Q1 2021 Carnival Corp & Carnival PLC Business Update

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Good morning, everyone and Welcome to our business update conference call. I'm Arnold Donald president and CEO of Carnival Corporation and PLC today. I'm joined telephonically by our chairman Micky Arison as well as David Bernstein our Chief Financial Officer and Beth Roberts senior vice president investor relations. Thank you all for joining us this morning.

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

Of course, the thing on everyone's mind is when are we going to resume selling here in the US and while we're very disappointed but the April 2nd additional guidance issued under the conditional same all Thirty of our ships in US Waters and that fall under the conditional sail order have achieved green status and we are continuing to work with the CDC and the administration to find practical approaches to resuming cruising in a way that serves the best interests of Public Health.

Now it's been over a year since we paused Our Guest Cruise operations, but we are on our way back and we are coming back and even stronger company operationally throughout this cause we bought a positioning Carnival to return the operations in even stronger company where emerging with an exciting roster of new ships across Our Brands to capitalize on pent-up demand. We are achieving cost efficiencies from the exit of less efficient ships along with ongoing streamlining of shoreside operations relative to pre COVID-19 levels and we've continued progress on our sustainability efforts with an emphasis on minimizing our carbon footprint.

We are excited that the majority of our nine Brands will resume failing this summer all be in on a limited basis. In fact, I eat is already sailing from the Canary Islands to over with positive feedback from our German guess but southern Europe following the voluntary pause Kosta will resume sailing with two shifts beginning next month in May.

for the UK piano cruises will have two ships offering UK Coastal cruising in June and August including the inaugural sailing with the brand new flagship, Iona

You know and we'll have the first of his three ships sailing in July and Princess is offering summer vacation out of the UK with to shift starting in July and August respectively.

And last but certainly not least Seabourn will offer ultra-luxury cruises and signature Seabourn moments sailing from Greece this summer.

Again, as we have demonstrated our portfolio of brands has clearly been an asset as we have announced resuming operations so far with nine ships representing 12% of our faith.

In addition, we are also Opening Our hotels and two operations and Alaska this summer our ownership of the vast majority of land-based infrastructure has been key to our leading presence in Alaska be opening our hotels will also help support our long-time Partners in Alaska. We've been very strong advocates for our return to Salem.

We have focused on resuming operations as quickly as practical while at the same time demonstrating prudent stewardship of capital and doing so in a way that serves the best way to Public Health.

Oh highest responsibility and therefore our top priority is always compliance Environmental Protection and the health safety and well-being of our guests of the people in the communities we touch and serve and of course of our Carnival family our team membership board in short side.

We continue to be very encouraged about recent vaccine distribution and the positive progress the signals.

Vaccines are a game changer. There are another important too along with advancements and treatment therapies contact tracing technology and affordable rapid testing.

Why we will have a limited number of sailings catering to those who have already received vaccines our decisions about vaccines and all of our health protocols continue to be informed by our Global Medical and suck and the requirements of the places we operate in visit. We continue to work on securing the ability to resume cruising from Sports in a manner consistent with them. That's the return of other forms of travel Leisure and entertainment activities.

At the same time we are of course working toward resuming operations and other parts of the world including Australia and Asia, in fact 59 of our 90 Chef or outside the US conditional sail order.

Meanwhile, despite minimal advertising we've seen an acceleration in Booking Trends globally with a near doubling and booking volumes during the first quarter Twenty One compared to the previous quarter. We've also experienced significant latent demands upon opening new sailing since summer. In fact open to a single biggest booking day in six years on the announcement of coastal feelings for his two shifts this summer and generated significant bugs with nearly a billion medium mentioned so far like Wise Choice summer at C luxury UK voices drove their biggest booking Day in the UK and over a decade while princess had his second biggest booking date in the UK.

The strong initial demand has affirmed our confidence.

indicates the potential prefer the pricing strength

Over the last fourteen months a Julie has been a key strength 20-21 will clearly be a transition year. We expect the environment to remain Dynamic over the next twelve months off as we roll out our Fleet while continuing to adapt to an ever-changing situation.

As expected we are staggering the introduction of shifts for each of Our Brands and we're ramp up the number of vessels and the occupancy levels over time as destinations reopen and we get further experience with our enhanced protocols.

Brand is coming back operationally stronger than before followed be sometime before we return to Prior capacity levels after accelerating the exit of less efficient Chef. We have an exciting roster of new ships, which will be rolling out across each brand. In fact in conjunction with our return the service nearly. Every brand will welcome a new ship by your own these exciting new shifts or considerably more efficient and they will drive even more enthusiasm excitement and demands around are restored plans with both our brand loyal and with new d'cruz.

