Q3 2020 Carnival Corp & Carnival PLC Earnings & Business Update Call

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Please stand by the Commerce will begin momentarily. Thank you for your patience thought you Peter we know a lot.

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And welcome.

The conference call.

Lauren Odonnell, President and CEO of Carnival Corporation and plc.

Today, I'm joined Telephonically by our chairman Micky Arison, as well as David Bernstein, Our Chief Financial Officer, and Beth Roberts Senior Vice President Investor Relations.

Thank you all for joining us this morning.

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

For the past eight months, we have dealt with the unprecedented impact cold at night see on our behalf.

And we have aggressively managed well.

In that time, we've come full circle.

Initiation of suspension in the early days of the pandemic to transition the fleet and supports that and Rightsizing, our organization and now embarking on the phase resumption of guest operation.

Underway into about world, leading cruise brands, Costa in Italy, and Aida in Germany.

We are very excited to resume gas operations across our brands and we are working hard to do so in a way that serves the best interest of public health.

Hi, its responsibility and therefore out top priority always always complain.

Environmental protection, and the health safety and well being of our.

The communities, we touch and our Carnival family.

Team members shipboard and shore side.

We are taking aggressive action, managing the balance sheet and reducing capacity to possess.

To position us to weather this disruption.

And to emerge a leaner more efficient company reinforcing our industry leading position.

As the leisure company, we believe we are well positioned within the travel sector.

Our industry is not reliant on business travel, we believe we will disproportionately benefit from the pent up demand for vacation experiences as compared with many others in the travel sector.

Historically, our company has demonstrated proven resilience through the cycle.

While business travel to the shutdown at time vacationers tend to travel through those challenges and we've seen that time and again after events for example, like the global financial crisis.

We believe we will capitalize on this demand given our extensive and law you have yes.

Historically, approximately two thirds of our guests globally are repeat users of source of nearly 8 million guests annually more.

Moreover, our internal data suggests on average a repeat guests returns every two plus years.

Being in cost that is eight months, we have a backlog of past guest ready and waiting to cruise again.

In addition, we have been active database.

40 million to mine in the coming months as we strategically ramp up toward full resumption of operations are.

Our company is uniquely positioned for a phase resumption in cruise travel given our multiple national brands, which can each be restarted independently.

And as we said before heavy national brands as a portion of our portfolio at this moment is clearly an asset.

This has already proven to be instrumental in enabling us to resume cruise we both in Italy, what cost the Europe, which is nearly 80%.

And then a European source and soon with that either which is roughly 95% German source. Our other brands like the UK, which is 98% British source in Australia, which is more than 99%, Australia, New Zealand source and Carnival cruise line, which is now.

92% Usource presents further opportunity.

Additionally, the fact that these brands are characterized by ready access.

Ride to market in a prevalence of shorter duration cruises.

Rent as the potential for success in today's environment.

Clearly cruising in totality is not coming back all Edwin as.

As we are demonstrating with low cost the eni either we intend to initially resume operations with a small percentage of the fleet, which naturally will make us less reliant on new to cruise.

Moreover, in importantly, the combination of the phase restart and this with the actions we have taken to accelerate the exit of less efficient ships will reduce our capacity in the near term.

Having reduced total available capacity by 12%, we believe we will be less relying on new to cruise, even when we resume full operations globally.

Never before have we been in this situation in fact in all prior cycles, we were actually growing capacity and needed to capture many more new to cruise.

Now we have not only seeing tremendous support for our brands from our loyal guests, who really missed their cruise vacations and intend to return. It is also very encouraging to see demand from new guests with.

With virtually no marketing efforts our book position for the second half of next year is that the higher end of historical ranges.

Selling indication of the fundamental strength in demand for our brands.

Upon resumed service, we believe we are well positioned to optimize that demand, while leading brands around the world.

Our strategic capacity reduction will also deliver a structurally lower coffee.

Just by the fact that the 18 ships, leaving the fleet or at least efficient ships, we will benefit by a 2% reduction in unit costs are.

Our efforts to rightsize, our shorts on operations will reduce out cost further as well as our continued focus on finding efficiencies across our ship operations.

And of course over time, we will achieve an additional structural benefit to unit cost as we deliver new larger and more efficient ships.

And while we will emerge as a smaller and leaner entity. We have retained the most cash generating assets in our fleet ready.

Representing the lion's share and in fact substantially all of our 2019 operating income.

All of the actions we have taken more in keeping with our primary financial objective going forward.

Maximize cash generation.

As we returned to full operations, our strong cash flow will be the primary driver to return to investment grade credit overtime.

And create greater shareholder value.

The sale of less efficient ships will also result in less ongoing maintenance capital expenditures than we would otherwise have.

And at the same time, we stretched out the delivery schedules pushing out new build capital and more importantly, we have just one ships on order in fiscal 2004, and just one ships on order in fiscal 2025.

That will significantly reduce capital expenditures during those years, enabling us to pay down debt.

As the industry leader, maintaining a strong balance sheet has historically been a key strength for our company and a differentiator for our shareholders, even though we retain the lowest leverage in our industry and our opportunistically strengthening our balance sheet as we begin our returned to service.

Which will position us well to create meaningful shareholder value over time.

As you know, we took swift action to secure sufficient capital to provide a financial runway to withstand an extended pause and gas operations.

Because of our strong balance sheet, we were able to raise the vast majority of that nearly $12 billion of capital on a secured basis minimizing dilution and.

And while it was certainly financially painful for a company that always manage to an investment grade credit rating bearing the cost of the capital raise was cruise.

Provide us the opportunity to create value over time.

While we have raised capital mainly debt this year given the recent momentum coming into the relaunch of our fleet. We saw a good opportunity to strengthen our capital structure through an equity raise announcing a $1 billion at the market program to be completed over time.

It's just one of the two than outside the box. We currently have the capacity to issue additional debt. We recently completed a convert flush, which opportunistically improved our balance sheet and our leverage we.

We also have the potential to monetize noncore assets to reduce the debt burden.

Of course cash generation upon returning to service will be the primary driver of de leveraging overtime.

For several months, we've worked to develop new and enhanced protocols and procedures based on the best available clients to specifically address the risks associated with.

Associated with over 19.

Now while we've dealt with many types of viruses previously and have had effective protocols in place on board, our ships and polluting screening measures medical centers, and sanitation procedures, which prevent and reduce spreads once brought onboard from land as.

As evidenced by the global shutdown this virus presents its own challenges.

And we have worked diligently and have engaged leading medical science experts, including among others Dr. Levy Mary Anne.

In the M.B.A. author former Vice Admiral in the public Health Service Commission core and the 19th surgeon General of the United States.

Michael Diamond MD, Phd forbid as gas or professor of medicine, molecular microbiology pathology in immunology and.

And associated Director Center for human Immunology, and immunotherapy programs washing University school of Medicine in St. Louis.

The Diamond was instrumental in developing a mouse model that is used extensively on the development of therapies and vaccines the cobot 90.

Michael Lynn in the Phd Associate Professor of Neurobiology, Bio engineering, and chemical and systems biology.

In principle investigator the Lin lab after University school of Medicine that.

That's the limit is one of the leading members of the scientists to stop COVID-19.

Group with this theme researchers physicians and Nobel Prize winners from across our country.

And that's the jewel model in the age.

Age associated the health equity University of Texas that often Dell Medical school.

Dr. Malone as an intern is epidemiologists public health physician leader and the former principal Deputy Assistant Secretary for help in the U.S. Department of health and human services.

I'll add HHS. She also served as the acting assistant Secretary for health and acting director of the National vaccine program office.

These experts and others have and are helping to determine what enhancements to our existing protocols and operating procedures will best serve the interests of public health.

They have been formed our protocols and procedures, which are established based on the science technology medical treatment data and overall understanding of the COVID-19 today.

We expect these protocols to evolve this society's understanding of COVID-19 strengthens.

We are working to build out our guests will not incur any greater risk versus engaging and similar experiences on land.

And of course, our aspiration is to achieve less risk than exposures to similar shore side activity.

Our company and the cruise industry has a track record of doing just that with moral of ours for example.

We are in active discussions around the world with appropriate authorities and agencies to resume guest operations when appropriate.

Including here in the U.S. and each region, we will only sale, where we feel we can honor our commitments to operate in the best interest for public health and when we sale, we will certainly fulfill each specific regions requirements and.

And we have achieved a significant milestone.

Our first brand to return to operations as I've mentioned with costs in Italy.

Cost to have successfully completed the reintroduction of two ships that lisi OTA and via Damon and soon a third the flagships morale, though will be underway. He.

Each of cost to ship, so offering weak loan cruises departing from multiple different regional home ports and accessing a variety of different drive two markets, but.

But easy initial barges, we have chosen the sale with low occupancy levels, enabling us to gain valuable experience with our enhanced safety protocol and we.

We received high satisfaction scores from our value gap, we have appreciated the changes that we've implemented.

In the coming days, we will mark another milestone as we embark out first ship from another of our brand Aida carries primarily German gifts on cruise in the Mediterranean and this will be followed by two more I either ships later this year.

Again, we're very excited about the resumption of cruise in Europe, and we look forward to what we hope will be a phase resumption around the world.

Throughout these challenging times, we have received tremendous support.

So sincerely.

Thank you to our guests.

Thank you to our dedicated members of the Carnival family, both shipboard and shore side.

Thank you to our trade partners that travel agent professionals.

And to our other stakeholders for their ongoing support.

And especially thank you to our investors for their confidence in us.

And in our future.

In summary, we remain committed to continue to deliver extraordinary vacation experience to our guests and value to our shareholders.

By accelerating the sale of less efficient ships, we will emerge a leaner more efficient company.

We will capitalize on pent up demand or reduce capacity as structurally lower our cost base.

While retaining our most cash generating assets and.

And opportunistically strengthening the balance sheet.

By stretching out the delivery schedule in pausing new ship orders.

We increased the opportunity to pay down debt.

As return to full operations, our strong cash flow will provide our pass that to an investment grade credit rating overtime and create increasing shareholder value.

With that I will turn the call over to David.

Thank you Warner it feels great to be transitioning into a new phase as we have successfully resumed some of our best cruise operation.

Our current financial action plan has three main pass.

Optimize the resumption of guests cruise operation.

Reserved cash and Opportunistically strengthen our balance sheet.

Proving our overall liquidity position.

I'll start today with an update on our second half 2021 cooking train.

