Q4 2020 Norwegian Cruise Line Holdings Ltd Earnings Call
[music].
Good morning, and welcome to the Norwegian Cruise line Holdings fourth quarter and full year 2020 earnings Conference call. My name is Josh and I'll be your operator at this time all participants are in a listen only mode. Later, we will conduct a question answer session and instructions for the session will follow at that time, if anyone should require.
Theres just been during the conference. Please press Star then zero on your Touchtone telephone as a reminder to all participants. This conference call is being recorded I would now like to turn the conference over to your host Miss on Andrea Demarco Senior Vice President of Investor Relations Corporate Communications and he is Gee Mr. Marco. Please proceed.
Thank you Josh and good morning, everyone. Thank you for joining us for our fourth quarter and full year 'twenty and 'twenty earnings call I'm joined today by Frank del Rio President and Chief Executive Officer of Norwegian Cruise line Holdings, and Mark Kempa Executive Vice President and Chief Financial Officer.
Frank will begin the call with the opening commentary after which mark will follow to discuss the results for the quarter before handing the call back to Frank for closing remarks.
We will then open the call for your questions.
As a reminder, this conference call is being simultaneously webcast on the company's Investor Relations website at Www Dot Enfamil H L. P. The investor Dotcom.
We will also make reference to ease for presentation. During this call, which may also be found on our Investor Relations website.
Both of the conference call and presentation will be available for replay for 30 days following today's call.
Before we discuss the results I'd like to cover just a few items our press release with our fourth quarter and full year 'twenty and 'twenty results was issued this morning and is available on our Investor Relations website.
This call will include forward looking statements that involve risks and uncertainties that could cause our actual results could differ materially from such statements.
These statements should be considered in conjunction with the cautionary statements contained in our earnings release.
Our comments May also reference non-GAAP financial measures.
A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release and our presentation.
With that I'd like to turn the call over to Frank del Rio Frank.
Thank you Andrea and good morning.
I hope that everyone. Joining us today is one of your loved ones remain healthy and safe.
Similar to our last few earnings calls, we will focus our commentary today on the progress of our response to the global COVID-19 pandemic, the overall booking and pricing environment, which had shown particular strength in recent weeks and our view of what the month that had may look like and we prepare for the eventual return to service.
The state of 'twenty, and 'twenty was challenging would be and incredible understatement.
As it was without a doubt the toughest and most difficult year and our company's 50 plus year history.
After a record breaking 2019 of the foundation, we're well set for 'twenty and 'twenty to be even a more successful year.
The upward trajectory. However, it quickly change last March and.
'twenty and 'twenty, instead became a year of great hardship and disappointment and one and which we had to rely on our nimbleness and our ability to adapt by taking swift proactive and decisive actions.
Work on the multifaceted challenges presented by the pandemic.
These actions include the bringing our entire fleet to a halt literally overnight.
Followed by the complex logistics of safely returning more than 50000 of our guests' homes.
The next came the challenge of repatriating over 25000 of of our crew members and finding safe Haven for our 28 vessels, all while transitioning them to various states of.
Reduced Manny.
We quickly bolstered our liquidity to multiple capital market transactions totaling in excess of $6 billion and lead the industry and the establishing cutting edge health and safety standards through the co founding of the healthy sales channel.
I'm incredibly proud and profoundly grateful for the dedication and perseverance demonstrated by our team members, who continue to adapt innovate and flawlessly execute while faced with unprecedented the challenges.
The tremendous efforts of our team on what have enabled our company to prove our resilience time and again.
In the past and gives me confidence we will do so again.
As we survey the current public health situation, both in America and around the World.
It is extraordinary the considered Chuck how much has transpired in the few months since our last update.
As expected the fourth quarter resurgence of the virus drove caseload to record highs.
Resulting and renewed lockdown and stricter global travel restrictions.
During this time, perhaps the most important breakthrough though was the needed.
And to meet the defeat the pandemic was the coming on line of several vaccines.
And we're authorized for emergency use.
Fast forward to today and case, both across the globe have been and decline since mid January while simultaneously vaccination programs are ramping up. We're currently over 6 million doses are being administered globally daily a number that will only increase the manufacturing distribution and health care system aligned.
So where does that put up and the cruise industry.
And the reality, we're not sure.
But directionally, we're headed and the right direction to and eventual restart of cruising.
Public health experts do predict the caseload, while already on the downside well.
Well continue to decline primarily for three reasons.
First a significant portion of the population has already been infected and recovered.
Second the number of individuals' vaccinated will rapidly increase and.
And lastly, we will soon move into the less troublesome spring and summer season.
All three of these factors are expected to combine to begin establishing herd immunity sometime during the third quarter with the spread of variance and the durability of vaccine protection between the two main variables that could slow down but not completely halt the rapid crop progress being made.
And while we are moving and the right direction scientists continue to caution that we are not yet out of the woods.
The crisis is far from over and we must all remain vigilant and ready to adapt to the ongoing fluidity of the public health environment.
Our industry has recently seen some encouraging green shoots.
After the first quarter resurgent caused Nathan cruise operations in Europe to temporarily halt.
Several European cruise line to have since resumed or are planning to return to service and the next few weeks sort of saying EU nationals from Italy and Germany.
The hope and expectation is that by late spring sailings will expand to include the cross border European Nationals, and eventually likely during the third quarter international guests as virus prevalent decreases to manageable levels.
Shifting to our company's recent events since our last earnings call of several key milestones Mark the fourth quarter, which can be found on slide three of our presentation.
