Q2 2021 Carnival Corp & Carnival PLC Business Update

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 Telefonica 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.

Now 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.

Excitingly, we are on a path to return to full operations and we are very happy to continue to welcome our loyal guests back onboard as well as the welcome new GAAP.

Now, we're working diligently to have offerings that serve all of our guests in a way that is compliant in the home force and destinations we touch while serving the best interest of public health.

So far we've announced the resumption of operations for <unk>.

<unk> 2 shifts across 8 for about 9 brands by fiscal year end.

For now represents over half of our fleet capacity returning to guests cruise operations.

And this includes what we expect to be.

Very successful relaunch of cruising in the U K later this week with piano cruises Britannia.

Sales once again from the United States on Carnival horizon over the fourth of July.

In fact carnival horizon will be joined by 9 other shifts restarting in the United States by the end of August.

Evaluating additional deployment options throughout the fall and winter period with a focus on maximizing future cash flow, while delivering a great guest experience in a way that of course serves the best interest of public health.

Again.

Highest responsibility.

Therefore, our top priority.

As always complying and.

Environmental protection, and the health safety and wellbeing of our GAAP of the people and the communities, we touch and service.

And of course, our carnival.

Our team members shipboard and shore side.

We continue to work toward resuming operations also in Australia and Asia.

While we can't predict the pace of the ramp up for full fleet operations. We continue to expect full operations well before our important commerce season next year.

In the near term, we will be impacted by physical distancing requirements on a portion of our cruises, which limits our historically high occupancy levels.

And also near term will be impacted by restricted deployment options if not all of the 700 ports. We visit are receiving guests gesture.

As more people will receive vaccines as treatments continue to advance and as mitigation of the spread of the virus continues.

Current restrictions of course will also evolve.

And we're confident we will eventually be able to sale without these restrictions.

Throughout this call we have been proactively managing to resume operations as an even stronger operating income.

Our strategic decision to accelerate the exit of 19 shifts as lowered our capacity growth to roughly 2.5%.

<unk> annually from 2019 through 2025.

That's down from 4.5% pre COVID-19.

Moreover, we are opportunistically rebalance our portfolio through the ship axis as well as the ship transfer any modifications or on Newbuild schedule for.

Combination of which will transfer in 8000 barrels from our continental European brands to America's favorite cruise line Carnival cruise line to optimize the current environment maximize cash generation and improve our return on invested capital.

While overall fleet capacity growth is constrained we will benefit from an exciting roster of new shifts spread across our brands to capitalize on the pent up demand and drive even more enthusiasm excitement and demand around a restart for nearly every brand. We also have a new ship welcoming.

Guests for the first time, beginning with our namesake brand carnival, introducing new Mardi Gras.

It's no small task to successfully address the challenge.

Honoring the original mining brown.

The shift that began the advent of our corporation that has been said the advent of modern day cruising, but the new Mighty growth does just that.

Recently featured on good morning America Mardi Gras.

Any features including the first ever roller coaster Etsy.

And Trust me.

We know from personal experience it is and be thrilled to arrive.

Premium brands Holland America will introduce the new Rotterdam sister ship for the very successful <unk> and new stack there.

<unk> will welcome guests aboard another new medallion class ship and chances Princess.

Ultra luxury brand Seabourn will welcome seaborne venture with this world class exploration team and spectacular 360 degree view submarine.

For the UK, we enjoyed a phenomenal virtual lane ceremony for Iona.

1 is in our euro sales will be August zone.

For Germany, we will introduce LNG powered Aida customer assistance at all so highly successful.

And for southern Europe constant currency.

LNG powered hospitals, Ghana will replace the exit of several less efficient ships.

We enjoy a structural benefit to revenue from these exciting new shift due to the richer mix of premium price validating tablets, which will increased 6 percentage points to 55% of our fleet in 2023.

And we will achieve further structural benefits of unit costs as we introduce these new larger more efficient ships, coupled with the 19 ships, leaving the fleet, which were among our lease position.

Again, the combination of which will generate a 4% reduction in ship level unit costs, and a 3% reduction in unit fuel consumption going forward, enabling us to deliver more revenue to the bottom line.

Moreover, we continue to find efficiencies across our existing fleet to reduce our costs for other as well as planning for streamlined short side operations as we ramp back up for full fleet operations.

Our advertising efforts continue to evolve with heavy utilization of direct mail and other lower cost channels, such as digital and public relations driven earn media as compared to higher costs traditional channel and fat.

