Q3 2020 Carnival Corp & Carnival PLC Earnings & Business Update Call
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Please stand by the Congress will begin momentarily. Thank you for your patience that you. Please remain on the line.
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And welcome business update conference call I Am Arnold Donald President and CEO of Carnival Corporation and plc today.
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 of coal that 19 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 in some parts that it rightsizing our organization and now embarking on the phase resumption of gift operation.
Underway into about World leader, whose 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 interests of public health.
Our highest responsibility and therefore, our 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 actions managing the balance sheet and reducing capacity 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.
Because 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.
Business travel expenses 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.
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.
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 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 toward full resumption of operation.
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% continental European sourced and soon with that either.
It is roughly 95% German source, our other brands like CNO, UK, which is 98% British source.
Australia, which is more than 99%, Australia, New Zealand source and 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 Edwin.
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.
Heavy 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 seen 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 guest 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 cost base.
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 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 record.
Representing the lion's share and in fact substantially all of our 2019 operating income.
All of the actions we have taken are in keeping with our primary financial objectives 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.
Pushing out new build capital and more importantly, we have just one ships on order in fiscal 2004.
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 retained the lowest leverage in our industry and our opportunistically strengthening our balance sheet as we begin our return to service which will possess.
Question 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 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 why.
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 crude.
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 that out to box. We currently have the capacity to issue additional debt. We recently completed a converged 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 science 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 effected 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.
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. Liebig 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 Donovan MD Phd from.
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.
Got the Diamond was instrumental in developing a mouse model that is used extensively in the development of therapies and vaccines for cold at night.
Michael Lynn MD, Phd associate professor of Neurobiology, bio engineering, and chemical and systems biology.
And principal investigator the Lin lab after University school of Medicine.
The limit is one of the leading members of the scientist to stop COVID-19, a group of this theme researchers physicians and Nobel Prize winners from across our country.
And that's the jewel modeling in.
The age.
Age associated deep held equity University of Texas that often Dell Medical school.
Dr. Malone as an internal epidemiologists public health physician leader and the form of principal Deputy Assistant Secretary for help in the US Department of health and human services.
While at 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 interest of public health.
They have been formed our protocols and procedures, which are established based on the science Tech.
Acknowledging medical treatment data and overall understanding of the cold at night today.
We expect these protocols to evolve societies understanding of COVID-19 strengthens.
We are working so that our guests will not incur any greater risk versus engaging and similar experiences on there.
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 in each region, we will only sales where we feel we can honor our commitment to operate in the best interests of public health.
And when we sales we will certainly fulfill each specific regions requirements.
And we have achieved a significant milestone.
Our first brand to return to operations as I've mentioned with cost 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 each.
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.
So these initial voyages we have chosen the sale with low occupancy levels, enabling us to gain valuable experience with our enhanced safety protocols 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 brands Aida carries primarily German guests on cruises in the Mediterranean and this will be followed by two more Aida ships later this year.
Again, we are very excited about the resumption of crews and 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 sales.
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 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 returned to full operations, our strong cash flow will provide out past 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 on or it feels great to be transitioning into a new phase.
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 preserve cash.
Opportunistically spreads.
While improving our overall liquidity position.
I'll start today with an update on our second half 2021 cooking train.
Yeah, and I'll provide a summary of our monthly average cash burn rate.
Any shop with cost third quarter cash flows as well as some insights into our liquidity position.
Turning to our second half 2021 booking trends at.
At this point in time, our cumulative advance bookings for the truck.
Second half 2020 line 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 crews credits.
More commonly known as FCC and onboard credit supply.
Correct.
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.
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 bucket with.
With the remainder to EPS.
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 Destocking brand loyalists, which is just a little higher than anyone.
Now, let's look at our monthly average cash burn rate.
Third quarter, a monthly average cash burn rate with $770 million, which was in line with our expectations.
For the fourth quarter, we expect that our monthly average rate to be approximately $530 million.
This results in a 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 expectations 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.
Whenever which occurred last week in chanted print.
Our $530 million fourth quarter monthly average cash burn rate includes four items.
First 250 per mile of ongoing ship operating and administrative expense.
Second in.
Interest expense is expected to be approximately 120 million per month.
Third.
Capital expenditures forecasted to be approximately 130 million per month.
Export credit cutting and sales and.
And this concludes to ship deliveries and the receipt of other capital commitment contracted for prior to the pause hit our guests operation.
The fourth and final component is other working capital changes, which are forecast to be approximately $30 million per month.
I'll provide a summary of our third quarter cash flows.
We are currently in a solid 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 things.
First our total cash burn for the quarter was $2.3 billion.
Typically our monthly cash burn 770 million per month timeframe.
Second.
600 million from majority of which was driven by scheduled debt maturities and.
And third the decline in customer deposit about 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.
Patients.
Finally.
Insights into our liquidity position.
The parks and our guests cruise operations earlier this year.
Reappraised liquidity, mainly through that transaction.
Given the recent momentum coming into the relaunch of our fleet. We saw this as a good opportunity to improve our capital structure through an equity raise.
So three weeks ago, we announced at the market equity offering program more commonly called ATM for up to a billion dollars.
To date, we have sold 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 best cruise operation and its recent announcement of their assumption as well.
We are looking at a variety of financial models, where we review guest operation in a same manner.
Rick specific brands in 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.
And now I'll turn the call back over time.
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, though individually or lose loved ones have suffered with the virus.
Operator, please open the call to questions.