These include two capital raises the resulting in approximately $1 7 billion of additional liquidity.
New debt deferral of amendments, providing additional financial flexibility and continued progress on our environmental social and governance initiatives, which I will touch on and more detail later in the call.
On slide four we outlined the actions we have undertaken as the continued to navigate through this crisis remaining focus on what we can control.
Subsequent to the issuance of the Cdc's conditional sale order in October we anticipated and returned to service and the first quarter of 2021.
Does it takes up to 90 days for radiation to reenter the servers from lay up status, we initiated a phase crew and re staffing of select vessels and begin a ramping up of marketing activities.
This initiative. Unfortunately was met with several headwinds most notably the rise of confirmed cases to all time high and the emergence of the variant.
Combined with the slower than anticipated rollout of vaccination programs additional lockdowns and travel restrictions continued closure of key ports around the world and most important.
Reluctance by public health authorities to lift cruise suspension.
These headwinds caused us to change course.
With the much hope for a Q1 relaunch postponed the decision was made to return vessels to reduce manning status until there is certainty on the timing for a return to service.
With new crew rested and ready and eager to work we took the opportunity to rotate certain crew that had been on board beyond the unusual contracted term and made the difficult decision to repatriate 4000 crew members back to their home countries.
Next we continue to execute on our strategic financial action plan, which Mark will provide an update on and on the incremental actions we have taken to bolster liquidity a little later in the call.
Turning to our roadmap to relaunch, which is illustrated on slide five we continue to work with the healthy sales channel along with the CDC and other public health authorities and governments across the globe to prepare for the safe and healthy resumption of cruising.
As we await for additional technical guidelines from the CDC and other public health officials around the world. We continue to make progress on enhancing our already rigorous health and safety standards and implementing new advancements, including digital technology for contract tracing as well as streamlining and safety drills with our state of the art E Mustering technology.
While we are confident and the ability of the 74 of protocols developed by the healthy say sales channel to keep our ships crew and guests safe are for.
And line Defense strategy has expanded from protocol that preventive measures to now and I'll also include the protective health and safety benefits of vaccine.
We view vaccine as a powerful tool the most powerful tool that when combined with various protective measure of society is already accustomed to such as face coverings and physical distancing forms a multilayered Stein based approach to mitigate the risk of COVID-19 infection.
We would expect that by the time cruising resumed vaccination, who most certainly the widely available and the developed world and we believe that by then we will be able to secure vaccines for our crew as we are today, well along and the procurement process.
A mix of vaccinated guests and crew along with the other established protocols will provide a powerful combination to mitigate the risk of COVID-19 onboard our ships and the communities we visit.
For the destinations of the next step of our roadmap and we are in constant communication with key ports around the world to assess the status of travel restrictions on.
19 requirements and port availability.
Of particular importance for the industry with the recent announcement by Canadian authorities to restrict cruise vessels from operating and Canadian waters through February of 2022.
Throughout this pandemic the travel industry has experienced the introduction and subsequent repeal and reintroduction of Lockdowns and travel restrictions depending on the prevalence of the virus and other factors thankfully the Canadian order allows for the suspension to be rescinded based on improvement and public health.
We remain cautiously optimistic the day rescission, maybe possible and in the meantime, we await the results of several of Alaskan delegation led and it's the initiatives, which we want to acknowledge today and greatly appreciate that may allow the Alaska cruise is to operate in 'twenty and 'twenty one.
The third step on our roadmap is to begin reactivating, our sales and marketing machine, which as you know is guided by our industry, leading market the fill versus discount to fill strategy.
We have re validated the effectiveness of this strategy and the pandemic environment generating demand for the back half of 'twenty, 'twenty, one and especially strong demand into 'twenty and 'twenty two and beyond.
We will resume a disciplined process of ramping up sales and marketing efforts once we finalize and initial voyage resumption plans.
Lastly, and once there is certainty we continue to expect a gradual and phased approach to the resumption of cruise voyages.
And depending on the timing of a return to service our vessels could return and certain regions before others. For example, given the seasonality of our operations a typical year the deployment of our vessel is concentrated in Europe. During the peak summer season with 17 of our 28 ships operating in this region.
And therefore, it's seasonality will likely play a key role and the initial deployment of our vessels.
Our booking trends, but you can see on slide six demonstrates how we continue to experience strong demand for future cruise vacations, despite the uncertainties and the broad travel sector the reduction of demand generating marketing investments and the temporary absence of the full complement of our all important and travel agent partners.
For the second half of 2021, and our little old Fab.
Actor is below historical ranges and impacted by continued uncertainty around timing of the resumption of cruising and the shift of our limited marketing investments to focus on 'twenty to 'twenty and 'twenty two voyages.
Pricing continues to be the.
And I think level, despite the dilutive impact of the value added and future cruise credits for canceled voyages.
And while it is still early and the booking cycle. We are very encouraged and very pleased by the strong booking activity driven by pent up demand across all three brands for 'twenty two voyages.
Volume during the anywhere and February sequentially improved by over 40% from November and December 2020, and as an added bonus over 80% of these bookings for new cash bookings.
For the first half of 'twenty and 'twenty, two and for all of 2022 in fact, our load factor is currently well ahead of pre pandemic levels with pricing at each of our award winning brands in line to up mid single digits, when excluding the diluted impact of future cruise certificates.
And the consumer appetite for global travel about our 28 ship the 28 vessels and so strong that even with limited marketing investments. We are yielding outsized results and we are experiencing record demand with our launches for our future itinerary and global voyage collections of <unk>.
