Q4 2020 Royal Caribbean Cruises Ltd Earnings Call
Good morning, My name is Shelby and I'll be your call.
Operator today.
At this time I would like to.
<unk> went to the Royal Caribbean groups business update and fourth quarter 2020 earnings call.
All participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
I would now like to introduce Chief Financial Officer, Mr. Jason.
Some liberty Mr. Liberty the floor is yours.
Thank you Shelby.
Everybody and thank you for joining us today for our business update and fourth quarter earnings call. Joining me are Richard Fain, Our chairman and Chief Executive Officer, Michael Bayley, President and CEO of Royal Caribbean International and Corolla mingled Meaney, our vice President of Investor Relations.
During this call we will be referring to a few slides, which have been posted on our investor website Www Dot RCM investor Dot Com before we get started I would like to refer you to our notice about forward looking statements, which is on our first slide.
During this call we will be making comments that are forward looking these statements do not guarantee future performance and do it.
Involve risks and uncertainties. Examples are described in our SEC filings and other disclosures.
Please note that we do not undertake to update the information in our filings as circumstances change.
Also we will be discussing certain non-GAAP financial measures, which are adjusted as defined and a reconciliation of all non-GAAP historical items.
It can be found on our website.
Richard will begin by providing a strategic overview of the business I will follow up with a recap of our fourth quarter and full year 2020 results. I will then provide an update on our latest liquidity action and on the booking environment. We will then open up the call for your questions Richard.
Thanks.
Thanks, Jason and good morning, everyone, even though it's a late February I still wanted to say happy new year, because I expect that this year will be so much better in so many ways in the last year.
At the same time, it's hard to believe that were only seven weeks into 2021, because so much has already happened.
It's been very intense for the last month of the half.
And because things are happening so quickly I think it's a good time to take a moment to review what we at the Royal Caribbean Group have been doing over the past year to adjust to the realities of the pandemic in the United States and wherever we sale and wherever we operate around the world.
As we've summarized on slide two 2020 was an unprecedented year in which our teams took on an accomplished actions there were unthinkable just 12 months ago.
I think that there was not one job that stayed the same in the <unk>.
Few months our.
Our teams moved our whole fleet into.
Repatriated more than 45000 crew members to their hundreds of home countries restructure our workforce implemented new credit programs for our guests took care of our travel agents and raised billions of dollars of new capital all while working from home.
It's been incredibly challenged.
<unk>, but everybody has seen the rise to the occasion.
Now the most important point to keep in mind and so while most of our ships are still sitting idle.
And while we suspended most of our global operations through April.
At least through April our company has also been moving ahead to create the conditions and to prepare.
Prepare for a healthy return to sales as.
As we continue to navigate this crisis. We've made continued progress on many fronts as noted on slide three.
One of them, especially speak about how we're engaging with various stakeholders, particularly governments and other actors in the travel industry to ensure that we can.
Ramp up and restart quickly I'll, let Jason talk about the initiatives that we've taken on the finance side.
First let me recall, what we've accomplished where they're healthy sales panel of medical public health Maritime Bio security and other experts we've taken their 74 recommendations for a healthy.
Return to service as the basis for over 2000 and separate protocols from passenger testing before sailing to physical distancing onboard the disembarkation of Covid Covid symptomatic persons all of these things will give our guests our crew and the destinations that confidence that the environment.
Healthy women celebrity Silversea or TUI ship is safer than a walk down My main street.
We know that we not only need to provide an environment that protects our guests from COVID-19, but also works to protect all of our people from having their vacations disrupted due to an isolated.
<unk> case.
At the same time, we have to recognize that the panels recommendations where were intended to address a pre vaccine environment.
A lot has occurred over the last four months since they report was submitted not the least of which is that we are regularly vaccinating over a million and a half people a day here.
On the Royal States.
Many elsewhere as well.
And so we continue to work with the panel led by Governor Michael evident Dr. Scott Gottlieb to identify the safest pathway forward in the new post vaccine environment. When we can protect our guests and crew as never before and.
Here in the amortization and the conclusions we draw from them will inform and advance our dialogue with governments around the world, including the CDC under its new leadership.
At the same time I believe strongly in the power of positive example, and in Singapore, We have a good one on how we can safely resume cruising while giving our.
These funds will experience they expect we've been operating there since early December.
And even before that we've had successful operations, which continue now in Germany in Canary Islands, Greece in the Middle East.
These early return to service not only provide vacations that they provided.
Our guests to entity to demonstrate proof of concept as well.
These early cruises provide valuable information about the best way to design and implement our health and safety protocols. They provide important learnings on how we can coordinate most effectively with governments port authorities travel partners and others to protect our guests crew.
Our per tested nations revisit.
These early cruises have also given us the opportunity to design, new attractive itineraries, where we can better control of the experience.
Now after 11 months of a pandemic.
We all know the Covid fatigue is real.
Are clamoring for the opportunity to have experience.
And inside their homes every day, we see signs that people want to get out and get away.
And once we're able to reopen and we start more broadly will be ready to respond with our best in class hardware, including our new buildings Odyssey of the seas celebrity apex, and silver mode, and our exclusive private destination.
Outs like perfect day at Coke Okay.