Thank you feel like the rest are a question. Please press the one followed by the four on your telephone you will hear a three tone prompt open 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 again that is one four to register for a question hormonal. Please for the first question.
And we have a question from Robin Farley, What's your best. 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 U.K.M. commercial paper facility in your trust 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'd be great to kind of hear about what that has meant for.
Demand. Thank you.
Hey, good morning.
Hey, good morning Robin.
Good to hear your voice.
Look first of all with regards to the ramp up in 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 sales had been 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 gone 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 yard or 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 the 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.
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 extensions no sale order.
No sale order was only 30 days it goes out to adopt over which aligns with what the industry 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 with enhanced protocols and operating procedures, we put there and as I mentioned, we've got the high guest satisfaction.
On those schools and we've been collaborating here in the U.S. with.
With all the various companies everybody has 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 has been 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.
That we will be sales 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 you know caustic Chester 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 we do.
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 them to 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 thank you for that that commentary about the broader research.
I didn't know how much should address it maybe just I don't know.
And a clarification about you know it is it 'cause your belief in.
Your belief in your conversations with the C.C. that they're kind of embracing any of the guidelines that have been success.
We have been successful in Europe in a way that maybe wasnt reflected in the language of their extensions statement.
And then on.
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 the CDC. They they've got a daunting task to and so they're they're trying to mitigate the spreads that said.
One 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 guests the peak.
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 inflows flip side. So so sad has a tremendous amount of influence on 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 salt and so forth everywhere and the various destinations we have to go to.
Thats the plethora of people who have to engage with a I think that.
I have every reason to at this time to be optimistic.
Thank you thanks.
Thank you.
Our next question is from Steve Whiskey from Stifel. Please go ahead. Your line is open.
Hey, 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 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 you know at this point given we can be in the height of normal flu season, plus obviously.
The overhangs from.
Kinda cobot scare.
I think on the first one is on the left shows they consume it.
Everyone's best interest no matter what your political leaning is to have Americans working again, and then to have people will go back to work and have livelihood and so forth. So so I think the election, if anything obviously made and then some momentum you 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 everybody 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 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 you know Congress and livelihood.
It means the quality of life.
Quality of life for people, so that would you answer that one 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.
So we are not going to be able to bring all the ships back up whats the depth.
The destinations are not them all open at one time.
And so it's going to be a staggered restarts. So we're going to have limited capacity with pent up demand and I don't think demand is going to be a big issue in the short term it will.
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 we see.
We see the bookings we see the number of new bookings not just future crews credits from castle cruises.
That's all those are real positive indicators, but David you want to add any color.
David you may be on mute.
Yes, sorry about that Arnold you you broke up for a minute I do apologize.
My cell surface.
Yeah, I'm I'm temper mill location. So yes, I lost a few number the words pay I do Oh I see.
Okay. So the only thing I would add I know I'm not sure. If you had made it.
Made this comment to put simply the fact that.
The fact that when carnival cruise lines and now.
And now Scott Reed.
Change where they are.
They had.
Cancel some crews busy November December out the cap in Miami in Port Canaveral, a couple of crews is open.
With the intention of restarting as you said before the end of year.
Number eight we see.
I can booking.
She's just the administration of the demand that's out there as you talked about the pent up demand so.
So with the ramp the up sales.
Kind of cruising or we believe it will be in fine shape as we move forward.
[noise] it.
Thanks for that and then my second question is that a bit.
A bigger picture question, but you know if we look out a couple of years down the road or are we correct to think that the cruise industry can be set up to be really in an outstanding position. Once the world kind of goes back to a nor any more normal environment and I guess, what I mean by that is with so much capacity being removed at this point in the fact, we were.
Probably aren't going to see a new new build 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 <unk> 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 don't I can't hear you.
Oh I'm sorry, Thank you I have it yet David I got it. Thank you I'm, sorry, you're absolutely right that the.
I was talking to there was it was all new condos try to minimize editorials. When you were talking about how that would break up but in any event now you're absolutely right.
This.
Additions, we never experienced before we've exited or plant after the 18 ships so that.
So that that reduces it helps our cost structure, because they will be sufficient shifts.
But it reduces capacity, yes, we're bringing on new ships. So 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 actually constrained initially and then over time still constrained because we would have gotten back for a while.
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 that create shareholder value.
David if you want to make a comment.
Yeah, No I completely agree I think Steve said, it very well 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 accrued 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 in 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 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 there was some kind of cruise operations.
Book to had to pay down debt and rebuilt that fact, 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, and 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, and regarding your optimism that the industry is going to be failing before the year end in the U.S. and I agree and I think a lot of.
[noise] information kind of point or 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 could and the issues there remain around what's happening overall with.
Endemic in the rate of spread in the U.S. really spread it'll be related also to the ongoing development in availability of various testing regimens, obviously, a rapid testing low cost rapid testing will make like simply put every.
More than.
We seem to be very much on the path for availability for that so there are 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 be that won't continue to be positive.
But so you know you can.
You can't predict the future completely but at this time you know everything is pointing in the right direct.
In the right direction.
And and we feel confident that we have protocols and operating procedures as demonstrated in Europe, and which would be enhanced in many ways also here in the U.S. with U.S. took a situation, which will still be resolved and work, though that we'll be able to cruise where there is.
No greater risk.
To the activities there people engage on a cruise ship.
Then they would almost similar shore side activities and and as I 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 because that even possibly be well that already exists you know for example would noro bars, so about 6%.