Beginning with our namesake brand Carnival introducing the new body just in time to commemorate the upcoming fifty year anniversary of the original Mardi Gras. Now the numerous promises not to disappoint the brands reputation built on fifty years of fun. And even after fifty years Carnival Cruise Line continues to innovate this time the first-ever roller coaster at see both Mardi Gras also both restaurants from Emeril Lagasse Guy Fieri and Shaquille O'Neal. The highly-anticipated app was recently named best new Cruise Ship by USA Today, but these exciting Innovations including its liquefied natural gas propulsion system the first Ellen cruise ship in North America reflecting our ongoing commitment to improve our carbon footprint.

Also in North America premium Brand Holland America will introduce a new Rotterdam featuring iconic music walk experience including BB King's Blues Club Stones rock room and Lincoln Center Stage princess will introduce two new ships. Both of which will feature Medallion class as well for the very first time the dead higher princess wait and see more Adventure will set a new standard in Expedition cruising for ultra-luxury Seabourn with spectacular features, including to 360 degree view battery powered submarines capable of taking guess to death of one thousand seat, Seabourn Venture will have a world-class Expedition team of twenty six staff who specialize in destination specific geology oceanography marine biology penguins and polar bears among others.

Is exploring the underwater world of Antarctica Beyond one hundred feet.

Is only been done by handful of people seaborn's guests will get to share a true once-in-a-lifetime experience.

In the UK we welcome. I owned also powered by LNG with her inaugural sailing August 7th her maiden voyage will in sales from England Coastal cruising to Scotland, including her namesake the beautiful island of Iona.

For Germany, we were introduced yet. Another environmentally-friendly LNG ship Aida the southern Europe half the Toscana in Casa for Wednesday will replace the exit of 7th. St. Fish and chips passive. Toscana curated by Adam tahanee is Casa second allergy ship and is a tribute to Tuscany Casa. Firenza is interior design is dead operation of the City of Florence pasta frenzy has been recognized by Rina with green star three, but excellence and environmental performance.

Of course, we will also achieve a structural benefit to unit cost as we deal with these new larger more efficient ships in addition. We will further benefit from the nineteen shifts, even of Life which are among our least-efficient ships. In fact Seventeen of the nineteen ships have already left the fleet.

Combination of all of that will generate a 4% reduction and Shift level unit costs and a 3% reduction in unit fuel consumption going forward enabling us to deliver mortgage to the bottom line.

We also continue our efforts to right-size are short side operations and find efficiencies across our existing seat to reduce our costs further importantly during this cause we have been a continuous Improvement in the environmental social and governance area. Now why we made significant progress on many fronts, we continue to focus on the important issue of carbon-intensive for more than a decade. We've demonstrated our commitment to reducing our carbon footprint through the development of or efficient new ships with the disposal of odor or less efficient and shift and throughout ongoing Investments and efficiency enhancements, but the existing Fleet which have averaged seventy million dollars annually and through our results.

Despite seating capacity grows up 25% from 2011 to 2019 our absolute carbon emissions key in 2011 and we delivered a more than 30% reduction in our carbon intensity since 2005. We also need the industry in the development of short power over 40% off about fleas. It's capable of plugging in while in Port and they main power from more sustainable sources today only 16 of the more than 700 ports. We visited worldwide off of this show off our capability, but we are working with our partners to increase availability as demonstrated by recently announced plans with mayor, and the Port of Miami.

And we leave the industry and development of and continued improvements in Advanced Air Quality Systems currently seventy eight of our ninety shifts have been fitted with these as a result. He shifts achieve for herself emissions and the same or lower nitrates in particular matter as ships operating on marine gas oil RMG while avoiding a carbon impact from the additional refining needed for MGO through our research and development efforts. We have aggressively implemented new technologies such as the afford month G the most environmentally friendly fossil fuels

A clear demonstration of our level of commitment with shown when we made the decision to build these ships, even though at the time the decisions were made the infrastructure fell and G was not yet in place.

We then partnered with Shale to develop the supply change to support allergy operations.

We now have eleven thousand G ships either currently in the fleet or on the construction representing nearly 20% of our overall Fleet capacity.

The utilization of LNG is a positive step for the environment, but it is not the ultimate solution.

Our goal is to eventually achieve that zero initial to get there over time. We are aggressively looking at other options, like Advanced lithium-ion battery technologies and Fuel Cell Technologies.

Moreover we have also Advanced our efforts on social responsibility and governors, for example, half of our operating companies are now led by women Executives reflecting our commitment to diversity and inclusion also upon resuming operations in even greater portion of executive pay will be tied to help environment safety package T and sustainability performance.