Before I hand off to Jason I do want to brag on our team just a little bit, but again, the dedication commitment and the integrity of our employees throughout this very difficult period has been exceptional in their individual and combined contributions have been extraordinary.
I am.
Nations every day, but what they do.
Also wanted to give a shout out to our loyal and committed travel partners for their ongoing support and to our investors for their trust.
So thank you all and now I'd like to turn it back over to Jason Jason.
Thank you Richard.
This morning, we reported a.
Impressed the net loss of $1 1 billion for the fourth quarter of 2020.
And a $3 9 billion for the full year.
Due to the suspension of our global operations, we were able to operate only 20% of the revenue cruises initially expected in our February 2020 guidance.
This simple stat reflects the staggering impact.
Adjusted pandemic brought to our company and the whole industry during 2020.
In the fourth quarter, we were able to reduce our quarterly crews operating expenses by more than 80% from one 5 billion in Q4, 2000 $19 million to $265 million in Q4 of 2020.
We achieved this by expeditiously laying.
Laying up our fleet and be becoming extremely diligent disciplined and agile and controlling our costs.
Something similar can be said about our general Capex, which were reduced by approximately 55% between 2020 in 2021.
I am incredibly grateful.
<unk> from the entire corporation and managing.
Pak true the toughest year in our history.
From a financial standpoint, our top priority remains ensuring that we are in a strong liquidity position.
While reducing our cash burn was and still is critical another crucial liquidity actions accessing capital prudently and Opportunistically, while also managing.
Managing our liabilities and our banking partners with our banking partners and export credit agencies.
Since we suspended our global cruise operations, we have raised about $9 $3 billion of new capital and have secured agreements to defer almost two 2 billion of ship related debt through the spring of 2022.
These later.
Managing our reducing our expected debt maturities for 2021 to approximately $400 million.
These successful transactions in negotiations where possible due to the strength of our brands the relevancy of our product and the great relationships that were built during decades of collaborative work with banks shipyards and vendors.
I.
Our efforts to highlight that this superb outcome was a huge undertaking executed by our amazing finance legal and accounting fees.
Now regarding our current liquidity position we closed the.
We closed 2020 fiscal year with $4 4 billion in available liquidity.
We remain focused on further improving this position while also managing.
Also our operating and capital expenditures to ensure that our family of brands are well positioned for the return to service.
I will stress that as we returned to service and stabilize our operations our cash flow will be primarily driven.
Our cash will be the primary driver to Delever, our balance sheet returned to investment grade.
Managing and create great shareholder value.
As it pertains to our cash spend for the fourth quarter. During the fourth quarter. We spent approximately $1 3 billion, which includes the payment of approximately $300 million of bond that matured in November and approximately $180 million from collateral postings.
Good fishing and financing fees.
When excluding these are average cash.
Burn rate was on the lower end of our previously announced range driven by the phenomenal diligence of our teams and some timing.
Furthermore, this morning, we reaffirmed that the cash burn will be on average in the range of approximately two.
<unk> hundred $50 million to $290 million per month during a prolonged suspension of operations.
Over the last year, we have executed several measures to structurally reduce our cost base realign our capital allocation and improve our scale and margins.
Besides reducing our G&A G&A expenses and streamlining.
Commitment efforts, we successfully divested three of our oldest ships and entered into a definitive agreement to sell our Azamara brand.
Reshaping, our fleet's efficiency and incorporation cost structure will help accelerate our margins by improving our operating leverage as we returned to service.
I will highlight that when we return to service.
And start to ramp up our sales, we expect that customer deposits and cash flow from operations will further improve our cash position.
At the same time ramping up our business will also include startup costs that relate to Crewing Crewing, our ships health and safety protocols and increased sales and marketing activities.
The environment is still very fluid, we are not able to provide further guidance or commentary on these figures.
I will now provide an update on the booking environment and our capacity.
While bookings remained below historical levels, we have been constantly impressed and humbled with a number of cruises booked throughout this extended out of service peer.
It's clear that a lot of people want to cruise and we can't wait to welcome them back on board or.
Our amazing brands and ships.
Clearly 2021 is not going to be a traditional year and to this end we did not plan for a traditional wave season, and therefore, our sales and marketing activities still remain anemic.
And extremely strategic.
Currently we don't expect to broadly ramp up our marketing until more ships come back into operation.
The lack of marketing spend we have seen a 30% increase in new bookings since the beginning of the year when compared to November and December.
Our lift and shift.
And future cruise credit programs have been very successful in both preserving cash and driving demand for future periods.
Having said this I will highlight that from a cumulative standpoint, almost 75% of our book business is new and not related to re booking activities.
The cumulative book position per.
Her sailings in the second half of 2021 is aligned with our expectations.
A resumption of cruising with pricing higher than 2019, both including and excluding the dilutive impact of future cruise credits.
It is probably too early in the booking window to talk too much about 2022.
Year to date is quite similar to booking activities in previous years.
Our book position for the first half of 2022 is within historical ranges at higher average prices.
As I noted we are not expecting a traditional wave season. However, we did see a similar increase in 2022 bookings.
But within the past six weeks to increases seen in prior years.
We think that this is a very this is very encouraging stat, giving our muted sales and marketing efforts.