Then I'll provide a summary of our monthly average cash burn rate.

Many shop with us third quarter cash flows as well as some insights into our liquidity position.

Turning to our second half 2021 booking trends.

At this point in time, our cumulative advance bookings for good.

Second half 2021 are at the higher end of the historical range at prices that are down in the mid single digits, including the negative impact of future cruise credits.

More commonly known as FCC and ongoing credit supply.

Directionally if you exclude the negative impact of these two items pricing would be in line with the prior year.

Our book position is very encouraging given that we had essentially suspended all advertising and promotional activity.

Chris, particularly reassuring to see that approximately 60% of the bookings take it seriously.

During the first three weeks of September where new booking with.

With the remainder to FCC rebooking.

It is also promising to see that approximately 45% of the 2021 concession.

Our guests that are new to brand with the remaining 55% of gas diesel brand loyalists, which is just a little higher than anyone.

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

Our third quarter, a monthly average cash burn rate with $770 million, which was in line with our expectation.

For the fourth quarter, we expect that our monthly average rate to be approximately.

$530 million.

This result in the monthly average rate.

$650 million for the second half of 2020 as previously discussed on our last business update conference call.

The monthly average burn rate in the third quarter is higher than the fourth quarter expectation driven by the timing of guest response payments of over a billion dollars flowing to accounts payable in the current quarter, partially offset by higher fourth quarter capital expenditures.

Product to ship deliveries.

One of which occurred last week in chanted print.

Our $530 million fourth quarter monthly average cash burn rate includes four items.

Her 250 per month of ongoing ship operating and administrative expense.

Second.

Interest expense is expected to be approximately 120 million per month.

Third.

Capital expenditures are forecasted to be approximately $130 million per month yet.

Export credits getting sick and this includes two ship deliveries and the receipt of other capital commitment contracted for prior to the pause in our guests operation.

The fourth and final component.

Other working capital changes, which are forecast to be approximately 30 million per month.

Next I'll provide a summary of our third quarter cash flows.

We are currently in a holler and liquidity position with 8.2 billion of cash on our balance sheet at the end of September quarter.

I'm happy to say that this is $1.3 billion more cash that we had on the balance sheet at the end of the second quarter Jerry.

During the current quarter, we added to our liquidity position by completing Corinne very well received financing transaction with cumulative net proceeds.

$4.7 billion. This was partially offset by three things.

First our total cash burn for the quarter was $2.3 billion.

Typically our monthly cash burn 770 million per month time frame.

Second.

600 million, the majority of which was driven by scheduled debt maturities and.

And third.

Decline in customer deposit.

A half a billion dollars from 2.9 billion at the end of the second quarter to $2.4 billion at the end of the third quarter, which was significantly less and the decline in the second quarter and was consistent with our previous expectation finer.

Finally, some insights into our liquidity position.

Our parks and our guests cruise operations earlier this year, we appraise liquidity mainly through that transaction.

Given the recent momentum coming into the re launch of our fleet. We so and this is a good opportunity to improve our capital structure through an equity raise.

So three weeks ago, we announced an at the market equity offering program more commonly called ATM for up to $1 billion.

To date, we had 23 million shares for net proceeds of over $350 million.

So with plenty of available liquidity enhance our focus has now shifted.

With cost is resumption of gas cruise operation and eager to recent announcement of their assumption as well.

We are looking at a variety of financial models, where we review guest operations in a safe manner.

Quick specific brands in ships returning to service over time to provide our guests with an enjoyable vacation experiences and our company with positive cash flow and additional liquidity and.

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

Thank you David.

Before we open it up to questions I'd like to extend my personal deepest sympathies to those around the globe who have suffered there so.

So individually or whose loved ones have suffered with the virus.

Operator, please open the call to questions.

Thank you feel like the register a question. Please press the one followed by the four on your telephone you will hear a three tone from Coke now that your request. If your question has been answered anyone who would like to withdraw your registration. Please press. The one followed by the three once.

Once again, that's one four to register for a question on among at least for the first question.

And we have a question from Robin Farley with UBS. Please go ahead. Your line is open.

Great. Thank you I have a.

A question.

And also a small housekeeping item just a housekeeping item first I wonder if you could just update you didnt mention the UK commercial paper facility in your service liquidity Arsenal. So I'm just wondering if that is still available or if its available, but you're not intending to use it so just to clarify that and then.

Then my bigger question is just given the success of the restart in Italy with yourselves and any other privately on cruise line, having no cases now going on to tertiary months increases can you give a little bit of color around.

What kind of ramp up in booking volumes, you're seeing for that brand like in other words have you seen that as you know weeks have gone by and multiple ships being in the market and kind of showing the success of all the protocols.

Would be helpful. I don't know if you can quantify in any way, but it would be great to kind of hear about what that has meant for.

So Matt Thank you.

Hey, good morning.

Good morning Robin.

Good to hear your voice.

Look first of all with regards to the ramp up than in Europe, where.

Were very pleased with.

With the experience in Europe at this point in are especially pleased that our guests are pleased with the experience in Europe.

What those early sailings have been about of course is not occupancy or anything we purposefully.

Have the occupancy Lois we.

Get used to the new procedures and protocols and we test to see how things are going in but they have been well and again the bookings generally as we've talked about now for the second half of 21 have been strong. These close in bookings that we have in Europe with limited itineraries.

It wouldn't be a bellwether for anything but we have seen.

Some increase interest even in those I would say more broadly they will ask for your question about commercial paper I have to do that I think more broadly I know the question on everybody's mind, So I'll just address it though.

So at this time, we have every reason to be optimistic that we will be selling in the U.S. before the year is the.

The the reality is that the extension, but also.

But no sale order was only 30 days it goes out to adopt over which aligns with what the industry had voluntarily.

Well on its own.

Yes, we've got.

We've got multiple testing regimens, becoming more available and more readily available we have the successful sailings today to us and others and in Europe within has protocols and operating procedures, we put there and as I mentioned, we've got the high guest satisfaction.

On those cruise and we've been collaborating here in the U.S. with.

With no all the various companies everybody's been informed by global medical experts and scientists.

Everybody's had their own bevy of these folks and and Fortunately that science is starting to align so we all got very similar recommendations and the industry is that able to align around protocols and operating procedures that you will be able to look at subject of course to approval from various authorities they have to wait.

All of this and so we have at this time every reason to be optimistic that we.

We will be sailing in the U.S. before year end, but that data you want to respond on the commercial paper question sure.

I guess I do just want to add one other comment on cost to I think.

I think you know cost to Jessica resumed advertising a week ago with their call to action program. So keep that in mind because early in the process. We are limiting occupancy so we do it.

So we do expect to see.

You know I get from posting pattern as we go forward with the advertising as far as the UK commercial paper program is concerned we continue to have conversations with the UK I'm. We're in discussions with them to get started again and keep in mind. We're also working with Germany.

In Italy to complete those alone over the next couple of months as well.

Okay. Thank you and also thank you for that that commentary about the broader research.

I didn't know how much your distress. It maybe just I don't know if you add a clarification about you know it is it your belief in.

Your belief in your conversations with the CDC that they're kind of embracing any of the guidelines that have been successful in Europe.

We have been successful in Europe in a way that maybe wasnt reflected in the language of their extension statement.

And now I would say I wouldn't try to adventure and it turns that from Gill.

The Cdcs receptivity to bear so very specific protocols, but what I will say is that you know the CDC.

They've got a daunting task to and so they're they're trying to mitigate the spreads are there.

The thing that is clear to them, we are as an industry totally committed to doing that as well.

Our highest responsibilities at all top priorities always or compliance.

By Middle protection to the health safety and well being of our guess Pete.

The people the places we go too and of course, our crude at our shore side personnel and so we are totally.

Totally committed as a company and as an industry to serve in the best interest of public health and so I do feel that the what's going on in Europe have some influence what excites us or say it has a tremendous amount of influence on all the scientists and of course.

What we are putting forward.

As we work with them and with HHS and with the ports and the local authorities in Saudi so forth everywhere and the various destinations we have to go to.

That's the plethora of people who have to engage with.

I think that.

We have every reason at this time to be optimistic.

Thank you thanks.

Thank you.

Our next question is from Steve Willey from Stifel. Please go ahead. Your line is open.

Hey, good morning, guys.

So our number one a follow on to that last piece about the potential to to start operations here in north.

America by the end of the year and I guess I'm not sure the right assets, but you know does the upcoming election change anything with you guys in the industry's ability to return eventually to service here in North America and then if you guys are allowed to start selling here before year end I guess the question is what do you think customer demand would look like.

This point given.

Could be in the height of normal flu season, plus obviously, all the overhangs from.

The kind of cobot scare.

I think on the first one is on the left shows they can send it.

Everyone's best interest no matter what your political leaning is to have Americans working together and then to have people will go back to work and have livelihood and so on and so forth. So so I think the election. This anything obviously made and then some momentum to say hey, how can we.

Work with this industry to make sure we get all those people that work in the ports back working again the taxi drivers.

All the people that don't catering and providing conversions and so I think there's momentum for that.

That period, because it's the right thing for the country and it doesn't matter what politically people have so in that regard as an election year I'm sure everyone want to stand up and say Hey, we helped bring back.

Congress and livelihood and means of quality of life for people. So that would you answer that one and then the set.

And then the second question in terms of demand.

Just keep in mind.

We as I said, we have.

Cup demand from people, who are very anxious to cruise.

And so we are not going to be able to bring all the ships back at what's the debt.

The destinations are lapping all open at one time.

And so it's going to be a staggered restarts. So we're going to have limited capacity that pent up demand and I don't think demand is going to be a big issue in the short term it will bring.

All the ships back at once where you have a heavy dependency on new to cruise.

With no marketing because nobody's market for the past several months you know that.

That could be a challenge, but that is not going to be the case and so we're not overly concerned about demand and we see the bookings we see the number of new bookings digest future cruise credits from castle cruises and all those are real positive indicators, but David you want to add.

Income.

David you maybe on mute.

Yes, sorry about that Arnold you you broke up permitted I do apologize.

Mike tell that's okay.

Yeah, I'm I'm, Andrew no location, so yes, I lost a few number the words pay I do.

I see okay, I think the only thing I would add I know I'm not sure. If you had made this comment.

Maybe just a comment to put simply the fact that.

The fact that when carnival cruise lines and now.

And now Scott.