Turning to our financial objectives first and foremost is to maximize cast generation while we have secured the liquidity to sustain as well. It's a 2022 even with your rep I'll pass for once we return to full operations will be the primary driver to return to investment-grade credits over time creating greater shareholder value month that we've lowered our capacity growth to roughly two and half percent compounded annually through 2025. We structurally reduce costs. We're working to lower interest costs and we are working aggressively to return our Fleet the gas operations as quickly as practical and still serving the best interests of Public Health.

With the aggressive actions, we've already taken managing the balance sheet and reducing capacity. We are well positioned to capitalize on pent-up demand and team merge a meaner dead and Company reinforcing our industry-leading position.

Welk

These challenging times. We have received overwhelming support. So again, thank you to our valued guest. Thank you to our dedicated members of the carnival family support in short side.

Thank you to our travel agent partners and thank you to our other many stakeholders for their ongoing support. And of course, especially with thank you to our investors for their continued confidence in us and in our future.

We can't wait to welcome everyone back on board with that. I will turn the call over today. Thank you Arnold. I'll start today with an update on booking Trends. Then I'll provide our monthly average cash burn rate along with a summary of our first quarter cash flows.

Next for those of you who are modeling our net income and EPS. I will provide you with some key data and then finish up with some insights into our financial position.

Turning to booking trends.

Our booking volumes have been very strong given the circumstances looking volumes for all future cruises during the first quarter 2021 were approximately 90% ahead of booking volumes during the fourth quarter 2020.

Justice positive are cumulative Advanced book position for the full year 2022 is ahead of a very strong 2019, which was at the high end of the historical range.

I would like to point out that are booking volumes and both positions are very encouraging given that they were achieved with minimal advertising and promotional activity pricing on a full-year 2022 book position is higher than pricing on bookings at the same time for 2019 sailings. If you took four bundle packages and exclude the dilute of the impact of future Cruise credits or more commonly known as fcc's

This is a great achievement given pricing on bookings for 2019 sailings is a tough comparison as that was a high-water mark for historical you.

We normalized for bundle packages since over the past year or so. We have offered and our guests have chosen more and more bundle package options with the end. We expect to see the benefit of these bundle packages in onboard and other Revenue.

Even more encouraging is the overall improve pricing Trends. We have seen over the last few weeks as we have announced the restart of cruise operations in several of our brands.

I just want to remind everyone at 2 to the pause and get screws operations. The companies booking Trends are being compared to booking trends for 2019 sailings. I'm not the prior-year.

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

For the first quarter our cash burn rate was five hundred million dollars, which was better than the previous expectation of six hundred million mainly due to the timing of cap expenditures.

For the first half twenty Twenty-One. We now expect a monthly average rate to be approximately $550 million which includes additional restored took pictures.

I am happy to say that this monthly average rate includes more restart expenses as we have recently resumed or announced the resumption of guests cruise for six of our nine Brands while we continue to plan for the others.

Despite the additional restart expenses are monthly average rate for the first half of 2021 is expected to be lower than previously indicated as both teams have worked tirelessly to opportunistically find ways to reduce our cash burn rate next. I'll provide a summary of our first quarter cash flows.

We are currently in a solid liquidity position with 11 and 1/2 billion of cash and short-term Investments on our balance sheet at the end of the first quarter off even better. This is two billion more cash and we had on the balance sheet at the end of the fourth quarter.

During the first quarter we added to our liquidity position by completing two very well-received Capital Market transactions with cumulative net proceeds 4.4 billion.

Signor unsecured note offering which was upside due to the stronger man raised 3.4 billion while our overnight Equity offering raised a billion.

This was partially offset by two things first or total cash burn for the quarter was 1.5 billion. Simply our monthly average cash burn rate of 500 million per month * 3 + second nine hundred million driven by principle debt payments.

I would like to point out that our total customer deposits were unchanged this quarter compared to the fourth quarter 2020 at 2.2 billion with cash inflows from new book about upsetting cash refunds. This is a welcome point on the road to the full resumption of guests Cruise operations.

Those of you who are modeling or net income and EPS. Let me provide you with some key data points depreciation expense for 2021 is expected to be approximately 2.2 billion that interest expense for 2021 is projected to be approximately 1.7 billion prior to our refinancing efforts of this year to reduce that number.

while I refinish

Hanting efforts will only have partial year impact on twenty Twenty-One. They will certainly have a more pronounced full-year impact on 2022.

Our diluted weighted average shares outstanding for the second quarter twenty Twenty-One and fiscal year 2022 is expected to be one point one three thousand billion for fiscal year 2023 and Beyond it will be around 1.185 billion the increase from 2022 to 2006 is driven by the conversion of our remaining convertible notes.