Regarding our deployment, we are not ready to announce any specific.
Surrounding the cadence with which we will be bringing our fleet back.
Into service currently we have canceled sailings on most of our ships through the end of April.
Our brands operate in multiple markets around the globe, therefore, the timing and pace of the ramp up in capacity will likely vary by region based on local conditions.
We are already operating quantum of the seas in Singapore and our second.
Kings or the shift in the water could also be outside of the U S.
We're also using the learnings from Singapore as well as from our TUI cruises joint venture who has had ship sailing in Europe in the Canary Islands since August and November.
Which is helping us.
Inform on how.
How how the ships will return to service.
Our customer deposit balance at the end of December 'twenty 'twenty was $1 8 billion. This.
This was relatively equal to the balances reported both at the end of September and at the end of June we were able to maintain a similar customer deposit balance for six months. Despite the suspension.
Pension of approximately 1100, failing because of the deposits collected on new bookings and the success of our future cruise certificates and lipton shift option.
Just over half the guests who booked.
Who were booked on canceled sailings have requested a cash refund with the other half either holding an FCC or lifting.
And shifting their booking to our future cruise.
Also approximately half of our customer deposit balance is associated with FCC's.
And Moreover, about 30% of the overall balance is nonrefundable.
As it pertains to our expectations for 2021, I will note that the timing.
Timing and trajectory of the recovery remains uncertain and we are therefore unable to provide further guidance for the year. We do expect however to incur a net loss on both a U S GAAP and an adjusted basis for the first quarter and the full year of 2021.
The magnitude of the loss will depend on many factors, including the timing.
<unk> an extensive are returned to service.
I will close my remarks by saying that we are clearly focused on what we can control.
But as the vacuum distribution continues to accelerate travel restrictions and advisors begin to ease and customer confidence begins to growth, we feel very optimistic about the future.
With that I will ask our operator to open up the call for a question and answer session.
Shelby.
As a reminder, if you would like to ask a question. Please press star followed by the number one on your telephone keypad, we do ask that you limit yourself to one question and one follow up.
Well pause for just a moment to compile the Q&A roster.
Your first question is from Robin Farley of UBS.
Great. Thank you for taking the question I know, it's very difficult to get any visibility on the timing of a restart I wonder if you could.
Telephone you mentioned your your fuel hedges you talk about you're adjusting it for forecasted fuel consumption.
I Wonder if you could kind of tell us what youre roughly thinking about it for your fuel consumption as a way to sort of help us think about.
You know what that would look like versus a normal year and then also specifically sort of related to Alaska. Two I'm wondering if your fuel consumption.
<unk> for that market two thank you.
Well, thanks, Robyn and by the way, that's let's say, that's a very interesting angle and trying to get us to.
Provide.
Provide.
How many ships are we expect to have up and running in the on the water.
So our on the fuel consumption side as I, just like everything else, it's very fluid.
Yeah.
And it will be based off of the timing on when we would.
Go back into service. So I don't have a specific number to guide you too although it was a creative way to ask it.
But yeah, we are.
Well disclose that as we know.
What the deployment will look like specifically and the shifts that.
I will come up and running.
Okay, Alright, maybe then just as a follow up.
Don't get Mike My first one just a just a clarification and in the release when you talked about second half of 'twenty. One pricing you said, it's higher than 2019, and I just wanted to clarify with a higher than second half.
Half of 2019, it doesn't specifically say that or did you just mean higher than 2019 overall, because obviously it has a little bit.
With different meaning.
Yeah.
Specific around the two the overall 2019, but it was similar.
Answer for the back half of 19.
So another words second half.
'twenty one pricing is above second half 19, specifically, both with and without the future cruise credits.
That's correct, okay, because that's an improvement I think since since your last quarterly call. So okay great.
Yeah.
Yeah, a little bit more but I mean, we're very as it's as we said before I mean, we are.
There is clear demand.
And as we look at 2021 based off of the different scenarios, we have in terms of resumption of service.
The volume that we see on a demand standpoint our.
And our perspective is impressive.
Okay, Great I'll hop back in.
Two more questions, but I will I'll get back in line. Thanks, Alright, Thank you Robyn.
Your next question is from Steve was in ski of Stifel.
Yeah.
Hey, guys good morning.
So so Jason I guess first question would be around the first half 'twenty two booking commentary I'm not sure the.
You know the right way to ask this question, but can you help us think about how much of your your first half 'twenty two inventory as is currently open for sale and I. You know I don't know if that is 100 per cent or at 50 per cent or whatever that number is but I'm trying to really understand that pricing comparison relative to to 19 I think there's some confusion out there with investors about.
You know what day, you know what that looks like actually on a on a pure like for like basis, and hopefully that makes sense.
Yeah well.
Most of our deployment is open before for the first half of 2022.
Now it is very early here in the booking stage in where we're sitting here in the first quarter.
In 2021, and historically, we don't really talk about 2022, but what we're seeing them continue on as our customers. There's a lot of pent up demand for.
For vacations right, they're saving more.
Dan.
They bypassed many of their vacations.
So they're.
Trying to eye out when we're going to return to service and they're going to be able to to go and enjoyed the vacations that they that they had previously planned.