Change where they can.

Can they.

Cancel some cruise instead November December out the cap in Miami in Port Canaveral, a couple of cruise is open he had with the intention of restarting as you said before the end of year.

Number eight.

I can booking but she's just the demonstration of the demand that's out there as you talked about the pent up demand so.

So.

Yep Yep phase.

Kind of cruising or we believe it will be in fine shape as we move forward.

Thanks for that and then my second question is that you know of a bigger picture question, but you know if we look out a couple of years down. The road are we correct to think that the cruise industry can be set up to be even really an outstanding position once the world kind of goes back to a nor more normal environment and I guess, what I mean by that.

As with so much capacity being removed at this point in the fact, we we probably aren't going to see a new newbuilding order for a couple of years I mean, as we get out to 24 25, 26, I mean, the industry itself should be set up for its lowest capacity growth rate that its probably going to witness for the last 20 plus years and.

That should really allow you guys to to push price and I hope all that makes sense, but we'd like to hear your thoughts there.

I I know they can hear you Oh, I'm, sorry, I haven't got David I got it. Thank you I'm, sorry, you're absolutely right that the.

I was talking to there was that we saw new condos try to minimize interference. When you were talking to a lot of breakup, but in any event that you're absolutely right.

This conditions, we never experienced before we've exited or planned acid 18 ships. So that that reduces it helps our cost structure because they were leased the efficient ships, but it reduces capacity, yes, we're bringing on new ships and we just took delivery of chatted process great deliver.

But but as you know when I got pointed out we only have one order in 24, and 125 and we retain yeah, our cash generative assets and so the bottom line is there will be you know somewhat concern.

Somewhat constrained capacity dramatically constrain initially and then over time still constrained because we would have gotten back for a while.

For a while to where we were before and then not.

A lot of new builds for us and the 24 25 timeframe, but.

Assets that are really cash generative, so we can generate cash and pay down debt and get back to the credit rating, we want to have that create shareholder value.

David if you want to make a comment.

Yeah, No I completely agree I think Steve said, it very well and I think our future is very bright you know if you think about it and we said this on the last conference call as well I mean people left the cruise a cruise vacation has the highest level of satisfaction of all vacation alternatives and.

And this is a temporary blip and we will be back will bring to scale back in a phased manner.

The man and all the other things that we're doing on board.

You know I have great hopes that Tom over the next Steve indicated over the next few years going out hi, the future looks very bright and that's why you know we made the comment that we also expect that over time with the recent kind of cruise operations, we will be able to had to pay down debt and.

Back to the balance sheet into a strong investment grade balance sheet once again.

Okay, great. Thanks, guys really appreciate it.

Thanks for your question I appreciate it.

Our next question is from Felicia Hendrix with Barclays. Please go ahead. Your line is open.

Thank you good morning, and I'm wondering are they like to be in line.

Good morning, I never like to me that person [laughter] deep dead horse, but I'll be about pursuing right now.

And regarding your optimism that the industry is going to be scaling before the year end in the U.S. and I agree and I think a lot of that.

[noise] information kind of point or.

Supports your optimism, but there is I think some nervousness among the investment community that.

CBC could extend that even further so just wondering why you don't think that would be the case.

I don't know about bank on the C.D.C., you know obviously could be.

The issues there remain around what's happening overall with the pandemic and.

The rate of spread in the U.S. really spread though there'd be related also to the ongoing development and availability of various testing regimens, obviously, a rapid testing low cost rapid testing will make life simpler.

Every one of them.

We seem to be very much on the path for availability for that sort of a lot of things that come into play and of course, you know what's happening elsewhere in the world, which right now is positive and we have no reason to believe that won't continue to be positive, but so you know we can't predict the future completely but at this time you know everything is pointing.

I'm in the right direction, and and we feel confident that we have protocols and operating procedures as demonstrated in Europe.

And which would be an has in many ways also here in the U.S. with U.S. took a situation, which will still be resolved them into work, though that we'll be able to cruise where there is no greater risk.

To the activities that people engage on a cruise ship then they.

Then they would arms. So most eurosite activity, then and as I've said in my comments and of course, our aspiration is that the risk is less than they would experiencing similar activity shore side and why could that even possibly be well that already exists. You know for example would normal bars show about 6%.

The U.S. land based population experiences our virus in a given year, that's the estimates and there's something like 0.07% on a cruise ship and the reason is because we have to deal with viruses and stuff all the time.

For Sars Ebola Laura.

Moreover, as Deca. So we have medical facilities on board, we have medical screening you know a lot of things a hand washing and hand sanitizer those things have been present on cruise ships for a long time. So I think we're positioned well have to see you know I cant guarantee obviously, but we have.

Every reason to be optimistic and and is ultimately the right thing to do to get people back to work.

To give people a chance for vacation experience of a lifetime minutes safe.

Way relative to similar experiences they would engage in Atlanta keep in mind, what we're doing in Europe.

It's not happening anywhere else I'm you know.

Hotels are doing.

Ill universal testing of gas before they walk into a hotel air.

Airlines are doing universal testing of airlines resorts aren't doing that and even parts are doing that.

They'll all have you know a medical screenings before you know you participate so we're doing a lot of things that you know, it's not generally happy for the public as they move about so as long as people are.

Our movement about engaging in activities you know as long as there is some social gathering then you know we're going to be open in a good position to delay.

To deliver less the same risk illustrious then people engaging in activities short so I hope that answered your question.

Yes. Thank you.

And David just kind of switching to you on you know we've gotten a lot of questions from investors about what the initial rollout and on that early transition period, where you need scale will likely be burning cash. So people are mainly wondering what the cash burn could look like in 21.

In early 21, so I was wondering if you could touch on that and also help us understand what kind of occupancy.

Shifting to cash flow breakeven I know in the last call. We talked about 50%. So is that a good benchmark to use and do you think it'll be guidelines that prescribed occupancy levels or will it be back to the operator, maybe kind of if you could talk about what you're doing in Europe as a benchmark and.

You know just generally how you're thinking about that when that kind of from a cash flow perspective and have seen a shift can be profitable once you actually scaling. Thanks.

Sure.

All bunch the question there you know.

We as I had mentioned in my notes.

We are working through Oh.

A large number of.

Hi different financial areas, but.

But it would be premature for me to give you know are you getting close to the cash.

Burn in various areas because there's a lot of uncertainty as to the ramp up and how exactly when chip will start.

But I think it's fair to say you know weve taken a look at I gave you in the fourth quarter, which was 530 million.

Per month in the fourth quarter, and then no revenue scenario and I know, we're not in no revenue scenario, but we did do some calculation.

And then no revenue scenario, the cash burn would probably be just slightly higher than that.

In the first half the year. We also have two ships being delivered just like the fourth quarter, but we do have a number of dry dock for various reasons some regulatory.

So that's the number and then no revenue scenario.

But we do expect over time as we build the.

Bill will be occupancy costs and meter and other brands to begin to generate positive cash flow from the tailings and reduce cash burn up right.

Something in the high fives down to a much smaller number and hopefully overtime.

Eventually turn positive and so as far as occupancy is concerned.

I think we've said this before our intention is to start with I kept.

With occupancy onboard on that so.

Hello, Chris that too [laughter] protocols to ensure that the gap.

I did not mention it.

Got caught up in the.

Given our excellent guest satisfaction ratings.

And so over time once you know, we got things right. Our intention is to increase the occupancy level.

Comp right now theories, Italy, and Germany, there is no occupancy limit they are making sure that they uh huh.

Okay, and no more judge and.

Increased the occupancy accordingly over time to tourists social distancing.

And then as far as the breakeven is concerned we set a number of times.

Breakeven on the various capsids from somewhere between 30% to 50% occupancy depending on their behalf.

And of course, the yield that we had the prices that we really did well.

I think that answers all the questions did I Miss anything.

No you guys just talk are you selling below 50% now.

In the beginning yes, we did say that we would start below 50% with cockpit practice, the protocol and work our way up.

And where are you now.

Where were below 50, I'm working our way out.

Okay. Okay. Thank you.

Thank you.

Our next question is from going to Brandt Montour with JP Morgan. Please go ahead. Your line is open.

Hi, Good morning, everyone. Thanks for taking my questions I appreciate it good morning, and I appreciate the color on pricing and it's obviously are the adjusted pricing metrics you gave a flat year over year is very reassuring, but did he.

But to the extent that some of us might be seeing a little bit of dispersion under the surface, but for the industry. Overall I was wondering if you could just comment on how you feel the state of the price integrity looking out to next year, it's holding up.

Were you know away from you entry industry overall.

Well, we would only comment on our own business, obviously, and I think you've heard that that.

At this time, we're not.

Experiencing significant discounting or anything.

Our future on bookings and and they'd only be a comment I wish Dave.

David I don't know if you had any other problem yeah, no I'd just reiterate that I mean, I did indicate that the book.

The booking curve in the back half to the or was it high end of historical range and when you take into consideration they haven't hit a few actually two.

Take out the Fccs.

And the onboard credits applied we indicated that pricing was in line with the prior year.

So pricing is very good.

It's very good and I think that once the we get back to cruising is they indicated before you know Carnival cruise line had seen you know good demand recently when they made their rack.

They made their actions I think once we get back to cruising there's going to be an opportunity with all of the pent up demand for us to take some positive price actions and as we have there is arnold talked about phased resumption of cruising the limited capacity Wi Fi and a high level of satisfaction that way.

We've been able to achieve on the gas side, how west cost huh.

I think that all bodes well for us going forward in the future.

Excellent.

That the.

I would just said that those certainly and once we start you know there's certainly a cruise and then once we because right now people are booking without that serves me right and then once we ramp up our marketing efforts, which of course have been very quiet well go in this area of yield that will also.

That will also then no greater support you know clearbrook pricing going forward.

Got it and one more on that certainty and if I may I apologize, but you know I wanted to ask about the industries sort of recent commitment to 100% testing and Arnold you mentioned that this was a factor or could be a factor with the CDC I guess what.

Do your plans in the U.S. entail for testing, specifically and so what are the current issues in status around procurement there.

Yeah, I think you know several things one we're not feeling.

We're not the only oh.

Here in the U.S. and so the testing is continuing to evolve availability of testing is evolving but in many places in the U.S., though there is access to TCR testing.

Well I would turn around times that would allow you to within five days or less you know take notice and be clear and in many cases free of charge.

And have that revenues from its sort of part of the.