Outstanding public relations opportunities coming up such as the 50 year anniversary for both our namesake brand Carnival cruise lines and the origin of our corporation.

Also we celebrated the 25th anniversary for our EBITDA Brian.

<unk> initiated an exclusive collaboration with Germany's number 1 newspaper in conjunction with the Jubilee and their return to service.

The Swiss banks went viral creating continuous news and onboard content that captured front page news, both print and online.

Of course, we always leverage day excitement around Newbuild Sidra media attention. So just a couple of weeks ago.

Rigor commodity go out into the U S in port Canaveral attracted extensive media attention.

And Jeff last month, our virtual naming ceremony that I mentioned earlier for piano U K Iona captured record breaking media coverage, receiving billions of media impressions far exceeding the reach of any prior UK gaming events.

Meanwhile, despite our minimal advertising spend we continue to experience an acceleration in booking trends globally, including capturing significant latent demand for our new sailings opening this summer.

The strong initial demand has affirmed confidence in our future and indicates the potential for pricing strength over time.

Also we see the potential for improved EBITDA in 2023 compared to 2019, driven primarily by the revenue growth from the introduction of new shifts along with potential for higher revenue yield given pent up demand.

The benefit of a richer mix of premium cabinets.

Coupled with structurally lower costs from the replacement of smaller less efficient vessels with larger more efficient vessels.

And at the same time, we are working aggressively to lower interest costs.

I want to acknowledge David Bernstein, and our entire financing for.

They're very successful effort and helping us to manage the balance sheet.

As we said in our press release. This morning, the company successfully refinanced $2.8 billion term loan and an annual future interest savings of over $120 million and this is the first of many opportunistic refinancings that we expect to undertake.

Also importantly, we've continued to make advancements in our sustainability efforts.

In fact earlier this week, we published our 2030 sustainability goals.

And our 2050 sustainability aspiration, which you can find in the press release issued earlier this week and online at our sustainability website.

WWF that carnival sustainability dot com.

A key focus of those sustainability efforts is our continued emphasis on the important issue of carbon emission reduction.

Now as we previously shared our absolute level of carbon emissions peaked in 2011.

That's despite or with 20% capacity growth since that time.

And it will remain below those levels as we capitalize on our industry, leading efforts to develop and rollout new technology.

This includes examples such as short profit.

Over 40% of our fleet is capable of plugging in while we reported.

And liquefied natural gas.

Have a 11 LNG shifts either currently in the fleet are under construction, which will power nearly 20% of our total fleet capacity by 2025.

In addition, 77 of our shifts are fitted with advanced air quality systems, which benefit our overall emissions profile.

And we will continue to aggressively explore new technologies as we work towards net zero emissions over time.

During this costs, we have made continuous improvements and other environmental social and governance areas.

We consider food waste and other important in place to focus our efforts.

<unk> production much of which is wasted.

<unk> is among the largest contributors for global warming now.

We've taken measures to dramatically reduce our per person food waste and it made good progress toward our initial goal of reducing our food waste by 30% by 2022.

Many efforts to honor our commitment to reduce our impact on the environment. We are installing food waste the justice onboard our fleet where needed.

These units will help to mitigate the risk of any non food waste discharge.

We are honoring our commitment to diversity and inclusion now we already have a diverse workforce without crew hailing from nearly 150 countries. In addition half of our operating companies are led by women executives.

We've been recognized.

For America's Best large employers as well as America's best employers for diversity and America's best employers for women.

We were named a Glassdoor Employees' Choice award winner in 2021 recognizing.

Recognizing the company as 1 of the best places to work, but we are still driving for diversity at all levels and in all areas of our greater enterprise. Therefore, we are working proactively to engineer diversity through our recruiting and development efforts.

And we're also striving for greater inclusion.

Every employee fuel they have the opportunity to make the contribution they want to to be recognized and rewarded for those contributions and to realize their individual career aspirations.

Agility has been a key strength over the last 15 months, we expect the environment to remain dynamic as we rollout our fleet, while continuing to adapt to an average changing situation.

So we're working aggressively to return I'll fleet against the operations as quickly as practical.

While still serving the best interest of public health.

With the aggressive actions, we've already taken optimizing our portfolio and reducing capacity, we are well positioned to capitalize on pent up demand and to emerge a leaner more efficient company reinforcing our global industry leading position.

