have and collection that we don't think or our or possible for ships that we have sold but it was under seller financing.
Okay. Thank you for the clarification.
Yeah.
Your next question is from Greg Badishkanian of Wolf.
Hey, guys. Good morning, it's actually Fred Whiteman on for Greg.
Richard and Jason you guys should both talked about the stronger backing up bookings in the back half of 21 I'm wondering if you could just put a finer point on that what is sort of the relative booking strength, you're seeing and that summer and beyond period relative to the first half the year.
Yeah sure. So so so one I would say its if weve a little bit more into also the front half of the year. So you see this kind of line.
As you kind of get into the early early to mid part of the second quarter, where there's just strong demand.
For <unk> for the season.
And beyond its almost as if the consumer has somewhat kind of focused on that's that's when its it will be it will be time for them to.
To deal with the pent up demand and Michael.
I had talked about and you. If you look at a by product I mean really is across all of our core products.
So there's been Caribbean, a European products Alaskan products.
And so forth. So it's it's not does not just one thing, but it's really clear as we get kind of mid Q2 and beyond that there is there's high demand in our consumers are willing to pay.
At or above these the the historical levels.
Okay, Great and then just on that pricing comment cumulative 21 pricing did soften a bit versus what we saw last quarter. I think you guys had suggested that would be the case, but should we continue or should we expect that cumulative pricing number to continue to come down a bit as more and more of those fccs are redeemed or should it be more stable.
Yeah really good question so I.
I think on the new booking side and the patterns that we're seeing is is with strength in our guests willing to to pay more than what they paid.
For same time last year in 2019, but as we as we you know at least as we as the Fccs get redeemed.
We would expect that that's going to have an impact on those apds because they are effectively a 25% discount.
On on the PD because of the application of that have that whose credit.
So I do think that there will be continued pressure on that APTP benchmark just because of the application of this absences.
Great. Thank you.
Sure.
Your next question is from Ben Chaiken of Credit Suisse.
Hey, How's it going you held the tip of the customer cohorts previously is there anything unique about booking channels that people are using for 21.
Joe for example, you mentioned pent up demand whether threepi cruisers are I think you mentioned the loyalty members is there any mix change you're seeing between direct verse travel agent for example.
Hi, then no everything is pretty much the normal incidents with her.
Bookings are coming through the various channels. So we've seen nothing yet that.
I would make you think there's some kind of trend change occurring I.
I think the one thing is true that you know at distribution as many about travel partners are obviously stress because of the situation. So.
That's something that were well aware, obviously and we're trying to be is supportive as we possibly can to oh travel costs in the community because when all of this does get behind us will will need them and want them to be booking for tourists. So but no no no noticeable change at the moment.
Gotcha. Thanks.
Great last question comes from since appeal of Cleveland Research.
Hi, Thanks for taking my question curious wanted to circle back on the Fccs.
No if you specified how much of the one.
Billion and customer deposit was FCC related and then separately as folks start to redeem their fccs, maybe once there's a clear path back to sailing what percentage of folks who take fccs are applying them to a specific selling right now.
Oh sure. So so you kind of thinking about 1.8 billion Oh customer deposits about 900 million no better. So is RF seems seems and about 40, 45% of those on nonrefundable.
We have seasons.
And and so so far there's been about third of those FCC that had been applied.
And we also have well, although there's about a third of the 125%. One then of course, our crews with confidence program, which are the model refundable, one it's been about.
About 20%, but have been.
Hum applied.
Our today.
Thanks.
Okay.
Well. Thank you for your system today Shelby with the call on the we thank you all for your participation and interest and the company.
Oh accrual will be available all day offering follow ups you might have in.
We all wish you all very agreed to be help thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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