The that Youre, Colgate, three and be in a position them to.

Well show that you're in a category that we were allowed to to board a ship subject to additional screens and so on.

So I think that's where it is today also as you know there's rapid test got a very low cost.

So when those will be available to the general public.

And how much remains to be seen but that will all come clear over the next you know months coming here before more than likely before the end of year.

So that will give additional.

Capability as you know in Europe, we're doing it.

We're doing a combination of PCR and antigen testing and so on and and it's working quite well and.

And there's not a major barrier at this point for the testing for someone that they consider a cruise and whether there's any shift that to to minimize oh I'm betting kogan onboard fablab.

Well, there's nothing else going to preclude completely oh, so the other part of the protocols of course is what do you do when there are symptoms on board or there is even a confirmed case. So they are not disrupting everyone else's cruise and we've done a great measures and that mitigates spread with physical businesses.

You know Dave is.

In the finance area. So he would say social doesn't say that he's actually a pretty social data, but what else in the <unk>. The rest of us on a cruise and we talk about physical doesn't mean things cruise is all about social skills exchange. So physical does the same.

Along with mass wearing it and all the proper things you need to be a this year rather.

Well communicable disease, and so and while at the same time people are still having a good time and enjoy themselves are having a great vacation experience. So we'll see how it evolves. There's so many different test regimens out there, though and we'll finalize as we get closer in and of course be Incompliance with every region comes.

It's not just about you know, leaving the U.S. you want to go somewhere and wherever you go they're going to have therefore recalls and so.

We have to be compliant with everybody. So.

So that will kind of determine the you know, but the final makeup but the point is.

There are more tools in the tool box now.

We demonstrated ability to execute universal testing in Europe.

And we have every right every reason to believe that.

That it is the right thing would be but also is something that can be executed in the U.S. as well.

Thank you for your question.

Thanks for those thoughts.

We have a question from Jamie Rollo with Morgan Stanley. Please go ahead. Your line is open.

Thank you, yes, just a question back on the U.S. returned to service thing.

Yes, sure it makes sense.

Hi, there, it's something they settle adult that makes it lumpy, it's not enough of the Green light to go ahead.

<unk> in Q4, and the U.S. want you all to wait for formal approval by the CDC.

I'm, sorry could you repeat the I missed the first part it was a little garbled I'm sorry could you repeat your question.

Yeah, It's just see if the CD season, they say lot adults definitely and later this month is that enough of a green light the company together, having said in Q4, the U.S. or would you rather wait until we got that full appraisal committee that comments last week was still pretty cautious.

Yeah, I think again, though I don't want to.

Try to interpret the rationale behind certain comments made by the CDC, but what I would simply say is we will only sale. When we feel we are honoring you know serving the best interest of public health and so we believe based on what the science.

Yes, the advisors, we've had some of those I mentioned.

They're done scientists with other companies, we all collaborate you know.

And medical experts and we believe that as we are in Europe.

We have a way to go forward that will.

Reduce the risk to no worse than if you were shore side and we are optimistic an aspiration and believe we can give to less risk than what exists so similar activity shore side.

In that context.

Then we feel we can sale and that we can handle issues that surface any issues the surface on the ships. So.

If there is no sale order. The fact, though that is a cool okay. They may have advice or warnings for certain people with other line additions, which we would as well you know, what I mean et cetera, but that.

But that is an effect you know, saying you're trying to sale.

So we'll see what happens there I know, but but at this time as I mentioned, we just have every reason to be optimistic that we will be able to sell the book in the U.S. before the end of the year based on all the things we share.

Thank you Jackie and then I've got a final follow up for me if I may as you say Europe. The protocols have been quite strict particularly COSA optic is having a testing of guests when they get to the ship you mentioned the LC sales protocols to the U.S. not might be five days before it's what she would get.

In the testing equipment can you not replicate in in the U.S. and have the actual test.

Some of the ship it just seems a lot safer than having a fuck days evolves.

Well actually there are you know differ.

Differing opinions on what's the scientist on whether you are better served 24 hours to five days before you know or you better serve you know add embarkation the point being what will have regardless well that ends up is universal testing, which doesn't really exist in the rest of society and so.

So that's the point there there will be universal testing, there will be ways to follow on.

People have symptoms and so on on board. So you can mitigate spread and events that that there is a risk of kogan on board are somewhat unknown risks or someone actually helps kogas. Those other important things the details on at embarkation, 24th there's different things about all of that.

Those opinions are really looking at different algorithms and models that project.

Very small percentage differences, obviously, we want to be the best we can possibly be but.

But all of those protocols whichever way you go whether using European one or use 124 hours before boarding which I wouldn't use or better than what exists and society at large.

Great. Thank you very much.

Thank you.

[noise] [noise]. Our next question is from James Hardiman with one push Securities. Please go ahead. Your line is open.

Hi, Good morning, Thanks for taking my call just just a clarification on the last conversation surrounding testing are you guys gonna be bearing that cost or is it the consumer and if it's you guys should should we be thinking about some you know material costs.

Cost overhang is as a result of testing all your customers.

Again, you know I don't want to get in front of things, we don't know yet because we have to do all of this obviously and in full compliance with whatever you know be authorities that bolt on say, we need to do but I would say what exists today here in the U.S. and.

But people are a number of places you can be tested at no cost today.

There are what PCR testing there are you know still.

Still avenues, where people would pay for testing and so on and at some point some of those will determine where we are and where we're doing it but we.

But we want to make it.

Responsible in the best interest of public health.

And then this hassle free and facilitated while being responsible for our gas. So we're not taking a hard line on that in any event. You know, it's a cost that will be back born and it will obviously go into the oval all cost a vacation experience and but in some cases that cost.

You know maybe zero or it could be you know whatever the going rate for PCR tests is today or with a different testing regimens that are coming along though.

It could drop to very low cost depending on what's available with a you know the apple.

They have a test for example, you know.

Julie I guess is $5 or something like that so we'll we'll see where we are the most important thing is to make commitment that we will do universal test it and remember early on is going to not it's not going to be their entire fleet.

It would be you know some shifts going to some destinations what a lot of pent up demand.

And it won't be like.

It shouldn't be a major challenge to fill those ships whatever the testing regimen ends up being.

Really helpful. And then with regards to the booking trends that you guys shared for the second half of next year really.

Really encouraging I'm trying to figure out how how excited we should be getting about that I guess as we look at the ramp in bookings and I'm, assuming it just doesn't.

Immediately get there in.

July of next year I'm, assuming there's a a meaningful ramp at some point in the in the first half what does the well the first of all if you could could you share with us sort of the timing of that that ramp in booking and what does that tell you if anything about how consumers are thinking about.

The time table with regards to a vaccine I'm, assuming it's safe to say that.

There's people that are willing to go on a cruise ship right now and then there's others, who will be willing to go one once the country's vaccinated.

To some degree, but maybe less interested if they still have to wear a mask can do it I think it'd be the social distancing so.

So maybe just walk us through what the data says about how consumers are thinking about.

That that recovery and how you think about relaxing youre protocols.

As the vaccine debt gets introduced next year.

Okay says a lot there, but also at a high level and then David can add some detail color. So at the highest level [noise].

What I see in demand at this point in time.

There's a lot of pent up demand so cruise Oh people are booking or we can also.

Some cruise is on carnival, the other day and and the and the cruise is we had remaining in that timeframe.

You know the bookings tripled so.

So there's there's pent up demand.

Cruise and.

That's 0.1, we have a huge previous cooler [noise] store base and they are comfortable and cruise ship they understand the medical screening the medical centers. The the physical distribution capability on these larger ships you know they get it they understand and as I said the guest experience.

I'm here with some background noise, if they could go on mute, but the guest experience Oh in Europe has been high the satisfaction has been high.

So so those are all positive indicators. So we feel very good about the demand okay.

Overtime as you get through all of next year and into the following year.

As you get all the three back up and going and so on and so for we will again need to be convincing new to cruise people as we bring on additional capacity in future years, although that capacity is going to be slowed as we talked about before well we'll have to.

Well, we'll have to continue to do what we were doing before which was previously people who hadn't cruise to cruise people might pretty cold, but there were a half a billion people globally, taking vacations, taking holidays and there were 30 billion cruise.

30 million excuse me cruising so.

30 me out of a half a billion. So we have lots of opportunity for this industry I was shifts where the sailing full.

They always do and so so.

So we have we are not overly concerned about the man now or to the first part of next year. Okay. At this point in time.

Yeah, just based on the dynamics of everything the slow ramp up the pent up demand and so on.

In terms of the vaccine and you don't want to go there.

Got it and just the general thoughts around the vaccine obviously, it's a psychological comfort for a lot of people are they would be a vaccine or who knows exactly when they will be available sometime you know if not this year next year and hopefully how many people will take the vaccine how effective although those vaccines be.

All that's still in the air but clearly the more tools vaccines therapies, you know that mitigate the onset of symptoms that are really problematic for people and and long term effects, who come from people who get cold it.

Trapeze that address those things you know there's continuing work on that when there have been some obviously.

Well some of the news recently data available.

Billable foot piece.

And so and then those societies are believed to be reasonable.

To be recent self responsible self responsible in terms of paying attention and doing the basic things you need to do to make certain that you are minimizing the risk that you get the infection itself washing your hands not touch interface were announced at appropriate times physical discipline at appropriate times all those things.

All bode for an environment, where we'll be able to fill our ships as they come back on stream.

So that would be my comment David.

Sure I know what you want to come one more question Yeah, Yeah, just a couple other [noise] quickly.

Quick things and you know I think that's fair to say that to two.

Two permits have the fccs are yet to then be applied to bookings I think people are you know the people took the fccs and they're waiting to make their holiday plans. We've seen a number of incidents as I mentioned before where we saw a spike.

We saw a spike in bookings when people believed that we would stop.

Starts failing again, so I think you know if you look at our bookings.

The uncertainty has caused the close herein booking trends to be different and the further out booking trends because when we look at the back half of next year, where people are much more confident that we'll be sailing we're seeing good booking trends and I think.

As we open up and we get approvals as you mentioned before and the uncertainty begins to go away. After all the reasons. We previously stated I think the booking trends will pick up and we are very excited about that prospect plus on top of that you know.

Cost stuff has shown that their safety and their protocols has afforded the gas and excellent holiday experience and I do believe overtime.