And point as Oceana cruises, 'twenty and 'twenty three world cruise, which sold out sold out within one day of opening for sales of the general public.
In addition to our loyal past guests approximately one third of all bookings for this growth came from first time new to brand guests.
We believe this achievement along with multiple booking records, we have announced in recent months demonstrates the pent up demand that exists from our mature and Apple and cruisers, even for long and exotic voyages once the severe impact of the pandemic subsides.
And this demand coupled with the opening of voyages for sale of further in advance and has also resulted in a significant expansion to the booking curve during the fourth quarter, which is now doubled versus the same time last year on me.
The back later to provide closing remarks, but for now I'd like to turn the call over to Mark for a financial update.
Thank you Frank.
My remarks today and will focus on the continued execution of our COVID-19 action plan as well as our roadmap to relaunch.
The global pandemic continues to evolve and we continue to focus on what we can control and we are prepared to adapt and modify our strategy as needed.
Slide seven illustrates the three focus areas of our action plan and the additional proactive measures taken since the beginning of the fourth quarter.
First we have reduced operating expenses and capital expenditures for a number of initiatives, including the further reduction or deferral of near term marketing expenses reduction of non essential capital expenditures.
The extended salary reductions and furloughs for shore side team members and.
The fact, we reduced capital expenditures by approximately 60% for each of the years 'twenty 'twenty and 2021 and.
In addition, we finalized the deferral of $220 million Euro of new building related shipyard payments through the end of the first quarter 2022.
Second we have also made significant progress on improving our debt maturity profile and order to provide additional near term financial flexibility through the following actions.
We amended our pride of America, Norwegian Jewel and senior secured credit facilities to suspend testing of certain covenants.
The covenant relief extends through maturity for the Pride of America, and dual facilities and through year end 2022 for the senior secured credit facility.
We were also able to the first $70 million of amortization payments due prior to June 30 of 2022 for the senior secured credit facility.
Second we secured deferrals for approximately $680 million of our export credit agency back amortization payments, representing 100% of our ECA payments originally due through the first quarter of 2022.
We also received covenant waivers through the end of the fourth quarter of 2022 on our ECA facilities.
We have tremendous support behind us from our strong long standing relationships with our export credit agencies, Saatchi and Hermes are ECA and commercial lenders as well as the shipyard the.
Our assistance is playing a significant role and our ability to weather. This pandemic and we can't thank them enough for their continued and ongoing partnership during these unprecedented times.
The final focus area of our action plan with securing additional capital.
And the fourth quarter, we executed two highly successful transactions and no.
Remember, we raised $824 million of debt proceeds through an equity offering of 40 million ordinary shares and the December we issued $850 million of five and seven eighths senior unsecured notes due 2026 and.
And a and.
And oversubscribed offering.
To date, we've accessed the capital markets five times over the nine month period.
As a result since the onset of the pandemic.
We raised incremental cash of nearly $6 5 billion, including the drawdown of the $875 million revolver early last year.
This tremendous accomplishment would not have been possible without the hard work of our finance Treasury legal and accounting teams, who have worked tirelessly around the clock to execute on these initiatives. We have also experienced and incredible outpouring of support from our investors and again, we can't thank you enough for having conviction and our business model and our management team.
And and the long term potential of our company.
Slide eight outlines the improvement of our debt maturity profile and response to the crisis.
Since the third quarter, we secured debt amortization deferrals of approximately $750 million, resulting in minimal debt service payments for the remainder of 2021.
Turning to liquidity.
Slide nine provides our current illustrative liquidity profile.
Our total liquidity as of year end was approximately $3 2 billion, which includes the portion of customer per customer deposit refunds that are included in the accounts payable at quarter end.
We have also estimated approximately 300 million for anticipated health and safety investments and other collateral obligations.
While we anticipate variability and our health and safety of investments as we work through the various requirements and continuously improve and refine our protocols. We wanted to earmark just the best investment and are illustrative of liquidity profile.
These factors combined result, and a net liquidity.
On a pro forma basis of approximately $2 9 billion.
Enabling us to continue to navigate through the fluid environment.
And execute on our return to service plan.
As for cash burn our team continues to work day and day out to further reduce expenses and conserve cash.
Since the beginning of the pandemic, we have made significant progress on reducing our controllable cash burn rate with the low watermark, representing a nearly 80% reduction and cruise operating expenses versus normalized levels.
For the fourth quarter, our average monthly cash burn rate was approximately $190 million.
This included approximately $15 million per month due to additional expenses related to preparing vessels for a potential return to service and early 2021 and included a limited increase and associated marketing events investments is for.
Frank discussed earlier.
That's for the first quarter, we expect the average cash burn to temporarily remained elevated at approximately $190 million per month or approximately 170 million per month, excluding non debt recurring non recurring debt modification costs as we ramp down our relaunch related expenses and <unk>.
Repatriate crew.
The approximately $60 million of onetime costs, we incurred in the quarter is the result of debt deferrals, and covenant waivers and suspensions, which when combined with the Newbuild payment expenses have resulted in approximately $1 billion of additional liquidity over the next 12 months.
Once the ramp down of re launch related expenses, including for repatriation efforts are complete we expect that the average cash burn rate to decrease and remain at reduced levels until returned to service preparations resume.
We will continue to take a thoughtful and disciplined approach to reintroducing costs as we resume voyages and order to conserve cash while at the same time balance the need to drive new cash bookings.
Turning to slide 10, we ended the fourth quarter with approximately $3 3 billion of cash and cash equivalents our.
Our cash balance and the fourth quarter increased driven by approximately $1 7 billion of net proceeds from capital raises.