I think it's worth noting that we also incurred almost two hundred million of non-cash expenses during the first quarter 20 21 for things like leasing a reservation and share-based compensation. It appears these items were not fully captured and consensus estimates given the focus on cash burn.

Finally, I will finish up with some insights into our financial position since the pause in our guests Cruise operations a little over a year ago. June twenty three point six billion dollars through a series of transactions these transactions included Equity offerings raising over four billion dollars these Equity offerings along with retiring 1.5 billion of our convertible notes through the issuance of common stock considerably strengthened our balance sheet from a financial position perspective. The last year was about obtaining sufficient liquidity to get through the pause and get screws operations.

However, with 11.5 billion of cash and short-term Investments on our balance sheet at the end of the first quarter. We believe we have enough liquidity to get back to full guess Cruz operation.

As we look forward given the Improvement in the debt Capital markets where interest rates for companies, like ours are less than half of what they were last year. We will be pursuing refinancing opportunities to reduce our interest expense and extend our maturities.

And now I'll turn the call back over to Arnold. Thank you David operator. Please open the call to questions.

Thank you. If you would like to register a question, please press the one for on your telephone. You will hear a three-tone prompt technology request if your question has been answered and you would like to withdraw your registration, please press the one followed by the three. One moment, please for the first question.

Our first question comes from Steve it was in ski with stifel please proceed.

Hey guys. Good morning. Good morning. Good morning. I hope you're doing well. So seems like you know yesterday we got some additional comments from the wage if they're you know, they're true or they're not but it seems like they could be you know the point where they might be open to allowing cruising from, you know, North American ports by mid-summer, which is encouraging and and I guess the the question is going to be you know, before those comments came out, you know, we've seen some of your competitors start to announce Caribbean itineraries that Embark, you know, they're embarking from you know, so-called foreign ports and and you guys react to anything like that for your Carnival your your your princess got a cord North American brand and I guess you know, is that something that you would still explore this point or do you just kind of sit back and wait at this point to see you know, what the CDC officially kind of comes out, you know for before you make, you know that type of decision and hopefully that will make sense.

Yes, I think first of all just a couple of things, you know princess, you know has announced. I'm coming from the UK, you know, some limited selling sound from the UK, but you're correct. We haven't announced I'm selling CS what princess are Carnival we have announced for Seabourn is not a grease, you know, as an example. So look the bottom line is we are in dialogue with CDC and with the administration, you know, we stand with everybody and trying to make certain that way, you know, we all contain this virus and you know public health is is Paramount here. So we we're in all that but as released on April, you know, that is not necessarily A workable or practical solution. And so when dialogue to try to come up with that so we want to share the optimism that wage

Detailing into I and I think by working together, we can all make that happen in terms of whether we would consider selling a home porting. You know out of the Caribbean, you know Carnival is you know, really America's original Cruise Line is American language film or more people than anybody else from American board kids and all that and point. It is the drive to Market capabilities access for people over 14 home ports up here in the US. Nobody else has anything like that upper corner where we prefer to give the people who are working in the ports, you know, all the people who depend on the the industry for their livelihood. Obviously we prefer and I'm sure the other companies would to you know, we prefer to have those jobs and all that stuff. I'll be here but if you know, we're unable then obviously, you know, we will consider home fourteen elsewhere.

OPEC answer your question

David thank you very much and then second question so I can be for David. But I mean so, you know, you guys were we're always kind of targeting a double-dip cheese. I guess she's you know, if we assume proving goes back to a so-called normal some point over the next, you know call a couple of years, you know, is there is there any color you can give us around? You know what that roic could look like right now, you know given the much lower cost structure, you know, but obviously you have you know, obviously have higher interest costs as well. So any color about you know, what that roic could look like down the road, you know, David Luiz helpful things.

Sure, Steve, so just to point out. Yes, we do.

Higher interest expense but clearly the return on invested capital is on all of the capital. So the interest expense doesn't impact the roic, but you know, we are still targeting an roic in the double digits. And as we said many times before once we get to the double-digit, we're not going to stop there. This is a business that we believe has the capability of going beyond that and and getting in our oh I see in the low teens so low to mid-teens, so we are moving forward and have a lot of optimism and positive attitude towards our business.

Okay, great. Thanks guys. Thanks for color.