The U.S. land based population makes.
Variances are a virus in a given year, that's the estimates and there's something like point you will see all summer episode on a cruise ship and the reason is because we have to deal with viruses and stuff all the time.
Errors 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 are crucial for a long time. So I think we're positioned well we have to see I 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 doing yield universal tuxedo gas before they walk into a hotel air.
Airlines are doing universal testing of airlines resorts aren't doing that amusement parks 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 moving about and engaging in activities you know as long as there is some social gathering then we're going to be in a good position to delay.
To deliver less yield the same risk illustrious than people engaging in activities I'm sure. So I hope that answered your question.
Yeah. 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.
The honest should 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 at the benchmark and.
You know just generally how you're thinking about the run 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.
A large number of hi.
Hi different financial areas, but.
But it would be premature for me to give you know qiagen test to the cash.
Burn you know in various here because there's a lot of uncertainty as to the ramp up and how exactly when some chip forestar.
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 10, and then no revenue scenario and I know, we're not and no revenue scenario, but we did do some calculations.
And no revenue scenario, the cash burn would probably be just slightly higher than that.
In the first half of 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 the occupancy cost than either and other brands to begin to generate positive cash flow from those ceilings and reduced cash burn up.
You know 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 sent to the protocols ensured that together.
No I don't mention it.
<unk> costs in the <unk>.
Kevin its 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 hockey limit they are making sure that they have social testing.
And.
Increased the occupancy accordingly over time to tour social distancing.
And then as far as the breakeven is concerned we said this a number of times.
Breakeven on the various shaft is from somewhere between 30% to 50% occupancy depending on the ice conditions.
And of course, the yield that we and the prices that we really did well.
I think that expenses 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, the protocol 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 going to brand Fonterra with JP Morgan. Please go ahead. Your line is open.
Hi, good morning, everyone. Thanks for taking my questions I appreciate it.
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 sounds might be seeing a little bit of dispersing or the surface, but for the industry. Overall I was wondering if you could just comment on how you feel on the state of the pricing integrity looking out to next year is holding up.
You know away from you entry into the overall.
Well, we would only comment there on our own business, obviously, and I think you've heard that that.
At this time, we're not.
Experiencing any 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 of 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 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.
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.
We've been able to achieve on the gas side, how west cost Oh, I think that all bodes well for us going forward in the future.
Excellent.
That the well I would just ER, but those certainly and once we start you know the certainty of cruising 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 it I'm doing this period.
That will also then no greater support you know for a good pricing going forward.
Okay.
Got it and one more on that certain here, if I may I apologize it 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 plan.
And 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 failing [noise].
Here in the U.S. and so that testing is continuing to evolve availability attest to the evolving but in many places in the U.S., though there is access to TCR testing.
The turnaround time that would allow you to within five days or less you know take a test and be clear and in many cases free of charge and and have that are those from a sort of follow up the that youre Colgate three and be in a position them to show that.
You're in a category that we were allowed to toward to ship subject to additional screens and so on so I think.
So I think that's where it is today also as you know there's rapid test got a very low cost and.
And so when those will be available to the general public.
And how much remains to be seen but that will all know come clear over the next you know months coming here before more than likely before the end of the year so that.
So that would be able to give additional.
Capability as you know in Europe, we're doing.
We're doing a combination of PCR and antigen testing and so on and dominance working all quite well and.
And there's not a major barrier at this point for the testing for someone that they consider a crazy, but it is an effective tool to minimize oh, no I'm betting kogut onboard sublet.
Well, there's nothing that's going to preclude completely up 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 comes from case, so that you're not disrupting everyone else's screws and we've done a great measures and that mitigates spread with physical business sales.
Davis.
In the finance area. So he he would say social distancing, but he's actually social that but but outside the <unk>. The rest of us on a cruise and we talk about physical doesn't mean those crews is all about social skills exchange. So physical does the same as the law wouldn't ask.
It was a law wouldn't ask wearing it and all the proper things you need to be and if your Robert you communicable disease, and so well and while at the same time people are still having a good time and enjoy themselves that have a great vacation experience. So we'll see how it evolves. There's so many different dose regimens out there, though and we'll find out.
Allies, as we get closer and of course be Incompliance with every region because it's not just about you know, leaving the U.S. you got to go somewhere and wherever you go they're going to have their protocols and so.
We have to be compliant with everybody. So.
So that will kind of determine in the end you know, but the final makeup, but the point is.
There are more tools in the toolbox now.
We've demonstrated an ability to execute universal testing in Europe.
And we have every right every reason to believe.
That it is the right thing to do 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.
How that if that makes that always dealt that next month, if not enough of the green light to go ahead and crews in Q4 in the U.S. or would you rather 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's a seamless.
If your 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 and see the GAAP EPS formal approval clearly that comments last week was still pretty cautious.
Yeah, I think again, though I do 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 sales.
When we feel we are honoring you know serving 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're done scientists with other companies. We've all collaborated you know.
And 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 sales and that we can handle issues that surface any issues the surface on the ships. So.
You know if there isn't a note 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 but that is an effect you know, saying you're free to sale. So we'll see what happens.
And so I know, but but at this time as I mentioned, we just have every reason to be optimistic that we will be able to sales 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 sort of follow up to that if I may as you say Europe. The protocols have been quite strict particularly Casa optic is having a testing of guests when they get to the ship you mention DLC sales protocols of the U.S. that might be five days. So it's what issue with getting the test.