And was partially offset by approximately $570 million of operating cash burn, which includes operating expenses SG&A interest and capex.
Customer cash refunds for canceled voyages of approximately $120 million.
And net working capital and other outflows of approximately $20 million, which includes health and safety investments.
Given the continued uncertainty around the timing of our voyage resumption.
We're not yet prepared to provide guidance on all metrics. However.
However, we have provided guidance on depreciation and amortization.
Interest expense and Newbuild related capital expenditures to assist with modeling, which can be found in our earnings release and on slide 19 of the presentation.
Broadly speaking, excluding newbuild related capital expenditures, we still expect the minimum required capital expenditures needed to run the business and maintain our best in class fleets is generally a few hundred million dollars per year.
Before handing the call back I want to reemphasize that while we are prioritizing our immediate business needs. We are also very focused on the future of our company are.
Our medium and long term financial recovery plan, which is provided on slide 11 and focuses on three critical components.
The first rebuild and gradually returned to pre pre COVID-19 margin levels, while continuing to identify opportunities to further drive margin expansion.
Second maximize our cash generation and.
And third focus on optimizing our balance sheet and charting a path to delever.
With that I'll hand, the call back over to Frank to provide closing commentary Frank.
Thank you Mark before we wrap up on prepared remarks today I'd like to provide and update on our global sustainability program fail on sustained which is on slide 12.
Despite the current public health challenge at the state our commitment to protect and preserve our ocean the environment and the destination of the visit while enhancing our culture of diversity.
Equity and inclusion and the workforce remains at the very core of our everyday operations.
And that in 2020, we launched unconscious bias micro aggression and diversity and inclusion training for our global workforce and have committed to expand our diverse hiring practices.
We are also building upon our supplier diversity program as part of our efforts to facilitate and encourage the growth of small and diverse businesses.
We strive to maintain a supportive and empowering workforce workplace for our team members across the globe. We believe our team members are by far our most important resource and that has never been clearer to me and during this crisis.
We are pleased the disc commitment to our team's development and wellbeing was recognized recently with our naming to the Forbes America's Best employers list and which we ranked among the top 75 companies in the overall of large employer category and among the 10 top companies and the travel and leisure sector.
Just as we support our team members. We are also committed to supporting our local communities and the destination. We visit this past year, we launched two initiatives and partnership with trust goods for giving Tuesday, we matched every case of chest water purchased in December through their online store with a water donation for local.
Food banks, and Miami, and New York City.
Really we provided nearly $275000 of in kind donations in the form of of just water and non perishable and canned goods to support two community organization and on says ongoing relief efforts and the archipelago of San Undressing, and Colombia after the devastating impact of category five hurricane.
Kaine Iota.
Furthering our partnership with Trust goods. We are also currently and the process of organizing several truckloads of just water donations to front of it to benefit food banks located in the areas around the southwest of the United States that have been severely affected by.
The recent winter storms.
Dedications and family and community is ingrained in our culture and to further demonstrate this commitment beginning this year, we are offering our U S shore side team members a paid volunteer day to give back to community programs of your choice.
On the environmental front, we are proud to have improved our score and our second CDP climate change submission to a D, which is higher than the marine transport sector, North America and global average for.
For 2021, we will be focused on enhancing our ESG disclosures to provide additional transparency and I look.
The forward to sharing additional details with you as we continue on our ESG journey.
Turning to slide 13, I'd like to leave you with a few final key takeaways.
First we are focused on the execution of our roadmap to relaunch as quickly as possible and we will continue to work with our expert advisors global public health authorities and government agencies to refine our science backed plans for a swift safe and healthy return to cruise it.
The second strong future demand for cruising across all brands source markets and deployments continue and early indications for 'twenty and 'twenty two bookings are extremely positive with load factors besting our previous high by a substantial margin.
Lastly, we continue to keep our longer term strategic and financial priorities and focus and we will be ready to execute on the on a recovery plan to improve our balance sheet.
The strong future demand, we are experiencing coupled with the positive momentum and the public health front.
It's extremely well for.
For our prospects and with that Josh Please let's open the call for questions.
And you.
Thank you Mr del Rio if you have a question at this time. Please press. The Star then one key on you touched on the telephone.
In order to get as many people through the queue. Please limit yourself to one question. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key are for.
First question comes from Brent on tour with Jpmorgan You May proceed with your question.
Hey, everyone. Good morning, and thanks for taking my questions I just wanted to maybe follow backup Frank on your comments on Alaska.
You sort of referenced the industry's attempt to try and salvage some of the Alaskan season.
I assume for the sailings that are leaving and arriving from Seattle, where I know you guys do much of your business. So I guess and maybe you could just give us your view on the potential success of those talks and then just remind us the portion of your Alaska business, that's in and out of Seattle.
On.
It's difficult to predict.
What the outcome will be we are encouraged.
That the.
The the situation with the Alaska, and then and the Canadian and.
Closure until spring of 'twenty two as the.
And it has.
Has been noted.
By various government officials and they were trying to do their best as you know.
Tourism is the third largest industry and Alaska.
And for certain Alaska and coastal communities.
And cruising is over 90% of their for the tourism business on and so if.
If we can operate in the last guy in 'twenty and 'twenty, one that'll be two years that the.
They will go without this.
Infusion of the business activity and that's going to be difficult for them and so we're.
We're hopeful.
Cautiously optimistic it's the law.
Lot of the.
A lot of hoops to jump through both from the Canadian side and also let's face of the.