People around the world and to see that with other around other others of our other brands of ours and that will lead to additional a cruise bookings as well.

Very helpful. Thanks, guys and good luck.

And we have a question from Asia Churchill have with Infinity Research. Please go ahead. Your line is open.

Good morning. Thank you for letting me sneak in a couple of quick questions. [laughter]. These have done a pretty dramatic and I think important reduction in capacity is tight.

The ability to possibly up to ships newbuilds further back into the future sort of through a domino effect. So you are able to even further tweak <unk> eurs of somewhat higher capacity additions such as the upcoming couple of years.

Yeah. Thank you for your question as you know there's been obviously a natural.

Push back and the scheduling as yards have the deal you know in in.

Their locales with community strength of both Covidien and yet work, which were not to be able to work in the yard short periods of time et cetera. So that's been a natural push that and as I mentioned in my comments, we actually only have one new deal for 24, and one new deals were 25 that country.

So that you know three to four new builds across our nine warley cruise line brands that we were experiencing.

The new years recent years prior to the onset of the pandemic.

So there is that natural.

A kind of a delay in and slow down that you're referencing and Oh I think that that combined with the fact that we've exited a number of legacy fishing vessels and we'll complete that process here over the next few months or you know what.

Let's just say.

Good capacity a spot you know relative to the current dynamics.

Hi, David.

Yeah I'm sorry.

David anything you wanted to.

You did okay go ahead.

Yes, sorry.

No I didnt have anything to add I think you said it well.

Yeah, David maybe for you just a quick follow up can you give us a range of the startup cost push up just so we know how to work with those over time as the resumption of service goes to the first months of 2021.

Sorry can you repeat the first part of your question I apologize.

Oh, whether you can provide us with a range of the startup costs per ship is David each separately so assumption of service.

Sure you know this is as we.

As we bring chips back from pause I mean, this is not that much different than the new ship entering service, where you have to bring the crew back we have to order food.

You know it theirs and keep in mind that as you bring the ships back meaning you've already announced the resumption of cruising you're also going to see an uptick in the advance ticket deposit and as a result of that debt that advance ticket deposits you know probably will pay for.

For most if not all of any startup costs or any costs getting the ship back into service.

Typically with the new shaft I mean, it's tens of millions of dollars you know negative working capital and advanced deposits before they ship enter service. So there's there could be plenty of liquidity to handle that these costs aren't all that significant.

Okay, and anything else, yeah, and since its almost a quarter past the hour I think well yeah for question I was going to cut it off here yet yeah. Thank you David Hey, Thank you everyone. We really appreciate your continued interest and.

Just be assured we are working hard as the entire industry to resumed selling globally and we are definitely I'm feeling good about the future prospects. Thank you very much.

That concludes the call for today, we thank you for your participation and please disconnect your line.

[music].

[music].

[music].

Welcome.

Uh huh.

Hi, Morris.

The <unk> portable Corporation.

Today, I'm joined Telephonically by our chairman Micky Arison, as well as David Bernstein, Our Chief Financial Officer, and Beth Roberts Senior Vice President Investor Relations.

Thank you all for joining.

This morning.

Before I begin.

Please note that some of our remarks on this call will be forward looking there.

Therefore, I must refer you to the cautionary statement in today's press release.

For the past eight months, we have dealt with the president and the impact of cold at night on our behalf.

And we have aggressively managed well.

In that time, we've come full circle.

Initiate a suspension in the early days of that and then make the transition the fleet at the POS data Rightsizing, our organization and now embarking on the phase resumption of gift operation under.

Underway into about where all the cruise brands.

In Italy, and Aida in Germany.

We are very excited to resume gas operations across our brands and we are working hard to do so in a way that serves the best interest of public health.

Oh, hi, its responsibilities and therefore, our top priority always always play.

Environmental protection.

And that health safety and well being of our yeah.

The communities, we touch and our Carnival family.

Team members shipboard and shore side.

We are taking aggressive action.

Energy and the balance sheet and reducing capacity.

Position us to weather this was Russia and.

And to emerge a leaner more efficient company.

Reinforcing our industry leading position.

As the leisure company, we believe we are well positioned within the travel sector.

Because our industry have not relying on business travel. We believe we will disproportionately benefit from the pent up demand for vacation experiences as compared with many others in the travel sector.

Historically, our company has demonstrated proven resilience through the cycle.

While business travel tends to shut down at time vacationers tend to travel through those challenges that we've seen that time and again after events for example, like the global financial crisis.

We believe we will capitalize on this demand given our extensive and loyal half yes.

Historically, approximately two thirds of our guests globally are repeat users of source of nearly 8 million guests annually more.

Moreover, our internal data suggests on average a repeat.

Returns every two plus years.

Being a cost that is eight months, we have a backlog up half guest ready and waiting to cruise again.

In addition, we have been active database.

40 million to mine in the coming months as we strategically ramp up towards full resumption of operations are.

Our company is uniquely positioned for a phase resumption in cruise travel given our multiple national brands.

Which can each be restarted independently.

And as we said before heavy national brands as a portion of our portfolio at this moment is clearly an asset.

This has already proven to be instrumental in enabling us to resume cruising both in Italy, what cost the Europe, which is nearly 80%.

Internationally European sourced and soon with that either.

As roughly 95% German source, our other brands like the UK, which is 98% British source CNO.

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

Carnival cruise line, which is 92% Usource presents further opportunity.

Additionally, the fact that these brands are characterized by ready access.

Drive to market in a prevalence of shorter duration cruises strength as the potential for success in today's environment.

Clearly cruising in totality is not coming back all at once.

We are demonstrating with low cost.

We intend to initially resume operations with a small percentage of the fleet, which naturally will make us less reliant on new to cruise.

Moreover, in importantly, the combination of the phase restart and this with the actions we have taken to accelerate the exit of less efficient ships will reduce our capacity in the near term.

Having reduced total available capacity by 12%, we believe we will be less relying on new to cruise.

Even when we resume full operations globally.

Never before have we been in this situation in fact in all prior cycles, we were actually growing capacity and needed to capture many more new cruise.

Now we have not only seeing tremendous support for our brands from our loyal guests really missed their cruise vacations and intend to return. It is also very encouraging to see demand from new guests with.

With virtually no marketing efforts our book position for the second half of next year is that the higher end of historical ranges.

Selling indication of the fundamental strength in demand for our brands.

On resuming service, we believe we are well positioned to optimize deadly demand, while leading brands around the world.

Our strategic capacity reduction will also deliver a structurally lower coffee.

Just by the fact that the 18 ships, leaving the fleet or at least efficient ships.

We will benefit by a 2% reduction in unit costs.

Our efforts to rightsize, our shores operations will reduce out cost further as well as our continued focus on finding efficiencies across our ship operations.

And of course over time, we will achieve an additional structural benefit to unit cost as we deliver new larger and more efficient ships.

And while we believe there is a smaller and leaner entity, we have retained the most cash generating assets in our fleet referees.

Representing the lion's share and in fact substantially all of our 2019 operating income.

All of the actions we have taken more in keeping with our primary financial objective going forward.

Maximize cash generation.

As we returned to full operations, our strong cash flow will be the primary driver to return to investment grade credit over time.

And create greater shareholder value.

The sale of less efficient ships will also result in less ongoing maintenance capital expenditures than we would otherwise have.

And at the same time, we stretched out the delivery schedules pushing.

Pushing out new build capital and more importantly, we have just one ship on order in fiscal 2004, and just one ship on order in fiscal 2025.

That will significantly reduce capital expenditures during those years, enabling us to pay down debt.

As the industry leader, maintaining a strong balance sheet has historically been a key strength for our company and a differentiator for our shareholders even.

Even though we retain the lowest leverage in our industry and our opportunistically strengthening our balance sheet as we begin our return to service, which will position us well to create meaningful shareholder value over time.

As you know, we took swift action to secure sufficient capital sort of.

By the financial runway to withstand an extended pause and guess operation.

Because of our strong balance sheet, we were able to raise the vast majority of that nearly $12 billion of capital on a secured basis minimizing dilution and while.

And while it was certainly financially painful for a company that always manage to an investment grade credit rating bearing the cost of the capital raise was.

Provide us the opportunity to create value over time.

While we have raised capital mainly debt this year given the recent momentum coming into the relaunch of our fleet. We saw a good opportunity to strengthen our capital structure through an equity raise announcing a 1 billion dollar at the market program to be completed over time.

It's just one of the two that are too low.

We currently have the capacity to issue additional debt, we recently completed a convert flush, which opportunistically improve our balance sheet and our leverage we.

We also have the potential to monetize noncore assets to reduce the debt burden.

Of course, Tas generation upon returning to service will be the primary driver of de leveraging overtime.

But several months, we've worked to develop new and enhanced protocols and procedures based on the best available clients to specifically address the risk of so.

Associated with over 19.

Now while we've dealt with many types of viruses previously and have had effective protocols in place on board, our ships and including screening measures medical centers, and sanitation procedures, which prevent and reduce spreads once brought onboard from land.

As evidenced by the global shutdown this virus presents its own challenges.

We have worked diligently and have engaged leading medical science experts, including among others Dr. Liebig Mary Anne.

In the EMEA author former Vice Admiral in the public Health Service Commission core and the 19 surgeon general of the United States.

Michael Diamond MD Phd.

But as gas or professor of medicine molecular microbiology.

Dollar GE in immunology and.

And associated Director Center for human Immunology, and immunotherapy programs, Washington University School of Medicine in St. Louis.

The Diamond was instrumental in developing a mouse model that is used extensively on the development of therapies and vaccines for COVID-19.

Michael Lynn in the Phd Associate Professor of Neurobiology, Bio engineering, and chemical and systems biology.

And principal investigator the land left after University school of Medicine.

In Atlanta is one of the leading members of the scientists to stop COVID-19, a group.

A group of us being researchers physicians and Nobel Prize winners from across our country.

And that's the jewel model in the age.

Each associated the health equity University of Texas at Austin, Dell Medical School.

Dr. Malone as an internal epidemiologists public health physician leader in the form of principal Deputy Assistant Secretary for help in the US Department of health and human services.

Ill add HHS. She also served as the acting assistant Secretary for health and acting director of the National vaccine program office.

These experts and others have and aren't helping to determine what enhancements to our existing protocols and operating procedures will best serve the interest of public health.

They have informed our protocols and procedures, which are established based on the science technology medical treatment data and overall understanding of the COVID-19 today.