Our next question comes from a robin Farley with GBS. Please proceed great. Thanks, you know on the the comments last night from the CDC in the office was interesting that you didn't mention the potential to to have those Brands operating from u.s. Ports. And and I guess it sounds like the April 2nd specifications might be burdensome. I guess my question is if you're reaching agreements with ports and local Health Care authorities in those places, isn't it possible that if you sort of probability wait the outcome of all of the scenarios that you need to take into account according to the specifications and the healthcare you have to provide in the land base. If you probability wait with the outcome with a fully vaccinated ship can't back at you to a number that's low enough right in other words a fully vaccinated ship the probability dead.

I would think would be so tiny that that you would need to incur those costs. Is it workable in in kind of a probability waited scenario?

Robin is a lot in your question, you know, I think the conversation around negotiating with ports and local authorities, you know, depending on the specificity that the criteria involved and all that we do that for example, we've sailed overseas the industry assailed I think almost 400,000 guests so far over and to do that we have to have arrangements with all all those places destinations we go and so that unto itself depending again on the criteria established and paperwork of all that may not be so burdensome. Cuz we need to have an understanding, you know, keep in mind when all this started people were concerned about ICU units being overwhelmed and so on and you know, fortunately, you know, that hasn't happened with the Advent of vaccines within advancement and treatments with more rapid testing more readily available testing with all of that wage.

It appears as well a trim.

And a trajectory with that is no longer the big risk having said that of course, we want to be having a pre-arranged agreement with what we going to do if there's a case on board because it's off the community. There's a chance that other deal on board the specific Solutions you're referring to in terms of of everybody's vaccinated and so on and so forth. We'll have to see how that evolves we can seem to be going by global medical and science Experts. Of course, we're going to be in compliance with whatever the protocols are regulated wherever we go. Of course, we're going to do that, But yes, you know today everybody doesn't have access to that cleans children or not yet. Really? I don't go for vaccines. Hopefully that'll change over time. Hopefully the availability of vaccines. So everyone will happen. So while so you don't change all the time that we would encourage everyone to be vaccinated we would today we can't buy vaccines, you know to do anything. So, yep.

Have to let this play out and keep in mind. We are currently sailing.

Without any major incidents without anybody being vaccinated in a number with protocols in place. And so you're hoping that the combination will result and combination of vaccinations and and other protocols, you know will result in a situation where the public health interest is being served. If we don't have to go through a very burdensome and almost unworkable situation. The key thing is mitigating risk. We can't be prefer home. That's the hope. We won't be F to stand up to a zero risk, you know standard because frankly, you know know where else in society is that being considered? We just like to be treated similar to the rest of travel and entertainment and and tourism sector and so if we do that will be fine, you know, an interesting point is today.

You can fly out to you at today. You can try to the US.

Take a cruise to fly back into the us whether you're vaccinated or not. And today if you're vaccinated, you can't take a cruise ship from the US Bank. So, you know, we've got a little work to do here but we stand with the CDC we stand with them in a situation and working together to come up with practical solutions that protect the public health, but I'll you know half million plus people in the US are dependent on the cruise industry for jobs to be able to get back to work and give people that vacation experience of their choice.

All right. No, thank you. Thank you for that perspective. Just one one quick follow-up. Just thinking about the opportunity to put additional ships into service this summer given the booking stats. You mentioned this record booking levels and all the pent-up demand that we're seeing how far in advance how close in could you add additional Edge July departures? In other words, you know, does that happen have to happen by the end of April to sort of reasonably add other ships in July. Just thinking about that timing. Thanks. Thank you ma'am constraint right now of course is being able to ramp up with and so, you know, it will take us minimum sixty up to 90 days to be able to get a crew onboard trained up with new protocols et cetera to be able to execute a sailing. So if you can backtrack from that in terms of you know when we be able to go home

looking announcement been so that

That's the biggest challenge we had was right, but we do have the opportunity from Adam and standpoint. Assuming we we have the crew available and ready to go and trained up that you know, we can do them closer in announcements on itineraries and and ceilings because of the man is there.

Thank you very much. Thanks. Thank you.

Our next question comes from a James Hardiman with wedbush Securities, please proceed.

Good morning. Thanks for taking my questions here. So a lot of discussion about you know vaccines and and how that may or may not help the the regulatory landscape wage. I'm curious about the consumer landscape. Obviously, you've got certain customers that would see a vaccine requirement as a reassuring step creating a a bubble on the sea. So to speak and then you've got another contingent that that would see that as as somewhat taking away their their freedoms talk a little bit about I'm sure you've surveyed your own customer base and and how you think about how big those different contingencies are and and how you serve both?