And we cannot operate as of today and in the U S waters and Alaska water. So.
We have suspended taking new bookings on Alaska, I think the whole industry has.
But we do hope we do hold out some hope that these initiatives led by the Alaska and dealt litigation and.
Can open up of Alaska for 2021.
Yeah.
Great. Thanks for that and then I wanted to also ask about the relaunch efforts and the wall and queue that you reversed and I think you made the announcement that you would repatriate. Some crew I think that was as of late January you made that announcement until I guess the latest murmurings out of the industry that then you could get CDC guidance maybe.
And maybe any day now.
Just wanted to reconcile those two things and understand maybe your timeline.
And the decision process the central zone.
Yeah, I think there.
That's clear and clarify a couple of things.
The the the CDC guidance that we at the.
And industry are expecting.
Sometime in the future and I wont label it as of few days, because I simply don't know could.
Could be a few days could be a few weeks, we simply don't know.
That doesn't.
Is the next phase of <unk>.
<unk> phase of.
The multi phase of.
Approach that the CDC has taken and I don't believe that we are awaiting and the next few days the green light to cruise.
That would not be correct.
But in terms of our of our decision to pull back book when when the C. D. C. A condition of the conditional sale order first came out there was great expectation, we had of conditional sale order.
And it proved to be more difficult than we first expected.
We also were and the middle of the spiked and the and the number of cases and so.
And it became.
Obvious to us that the.
The initial expectation that maybe the industry could begin to cruise.
And the first quarter, which as you know and it's heavily focused on Caribbean.
Theater of operations was not going to take place and so we.
Took the difficult decision to Ah.
Reduce our cash burn repeats repatriate those crew members back home and and cut down on our on the marketing expenses and we have begun to ramp up to.
Two of them.
Along with the ships that we thought we could operate.
And so today I would tell you that we.
We are and a better place for more encouraging place and we were <unk>.
And just six weeks ago. The at the end of the day I think the prevalence of the disease and.
And our own country and around the world will be the greatest.
Indicator of when we can resume cruising and the prevalence is dropping and we believe based on all of the experts that we talked to and clean and healthy sale panel that we're going to see a continuation of the of the significant drop and cases as.
We enter spring summer as we are continuing to vaccinate over one and a half million Americans of day.
And when people get infected and recover so all of those things the point into of direction, where the prevalence should dropped considerably.
Giving us a better opportunity to restart operations.
Very helpful. Thanks for the comments.
Thank you. Our next question comes from Steve on just keywords.
And you May proceed with your question.
Hey, Good morning, guys, just the Frank Frank add on to that your last commentary there if the if the CDC gave you guys kind of the.
The the all clear kind of smoke signals to get to the test phase component and the startup of the test cruises is that still would you still need about 90 days or could you shorten that up a little bit.
No, we we think that.
It can be short and I know that there is a.
Our 60 day sort of waiting period.
The conversations we've been having with them at the.
It's not a hard 60 days I think it could be could be less.
And how much less.
I don't know, we've not received that kind of.
So the city on on these guidelines.
Generally believed that from the moment that we get the green light.
Depending on where the ships are that you want to stand up depending on the seasonality you know summer is a where are the ships and some are generally they are in Europe, there and Alaska.
Where are they and the fall winter there primarily in the Caribbean, Mexico, Panama Canal.
Around the world.
But I think for planning purposes, we would like to give ourselves that 90 day window more or less.
And so we've canceled cruises through the end of May.
So if you kind of with your fingers, we use basically March 1st of all all of March all of April all of May.
And and it's.
No it's sequential.
We we keep bookings and and cruising cruise is available.
And as long as we believe there is a chance that we can operate once we know we start entering that 90 day or so of window and we owe it to everyone in the ecosystem, whether it's travel agents consumers our own employees the crew to to cancel cruises and the future. So we were always hopeful.
I hope always hopeful that the.
The public health situation improves.
And that we can debt we can restart the you know of.
And as soon as we possibly can.
Okay got you and thanks, Frank and then the second question would be you know around the out your booking trends across your brands and I know you indicated the booking trends seem pretty pretty similar across all three brands, but I wanted to dig and a little bit more into your and your luxury brands given the debt.
The strong pent up demand, we have seen from the 60 plus age demographic.
Cross other consumer verticals and I guess the question is has that demographic been very active in terms of booking and there and it has there been any changes and their preference in terms of length of itinerary or or destination and I hope that makes sense.
And it does make sense the look.
Early in the pandemic.
People were writing off the mature market.
And it's been anything but that.
So as you know the the upscale brands tend to book further out than the contemporary brands.
Partly because of the itineraries the longer more exotic itineraries everything else being equal people book further out.
And so we're continuing to see that I mean.
The both the Oceania and regent or nearly 40% or 40% book for 2022, that's much better than they've ever been.
At this stage of the booking cycle and so these are folks who are typically over the age of 65 and now the average age of the Oceania and regent consistently and the 66 67 age range and ease of the folks who.
Getting the vaccine first.
And they've been cooped up and they want to go out I mean, there are no different than 40 year old there of 30 year olds are they've got the money and they are booking further and further out as we said and our prepared remarks, the booking curve has now doubled.
And what it normally is and that's because of two reasons. One there are literally no bookings being made for the next three or four months day link because they've been canceled.
And.
People are booking further and further out and people know that this pandemic will and someday and that's some day is not.
Tomorrow, but.
Further out.
So it's we have more visibility today, and our future business than we've ever had and so that's one of the things that encourages me. The most I mean I have a lot of things to worry about these days the fundamental consumer demand and our ability to fill our ships.