Getting equipment can you know replicate in in in the U.S. and have the actual test customers. The ship. It seems a lot sales for that having a fuck days and evolves.
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 or you are better served 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.
There will be ways to follow on you know is that people have symptoms and so on onboard. So you can mitigate spread and even the bet that there is a risk of Colgate on board or someone unknown risk or someone actually helps coupled 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.
You know very small percentage differences, obviously, we want to be the best we can possibly be but all of those protocols whichever way you go where they use the European one or use 124 hours before boarding which I will use are better than what exists.
And society at large.
Great. Thank you very much.
Thank you.
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 going to 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.
Cost overhang is as a result of testing all your customers.
Again, you know I don't want to get in front of the things we don't know yet because we have to do all of this obviously and in full compliance with whatever you know the authorities in both let's say, we need to do but I would say what exists today here in the U.S. none.
Our 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 guests. So we're not taking a hard line on that and any that you know it's a cost that will be that 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 a 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 the Apple.
They have a test for example, you know allegedly I guess, it's $5 or something like that so we'll we'll see where we are the most important thing is to make sure that we will do universal test it and remember early on.
It's going to not be it's not going to be the entire fleet.
It would be you know some ships go into some destinations with a lot of pent up demand.
And it won't be like though it shouldn't be a major challenge to fill those ships whatever the testing regimen ends up being.
Really helpful and then with regard 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.
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 do.
And what does that tell you if anything about how consumers are thinking about the timetable with regards to a vaccine.
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 once once the country's vaccinated to some.
To some degree, but maybe less interested if they still have to wear masks can do attack thing and do the social distancing.
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 <unk>.
As the vaccine get it gets introduced next year.
Okay. So there's 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 crews.
People are booking or we we canceled.
Some cruises on carnival, the other day and and the and the crews as we had remaining in that timeframe.
The bookings tripled.
So there's there's pent up demand for cruising.
That's 0.1, we have a choice.
We have a huge previous cool [noise] store base and they are comfortable on cruise ships.
I understand the medical screening the medical centers, the the physical disposing capability on these larger ships you know they get it they understand and as I said the guest experience and.
I'm hearing some background noise, if they could go on mute, but the guest experience Oh in Europe has been high this et cetera, it's been five or so so those are all positive indicators. So we feel very good about the demand.
Overtime as you get through all of next year in until 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 additional capacity in future years, although that capacity is going to be slowed as we talked about before well we'll have to continue to do what we were doing before which was previously people who hadn't crews to.
Crews know people my pre code there were half a billion people globally, taking vacation, taking holidays and there were 30 billion.
30 million excuse me cruising so.
So 30 me out of a half a billion. So we have lots of opportunity for this industry I was ships were sailing full <unk>.
As they always do and so so.
So we have we are not overly concerned about the man now or through the first part of next year. Okay. At this point in time.
Just based on the dynamics of everything a slow ramp up the pent up demand that's all it into.
In terms of the vaccine and you don't want to go there.
Go to just the general thoughts around the vaccine obviously, it's a psychological comfort for a lot of people that they would be a vaccine.
Knows exactly when they'll be available sometime you know if not this year next year and hopefully how many people will take the vaccine how effective we will though those vaccines be all that.
All that's still in the air, but clearly the more tools vaccines therapies 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 therapies that address those things.
No there is continuing to work on that and there have been some obviously.
At about some of the new recently that.
That oh.
No available for people.
For people and so and then those societies ability to.
To the 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, where mask at appropriate times physical distance 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 might call. One more question. Yeah go ahead, just a couple other [noise] quickly.
Quick things and you know I think that's fair to say that two thirds of the.
Two thirds of the Fccs are yet to then be applied to bookings I think people are hobbies, you know the people kept 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 in bookings when people believed that we would start.
Start tailing again, so I think you know if you look at our bookings.
The uncertainty.
Has caused the close herein.
Booking trends to be different than 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 uncertain to begin.
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 in their protocols has afforded the gas and excellent holiday expire.
Variance and I do believe overtime.
People around the world and to see that with other around other hundreds of our other brands of ours and that will lead to additional crews bookings as well.
Very helpful. Thanks, guys and good luck.
And we have a question from Asia Churchill have with.
The research. Please go ahead your line is open.
Good morning. Thank you for letting me sneak in a couple of quick questions. [laughter] teams have done a pretty dramatic and I think important reduction in capacity is tight.
The ability to possibly a push ships newbuilds further back into the future is sort of through a domino effect. So you are able to even further tweak years 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 had the deal you know in in their local sales with me.
Let me stress that covidien.
Covidien and work its were not to be able to work in the yard structures. The 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 deal for 25 that contrasts with you know three to four new builds across all night.
Charlie Cruise line brands that we were experiencing.
Many years in recent years prior to the onset of the pandemic.
So there is that natural.
Kind of a delay and slow down that you're referencing and I think that that combined with the fact that we've exited a number of Nazi fishing vessels and we'll complete that process here over the next few months or puts us in.
Puts us in a.
Oh, good capacity a spot you know relative to the current dynamics.
Hi, David.
Yeah I'm sorry.
David anything where that.
Good Okay go ahead.
Yes, sorry.
No I didnt have anything to add I think you said it well.
In David maybe for you just a quick follow up can you give us a range of the startup cost per ship 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 start up costs per ship is daisy each separately Oh 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 deposits and as a result of that that advanced ticket deposits you know probably will pay.