Well, I would say first of all we would encourage everyone to get a vaccine if it's available today. You know that combined with other basic simple as you can take is your best defense against I'm getting cold at and certainly your best defense against having any serious effects. If you do get hold of and so um, so I encourage everyone to get a vaccine you don't happen said that of course people have the individual so personal Liberties et cetera to my knowledge and and we're involved in the world travel and tourism Council involved in US Travel et cetera to my knowledge. There is no country major country today that is mandating vaccines for travel. And so the option is, you know vaccines are testing or whatever and so that's my understanding today there as you can see as we go about in society today with a dog

Restaurants entertainment venues, you know, some of the sports teams are opening up where they're taking guests in, you know, there is not a mandate, you know for vaccinations then some choices in the world, you know, it's not even legal to mandate vaccination no vaccinations or anything. So so there's a lot of complication and all of that Kevin said that as I said before will be informed by the global experts in the medical experts and scientists. And of course, we will follow whatever you know, the protocols are that it's regulated in place wherever we go home. You have to follow those and you're right, you know, there are a lot of people who you know, don't feel even they are willing to take the vaccine. They don't want to be mandated to take it off and people, you know do have that personal freedom perception and orientation. So we want to encourage people not to take the vaccine and then what our ultimate policies will be dead.

Apple that that evolves the in the UK we have some we can also notice aliens in the UK. We just announced one.

Busy board where it's available to people who have vaccinations but we do not have a company our brand policies right now around vaccinations and allows them to play out in line up with what makes the most sense.

Today. It was very helpful it does and then I guess second question here and you get this question all the time, but I figure it's worth asking every few months will walk us through all of your latest thoughts on the time tables around mobilizing the fleet how quickly you could get to sort of cash flow break-even. How quickly did it would how long have you think it would take to get the full Fleet up and running and then as I think about occupancy no region talked about a 60% occupancy level to start you think that's a reasonable number or is there another number that you may thanks? Okay, and and one other comment In fairness to people on the vaccines to I just have to make is that you know, as I said, I'll repeat it. But you know, everybody doesn't have access to vaccines today. Hopefully that will change. Hopefully it'll change very quickly. But today everyone doesn't have access and so that's a whole another factor to put it and children.

Today, you know or not approved to take vaccinations and so there's testing going on and and Sciences at work and you know in coming months that could change as well as Thursday, you know children, you know, obviously are not approved for back home. And so those are a different vaccine, now back to your current question, you know initially issue like our UK selling for some of the other sales initially so we can have the opportunity to practice the protocols and make sure everything is going as planned. We're starting with your with your less than 50% occupancy, but that will ramp a pretty quickly, you know, as we make certain that the execution, you know, is that is you know in place and and going well and and so that's where we're in some of the initial sailings again for other companies. Whatever their Hazard. It's probably just a similar thought process. So I want to make sure that wage.

What recalls are in place and working? Right and we all get good practice without crew and the managing all of them and then it would ramp up as as we get better at it. So so that's the first, the terms of how quickly it gets break out that David make some comments from the financial perspective. But you know, the what we've been saying is, you know, thirty two depending on the brand and the shift size and bought a bunch of other things 30% is of occupancy because as you know better than break-even, you know Finance you for us for a given not ship in terms of old bulb. We are going to come back standard no matter what, you know, we will be bringing in, you know few shifts in a brand at a time and hopefully if we were proved to go in the dedication blow up and running and we can have all the various itineraries and all that, you know, ideally we'd like to be able to have the fleet fully going by the end of this year or early next year and that's our dog.

Operation and what not working?

Park with various bodies around the world to accomplish. And then the last time that I just want to emphasize for us the u.s. Is very important to us at the same time. So as the rest of the world is going to benefit to have all the brands we have and so, you know, as I said in my opening remarks, we have like nine ships that are involved in other jurisdictions and other regulatory environment that that we have to work with. So today there was a little bit ahead of where we are in the US, but hopefully we'll get to Level Playing Field and be able to bring the flame that overtime. I hope I answered your question, but I'll let David make a comment you want that anything on the break-even position?

So let me just address the break-even. It'd be very difficult at this point in time because to determine exactly where we break. Even there was so many variables. I mean you're talking about pricing the cruise ticket is the price of fuel that's currency. So, you know, what I've been doing is referring people back to life or 2019 actual and when we looked at 2019 and I've said this before if we had the top 25% twenty-five ships in our Fleet operating off we would and yes, they would be I'm just talking about. Eration with full occupancy. Those twenty five shifts would generate enough cash flow to cover off the pause cost for the other, you know, sixty ships in sixty five ships in our Fleet as well as cover the full 2.4 billion of sg&a.

That we had in 2019. And by the way, you know with Arnold's comments, you know coming back and being more efficient. Hopefully we can do better than what we did a 2019 in terms of sg&a, but hopefully that helps you build your own model because there are just too many variables at this point for me to to be specific on the guidance office when we beat cash flow breaking.