Strong pricing is not one of them and.
And for being able to do what we're doing in terms of of the load factors and new bookings new cash bookings with the de Minimis amount of marketing that we're doing with the travel agency.
Uh huh.
The system being.
Less than 100%.
It's truly remarkable and again points to what we've been saying per year, the resiliency of our of the consumer the.
The resiliency of those who loved the crude or the great value that hasnt changed.
And and.
And people are you going to get back the Hiseq and so there's no question about that.
Okay, great. Thanks for the color Frank appreciate it.
Christi.
Thank you of our next question comes from Robin Farley with UBS. You May proceed with your question.
Okay, great. Thanks.
Yeah, and just looking at some other cruise lines that are operating in Asia, and and have operated in Europe.
And I'm just curious are the are the cruise line sharing their learnings and protocols and I'm, particularly thinking of the cruise line that the.
On your on the healthy cell panel with whether you're kind of getting the benefit of those.
The other regions. Thanks.
Yeah, Hi, Robyn and yes look we don't compete on.
And on on the safety and health issues.
And and the and the industry has been very very cooperatively with one another.
We do share our findings.
We find that those those companies brands that are operating whether it's in Asia or in Europe.
A very much forthcoming much like.
The Royal and us to develop the healthy sales channel that 74 of protocols, we've made them available to the entire industry of the entire industry has adopted them. So it's.
It's a it's a very good and healthy dynamic.
Okay, great. Thanks, and then just a quick follow up I think I can guess the answer to this but you guys have not sold any ships and some other companies have I know you have the youngest fleet out there and so maybe the interest that you have no interest or need to sell any shifts are you is that something you've thought about at all of their had conversations about.
No. We you pointed out where you do have the youngest fleet every one of our ships reduce.
Positive margin positive EBITDA of good ROI on their book value. So we have no interest.
Only being the smallest of the big three.
As an advantage I believe during this time.
So we only have to worry about 28 vessels and not some greater number and also where we're very well.
We're very eager to start taking delivery of the of the vessels that we have on order of which will begin.
In the third quarter of 2022, we've been fortunate debt. During this pandemic, we didn't have to take any new deliveries, but by the same token we have zero interest and sell.
Selling any of ours for any of our assets.
Great. Thank you.
Thank you.
Thank you. Our next question comes from been Super cruise.
Because of the research and we appreciate you for your question.
Great. Thanks for taking my question I'm curious your perspective of our updated thinking on the.
Timeline to get the whole fleet back up and the sailing assuming you have some success with trials sailings and then begin revenue sailings out of few ships from that point about how long do you think it would take to get the the whole fleet up and running again.
And no we don't know when debt start date is.
And as I said earlier the.
The Directionally, we're heading in the right.
And the right and the.
The right direction.
The prevalence is decreasing the vaccines are ramping up.
We're all confident of all of the protocols.
Enhanced by the the vaccinations.
What we have set and the past is that we think that from whatever date debt.
It is that we start and it will likely take six to seven months.
Assuming that the ports are open around the world member of our ships are seasonal.
One of the one of the requirements at the ports be opened the travel restrictions being lifted so assuming that those hurdles are cleared.
Physically we think it'll take six seven months, so roughly of ship a week.
And so for us to be a 100%.
Operative, we would have to start standing up vessels and the and the June July timeframe of this year. So that we can be 100% by yearend early 'twenty two.
Great and it sounds similar to how you would think of it last time and then on the on the.
Future cruise credits last time, you noted the I think 65, 70% of those being canceled here recently, we're opting for future cruise credits versus cash and I was just curious of that kind of ratio has held and then also I think as of last time, you had about half of your FCC and still outstanding which.
And interesting and good base of pent up demand and I'm curious if that number still held at hill.
I'll tell you that and I forget the exact day.
Right, but since the fall at least when we do cancel a set of sailings like we recently did for the month of May of 'twenty two.
And everyone gets the cash refund, where we're no longer offering the option of the of and FCC.
Or cash.
We have the liquidity FCC's are dilutive to future business, we don't want to net.
<unk> impact future business anymore than the dilutive effect of the existing FCC.
So today there is no choice you got your money back.
And in terms of.
The percentage of of FCC's that had been redeemed.
Varies by brand, but at the consolidated H level, roughly 40% of ball.
FCC debt, we have issued over time have not been redeemed. So theres still remains 60% of the FCC's issued.
And in that bucket of folks who've got Oh.
And our ability to re book and look we somehow.
And some quarters of the the investment world perhaps.
And the FCC bookings are seen as not as good as the cash booking I think they're both important.
The customers, who took on FCC showed a great deal of confidence and support and and and our business and we want to make sure that day.
The day get their cruise and so if we have to extend the booking date or we have to extend the sailing day.
And as the suspensions continue we will do so we.
We actively encourage people to redeem the FCC, we want them to take of cruise and we also want to be able to clear the deck. So to speak of as soon as possible. So that when we do resume cruising we can get back to what we do best which is you know.
Selling cruise is at the highest yield and the industry both on ticket and on on the onboard revenue so that we can.
We can resume our positive.
The positive momentum that we had at the end of 2019.
And Vince just to add on that I think you had said mentioned that it was a big book of business, you're absolutely right. So as we think about that going forward that gives us opportunities, where we can really get more efficient and and and reduce some of our operating expenses because of our simply speaking our acquisition cost would be.
<unk> will come down over time with that business. So as Frank said the FTC's are a good booking just like any other booking and it's a positive song and having such a significant amount on our books.