And so I think when you look at the first half of 2022 again, it's very very early the pricing that we're seeing relative to like for like for <unk> for 19.
Jos.
Oh.
I'm going to repeat either with or without any application of future cruise certificates.
Okay understood.
And then second question I guess would be around your your liquidity position, which you know again right now still looks pretty solid on paper, but you know Joe you.
He made somewhat of a common or at least I think he did that says you know you're still looking at kind of where you're taking proactive steps. So just trying to understand you know what those steps could mean moving forward and you know kind of are you still evaluating any option possible out there.
Over the near term.
Well.
First of all we have a lot of options.
So it's not just some options we have a very full quiver of.
Options.
Both on the capital market and even non capital market activities.
Whether we still have a lot we can access as it relates to our debt baskets.
You can access equity and other instruments.
But we are and we have been extremely methodical.
About our capital raises some of it's based off of the operating landscape.
Of it as being opportunistic and seeing how we how we can you.
You continue to focus on the balance sheet.
Obviously, we will just continue to evaluate the situation and based off of that we'll look to continue to be in a strong liquidity position.
So that as we return out of this.
Business can accelerate.
Okay got you thanks, guys appreciate it.
Thanks, Steve.
Your.
But it is from James Hardiman of Wedbush.
Hi, good morning.
So two questions for me thank.
You guys talked about on some of the prepared remarks, just how.
Much time was spent by the healthy failed panel trying to figure out how to fail in sort of a pre vaccine world obviously.
Question, where the world in which we live and so I'm just trying to figure out how the cruise experiences what it's gonna look like in 2021, and maybe beyond but I guess for starters the whole notion of a vaccine requirement onboard some ships on board all shifts maybe speak to.
And maybe the C D C willingness to let some ships sale earlier.
If you know you have a critical mass of people that have already been back to Nate.
Financer.
Financer that.
Youre right the healthy sales panel's work and <unk>.
For that lets discussions or pre vaccine and vaccine really does change it.
We're really in the.
Interim period, where the vaccines are still relatively new they're coming out amazingly quickly, but it still is going to take months.
To get.
Huge.
And all of the people vaccinated.
And so we and C D C and governments around the world are looking at how that would change it and we don't have the answers yet.
I think one of the things everybody is looking to see is just how effective vaccines.
Numbers are.
And people actually want to see that happening and one of the nice things. We have is we can look at the example of Israel, where.
The vaccination level is one of the highest in the world.
And therefore, they are able to make some very significant.
Seems a statistical correlations and one of the things that you've seen coming out of there for example is that the.
Hum.
A number of people who are.
Get the disease, who have been vaccinated is the efficacy is as high or higher than the than the.
<unk> trials that were done and this is now on larger numbers of people. So that makes it even more reliable, but more significantly. We're also seeing the ability to prevent the disease.
Being serious and people is even better than that so these are in.
In the history of vaccines in the World. These are really exciting kinds of levels that give us all a lot of hope, but we really need to see it in practice.
And it's really hard to say.
While we're not yet at a point, where there are enough people have been vaccinated, but you could say okay.
Everybody onboard relative in vaccines that sort of thing.
But it is something we think that the vaccine is of course, the ultimate weapon and the fact that it is coming out and beginning to come out so quickly and liquid.
The pace of that is growing well.
We will be a basis for.
Okay.
Of approaches, but we haven't.
We know where the governments around the world or the milk himself panel has yet.
Been able to define exactly what that will look like.
Got it that's helpful. And then my second question is maybe for Jason I'm trying to wrap my head around.
A new sort of the new revenue and margin profile of your of your post pandemic fleet, obviously, you've gotten rid of quite a few ships and so on I don't know the best way to frame it whether it be to talk about what what the yield <unk> margins were on the ships that you got rid of.
Or just looking back to.
Round, but a pre pandemic margin levels of call. It 19, 20%.
And sort of order of magnitude what those could look like once we're back to quote unquote normal, but with or without.
Significantly our newer and presumably more profitable fleet.
Yeah.
Yeah.
I do appreciate the challenge James because we Joe.
Obviously.
It's still early for us to kind of talk about what margins will look like as we come out.
The sale of all Tomorrow, we've sold some of our older tonnage.
The net of that is it will be.
It's a.
Very slight good guy on a yield standpoint, it would be a good guy on the cost standpoint because.
The ships were smaller so spreading the spreading of costs were.
Not as efficient.
But you know as an organization, we have and we continue.
To take you know take advantage of this opportunity to analyze our cost.
And find ways to be more efficient as we come out of this.
We have the ability to add on to those margins.
It's still too early to talk specifically about how much that will be.
But.
You know, we're you know we're trying as I kind of describe it you know our goal is to kind of be in our in our our wedding wheat.
As we come out of this and and then accelerates.
As we as we move back into service.
Got it and just just to clarify you called out a couple of good guys. There aren't any bad guys we should be.
But in terms of the margin in a post pandemic world correct.
Yeah, I mean, I don't I don't think there's necessarily bad guys. Obviously, we will have returned to service costs here as we wrap ourselves up which could just make it look a little bit lumpy in the beginning I also think.
It is important to note that.
Besides for the ships.
Thinking about sold or the or the brand that we have sold.