We have secured sufficient liquidity to see us through to full operations.

Once we return to full operations, our cash flow will be the primary driver to return to investment grade credit over time, creating greater shareholder value.

Throughout these challenging times, we have received overwhelming support.

So once again.

Thank you for our valued guests.

Thank you to our travel agent partners.

Thank you for the core communities for continuing to work with us to prepare for a successful restart around the world.

Thank you for the governments and health agencies, and numerous countries and states, who have partnered with us to vaccinate. So many of our thousands and thousands of crew members.

Thank you to our other many stakeholders for their ongoing support.

Thank you for the dedicated members of our Carnival family Shipboard and shore side, who have worked tirelessly to get us to this turning point in our global restart outbreaks.

And of course.

Thank you to our lenders and investors for their continued confidence in us.

And in our future.

We can't wait to welcome everyone back onboard.

With that I will turn the call over to David.

Thank you Arnold.

I'll start today with an update on booking trends.

I'll provide a monthly average cash burn rate along with a summary of our second quarter cash flows and then finish up with some insight into our financial position.

Turning to booking trends.

Our booking volumes have been very strong given the circumstances and are clearly improving.

Volume for all future cruise and during the second quarter 2021 were 45%.

Our peripheral volume during the first quarter.

The increase was driven by both protein bookings associated with the recent restart announcements as well as strong booking volume for 2022.

There is a clear demonstration of the pent up demand for cruises as well as the long term potential for the market.

Yes, the positive our 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 our peripheral volume and bulk position.

Very encouraging given that they were a team with minimal advertising and promotional activity.

Pricing on our full year 2022 position is higher than pricing on Brooklyn for full time for 2019 failing.

Driven in part by the bundled pricing strategy for a number of our brands, but excluding the dilutive impact for future cruise credits or more commonly known as <unk>.

This is a great achievement given pricing on bookings for 2019 for failing is a tough comparable as it was a high watermark for historic low yield.

Over the past year ex cel, who have offered and our guests have chosen <unk>.

More and more bundled package option.

In the end, we will see the benefit of these bundled packages.

Onboard and other revenue.

I just want to remind everyone that due to the gas.

GAAP cruise operation the company's current for full trends are being compared to booking trends for 2019, failing and not the prior year.

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

For the first half of 2021, our cash burn rate with $500 million per month.

Which was better than the previous forecast of $550 million.

The improvement was mainly due to the timing of cash received from hip sales.

For the end of the second quarter.

Some other small working capital changes.

During the third quarter, we are forecasting positive cash flow from the 27 ship that will have guessed cruise operation during the quarter.

However, keep in mind that many of those ships do not begin operations until late in the quarter.

As a result the <unk>.

<unk> lower birthdays or <unk> as they are more commonly called for the third quarter will only be $3.8 million.

However, as we have previously discussed not all of these <unk> will be sold for our third quarter cruises.

Despite the forecasted positive cash flow from GAAP cruise operation, we are anticipating increased in the third quarter monthly cash burn rate versus the first half of 2021 because of several good news positive factor.

First restart expenses are accelerating as we have announced 42 ships for who will get cruise operations by November 30 at fiscal year end.

Second capital expenditures will be higher driven by the restart and third we have a number of progress payments on our future Newbuild, which are time to be payable during the third quarter.

All of these expenditures have been anticipated and given the announced restart <unk> of them are now occurring in the third quarter.

Because of the difficulty in projecting the timing between the quarters.

All of the restart expenses and capital expenditures.

Well as the exact amount of revenue associated with third quarter guest cruise operation as a result of the 8 core short booking window given that these cruises were announced so close to departure.

We will not be providing a forecast of net.

Third quarter monthly average cash burn rate.

For those of you who are trying to model our future results don't forget that margins on the third quarter cruise it will be less than our normal margin given the lower level of occupancy that is anticipated during the third quarter.

However, with $9.3 billion of cash and short term investments on our balance sheet.

Believe we have enough liquidity to get us back for full GAAP cruise operation.

Spring of 2022.

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

During the second quarter, our total cash burn with $1.5 billion, formerly our monthly average cash burn rate of 500 million per month times 3.

And we used an additional $1 billion of cash primarily for that.

Principal payments.

This was somewhat offset by a $300 million increase in customer deposits.

During the second quarter customer deposits on new bookings exceeded the impact of refunds driven partially by the receipt of payments from guests for cruise is failing in the current quarter.