We expect these protocols to evolve societies understanding of COVID-19 strengthens.

We are working to build out our guests will not incur any greater risk versus engage in a similar experiences online.

And of course, our aspiration is to achieve less risk than exposure to similar shore side activity.

Our company and the cruise industry has a track record of doing just that with lower bars for example.

We are in active discussions around the world with appropriate authorities and agencies to resume gas operations when appropriate.

Including here in the U.S. in each region, we will only sale, where we feel we can honor our commitments to operate in the best interest of public health and when we sale, we will certainly fulfill each specific regions requirements and.

And we have achieved a significant milestone.

Our first brand to return to operations as I've mentioned, what's cost in Italy.

Cost to have successfully completed the reintroduction of two ships that.

Okay and via Damon as soon as third the flagships morale, though will be underway.

Each of cost to ship, so offering week long cruise departing from multiple different regional home ports and accessing a variety of different drive to markets for these.

For these initial barges, we have chosen the sale with low occupancy levels, enabling us to gain valuable experience with our enhanced safety protocol and we.

We received high satisfaction scores from our value gap, we have appreciated the changes that we've implemented.

In the coming days, we will mark another milestone as we embark out first shift from another of our brand Aida carries primarily German guests on cruise in the Mediterranean and this will be followed by two more either ships later this year.

Again, we're very excited about the resumption of cruise in Europe, and we look forward to what we hope will be a phase resumption around the world.

Throughout these challenging times, we have received tremendous support.

So since clearly.

Thank you to our guests.

Thank you to our dedicated members of the Carnival family, both shipboard and shore side.

Thank you to our trade partners the travel agent professionals.

And to our other stakeholders for their ongoing support.

And especially thank you to our investors for their confidence in us.

And in our future.

In summary, we remain committed to continue to deliver extraordinary vacation experience to our guests and value to our shareholders.

By accelerating the sale of less efficient ships, we will emerge a leaner more efficient company.

We will capitalize on pent up demand or reduce capacity as structurally lower our cost base.

While retaining our most cash generating assets and.

And opportunistically strengthening the balance sheet.

By stretching out the delivery schedule in pausing new ship orders.

We increased the opportunity to pay down debt.

As we return to full operations, our strong cash flow will provide our pass that to an investment grade credit rating overtime and create increasing shareholder value.

With that I will turn the call over to David.

Thank you Warner it feels great to be transitioning into a new phase actually have successfully resumed some of our best cruise operation.

Our current financial action plan has three main pass.

Optimize the resumption of guests cruise operation.

Zero cash and Opportunistically not challenge.

Proving our overall liquidity position.

I'll start today with an update on our second half 2021 booking trends.

Then I'll provide a summary of our monthly average cash burn rate.

Many shop with us third quarter cash flows as well as some insights into our liquidity position.

Turning to our second half 2021 booking trends.

At this point in time, our cumulative advance bookings okay.

Second half 2021 are at the higher end of that historical range at prices that are down in the mid single digits, including the negative impact of future cruise credits.

More commonly known as FCC and ongoing credit supply.

Directionally if you exclude the negative impact of these two items pricing would be in line with prior year.

Our book position is very encouraging given that we had essentially suspended all advertising and promotional activity.

Chris, particularly reassuring to see that approximately 60% of the bookings taken during the first three weeks of September where new bookings.

The remainder.

Absolutely.

Rebooking.

It is also promising to see that approximately 45% of the 2021 concession.

Our guests that are new to brand with the remaining 55% of gas being brand loyalists, which is just a little higher than anyone.

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

Third quarter, our monthly average cash burn rate with $770 million, which was in line with our expectation.

For the fourth quarter, we expect that our monthly average rate to be approximately $530 million.

This result.

Monthly average rate.

$150 million.

Can have some 2020 as previously discussed on our last business update conference call.

The monthly average burn rate in the third quarter.

Is higher than the fourth quarter expectation driven by the timing of guest response payments of over a billion dollars flowing to accounts payable in the current quarter, partially offset by higher fourth quarter capital expenditures from two ship deliveries.

One of which occurred last week in chanted print.

Our $530 million fourth quarter monthly average cash burn rate includes four items.

Her.

250 per mile of ongoing ship operating and administrative expense.

Second in.

Interest expense is expected to be approximately 120 million per month.

Fair.

Capital expenditures forecasted to be approximately 130 million per month.

Out of export credits getting sick and.

And this concludes to ship deliveries and the receipt.

Other capital commitment contracted for prior to the pause in our gas operations.

The fourth and final component is other working capital changes, which are forecast to be approximately $30 million per month.

Next I'll provide a summary of our third quarter cash flows.

We are currently in a.

Alan liquidity position with 8.2 billion of cash on our balance sheet at the end of the third quarter.

I am happy to say that this is $1.3 billion more cash that we had on the balance sheet at the end of the second quarter.

During the current quarter, we added to our liquidity position by completing three very well received financing transaction with cumulative net proceeds of $4.7 billion.

This was partially offset by three thanks.

First our total cash burn for the quarter was $2.3 billion typically our monthly cash burn 770 million per month time frame.

Second.

$600 million from majority of which was driven by scheduled debt maturities and.

And third.

Decline in customer deposits.

Half the billion dollars $2.9 billion at the end of the second quarter to $2.4 billion at the end of the third quarter, which was significantly less and the decline in the second quarter and was consistent with our previous expectations.

Finally.

Insights into our liquidity position.

Our parks and our guests cruise operations earlier this year.

We have great liquidity, mainly through that transaction.

Given the recent momentum coming into the re launch of our fleet. We saw this as a good opportunity to improve our capital structure through an equity raise.

Three weeks ago, we announced.

At the market equity offering program more commonly called ATM.

Up to a billion dollars.

Today, we have 23 million shares for net proceeds.

Okay $350 million.

So with plenty of available liquidity enhance our focus has now shifted.

With his resumption of desk cruise operation and either to recent announcement of their assumption as well we are.

We are looking at a variety of financial models, where we review Gatzke operations.

Thanks, Matt.

Rick Aseptic grandson ships returning to service over time to provide our guests with enjoyable vacation experiences and our company with positive cash flow and additional liquidity.

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

Thank you David.

Before we open it up to questions I'd like to extend my personal deepest sympathies to those around the globe who have suffered there so.

So individually or loved ones have suffered with the virus.

Operator, please open the call to questions.

Thank you feel like to register a question. Please press the one followed by the four on your telephone you will hear a threex turn prompt Coke now that your request. If your question has been answered anything you would like to withdraw your registration. Please press the one followed by the three once.

Once again that is one four to register for a question hormonal. Please for the first question.

And we have a question from Robin Farley with Qbs. Please go ahead. Your line is open.

Great. Thank you.

A question.

And also a small housekeeping item just a housekeeping item first I wonder if you could just update you didnt mention the UK commercial paper facility in your sort of liquidity Arsenal. So I'm just wondering if that is still available or if its available, but you're not intending to use it so just to clarify that and then.

Then my bigger question is just given the success of the restart in Italy with yourselves and any other privately owned cruise line, having no cases now going on to tertiary months increases can you give a little bit of color around.

What kind of ramp up in booking volumes, you're seeing for that brand like in other words have you seen that as you know weeks have gone by and multiple ships being in the market and kind of showing the success of all the protocols.

I would be helpful. I don't know if you can quantify in any way, but it would be great to kind of hear about what that has meant for.

For now thank you.

Hey, good morning.

Good morning Robin.

Good to hear your voice.

Look first of all with regards to the ramp up than in Europe, where.

Were very pleased with.

With the experience in Europe at this point in are especially pleased that our guests are pleased with the experience in Europe.

What those early sailings have done a bottle of course is not occupancy or anything we purposefully.

Have the occupancy low as we.

Get used to the new procedures and protocols and we test to see how things are going in but they have barnwell.

And again the bookings generally as we've talked about LOE for the second half of 21 have been strong.

These close in bookings that we have in Europe with limited itineraries or wouldn't be a bellwether for anything.

But we have seen.

Some increase interest even in those I would say more broadly then they will answer your question about commercial paper I have to do that I think more broadly I know the question on everybody's mind, So I'll just address it though.

So at this time, we have every reason to be optimistic that we will be selling in the U.S. before the areas.

The reality is that the extension.

No sale order was only 30 days it goes out to food October which aligns with what the industry had voluntarily.

So.

We've got multiple testing regimens, becoming more available and more readily available we have the successful sailings today to us and others and in Europe.

It has protocols and operating procedures, we put there and as I mentioned, we've got the high guest satisfaction.

On those cruise and we've been collaborating here in the us with.

With all the various companies everybody's going to form by global medical experts and scientists.

Everybody's had their own bevy of these folks and and Fortunately that size is starting to align so we all got very similar recommendations and industry is that able to align around protocols and operating procedures that you will be able to look at subject of course to approval from various authorities they have to wait it out.

All of this and so we have at this time every reason to be optimistic that we.

That we will be sale in the us before year end, but that data you want to respond on the commercial paper question sure.

I guess I just want to add one other comment on cost to.

I think it cost to Jessica resumed advertising a week ago with their call to action program. So keep that in mind because early in the process, we were limiting occupancy so.

So we do expect to see.

You know I get from posting pattern as we go forward with the advertising.

As far as the UK commercial paper program is concerned we continue to have conversations with the UK we're in discussions with.

We're in discussions with them get started again.

And keep in mind, we're also working with Germany, and Italy to complete those alone over the next couple of months as well.

Okay. Thank you and also thank you for the commentary about the broader restart I I didn't know how much should address it maybe just I don't know if you add a clarification about.

It is it.

Your belief in your conversations with the CDC that there.

Bracing any of the guidelines that have been six.

We have been successful in Europe in a way that maybe wasnt reflected in the language is there any extensions statement.

And then on.

I would say I wouldn't try to venture and it turns that can go.

The Cdcs receptivity to bear so very specific protocols, but what I will say is that the CDC. They they've got a daunting task to.

And so they're they're trying to mitigate the spreads.

I think that is clear to them, we are as an industry totally committed to doing that as well.

Our highest responsibilities at all top priorities always or compliance.

I am going to protection of the health safety and well being of our guests the peak.

The people of places, we go too and of course, our crude at our shore side personnel and so we are totally.

Totally committed as a company and as an industry to serving the best interest of public health and so I do feel that what's going on in Europe have some inflows flip side. So so sad has a tremendous amount of vessels all of the scientists and of course.