We also have an incredible new tonnage that is coming in into our.
Our fleet and so as we know those ships are the inventory mix is better they're much more cost efficient on a fuel perspective.
And they deliver higher.
We have virgins.
All the ships in which he Richard had noted that are coming in here in the next couple of years plus what we have on order will also help us expand our margins further.
Got it thanks, Jason Thanks, Richard.
Our next question is from Brent <unk> of J P. Morgan.
Hi, everyone. Thanks for taking my questions.
I wanted to talk about Albemarle quickly, hoping you could give us some comments around the process there and I think it was competitive and how long you've been working on it and then and then shifting gears to maybe additional ship sales what are the different factors, you're assessing for potential future ship divestiture.
And sort of what are the flexibility you have around that and your existing credit agreements.
Yeah sure so on the Army Azamara sale.
It really kind of through this whole process. We have we have really tried to be opportunistic and.
Strategic and look at as we as we are today and as we were.
That is true to this how do we want to prioritize.
Yeah.
Whether it's how we're investing or how we're supporting our resource base a missed opportunity came our way here with Sycamore It gives on tomorrow and opportunity to growth.
And and and I think that.
We'll come out it's a it's a great brand that we think are.
We'll do quite well under this other other.
Other venture.
I think moving into other ship sales and so forth yeah, we remain opportunistic.
I think we need to remember that pre pandemic all of these ships generated.
You know, we had a bit of cash flow.
And so it needs to be you know for US typically the test on a ship is little bit less a little bit less about the.
The cash that we would receive it's more strategic on whether we think the ship.
With whether it's in its current state or through some moderate investment.
Not quite as something that fits our brands.
Another brand within our within our our our organization or even with our JV and that's that's kind of how we look at it and I think we'll remain opportunistic.
Okay. Thanks for that Jason and then if I could just fit one more in here for this summer.
But where I.
I assume you don't need CDC certification to sale, but presumably you know a decent portion of your guests are coming from the U S and we'd have to we'd have to fly over I guess, maybe just as things stand today for the summer sailing in the med can you just reframe maybe the range of scenarios that could that could have that could play out there.
In Europe.
Okay.
Hi, Brian It's Michael Yeah, I mean technically the.
Our operations in Europe.
Correct to the CDC jurisdiction, but.
It's a fair to say this.
Awful lot of Americans, who do fly out to Europe to join us.
There being products, particularly for Royal and celebrity.
So nevertheless will be guided by.
The protocols either through the healthy sales panel because they come from the European Union or the U K.
So we know that the operations in some of the European countries, particularly Germany, Italy have been ongoing.
Over the past couple of months on the scenario and.
Those.
Protocols that have governed operations basically being.
Based on the cover.
Healthy cell panel for the clear member policies, and then overlaid with specific instructions by the National Health Authority.
<unk> is very similar to what we're going to see in the United States, which is as we continue to see a infections decline in vaccines increase then were going to move to protocols that probably have some kind of hybrid between vaccines and testing.
We are fortunate in.
What we're gonna that were coming through the winter season. So it's incredibly low in terms of volume and revenue during the winter, but were entering into the spring.
And for.
For the Royal Caribbean Group, we have multiple ships that are currently deployed and into our European operations. So it's gonna be subject to the guidance.
In a way either.
European Union or the U K authorities, and we imagine that there'll be very similar to the guidelines that we'll get from the C V C.
Does that does that help or do you need more more color on that.
And if you wanted to provide money I know that.
That's very helpful. I appreciate it.
Okay.
Yeah.
Thank you your next.
Your next question is from Jamie Katz of Morningstar.
Hi, Good morning, Thanks for taking my question I guess I'd be curious to hear what changes have been made to content that we can implement.
Domestically.
Sure Frank when they start sale begins and then a question.
Is there something that you got.
They're getting differently, maybe just sort of geographically difference.
And that leads me to believe that May one is a better start sales eight engine language or we can put out there. Thanks.
Hi, Jamie it's Michael.
As Richard commented.
In his opening comments, we're really pleased with the performance of quantum in Singapore, It's been.
An incredible learning experience for our company and it's been a remarkable example of great collaboration between our cruise company.
Health Ministry and the government of Singapore.
So we've been operating now for close to three months we've carried.
Really around 35000 Singaporeans on Ocean cruises.
Customer satisfaction Ironically is higher.
With our protocols than it was before.
The protocols, which is which is quite quite fun in a way.
Our revenue has exceeded our expectations both from a ticket and onboard revenue perspective.
So the overall performance of our products has been really quite strong it's subject to a series of protocols that is U S.
Before a bastion are probably very similar to a framework that we may be operating with in the future out of the U S or Europe.
But it's a changing landscape. So what we've started with in Singapore in terms of protocols already being reviewed in this in.
In the coming weeks, we expect some of those protocols to be change.
As you can pool low track to constraint in the beginning of our Singapore operations was tap.
Capped at 50% and.
When I'm in discussions about increasing that count to 65 per cent in the coming weeks.
And some of the testing regime has changed.
So one of the things that's.
For example from quantum well.
Well two things one is that operationally, we've really begun to understand how we can work together with the health Ministry to safely operate.
A large cruise ship.
During the Covid times.
And we've also gained from our investments in technology.