Very helpful Arnold David. Thank you.

Thank you.

Our next question comes from Patrick scholes with truth, please proceed. Hey, good morning. Everyone Hi Patrick a couple of questions. Good morning. Couple questions for you Thursday the CDC came out and it was in a Bloomberg article and I quote hopefully by mid-summer with you'll hopefully by mid-summer, they'll be restricted Revenue sail, and I'm sure I'm sure you've thought about this by them saying restricted Revenue. Do you interpret that to mean our cruises or would that be limited occupancy on paying cruises?

Thank you for the question Patrick. I think I'd rather the CDC, you know respond to what they would thinking, you know, when when they said that again we want to work with them and the administration Jim Shore that ultimately it would be really Revenue Cruisers that point in time and and we look forward to working with him to come up with a practical approach that would make that happen still serve the interests of Public Health. I understood and then in that regard, do you have you know a date in your mind and I don't want to you know, I don't expect you to tell what that date might be. But you have a date in your mind that you just say. Hey, it's X date and we're just not really moving forward here selling out of the page states that you would possibly

Go ahead and and and pull the chips and sell them out of other countries at that point where the deadline date in your mind. No, I wouldn't say there's a date wage per se obviously practically speaking as a company will will have to make prudent decisions but you finally investors, you know, and and so we'll do what we think we may need to do to get people an opportunity to sell them to give opportunity for people to work and earn a living and so on and so forth, but we don't have a whole Barbara Terry I would say it's is sooner rather than later that we might have to know some additional home porting outside the US we're trying to hold back on that but it could be sooner rather than later on that but I continue to be, you know very much focused on working with the CDC and the administration to come up wage.

You're a solution networks, you know for American workers and American public and and I think we can't I think if we all know just continue to work together. We'll figure that out loud. Okay? Sure. Thank you for the update. And I think we can figure it out here, too. I'm sorry. Go ahead. Thank you.

Our next question comes from a Brandt Montour with JPMorgan, please proceed.

Good morning, everyone. Thanks for taking my questions. So sorry one more on vaccines and see see and understand that you don't want to alienate any of your Royal guests other Norwegians 100% vaccination looking to ramp up load factors, you know much more quickly than what we would expect, you know, you could probably anyone could probably realize under the conditional sail in order that I realized work in progress. My question is if that strategy for no reason to be able to move forward either a world in which you could Envision moving to something like a like a hybrid approach or some shifts require vaccinations and then you can you rap uploads really quickly. And in others are are are more, you know, uh, you know available to people that didn't want to have a vaccine. Is that something that's on the table for you.

I think again.

You know, that's one of probably a thousand different scenarios in my comments. I mentioned but generally constantly changing, you know Dynamics and ability to adapt and so certainly, you know, that's one of a of a thousand different, you know possibilities. Hopefully, you can come up with something that wouldn't require those kinds of Dynamics and you know more than cost with the optimistic we all can working together. But you know, I guess there could be scenarios like that. But you know, I'm hopeful that we'll have something much more straightforward, you know that will accommodate the world that will let the appropriate authorities damage information we have

Okay, thanks for that. And then you know drives we have to talk about your pricing commentary yet, cuz it was really positive. You know, you mentioned further pricing looking for for the pricing of the VIN and then David, you know, you mentioned the last few weeks price and transfer we're positive. I guess I guess the question is, you know, you haven't even started marketing yet to assume it would potentially that would be another Catalyst but there any concern or one concern we would have is that you know, if people aren't booking non balcony cabins or inner cabins right now. Is there any is there any benefits from from cat in the mix in those in those notes?

I'll just make, course David to speak to the specific, you know, generally as you you understand, I'm sure you know, what you have is a basic kind of supplied them anything right now. We have very limited sailings available and a lot of pent-up demand and so, you know, therefore there is an opportunity to give people at Great Value the vacation exchange they want, you know still at a much better value than put a land base, you know experience so it's still a great value. And so we're we're seeing that reflected. Oh and in the general price and stuff, but they're wrong answer the specific question to keep in mind the pricing comments that we made the pricing was up. We were looking at the full year 2022 booking Trends month and essentially, you know, substantially all our Fleet is open for the full year 2022 without the you know, so what we see we looked at it by quarter. We looked Thursday.

Buy brand, we looked at it by category mix and we we see the same general positive pricing Trend regardless of how you you look at it. So we thought we felt very good about the overall book position as well as the the last couple of weeks. As I had said in my prepared remarks am booking volumes and pricing was very encouraging in the last couple of weeks. And by the way, it wasn't just on the Voyages that we opened up for this summer looking at 2022 as well. You know, everybody wants to go away and I will tell you, you know, the next best thing to actually going away is planning a vacation and that's what a lot of people seem to be doing right now.