What we are putting forward.

As we work with them and with HHS and with the ports and the local authorities and so on and so forth everywhere and the various destinations we have to go to.

Thats, a plethora of people who have to engage with.

I think that we have every reason at this time to be optimistic.

Thank you thanks.

Thank you.

Our next question is from Steve Wishy Washy from Stifel. Please go ahead. Your line is open.

Hi, good morning, guys.

So our number one a follow on to that the last piece about the potential to to start operations here.

In North America by the end of the year and I guess I'm not sure the right assets, but.

Does the upcoming election change anything with you guys in the industry's ability to return eventually to surface here in North America and then.

If you guys are allowed to start selling here before year end I guess the question is what do you think customer demand would look like.

Point given.

Could be in the height of normal flu season, plus obviously, all the overhangs from.

The kind of cobot scare.

I think on the first one is on the election I think ascend.

Everyone's best interest no matter, what your political leaning is.

To have Americans working together and then to have people will go back to work and livelihood and so forth. So so I think the election.

The election this anything obviously, maybe losing some momentum to say hey, how can we work with this industry to make sure we get all those people that work in the ports back working again the taxi drivers all.

All the people that don't catering in providing provisions and so I think there's momentum for that period, because it's the right thing for the country and it doesn't matter what political leaning people have so in that regard as an election year I'm sure everyone want to stand up and say Hey, we helped bring back.

Congress and livelihood and means the quality of life.

Quality of life for people, so that would you answer that element in there.

And then the second question in terms of demand.

Just keep in mind.

We as I said, we have.

Cup demand from people, who are very anxious to cruise.

And so we are not going to be able to bring all the ships back at what's the debt.

The nations are not on all open at one time.

And so it's going to be a staggered restart so we're going to have limited capacity with pent up demand and I don't think domain.

The man is going to be a big issue in the short term. It we're bringing all the ships back at was where you have a heavy dependency on new to cruise that with no marketing because nobody's market for the past several months.

That will be a challenge, but that is not going to be the case and so we're not overly concerned about demand we see the bookings we see the number of new bookings not just future cruise credits from castle cruises and all those are real positive indicators that David.

To add any color.

David you maybe on mute.

Okay.

Yes, sorry about that Arnold you you broke up permitted I do apologize.

Mike So that's okay.

Yeah, I'm I'm okay.

Location. So yes, I lost a few number the words pay I do a nice.

Okay. So the only thing I would add I know I'm not sure if you had.

Made this comment with sampling.

The fact that when carnival cruise lines and now okay.

Change where they can't they.

Cancel some cruise because in November December out the cap in Miami in Port Canaveral, a couple of cruise is open.

With the intention of restarting as you said before the end of year for November.

Hi can booking.

She is just the administration of the demand that's out there as you talked about the pent up demand.

So.

The phase.

Kind of cruising what we believe.

We believe we will be in fine shape as we move forward.

Thanks for that and then my second question a bigger picture question, but you know if we look.

If we look out a couple of years down the road are we incorrect to think that.

The cruise industry can be set up to be really an outstanding position once the world kind of goes back to a normal more normal environment and I guess, what I mean by that is with so much capacity being remote at this point in the fact, we we probably aren't going to see a new newbuilding order for a couple of years I mean, as we get out to 24 25 26 I mean.

Mystery itself should be set up for its lowest capacity growth rate that its probably going to witness for the last 20 plus years and.

That should really allow you guys to push price and I hope all that makes sense, but we'd like to hear your thoughts there.

I know I can hear you Oh I'm sorry, Thank you I have it.

Yes, David I got it. Thank you I'm, sorry, you're absolutely right that the.

I was talking to there was that we saw new because I was trying to minimize interest when you were talking to everyone I would break up but in any event that you're absolutely right.

This condition.

Conditions, we never experienced before we've exited or planned acid 18 ships so that.

So that that reduces it helps our cost structure because they were at least efficient ships.

But it reduces capacity, yes, we're bringing on new new ships, we just took delivery of chatted process great deliberate.

But as you know and as I pointed out we only have one order in 24, and 125 and we retain yes, our cash generative assets and so the bottom line is there will be.

Somewhat constrained capacity.

Good adequate constraining initially and then over time still constrained because we would have gotten back.

Well to where we were before and then not a lot of new builds for us and the 24 25 timeframe, but.

Assets that are really cash generative, so we can generate cash and pay down debt and get back to the credit rating. We want to have it creates shareholder value go ahead, David if you want to make a comment.

Yeah, No I completely agree I think Steve said, it very well and I think our future very bright you know if you think about it and we said this on the last conference call as well I mean people left the cruise a cruise vacation as the highest level of satisfaction of all vacation alternatives and.

And this is a temporary blip and we will be back.

We'll bring the scale back and a phased manner that pent up demand.

And all the other things that we're doing on board.

You know I have great hopes that Tom over the next Steve indicated over the next few years going out part of the future looks very bright and that's why we made the comment that we also expect that over time with the recent kind of cruise operations.

The book to had to pay down debt and rebuilt pack the balance sheet into a strong investment grade balance sheet once again.

Okay, great. Thanks, guys really appreciate it.

Hey, Thanks for your question I appreciate it.

Our next question is from Felicia Hendrix with Barclays. Please go ahead. Your line is open.

Thank you good morning.

On one of her life would be good.

Good morning, I never like to me that person [laughter] deep dead horse, but I'll be about right now.

Yes.

Regarding your optimism that the industry is going to be scaling before the year end in the U.S. and I agree and I think a lot of the.

[noise] information kind of point.

Kind of support your optimism, but there is I think some nervousness among the investment community that.

CDC could extend that even further so just wondering why you don't think that would be the case.

I don't know about bank on that so you do see you know obviously good.

The issues there remain around what's happening overall with the pandemic.

The rate of spread in the us through any spreads.

Although the related also to the ongoing development in availability.

Various testing regimens, obviously rapid testing low cost throughout the testing will make life simpler hello, everyone.

We seem to be very much on the path for availability for that sort of a lot of things that come into play and of course, you know what's happening elsewhere in the world, which right now is positive and we have no reason to legal all continue to be positive.

So.

I can't predict the future completely but at this time you know everything is pointing in the right direction and and we feel confident that we have protocols and operating procedures as demonstrated in Europe, and which would be it has in many ways also here in the us with us.

It took a situation, which is going to be resolved and that worked out.

That will be able to cruise, where there is no greater risk.

To.

Activities that people engage on a cruise ship.

They would owns similar shore side activity, then and as I've said in my comments and of course, our aspiration is that the risk is less than they would experiencing similar activity shore side and.

And why because that you can possibly be well that already exists you know for example would noro bars, so about 6% of the U.S. land based population experiences are a virus in a given year. That's the estimates and there's something like 0.07% all the cruise ship and the reason is because we have to deal with.

This is a stop all this hard work.

Mers Sars Ebola.

Moreover, as deca.

So we have medical facilities on board, we have medical screening you know a lot of things Handwashing at hand, sanitizer those things have been present, our cruise ships for a long time. So I think we're positioned well we have to see can't guarantee obviously, but we have every reason to be optimistic and.

And is ultimately the right thing to do to get people back to work.

To give people a chance for vacation experience of a lifetime minutes safe.

Way relative to similar experiences they would engage in Atlanta keep in mind, what we're doing in Europe.

It's not happening anywhere else.

Hotels are you doing.

Ill universal testing of gas before they walk into a hotel.

Airlines are doing Universal test of airlines resorts aren't doing that amusement parks are doing that.

They'll all have you know a medical screenings before.

You participate so we're doing a lot of things that you know its not.

No its not generally happy for the public as they move about so as long as people.

Moving about engaging in activities as long as there is some social gathering.

And you know we're going to be in a good position to delay.

To deliver less the same restaurant less robust than people engaging in activities. So I hope that answered your question.

Yes. Thank you.

And David just kind of switching to you on you know we've gotten a lot of questions from investors about what the initial rollout and that early transition period, where you need scale to likely be burning cash. So people are mainly wondering what the cash burn could look like in 21.

In early 21, so I was wondering if you could touch on that and also help us understand what kind of occupancy.

Moving onto shipped pay cash flow breakeven I know in the last call. We talked about 50%. So is that a good benchmark to use and do you think it'll be guidelines that prescribed occupancy levels or will it be back to the operator, maybe kind of if you could talk about what you're doing in Europe as a benchmark and.

Just generally how you're thinking about the one last kind of from a cash flow perspective and have seen a shift can be profitable once you actually scaling. Thanks.

Sure.

All bunch the question there.

We as I had mentioned in my notes.

We are working through Oh.

A large number of.

Hi different financial areas, but.

But it would be premature for me to give you are you getting close to the cash.

Burn in various here because there's a lot of uncertainty as to the ramp up and how exactly when some chip pull start.

But I think it's fair to say you know weve taken a look at I gave you the fourth quarter, which was 530 million.

Per month in the fourth quarter, and then no revenue scenario and I know, we're not and no revenue scenario, but we did do some calculation.

And then no revenue scenario, the cash burn, but probably being just slightly higher than that.

In the first half of the year. We also have two ships being delivered yet like for fourth quarter, but we do have a number of dry dock for various reasons regulatory.

So that the numbers and then no revenue scenario would be.

But we do expect over time as we go.

Bill will be occupancy costs and meter and other brands to begin to generate positive cash flow from those ceilings and reduce cash burn up.

You know something in the high fives down to a much smaller number and hopefully over time.

Eventually turn positive and so as far as occupancy is concerned.

I think we've said this before our intention is to start with.

Occupancy onboard on that goal.

Hello, Chris Thanks to the protocols ensured that together.

As Don mentioned.

The gas cost in this.

Given an excellent guest satisfaction ratings.

And so over time once you know, we got things right. Our intention is to increase the occupancy level.

Costs are right now.

There is Italy, and Germany, there is no hockey.

Limit they are making sure that they have social testing more judge and.

Increased the occupancy cordingley over time to mature household debt.

And as far as the breakeven concern we set a number of times.

Breakeven on the various shaft.

Were between 30% to 50% occupancy I think.

I think the shaft and of course, the yield that we had the prices that we received as well.

I think that answers all the questions did I Miss anything.

No you guys just talk are you selling below 50% now.

In the beginning yes, we did say that we would start below 50% with cost feta practice protocols and work our way up.