There are two technologies that have come from quantum but really a game changing one is the IMO string which completely transforms the whole process of lifeboat my strength and it's all done digitally through through your iPhone or in an app.
The second is we've really.
So technology for contact tracing using the combination of technologies one of them is a tray slip, which basically each guests with and can tell exactly how long and they've been in contact with everybody else who's wearing a trade slip.
Then we have artificial intelligence connected into basically.
The reality T V cameras that use them for.
I shall end body recognition to then double check and verify contact tracing in the event that somebody did have COVID-19 on book ship, we've been fortunate that that hasn't happened, but that technology development is really we think groundbreaking in very.
<unk>, just Takeda and.
In our conversations that we had the week before last with the C. D C based.
Specifically asked us to share that technology and.
What we've been doing in Singapore with them, which we've subsequently done so.
There's a lot of lessons being learned and.
So I think I think ultimately it.
It will create a foundation for how we'll operate but again the landscape is changing quite significantly as well with the with the vaccines and the infection rate.
Thank you Jeremy.
Yeah.
Your next question is from Stephen Grambling of Goldman Sachs.
Thanks, perhaps I missed this in the intro, but as you've seen an improvement in the mix of new bookings can you comment on what the demographics of the new bookings look like versus history as you've been marketing less in other words are you seeing any change their bifurcation demand trends between older versus younger new to cruise returning or by region.
Steve and let me comment and I think Jason and I will jump in as well.
One of the things that we've seen.
Really after we came out of the holidays early in January.
Is a.
Proportional increase in the number of guests booking who 60.
Five plus.
And that has continued to increase so as the weeks have passed.
I believe we don't know if this is a fact, but I belief is is that 65, plus or getting vaccinated than their August is becoming more comfortable with booking and we're seeing that very much in our bookings from about January.
64, so I think that that's something that we think is.
It is a major positive obviously is the vaccine spreads down into the population by age group, you'll see that probably accelerate and that's also true of Silversea, which I think even before the holiday started to see an uplift in bookings coming in based.
Upon age demographics so.
We see that as a positive and obviously as this continues.
You know, we expect to see more bookings coming in by by every age category.
Just a just a few other things that I would just add to it.
We've also.
Over the past year, we have seen.
A disproportional amount of our loyalty guests as well as experienced cruisers.
As part of as part of the mix of our bookings what we have seen more recently, though it's not back to where it was pre COVID-19.
It has been an increase in the first two crews coming back into the space.
Other point that I would just add is and some of this I think it's because people are being vaccinated and to Michael's point of 65 plus.
But as the distribution of our shots in the arm of.
Of.
Of our of our.
Hum the vaccines are being rolled out.
We're seeing that there's a pretty strong relationship to booking volumes and and and vaccines.
So that is that is I mean something to point out that.
Are they one they're obviously, they're the people 65 and older who are getting the vaccine who are now becoming confident to travel on the other side of it. It's also building confidence that we're getting closer to the other side of this and people are beginning to realize that that that travel should be here.
One sooner rather than later and so I just want to make that point as well as there seems to be a tight relationship to that.
And it just makes it that Steven just to add one one more comment that that surprises on quantum's bookings is because we saw an exceptionally high.
Number of new to cruise booking with Clinton.
Which surprised us, but that's a real positive.
That's great to hear that as a follow up on the balance sheet. Jason how are you thinking about the appropriate net debt to EBITDA level near term and long term as we think about a recovery path.
Yeah, well the near term will will really be based off.
Richard when we were able to return to service. So it's tough to kind of peg exactly hum.
The coordinates within a certain period of time.
We are extremely focused.
Our board down on getting back to pre COVID-19 levels as soon as possible. So on a balance sheet basis that means for us to be three five times debt to.
Our better and obviously most of that is going to it's not all of that is going to come from the generation of cash from operations.
But we continue to look at.
That that path as we get back into service here to try to get the balance sheet.
Go back in and.
EBITDA.
Yeah.
Got it thanks, I'll jump back in the queue.
Great. Thank you. Your next question is from Ben Chaiken with credit Suisse.
Yeah.
Hey, How's it going.
I guess on the booking side did I catch did you guys say that January and February are implied.
In a healthy January and February were up 30%.
November and December so a sequential comment there I guess, if that's correct and then we're in November and December perfect. Sorry got you said that's correct.
That is correct then and of course November and December were tough months because of.
Slide you know just a incredible rise in cases in society.
Gotcha, Okay, and then I guess, but then you saw the tailwind from normalization plus the 65 plus comment you're kind of alluding to.
In a previous question.
Well I think its I think its normalization as is or.
But really you're seeing a a decrease our and cases and you're seeing.
They're rolling out the vaccine, but I do I wanted to bifurcate the point again on on the relationship.
You have to the vaccines, because it's not just honestly people.
If I remember who've gotten the vaccines, who are now focused on their travel, but I think it's also a stimulus.
Of of complement and the consumer that there'll be able to travel soon again. So you know we're also it's not just an increase in 65, plus we're seeing an increase in all the other demographics as well.
Gotcha that makes sense, that's super helpful and then as it pertains.