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 in advance deposit 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 will go up for question I was going to cut it off here yet yeah. Thank you David. Thank you everyone. We really appreciate your continued interest and.
This 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 I ask you. Please disconnect your line.
[music].
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Welcome.
[music].
Hi, good morning.
Carnival 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.
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 there.
Therefore, I must refer you to the cautionary statement in today's press release.
For the past eight months, we have dealt with me on that didn't impact cold at night see on our behalf.
And we have aggressively manage well.
In that time, we've come full circle.
We initiated a suspension in the early days of the pandemic to transition the fleet at the parks that it right.
Rightsizing, our organization and now embarking on the phase resumption of gift operation underway.
Underway and soon about welding.
In Italy, and either 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 interests of public health.
Oh, hi, as responsible and therefore, our top priority always always complying 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.
Gene 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.
Because our industry have not relying on business travel, we believe we will disproportionately benefit from the pent up demand for vacation experiences EPS.
Compared with many others in the travel sector.
Historically, our company has demonstrated proven resilience through the cycle.
While business travel tends to shutdown 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.
Over our internal data suggests on average rupee returns every two plus years.
Bina talked that it's eight months, we have a backlog up half guest ready and waiting that proves 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.
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 reason, including both in Italy, what cost to 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.
Australia, which is more than 99%, Australia, New Zealand source and 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 Edwin.
We are demonstrating with low cost and I, either we intend to initially resume operations with a small percentage of the fleet, which naturally will make us less reliance 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 and fat and all prior cycles, we were actually growing capacity and needed to capture many more new recruits.
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 very.
With virtually no marketing effort.
Position for the second half of next year is at the higher end of historical ranges.
Selling indication of the fundamental strength in demand wildbrain.
Upon 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 2% reduction in unit costs.
Our efforts to rightsize, our short operations will reduce our costs 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 smaller and leaner entity, we have retained the most cash generating assets in our fleet record.
Representing the lion's share and in fact substantially all of our 2019 operating income.
All of the actions we have taken are in keeping with our primary financial objectives 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 schedule Cushing.
Pushing out new build capital and more importantly, we have just one ship 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 return to service which will possess.
Question 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 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 why.
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 that 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.
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 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 risk of so.
Associated with Golden 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 spread was brought on board from land as.
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. Levy in.
In the EMEA author form of Vice Admiral in the public Health Service Commission core and the 19th surgeon General of the United States.
Michael Diamond MD Phd.
But as gas or professor of medicine molecular microbiology.
Dollar Jian 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 in the development of therapies and vaccines for cold at night.
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 of this theme researchers physicians and Nobel Prize winners from across our country.
And thus the jewel modeling in.
The EBITDA.
Age associated the health equity University of Texas at Austin, Dell Medical School.
Dr. Malone as an Internet epidemiologists public health physician leader and the former principal Deputy Assistant Secretary for help in the US Department of health and human services.
While at HHS. She also serves 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 interest of public health.
To 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 this society's understanding of COVID-19 strengthens.
We are working so that our sales 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 moral bars for example.
We are in active discussions around the world with appropriate parties and agencies to resume gifts operations when appropriate including here in the U.S. in each region, we will only sales where we feel we can honor our commitments to operate in the best interest of public health and when we sales 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 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 weak loan cruises departing from multiple different regional home ports and accessing a variety of different drive to markets for these.
For these initial wages, 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 brain I eat it carries primarily German guests on cruises 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 crews 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 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 on reduced capacity has 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 and Paul the 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 on.
Optimize the resumption of gas cruise operation preserve cash and Opportunistically.
While improving our overall liquidity position.
I'll start today with an update on our second half 2021 booking trends.
Then I will provide a summary of our monthly average cash burn rate and then.
Many shop with us third quarter cash flows as well as some insight into our liquidity position.
Turning to our second half 2021 booking trends.
At this point in time, our cumulative advance bookings for the 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 crews credits.
More commonly known as FCC and onboard 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.
Advertising and promotional activity.
Chris, particularly reassuring to see that approximately 60% of the booking pace during the first three weeks of September.
New bookings.
The remainder to EPS.
EPS 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 casting brand loyalists, which is just a little higher than the norm.
Now, let's look at our monthly average cash burn rate.
Third quarter, a monthly average cash burn rate with $770 million, which was in line with our expectations.
For the fourth quarter, we expect that our monthly average rate to be approximately $530 million.
This results in a 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.
Hum to ship deliveries.
One of which occurred last week and chanted print.
Our $530 million fourth quarter monthly average cash burn rate.
Four items.
First 250 per mile 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.
Net of export credits cutting in sales and.
And this concludes to ship deliveries and the receipt.
Other capital commitment contracted for prior to the pause in our guests operation.
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 while and liquidity position with 8.2 billion of cash on our balance sheet at the end of the third 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.
During the third quarter, we added to our liquidity position by completing Skouries 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.
Separately, our monthly cash burn seven.
770 million per month time frame.
Second.
600 million, the majority of which was driven by scheduled debt maturities.
And third the decline in customer deposit.
About half a billion dollars.
[music] point $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 fine.
Finally, some insights into our lives.
Insights into our liquidity position.
A pause in our gas 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 and this has had the opportunity to improve our capital structure through an equity raise.
So three weeks ago, we announced an aftermarket equity offering program more commonly called an ATM.
Up to $1 billion.
To date, we have 23 million shares for net proceeds.
Okay $350 million.
So with plenty of available liquidity enhance our focus has now shifted.