Great I think that makes a lot of sense. Thanks.
Take care of our next question comes from Jamie Katz from Morningstar and proceed with your question.
Hi, good morning.
And I'm, hoping that you guys will help I think true the cash burn over the first half I guess and there is the inflated number for <unk>, but theoretically if you're going to start ramping in June and Youre.
If anything some of those costs are of pitch and you bring people back to the ship and reman and them again and so it's one of the 70 months and better number than sort of and the numbers, maybe it's given out in the past.
On for ongoing cash burn and some of the ships come back online.
Hi, Jamie it's Marc I'll take that so you know when we are we really reduced our cash burn and the third and you look at the second quarter third quarter, we were down to levels of 150 116.
It's slightly elevated and the fourth quarter, primarily due to some additional cash interest and some of our startup activities, which we noted some of that is lingering into Q1 as well with the startup activities and then beyond that and.
And this environment today, our expectation would be that we're going to get back down to those levels, we had seen and the earlier part of the year absent the.
And the clear visibility and clear indication that we can start back up.
So again, we started this exercise and the fourth quarter, we were hopeful with the conditional sales order that we were going to be able to operate early in 2021, obviously that proved to be a.
A false hope, but it's really going to be dependent upon when we get the green light and when we get that visibility, but again, if the if you look at Q as the fourth quarter and the first quarter as we've outlined.
I think I said on my prepared remarks today, roughly kind of 15 million of months was related to some of those restart costs. That's probably the levels you would start to see once we and Ernest restart back.
And whether it's the second quarter third quarter, but again based on when we when we get that clear path of resumption.
Okay, and then I think there was that comment and the slide deck that said, 60% of the bookings were from the wireless which would imply 40% were new credit there isn't and I know you guys have talked a lot about some.
Some of the inroads he's made with millennials and the past and so on and I'm curious if there has been any different demographic patterns, you've seen across the fleet and.
And the more recent book growth. Thanks.
Yeah, I will I will tell you that the.
The the sweet spot on.
And as for for folks.
And 55 plus.
Historically that is the cohort.
That the greatest percentage of our guests across all three brands comes from and we have seen a slight increase and the proportion of total bookings coming from that cohort and as I said earlier that is partly because those of the cohorts that have been vaccinated more so than the <unk>.
One of them.
And these folks are.
And our retired semi retired the stock market has been doing well investments had been doing well they've got cash.
And of.
These are people who tend to travel more.
And they haven't been able to so the pent up demand for them for this cohort I think is greater than the.
The younger cohorts.
Thank you.
Thank you.
Thank you. Our next question comes from Stephen Grambling with Goldman Sachs. You May proceed with your question.
Hey, good morning. Thank you I know, there's a lot of moving parts still but within that six to seven months the E.
And you cited for re launching of whole fleet.
Would you think about occupancy of the ship level within the current CDC framework and how might the the vaccine change that.
Well you know the CDC the best of my knowledge has yet to give.
And the industry a target occupancy.
For our own internal working purposes, we assume that at the beginning of that.
Maximum occupancy will be and the 50% range.
Think about this you know today.
Our entire fleet is available for the the book, let's say and in the third quarter and July moving forward.
Every single shifts and the fleet has passengers is theres bookings on the <unk>.
And we don't we're going to start we're not going to be able to start all 28 vessels as I said, it's going to be.
A little bit maybe a week on a week something like that which means that there was going to be a lot of customers who are book today, who will be displaced.
And part of that displacement will be and cancellations of people will get their refunds, but part of it is that people will move from the Norwegian jewel and Alaska to the Norwegian Bliss, and Alaska or they will move from the Eaton or you know the oceana Riviera and Europe to the Oceania Marina and Euro.
And so we believe that there are enough.
Our bookings today, if we never took another booking let's say for Q3, assuming a reduced capacity at the start that we don't have to take any more bookings.
For for Q3, and as the and as you move forward from the start date, you have more ships coming on line less ships that are going to be those customers is going to be displaced and so there'll be a a a rebalancing. If you will at some point, where we do need to start taking more bookings.
But my guess is the that'll be beginning month three for forward and that's what we were doing and and the restart the mark and I discussed earlier and our remarks, when we thought we were gonna starting in Q1, because there was always a book of business there.
Waiting hoping to the cruise that when we knew when we do know we're going to start and it won't be the entire fleet and therefore, we have excess bookings if you will at the beginning so again of all the things we worry about filling vessels.
Oh generating demand just isn't one of them, but we have a we don't have a short term issue as we just described and as you've heard me say earlier 2022 of more of a longer term business is better than ever.
And I guess and one of the other things that's within your control, but if you think about the operations and and expense structure. What are some of the things that you think could be structurally changed coming out of this that could.
And ultimately make the shifts more profitable and as a related follow up are there any.
Considerations that we should have on dry dock.
Dry dock days coming out of Lea.
Lay up you can book should that the lower or could it be higher.
Thanks.
Yeah.
And I'll take the I think I'll, let mark answer that.
Yeah, I think first Steve on the on the on the dry docks look you know ships. The ships have the dry dock they have to stay within the classification Society rules.
And what I can tell you is the while we have pulled back on our capital expenditures and some of that is it is it is related to investments that are enhancements that we would've made during dry docks, we are not stopping drydocks dry docks have to occur.
By class and there are certain investments that we continue to make a good example of that is some some some of the scrubbers on the breakaway and getaway that was they were scheduled to be completed in early 2023, and because of the ships are out of service and going through their normal dry dock periods of <unk>.