And where are you now.

Where were below 50, I'm working our way.

Okay. Okay. Thank you.

Thank you.

Our next question is from the line of Brandt Montour with JP Morgan. Please go ahead. Your line is open.

Hi, Good morning, everyone. Thanks for taking my question.

I appreciate it good morning, and I appreciate the color on pricing and it's obviously the adjusted pricing metrics you gave a flat year over year is very reassuring, but did you.

But to the extent that some of us might be seeing a little bit of dispersing under the surface, but for the industry. Overall I was wondering if you could just comment on how you feel on the state of the price integrity looking out to next year is holding up.

Away from you entry industry overall.

We would only comment there on our own business, obviously in the UK.

You've heard that that.

At this time, we're not.

Experiencing significant discounting or anything.

Our future on bookings and.

And then I will give a comment I wish Dave.

David I don't know if you had any other problem yeah, no I'd, just reiterate that I mean I did indicate that.

The booking curve in the back half of the or what was it.

Hi end of historical range and when you take into consideration they haven't hit a few actually.

Take out the Fccs.

And the onboard credits applied we indicated that pricing was in line with the prior year.

So pricing.

He is very good and I think that once the we get back to cruising is they indicated before carnival cruise line had seen.

You know good demand recently when they made.

They made their actions I think once we get back to cruising there's going to be an opportunity with all of the pent up demand for us to take some positive price actions and as we have there is arnold talked about phased resumption of cruising unlimited capacity Wifi and the high level of satisfaction that.

We've been able to achieve on the gas side, how west cost.

I think that all bodes well for us going forward in the future.

Excellent.

That the.

I would just put those certainly and once we restart certainly of cruising and once we because right now people are booking without that serves me right.

And then once we ramp up our marketing efforts, which of course have been very quiet well during this period.

That will also then well greater support for good pricing going forward.

Yes.

Okay.

Got it and one more on that certainty and if I may I apologize, but I wanted to ask about the industry is sort of.

Sort of recent commitment to 100% testing and Arnold you mentioned that this was a factor or could be a factor with the CDC I guess, what do your plan and the U.S. entail for.

For testing, specifically and so what are the current issues in status around procurement there.

Yeah, I think several things one we're not feeling though.

We're not feeling well here in the U.

Well here in the U.S. and so the testing is continuing to evolve we'll be able to build the excessive is evolving but in many places in the U.S., though there is access to PCR testing.

What turnaround times that would allow you to within five days or less.

Hey, good to us and be clear then in many cases free of charge.

And have that cover those from a sort of follow the that youre Colgate three and be in a position to show that you are in a category that we were allowed to board to ship subject to additional screens and so on so.

So I think that's where it is today also as you know there's rapid tests that are very low.

Got a very low cost.

So when those will be available to the general public.

How much remains to be seen but that will all come clear over the next few months coming here before more than likely before the end of the year.

So that will give additional.

Capability as you know in Europe, we're doing it.

We're doing a combination of PCR and antigen testing and so on and Diamond is working quite well.

And that's not a major barrier at this point for the testing so someone may consider cruising, but it is an effective tool to minimize oh I'm betting kogut onboard felt like.

Well, there's nothing else going to preclude completely oh, so the other part of the protocols of course is what do you do when there are symptoms on board are there is even a confirmed case. So they are not disrupting everyone else's cruise and weve done great measures and that mitigates spread with physical business.

Yes, David some.

In the finance area. So he would say social distancing, but he's actually social, but but but outside the <unk>. The rest of us on a cruise and we talk about physical differently because cruise is all about social skills exchange. So physical does the same.

Along with mass wearing it all the proper things you need to be if you or Robert.

Well communicable disease, and so and while at the same time people are still having a good time and enjoy themselves. So that was a great vacation experience. So we'll see how it evolves. There's so many different dose regimens out there though.

And we'll finalize as we get closer and of course be Incompliance with every region because it's not just about no leaving the U.S. you want to go somewhere and wherever you go they're going to have therefore the calls.

So we have to be compliant with everybody.

So that will kind of determine in the EM.

The final makeup, but the point is.

There are more tools in the toolbox, though.

We demonstrated an ability to execute universal testing in Europe.

And we have every right.

No reason to believe.

That it is the right thing to do but also is something that can be executed the U.S. as well.

Thank you for your question.

Thanks for those thoughts.

Okay.

We have a question from Jamie Rollo with Morgan Stanley. Please go ahead. Your line is open.

Thank you, yes, just a question back on the U.S. returned to service thing.

Yes makes sense.

How about if I may settle with Delta.

Thats lumpy, it's not enough of the Green light to go ahead and cruise in Q4 in the U.S. want you all to wait for formal approval by the CDC.

I'm, sorry could you repeat that I missed the first part it was a little garbled I'm sorry could you repeat your question.

Yeah. It just seems as if your CD season, they say lot adults definitely and later this month is that enough of the greenlight. The complete together, having said in Q4, the U.S. or would you rather wait until we got that formal approval clearly that comments last week was still pretty cautious.

Yeah, I think again I don't want to try to.

Try to interpret the rationale behind certain comments made by the CDC, but what I would simply say is we will only sale. When we feel we are honoring you know serving the best.

The best interest of public health.

And so we believe based on what the scientists the advisors. We've had some of those I mentioned.

They've been scientists with other companies we've all collaborated.

And medical experts and we believe that as we are in Europe.

We have a ways to go forward that will.

Reduce the risk to no worse than if you were shore side, and we are optimistic and Aspirationally. We believe we can get to less risk than what exists so similar activity shore side.

In that context.

Then we feel we can sale and that we can handle issues that surface any issues the surface on.

The ships so.

If there is no sale order. The fact, though that is approval. Okay. They may have advice or warnings for certain people with other lighting conditions, which we what is what I call. You know, what I mean et cetera, but that is an effect you know, saying you're free to sale. So we'll see what happens.

So I know that but at this time as I mentioned, we just have every reason to be optimistic that we will be able to sell the book in the U.S. before end of the year based on all the things we share.

Thank you Jackie I'm done.

One follow up if I may as you say Europe protocols have been quite strict particularly Casa optic is having a testing of guests when they get to the ship you met shouldn't be healthy sales protocols of the U.S. that might be five days. The school is one issue with getting the testing equipment can you not replicate docking in.

In the U.S. and have the actual test customers. The ship it seems a lot safer than having a flock data develops.

Well actually there are you know they are.

Differing opinions on what's the scientist on whether you are better served 24 hours to five days before you know are you better serve you know add embarkation the point being what will have regardless well that ends up is universal testing, which doesn't really exist in the rest of society and so.

So that's the point there will be universal testing.

There will be ways to follow on you know the people have symptoms and so on on board. So you can mitigate spread and events that that there is a risk of kogut onboard are somewhat unknown risks or someone actually helps coat with those other important things the details on add embarkation 24th.

There's different opinions about all of the those opinions are really looking at different algorithms and models that project.

Very small percentage differences, obviously, we want to be the best we can possibly be but all of those protocols, which ever where you go where they use the European one or use 124 hours before boarding which everyone use are better than what exists.

And society at large.

Great. Thank you very much.

Thank you.

Our next question is from James Hardiman always when push Securities. Please go ahead. Your line is open.

Hi, Good morning, Thanks for taking my call just just a clarification on the last conversation surrounding testing are you guys going to be bearing that cost or is it the consumer.

And if it's you guys should should we be thinking about some material.

Cost overhang is as a result of focusing all your customers.

Again, you know I don't want to get in front of things, we don't know yet because we have to do all of this obviously and in full compliance with whatever the authorities. Both I'd say, we're going to do but I would say.

But I would say what exists today here in the U.S. a number of people you know a number of places you can be tested at no cost today.

There are what PCR testing there are you know still.

Still avenues, where people would pay for testing and so on and at some point some of those will determine where we are and where we're doing it but we.

But we want to make it.

Responsible in the best interest of public health.

And then this hassle free and facilitated while being responsible for our guests. So we're not taking a hard line on that in any event.

Cost that will be back born and it will obviously go into the oval all cost a vacation experience and but in some cases that costs you know maybe the ROE or it could be you know whatever the going rate for a PCR to us today are with the different testing regimen.

Along though.

It could drop to very low cost depending on what's available with the Apple.

They have a test for example.

Julie I guess is $5 or something like that so we'll we'll see where we are the most important thing is to make investments that we will do universal test it and remember early on it's going to be not it's not going to be their entire fleet.

It would be some ships going into some destinations with a lot of pent up demand.

And it won't be like.

It shouldn't be a major challenge.

To fill those ships whatever the testing regimen is open.

Really helpful and then with regard to the booking trends that you guys shared for the second half of next year right.

Really encouraging I'm trying to figure out how how excited we should be getting about that.

I guess as we look at the ramp in bookings and I'm, assuming it just doesnt.

Immediately get there in.

July of next year I'm, assuming there's a meaningful ramp at some point in the in the first half what is the first of all if you could could you share with us sort of the timing of that that ramp in booking and what does that tell you if anything about how consumers are thinking about.

The timetable with regard to a vaccine I'm, assuming it's safe to say that.

Theres people that are willing to go on a cruise ship right now and then there's others, who will be willing to go one once the country's vaccinated.

To some degree but may be less interested if they still have to wear masks can do it I think it'd be the social distancing so.

So maybe just walk us through what the data says about how consumers are thinking about.

That that recovery and how you think about relaxing youre protocols as the.

As the vaccine getting introduced next year.

Okay. So is a lot there, but also at a high level and then David can add some detail color. So at the highest level [noise].

What I see in demand at this point in time.

There's a lot of pent up demand for cruise.

People are booking we canceled.

Some cruise is on carnival, the other day and and the and the cruise as we hit remaining in that timeframe.

The bookings tripled.

So there's there's pent up demand.

For cruise.

That's 0.1.

We have a huge previous cool store base and they are comfortable and cruise ship.

I understand the medical screening the medical centers, the the physical discussing capability on these large ships they get it they understand and as I've said the guest experience and.

Here are some background noise, if they could go on mute, but the guest experience Oh in Europe has been high the satisfaction has been high so.

So so those are all positive indicators. So we feel very good about the demand okay.

Overtime as you get through all of next year and into the following year.

As you get all the three back up and going and so on and so far we will again need to be convincing new to cruise people as we bring on the additional capacity in future years, although that capacity is going to be slowed as we talked about before.