With this redemption best cruise operation and easier to recent announcement of their assumption as well we are.
We are looking at a variety of financial models, where we review guest operations in a manner.
Rick Aseptic grandson ships returning to service over time to provide our guests with an enjoyable vacation experiences and our company with positive cash flow and the 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 so individually or lose loved ones have suffered with the virus.
Operator, please open the call to questions.
Thank you feel like the rest are 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 anything you would like to withdraw your registration. Please press the one followed by the three one.
Once again Thats 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.
Yes.
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 and then my bigger question is just given the success of the restart in Italy with your sales.
Sales 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.
It would be helpful. I don't know if you can quantify in any way to put it would be great to kind of hear about what that has meant for.
Thank you.
Hey, good.
Good morning Robin.
Good to hear your voice.
Look first of all with regards to the ramp up than in Europe, where.
We are very pleased with.
With the experience in Europe at this point in are especially pleased that our guests are pleased with the experience in yours.
What those early sailings have been a bottle 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 gone well.
And again the bookings generally as we've talked about 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.
But we have seen.
Some increase interest even in those I would say more broadly and 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 sales in the us before the areas.
The reality is that the extension.
No sale order was only 30 days it goes out to two GAAP, tolbert, which aligns with what the industry had voluntarily.
Well its own sales.
We've got multiple testing regimens, becoming more available and more readily available we have the successful sales today ups and others and in Europe.
Hey, guys protocols and operating procedures, we put there and as I mentioned, we've got the high guest satisfaction.
On those screws and we've been collaborating here in the us with.
With all the various companies everybody has been informed 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 that industry has been able to align around protocols and operating procedures that you will be able to look at subject of course to approval from various authorities say half the way.
All of this and so we have at this time every reason to be optimistic that we.
That we will be sales in the us before year end with that David you want to respond on the commercial paper question sure.
I guess I just want to add one other comment on cost.
I think you know customer Jesper 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.
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 where.
We're in discussions with them to get this 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 research I didn't know how much should address it maybe just I don't know if you add clarification about.
It is it.
Your beliefs and your conversations with the CDC that they're kind of embracing any of the guidelines that have been.
We have been successful in Europe in a way that maybe wasnt reflected in the language of other extensions statement.
And now I would.
I would say I wouldn't try to venture and it turns out it can go.
The cdcs reach.
Receptivity prepared for very specific.
Total calls, but what I will say is that the CDC. They they've got a daunting task to.
And so they are trying to do.
Trying to mitigate the spreads this or that.
That is clear to them, we are as an industry totally committed to doing that as well.
Hi, its responsibilities at all top priorities always or compliance.
Environmental protection to the health safety and well being of our gas.
The people the places we go too and of course, our accrued at our shore side personnel and so we are.
Totally committed as a company and as an industry to serve in the best interest of public health and so I do feel that what's going on in Europe have some inflows split. The scientists are sales 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 salt and so forth everywhere and the various destinations we have to go to.
That said, 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 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 does the outcome.
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.
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 at this point given we can be in the height of normal flu season, plus obviously, all the overhangs from.
The kind of Covance care.
I think on the first was 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, if 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 work.
And again the taxi drivers all the people that go and catering and 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 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.
Commerce and livelihood and.
I mean, the quality of life.
Quality of life for people, so that would you answer that one.
Then the second question in terms of demand.
Just keep in mind.
We as I said, we have.
Demand from people, who are very anxious to cruise.
So we are not going to be able to bring all the ships back at ups the death.
The destinations are not going to 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 you know dumb.
Demand is going to be a big issue in the short term, we're bringing all the ships back at once where you have a heavy dependency on new to cruise that with no marketing because nobody's market for the past several months.
That could 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 crews credits from castle cruises and all those are real positive indicators, but David you want to add any color.
David you maybe on mute.
Okay.
Yes, sorry about that Arnold you you broke up permitted I do apologize.
Mike sell that's okay.
Yeah, I'm I'm Andrew location, so, yes, I lost a few number the word today I do I just.
Okay. So the only thing I would add I know I'm not sure. If you had made this.
Made this comment with that please.
The fact that when carnival glide path and now okay.
Change where they can.
Okay.
Cancel some crews busy November December out the cap in Miami in Port Canaveral, a couple of crews is open.
With the intention of restarting as you said before the end the year.
And remember we did tighten booking but she's just a demonstration of the demand that's out there as you talked about the pent up demand so.
So.
The phase.
Kind of cruising <unk>.
What we believe will begin behind shape as we move forward.
Thanks for that and then my second question a bigger picture question, but you know it.
If we look out a couple of years down the road are we correct to think that the.
The cruise industry could be set up to be a really an outstanding position once the world kind of goes back to a nor a more normal environment and I guess, what I mean by that is with so much capacity being removed to this point and 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 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, I haven't yet David I got it. Thank you I'm, sorry, you're absolutely right that the.
I was talking to that was that was on new condos try to minimize editorials. When you were talking to a lot of breakup, but in any event that you're absolutely right.
Because 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 at least efficient ships.
But it reduces capacity, yes, we are bringing on the 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.
We retain our cash generative assets and so.
And so the bottom line is there will be you know.
Somewhat constrained capacity.
Good adequately constraining initially and then over time still constrained because we would have gotten back.
For a while so where we were before and then not a lot of new builds for us and the 24 25 timeframe, but ask.
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 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 to cruise.
Cruise vacation as the highest level of satisfaction of all vacation alternatives and this is a temporary blip that we will be back.