Thanks for all the thoughts and good luck. Okay. Thank you.

Our next question comes from a Jamie Katz with Morningstar, please proceed.

Good morning. I'm actually curious to understand a little bit better what the mechanics behind me Revenue management processes right now particularly, whether I'm just filling the ships to that fifty percent Mark leaving some incremental ability closer in if you can film or or whether you're looking above and beyond that off for maybe later this year where you know is there may have to be some adjustment or some of those reservations. They have to be walked back that makes sense.

Yeah, well first I'll make you comments in the day the day at whatever you like. When you think about Revenue Ministry thing about the booking information. We're sharing a lot of bookings as well out into age 22 and some is even in the twenty-three where we fully expect to have, you know, full occupancy and full Fleet sailing and so on and so forth by that point in time down there is confidence obviously amongst those who want to cruise that is likely they'll be able to you know at that point. I'm so that's a lot of what's driving what you're hearing much more. So then the the mirror end, you know shorter-term stuff, which is more limited. You know, I see the David go ahead.

Yeah, the technical analyst I think you said it. Well, you know the first of all on the revenue management side, you know, Nikki and and Arnold and I may have met with every single Revenue management team recently and we've been talking to them about what they're doing and how they're doing it and sharing best practices to make sure that everybody is thinking very clearly about what is optimal under the circumstances cuz as you would imagine the models that we have, you know while they're helpful that they're not the answer in this environment and we have to layer in our own thought process on top of that. So the people are actively thinking this through very carefully the limitations off occupancy that you're describing for more of a short-term thing that we are focused on to the Voyages. We've announced this summer in both the UK.

P&O Cruises Canard and Princess as well as what we're seeing with pasta and and of course Seabourn in Greece as well. So we are focusing and we will limit the occupancy as appropriate the way Arnold had described and of course try to take advantage of the positive cabin mix in a sense of pricing when we do that and so it's it's a shorter-term issue. But when we look out to 2022 at this point in time, you know, the percentage that's on Thursday is much slower and therefore as a result of that the capacity limitations aren't a factor and hopefully by then when the full fleets operating were operating at a much higher level as well, you know, the vaccine rollout continues around the world and hopefully we get to a better place.

Okay.

And then I think you had said demand quarter of a quarter was up 90% Is there a way to think about what the sort of organic part of that is and what part of that is attributable to Faith in our areas that were open for 2021.

Well, so let me tell you some of the things I looked at to better understand the demand and what flowed through so I looked at the first quarter booking just for 2022 cuz all of those sailings were already opened and 428 the booking in the first quarter were higher than the bookings for 2019, which we all know is a very robust year and then when I look at the the March bookings for twenty twenty-two, they I said the accelerated because just for twenty twenty-two in March. We saw a significant increase in Booking versus what we had seen in 2019. And so this was to my point

When you do an apples-to-apples comparison just for 29 for a 2022 versus 2019. You're seeing some very positive booking momentum. As I said before, you know, people are looking forward to getting away. There's all that pent-up demand and they're planning their vacations.

Thank you for the clarification. Thank you.

Our next question comes from David Hargreaves with stifel please proceed.

Hi, great job on controlling cash flow with respect to the refinancing efforts that you talked about. I'm just wondering if there any specific elements of the debt stack home. You may be targeting and whether we should be thinking in terms of equity callbacks, and then I have a follow-up. Thank you.

David yeah, so

I mean you can look at all of the the debt that we did early last year and the April June and July and August timeframe, which was as Arnold has said very expensive and those are the things that were focused on in terms of refinancing and we've been very specific that we're looking clearly at refinancing to lower interest rate and and we're not necessarily will be patient in terms of reducing our debt load and using the extra cash until we have clear line of sight that our Fleet is going to be, you know, fully back in operation and we feel comfortable. I'm expecting to focus on refinancing the early expensive then okay. Well, I'm sorry. Can you a question it will take one more and that will be it. Go ahead.

Thank you. So with respect to the the vessels that that you've taken on.

And and expect to take on could you talk about secured borrowing capacity if they've been changes to that and if you expect a need for any further Covenant amendments, thank you.

So the vessels that were chasing on with each vessel, we have a a committed export credit that's associated with those shifts. So has we take delivery of the vessels going forward will use those export credits and they are unsecured financing and the export Credit Agencies have been very supportive. We continue to work with them. And so we feel very comfortable with that financing and it's committed in place and our bank.