Well the to install those sooner and get the benefit once we restart operating but I think when you look when you look at the ships going forward and you look at the cost structure on the ships by and large we've always said this the the cost structure on a ship is generally a highly fixed cost structure that said, there's always going to be pockets of opportunity and I think.
As we think about our costs going forward. We're looking at shore side. You know this pause has really given us a chance to reevaluate every cost everything we do from our supply chain to everything we do on our shorts on operations and I think we've mentioned this in the past that you know, we're making some pretty significant <unk>.
Earnings and our marketing area, we continue to transform toward the digital World you get more Bang for the dollar there were garnering significant amount of booking activity with this V. A less marketing spend so we're taking those learnings and every day that we're on pause we're going to continue to look at every nook and cranny and asked ourselves.
Are we doing this correctly. So so I think there is opportunity for cost enhancement and then further as you as you look.
Further down the future and you think about that how does that translate to margin expansion.
The combination of reduced cost, we have more efficient capacity coming online.
With our with our nine ship Newbuild program and that's going to help drive margin expansion. In addition to again driving the top line.
Driving increased pricing.
That we've always been the industry leader and pricing and as we think about that.
Look at the industry capacity has been reduced so we think that's going to provide even more of an opportunity to to help rebuild margins and drive that margin expansion.
Yes.
And that's super helpful. Thanks, so much.
Operator, we have time for one more question this morning.
Thank you our last question comes from Ais and find since the Tigress financial you May proceed with your question.
And you for taking my question. It looks like there are some really bright light at the end of this tunnel and while there was concern and the beginning that the industry would have to heavily discount to get people back on the ship. It definitely seems not to be the case and how do you feel or there's any indication that there's even more shadow demand of people who are there's a lot of people on waiting list to get vaccinated.
And once people are vaccinated and then more itineraries open up that you'll even see more demand for trips.
Yes, good morning Ivan.
And thanks for the question look.
The industry has been shut down at least one year and that means 30 million people that would've cruise and that you are having cruise and this is a finite capacity business I can't cruise with the 150% occupancy.
So there's going to be a squeeze play here of that demand is going to exceed supply, especially out there.
The the.
Withdrawal of some 20 plus ships from the the so called North American fleet, So you've got less supply.
Got the pent up demand, you've got people with money and their pocket.
And I I think this is just the the making of a of a of a boom time for the cruise industry and since we can expand.
Supply any faster than it's coming on line.
Pricing is what's going to dictate the day and we're seeing it I mean.
It's the astonishing to me and the 25 plus years Ive been and this business.
Given the.
The fact that travel agents are not at full strength, we're spending a fraction of what we normally spend the bad news cycle of Lockdowns, and and Pandemics and travel restrictions and quarantine debt that business is as robust as it is.
Not only and volume, but we're able to price it.
So when we say that we.
Just do a couple of connect the dots here of 40% of FCC had been redeemed.
Those are those are the FCC had a 25% premium on them.
That we are at.
Flat to slightly ahead of pricing of the all time high pricing and.
Including the dilutive effect of those 125% of FCC and <unk>.
Debt, we are so well booked into the future I mean, I I've never seen.
You know such a such a positive.
Set of circumstance, we just need to get back to work, we need take the cruising operating again.
And and we're hopeful of.
As much as it bothers me to see other sectors of the travel.
<unk> opened and I'm happy for them Trust me and I'm happy for the casino operators and the airlines and the hotel operators and the resorts.
I wont be happy for us as well and I think our day.
Our day should be approaching should be approaching I've been given.
The advances were making and and the vaccine front prevalence is coming down.
The industry the protocols, we've put in place no other sector of the travel business or any other business has put forth.
And as many comprehensive.
Protocols.
And to combat the spread of the virus as we have and we're eager to get back to work and we're happy to see it starting and in Asia, starting in Europe, we're going to see I think more vessels starting on.
And Europe soon and so we're encouraged by all of those are all of those developments, but at the end of the day, we've got to get back to work soon and.
And and we're ready we're already.
Thank you and.
Also when the city right now Youre planning on 50% capacity, but working with your healthy healthy cell panel you feel once people are vaccinated and.
And comfortable that ramping up capacity quickly because you know and a cruise ship youre kind of interacting with a lot of people and whether you're at 50 or even 75% capacity, that's not going to be the determining factor of the factor is people just being vaccinated.
That's right, that's right and sort of allowing you to get until the higher level of capacity faster.
Yes.
Look I agree I think the we all knew that vaccinations were ultimately going to be the the deciding factor and.
Quicker, we vaccinate when we get to the point of herd immunity, which by most accounts.
That that timeframe is and the July August time from sometime in summer and all the experts believe that by.
By the end of April anyone who wants the vaccine at least from the United States, even in Europe, Canada, and we will have access to one that all bodes well.
But look one step at a time.
We just have to start we have to start we have to build momentum we have to demonstrate to government agencies and society as a whole are our guests our crew and to ourselves that we can the fact, though operate safely and a low prevalence environment.
Where true and and guests are vaccinated.
And then this will this will pivot from being the pandemic to be in and endemic and and and and that's what we have today with the flu. This will be you listen to the experts that per day say that.
And this pandemic will pivot to being a seasonal event.
And and it won't be the debt of.
Scary thing that it is today.
Very good thank you and good luck.
Thank you Ivan.
Thank you Evan and thank you everyone. We truly appreciate the.
Your your call and today your questions. Your continued support for our great industry and a great company and I look forward to speaking to you.
On May <unk>.
Thank you.
Thank you for this concludes today's conference call you may now disconnect.
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