We'll bring the scale back in a phased manner that 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 on the future looks very bright and that's why we made the comment that we also expect that over time, there was some kind of cruise operations.
To had to pay down debt and retail pack the balance sheet into a strong investment grade balance sheet once again.
Okay, great. Thanks, guys I 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.
Our no one likes to be good wine 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 failing before the year end in the U.S. and I agree and I think a lot of that.
[noise] information kind of point.
Kind of support your optimism, but there is a.
Thanks, and nervousness among the investment community that the CDC could extend that even further so just wondering why you don't think that would be the case.
I think on the CDC, obviously could be.
The issues there remain around what's happening overall with the pandemic.
The rate of spread in the U.S. really spread.
Although the related also to the ongoing development and availability.
Various testing regimens, obviously, a rapid testing low cost throughout the testing will make life simpler for everyone.
We seem to be very much on the path to availability for that so 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 it will continue to be positive.
So you know.
I can't predict the future completely but at this time you know everything is pointing in the right.
In the right direction, and and we feel confident that we have.
Protocols and operating procedures as demonstrated in Europe.
And which would be and has in many ways also here in the U.S. with us that particular situation, which will still be a result of the work though that.
That will be able to cruise, where there is no greater risk.
To.
Activities that people engage on a cruise ship.
They would homes similar shortsighted activities and and as I 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 you could possibly be well that already exists you know for example would noro bars show about 6% of the U.S. land based population experiences are a virus in a given year. That's the estimates and there is something like 0.07% on a cruise ship and the reason is because we have to deal with.
Dresses and stuff all the time.
Mers Sars Ebola.
Moreover, as the.
Good.
So we have medical facilities on board, we have medical screening you know a lot of things Handwashing at hand, Sanitizers those things have been present on cruise ships for a long time, so I think we're positioned.
We're positioned well we have to see I 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 sales.
Occasionally experience of a lifetime that it's safe.
Way relative to semi experiences they would engage in Atlanta.
Keep in mind, what we're doing to Europe.
It's not happening anywhere else.
Hotels are doing.
Ill universal testing of gas before they walk into a hotel airlines are doing universal test of Airlines resorts are doing that amusement parks are doing that.
Sales all have no medical screenings before you participate so we're doing a lot of things that you know it.
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 we're going to be open in a good position to delay.
To deliver less the same risk illustrious than people engaging in activities short so I hope that answered your question.
Yes. Thank you.
And David just.
Switching to you we've gotten a lot of questions from investors about what the initial rollout and that early transition period, where you still will likely be burning cash. So people are mainly wondering what the cash burn could look like in 21.
In early twenties line. So I was wondering if you could touch on that and also help us understand what kind of occupancy.
Need on a ship pay cash flow breakeven I know on 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 mapped to the operator, maybe kind of if you could talk about what you're doing in Europe as the 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.
Sure.
All bunch the question there.
No we as I had mentioned in my notes.
We are working through.
A large number of hi.
Hi different financial areas, but.
But it would be premature for me to give you as to the cash.
Burn you know in various areas because there's a lot of uncertainty as to the ramp up and how 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 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 and 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 we also have two ships being delivered just like in the fourth quarter, but we do have a number of dry dock for various reasons regulatory.
So that the numbers and then no revenue scenario.
But we do expect over time as we build the.
Bill the occupancy costs and meter and other brands to begin to generate positive cash flow from those failing and reduced cash burn off.
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.
Okcupid to onboard our vessels.
Hello, Hi, Chris Thanks to the protocols to ensure that together are satisfied as Donald mentioned.
The gas costs and EBITDA.
Excellent that is actually rating.
And so over time once we know we got things right. Our intention is to increase the occupancy level.
Hi, there right now.
There is Italy, and Germany, there is no hockey limit.
They are making sure that they.
Have social assistance.
And.
Increased the occupancy cordingley over time to mature household debt.
And then as far as the breakeven concern, we said that a number of times.
Breakeven on the various skepticism from somewhere between 30% to 50% occupancy depending on the size of this.
Yeah.
And of course, the yield that we had the prices that we read as well.
I think that answers all the questions did I Miss anything.
No you guys can just talk are you selling below 50% now.
In the beginning yeah, yes, we did say that we would start below 50% with cost feta practice, the protocol and work our way up.
And where are you now.
Where were below 50, and working our way up.
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 questions I appreciate it good morning, and I appreciate the color on pricing and it's obviously.
Adjusted pricing metrics, you gave a flat year over year is very reassuring, but did it.
But to the extent that some of us might be seeing a little bit of dispersing under the surface.
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.
Wait from Usthree industry overall.
Well, we would only comment on our own business, obviously in the UK.
You've heard that that.
At this time, we're not.
Experience any significant discounting or anything.
Our future on bookings and sales and then.
No that would be a climate I wish there David I don't know if you had any other color yeah. No I'd just reiterate that I mean I did indicate that the.
The booking curve in the back half of the or was it high end of historical range and when you take into consideration they haven't hit a few actually.
Pick out the Fccs.
And the onboard credits applied we indicated that pricing was in line with the prior year and.
And so pricing.
Is very good and I think that once the we get back to cruising as I indicated before carnival cruise line had seen a good demand recently when they.
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 Wifi and a high level of satisfaction that.
We've been able to achieve on the gas side, how west cost stuff I think that all bodes well for us going forward in the future.
Excellent.
Well I would just those certainly and once we start to see.