People see D. C. I think then if I'm not mistaken I think the next step is to potentially get some technical instructions back I'm curious you have any view on timing there and then a day if not maybe alternatively key questions, you're hoping to declare upper get answered there.
Yeah, Hi, Ben Yeah, we've been in regular communication.
The C D C booths at the with the maritime units and at the executive level and.
With literally expecting the technical specifications any day soon so that it's an intergovernmental process between several agencies within the government that are reviewing the technical specifications.
But.
They have assured us that as soon as.
As soon as all of these things come together, they want to get us back into our operation. So we're just literally waiting and I think I think.
Again to previous comments I think our level of optimism is increasing as we see the infection rate.
Rates declined so dramatically in the U S and the number of vaccines increasing.
And so.
So we're waiting and you know.
Hopefully we will get them soon and we can we can start our trial selling so I think you may know that when we asked for volunteers Royal trials sailings, we received over 250000 volunteers. So there's plenty.
Any of people interested in cruises.
Gotcha, that's great I appreciate it thank you.
Youre welcome.
Thanks, Dan.
Your next question is from Asia Georgieva of Infiniti research.
Good morning. Thank you for taking my question and just to follow up on Ben's question.
Now with the change of guard and the C. D. C are should we expect a more streamlined process, including vaccinations in the job in terms of cases.
We're both you and all of us have more visibility in terms of how the pluses will evolve a technical.
Oh waters.
Saturday.
Yeah.
Hi, Asia, Yeah, I think you know I think Uh huh communication and dialogue with the C. D. C is as productive.
You know, they're dealing with an incredibly challenging situation and environment.
And.
When we have our discussions it's a relatively open process and as.
As Dave explained to us.
On many occasions.
This really is about what's happening with the virus and you know and they've they've showed us on several occasions that when these.
These indicators really start to move in a very positive way then they'll they'll start working with us to get us back into operation and that's exactly what we're seeing now so I must admit every single day I go on the Covid USA chart on Google and so you have the trend line is in its just plummeting so.
My sense is is that we're getting closer and closer to two to good news.
Michael has the C. D. C are all find any sort of a threshold in terms of infection rates we are.
They would be willing to loosen restrictions and provide more more of a time frame if.
If you will our schedule.
Yeah, you know I think they.
They like US are looking at these statistics and you.
It's not just the absolute numbers.
There are the unknowns how quickly the vaccine continues to rollout.
The variance.
<unk> will affect the numbers going forward. So I think it's premature for them or for us It's Brian.
Speculate on.
And what thresholds and the number has to be because it's so many variables.
I think every day, we learn a little bit more and I think we're more.
We're encouraged to see the really dramatic drop that we've been experiencing and the really nice rollout, particularly in the United States in the U K in the in the vaccine.
But I think it's it's still too early for them or us to try and and.
And pinpoint this is the threshold.
It allows us to move forward.
Thank you Richard that makes a lot of sense and thank you Michael as well.
Thanks Assia.
Your next question is from Patrick Scholes of true security.
Hey, guys good morning.
Everyone.
You've sold a number of ships.
<unk> and brand so far.
That's an additional sales going forward.
Yeah.
Hey, Patrick.
We remain opportunistic and.
And considering.
As I comment earlier.
That that for us it's it needs to it's all about selling ships to get cash.
It's about whether or not when we look at the investment in the ship or where the ship catch within the fleet, whether or not it's it fits strategically within the brand working or considering one.
Our other brands.
So yeah. We you know we continue to evaluate hum opportunities that come our way, but we don't have any specific plans or a specific goal.
In mind here.
Okay. Thank you and Dan just a quick.
Quick follow up Jason a housekeeping.
What was the year.
And share count.
Yeah.
Let me see if I have it I don't have that right in front of me makes sense.
Now we can we can get a meeting we can get right back to you right after that.
That would be that'd be great.
Thank you.
Got it.
Your next question is from Paul Holden of Macquarie capital.
Great. Thanks, so much for taking my question. So just a couple on the Oh on the capacity front have you summarize the aggregate cut to supply and what you've announced the three ships cut and the.
Asmara fleet and then as a follow up.
Given the quantum.
The modifications and the insights you've gleaned from that.
<unk> changed in your view on lead time around once you're ready to get the fleet back in the water what that lead time might be.
If you have to make modifications et cetera. Thanks, so much.
Well, let me let me take the first one and then I'll pass it to.
Michael in terms of I'm, just talking about our lead time for ramp up of service.
But if you if you consider azamara and you consider the <unk>.
And I, just didnt Empress which are the two ships that we sold.
But that's about a five per cent impact on our on our capacity so just to.
Pardon me those numbers.
Great. Thanks.
On the share.
Let me just follow up on the second part of that question with regards to earn.
Bringing our ships back into operation with regards to al.
Learned lessons from quantum.
We we've been I mean as you can imagine we've been working on return to service for many many months and we have multiple teams who've been working on all of the logistics and operations at this and of course.
All of the lessons that we've been learning from quantum have been applied to the whole corporation in terms of planning and logistics. So I think.
There's a lot of variables and a lot of dynamics in returning a fleet operation, but we've.
Obviously been doing it for many many decades in terms of bringing new ships to life.
And we put a lot of energy now behind.
Ensuring that we understand how and what we need to do to bring our ships back one comment I'd like to make.