Certainly a 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 quite it during this period.
That will also.
Then well greater support for good.
Well good pricing going forward.
Got it and one more on that certain here, if I may I apologize, but I wanted to ask about the industrys sort of re.
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.
For testing, specifically and so what are the current issues in status around procurement there.
Yeah, I think several things one we.
We're not filling up.
Here in the U.S. and so the testing is continuing to evolve availability of testing thats evolving but in many places in the U.S., though.
There is access to TCR testing.
Turnaround times that would allow you to within five days are low so we'll take it to us and be clear then when many cases free of charge.
And have that plug of those from a sort of follow the that you recorded three and be in a position them to.
Show that you're in a category that we were allowed to the board to ship subject to additional screens and so on so I think.
So I think that's where it is today also as you know there's rapid test got a very low cost and.
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 month.
Months coming here before more than likely before the end of the year. So.
So that would be able to 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 Domino's working all quite well.
There's not a major barrier at this point for the testing for someone that consider cruising, but it is an effective tool to minimize oh I'm betting kogut onboard suppliers.
Well, there's nothing that's going to preclude completely.
So the other part of the protocols of course is what do you do when there are symptoms on board. Our days EBITDA comes from case, so that you're not disrupting everyone else's crews and we've done a great measures and that mitigates spread with physical business sales.
Davis.
Davis.
In the finance area. So you would say social distancing, but he's actually social graph, but but outside the <unk>. The rest of us on a cruise and we talk about physical doesn't think those crews is all about social skills exchange, so physical doses sales.
It's a law wouldn't ask wearing it and all the proper things you need to do this year round of communicable.
Communicable disease, and so oh, while at the same time people are still having a good time to enjoy themselves that have a great vacation experience. So we'll see how it evolves. There's so many different sales regimens out there, though and we'll finalize as we get closer in and of course be incompliance with.
We reach because it's not just about.
So, leaving the U.S. you want to go somewhere and wherever you go they're going to have therefore, the calls and so we have to be compliant with everybody.
So that will kind of determine in the OEM.
I don't make up but the point is.
There are more tools in the toolbox, though.
We've demonstrated an ability to execute universal testing in Europe and.
And we have every right every reason to believe that.
That it is the right thing to do but also is something that can be executed new 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. for time to surface thing.
Yes, they said.
Hi, there, it's something they settle adult that they are lumpy, it's not enough of the green light to go ahead.
Yes in Q4 in the U.S. or would you rather wait for formal approval by the CDC.
I'm, sorry could you repeat I missed the first part it was a little garbled I'm sorry could you repeat your question.
Yeah, if you're seeking.
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 formal approval clearly that comments last week was still pretty cautious.
Yeah, I think again 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 sales 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 collaborating you know, we 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 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 sales and that we can handle issues that surfaced any issues the surface.
The ships so.
If there is no sales water. The fact, though that is a cool okay. They may have advice or warnings for certain people with underlying conditions, which we would as well you know what I mean et cetera.
But that is an effect.
And you're free to sale. So we'll see what happens there I know that but at this time as I mentioned, we just have every reason to be optimistic that we will be able to sales in the U.S. before the end of the year based on all the things we share.
Thank you Jackie and then I'm going to put a final 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 mentioned DLC sales protocols to the U.S. that might be five days. The school is one issue with getting the 10.
Getting equipment can you not replicate docking in in the U.S. and have the actual test customers. The ship. It just seems a lot sales for that having a flock Dayton evolves.
Well actually there.
Differing opinions on what's the scientists on whether you are better served 24 hours supply days before you know or you are better served.
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 that piece.
We have symptoms and so on on board. So you can mitigate spread and even with that said there is a risk of Kogan on board are somewhat unknown risks or someone actually helps cotwo. Those other important things the details on at embarkation 24, there's different opinions 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 all of those protocols whichever way you go whether using European one are useful in 24 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 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 going to be bearing that cost or is it the consumer benefits you guys.
And if it's you guys should should we be thinking about some material costs.
Cost overhang is as a result of focusing all your customers.
Again.
I don't want to get into a lot of things, we don't know yet because we have to do all of this obviously and in full compliance with whatever the authorities that bode well say we need to do.
But I would say what exists today here in the U.S. a number of people a number places you can be tested at no cost today. There are what PCR testing there are you know.
So 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.
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 you know, it's a cost that will be bad born and it will obviously go into the oval all cost.
Vacation experience and but in some cases that costs are you may be the ROE or it could be you know whatever the going rate for a PCR to assist today are with the different testing regimens that are coming along though it could.
It could drop to very low cost depending on what's available with the appetite.
The APA 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 commitments that we will do universal test it and remember early on it's going to be not is not going to be the entire fleet.
It would be some shifts going to 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 a bit.
Really helpful and then with regard 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 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 little bit first of all if you could could you share with us sort of a timing of bat 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 masks can do with that thing would 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 identical gets 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 or we can also.
Some cruises on carnival, the other day and the and the crews as we had remaining in that timeframe.
The bookings tripled.
So there's there's pent up demand.
Crudes.
Thats 0.1.
We have a huge previous cool store base and they are comfortable and cruise ships.
I understand the medical screening the medical centers, the physical distribution capability on these larger ships they get it they understand it and as I said the guest experience and.
Here are some background noise if that could go on mute, but the guest experience Oh in Europe has been high this satisfaction has been high so.
So so those are all positive indicators. So we feel very good about the demand pull.
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.