I think is kind of interesting and it's related to bringing on ships back and that is our crew members.
We recently sent a survey.
Two our entire crew a database of around 70000 employees.
And we had 32000 responses within 12 hours and subsequently within a couple of days, we've had 98% of all of our crew respond and we asked them a couple of questions.
And so we asked them.
Are they are they planning on returning to work with us in the the unanimous response was yes, we can't wait to come back.
We spoke to them about vaccines and the probability that they will be required to be vaccinated to work on the ships and what did they think about that 90.
Eight per cent of the crew were completely in favor of that and we also learned that the that the over 4000 of our crew have already been vaccinated at home. So that's another important element of a 10th of services. The crew and I think we are very encouraged by the results of the survey and it literally was last week.
Late last week. So just wanted to give you the extra nugget of information.
Thank you.
Thanks, so much.
Your next question is from Vince <unk> of Cleveland Research.
Great. Thanks for taking my question.
Curious on your thoughts.
That's longer term about occupancy do you think you'll get back to pre COVID-19 levels, you've seen anything in the bookings data about consumers.
Appetite for interior cabins anything related to maybe spacing of crude that you have to consider going forward and with all of those considerations.
<unk> has that maybe changed their informed the way that you're building your new ships in and lay out there.
So it's a great question.
One thing we saw on quantum was that outside rooms sold.
Very quickly and of.
Of course, we we put premiums on those rooms.
And so you can see that people are considering that or thoughtful of that.
We know that in the beginning when we do start up depending upon the environment that there will be you know protocols in place with regards potentially with Berthing of crew access.
So net debt.
You know may present, some challenges, but we.
We don't see it as permanent we see it as transitional and so I think I think in the beginning we may see more focus on outside inventory than inside but theres no really significant dynamic.
That's in front of US right now and we do definitely see it as transitional and and in terms of the question of.
Returning to our pre Covid load factors.
We honestly don't know, but I think our expectation is that once we go through the transitional phase that we will be returning to a.
Pre COVID-19 our load factors.
That's helpful and then unrelated follow up for Jason related to that did you mentioned the debt debt capacity remaining maybe maybe I missed that I think as of August you said $3 billion and I think you've utilized 1.3 since then.
And then I believe that the old debt.
Yet.
The maturity schedule called for about $1 3 billion of pay down in 'twenty, one and I think the most recent number is zero force. If you could is that correct and could you talk about kind of what changed.
Yeah sure so as it relates to our.
That basket or our current availability is $2 billion and under under under those indentures.
And.
But you are right.
We did talk about that or our liquidity.
Our our maturities for 2021 and $400 million.
As we as we.
He noted late last week.
We did secure debt holidays from our export credit agencies.
For the vast majority of what was available.
Available and we should have the balance of that closed out here hopefully in the next couple of weeks and based off of those two things we will hum.
Our our maturities for 2021 will be about $400 million.
Thank you.
Your final question is a follow up from Robin Farley of UBS.
Oh, great. Thank you for letting me happy with a last question.
Just two.
Two things one is.
You mentioned that the next royal ship to be back in service would likely be outside the U S. And I'm. Just wondering is that sort of more likely to be maybe Australia, I'm, just thinking about kind of where your sourcing comes from the market.
You can through a fully source of ship as opposed to Europe.
Just kind of thinking if that's more likely to be Australia.
And then the other question and this is very minor, but I was just curious with the sale of the Empress and Majesty.
Those four ships that my understanding I thought those were the only royal Caribbean ships that fit into.
The port.
On it in Cuba, and I know, that's like way out on your radar screen, but are there other ships that could potentially.
We returned to that market, if if that were to reopen.
So Robyn great question on on Cuba deployment and of course, you know.
When when when Jason coldest instead, I think I think we've got a buyer for these two ships.
It was the very first question, we all went to double check.
And we're okay. So we do have.
They ship that are ships that will fit into into our Q, but if that should come back. So we were okay. There.
With regards to ship stuff is studying in Australia or China.
Europe.
Elsewhere for example.
We literally are in discussions globally around the world with different governments and looking at where they are with COVID-19 and vaccines et cetera et cetera. So I think the point is is that it.
There's a lot of opportunity that's starting to.
Open up globally in terms of what's occurring with.
Covid and so we've we are in discussions around the world one of the products that we.
Opens this is not a product that's but.
Would be the next product for Royal Caribbean to open up but we reopened.
And grandeur of the CS home pulling in Barbados selling out at Barbados in November of 'twenty one.
On a mix of seven and 14 night cruises into the southern Caribbean.
And.
Really focused into the North American American Canadian and the U K market.
It is.
<unk> exceeded our expectations quite significantly I mean, we literally sold 25% of our load factor within within a couple of weeks so back to Jason's point, there's a lot of demand. We think is building up.
Globally for vacations and cruises for Royal Caribbean.
Caribbean So.
So we're quite optimistic about where this is heading.
Alright, great. Thank you thanks Robyn.
Thank you Robyn.
Okay. Thank you everybody in Shelby for your system through the call today and we thank all of you for your participation and interest in the company.
Our growth will be available for.
She might have gotten in putting the share count.
Michelle pass along.
And I wish you all a very great day.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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