This is a welcome milestone and truly a sign that we are now solidly on the road to full resumption of GAAP cruise operation.

Finally, I will finish up with some insight into our financial position.

As I said before we believe we have sufficient liquidity to get us back for guests cruise operation. Therefore, we are focused on pursuing refinancing opportunities.

And maturities and reduced interest expense.

During the second quarter 3 in Europe for export credit agency Saatchi are amazing for Dara provided approval in principle to net holiday too.

<unk> of approximately $2 million.

For both payment that would otherwise over a 1 year period.

These transactions can be completed during the third quarter.

The deferred principal payments for instead made.

<unk> made over the 5 year period, following the completion of the transaction.

Adding the maturity profile of these loans.

I want to thank everyone involved in these transactions for the support that they have demonstrated towards the company.

In addition last month, we repriced, our $2.8 billion dollar term loan day.

It was an incredibly successful transaction.

Was well oversubscribed, which is unusual in the term loan b market.

The U S dollar portion of the term loan B facility now has an interest rate.

LIBOR plus a margin of 3%, which is for in a half percentage point less than our LIBOR margin was for repricing.

The euro portion of the term loan facility now has an interest rate of Euribor plus a margin of 375%.

Which is 3.7 percentage points less spending arrived for margin was before repricing.

This was the largest re pricing change of a term loan ever achieved by any company in the term loan b market.

We'll reduce our future annual interest expense by over $120 million per year.

Clearly this transaction is in half formation coming periods on a bright future and their confidence in our management team.

As we look forward given how supportive the debt capital market investors for commercial banks have been we will be pursuing additional refinancing opportunities to meaningfully reduce our interest expense.

And extend our maturities over time.

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

Thank you David.

Operator, please open the call for questions.

Absolutely well.

Now begin the question and answer session. If you would like to register for a question first 1 for Bob.

For on your pet food.

For the 3 Tim from Technology request.

The question has been answered and you'd like to withdraw your registration paths to 1 followed by the 3 once again, ladies and gentlemen.

1 follow up other for now.

Just a question.

Thank you Howard.

First question comes from the line of Robin Farley with UBS. Please go ahead.

Great. Thanks, good morning.

I wanted to ask you about your comment on.

Pricing is for 'twenty, 2 'twenty 'twenty 2 cruises.

Excluding future cruise credits it seems like a future cruise credits or about 15% of bookings and maybe only a 20% discount on average then it would basically be kind of a low single digit impact here pricing. So I guess my question is is is pricing.

That we do is showing very strong pricing for 22 and a lot of that is probably the bundling impacting that but if you included that sort of a 3% impact or so from future cruise credits.

With pricing.

First 19 levels for 2022, and then sort of part B of that question is just given that you know.

Do you expect to ship to be in service all ships by the spring.

Maybe potentially not all at 100% occupancy yet at that point.

Does that give you the ability to.

Have a little more price, if there's sort of lowest 10% of cabins on this ship.

Don't get sales thanks.

Yeah, Thank you, Rob and good morning.

I'll, let David add some detail, but generally the price environment as you pointed out is strong.

In terms of the fleet returning.

Yes, we're planning to have the fleet failing before next summer.

Our fleet of.

Of course, we have to see what evolves around the world there are still pockets of.

And large pockets of still serious challenges.

But with COVID-19.

I have to see how that unfolds.

But we expect to have the the fleet failing in full.

Fire to next summer.

This environment is strong David.

Yes.

So robyn.

When you think about 2022 as Arnold said the environment is strong as I can remember we only have.

A portion of 2022 on the book so.

The FCC re bookings represent.

A meaningful part of the overall bookings for 2022.

And as a result of that.

You're seeing that in the short term.

You mentioned, 3% number is actually larger than that.

<unk> at the moment given.

The number of bookings we have the other thing to keep in mind is that there were a lot of re bookings into 2022 from 2021.

As people as we did pause and cancel some cruises.

We rebooked people at the same price in 2022.

So the impact is for the FTC is a bit larger than what you had indicated however, I will say is we continue to book the remaining portion of 2022.

FCC re bookings will become a smaller and smaller portion of the total and I do expect that when all is said and done.

The FCC impact will just be a few percentage points on the ultimate final yield for 2022.

No. That's that's very helpful. Thanks.

Understanding the timing of that right that the FCC portion of volt.

<unk> is no more new bookings are taken.

Reasonable to think that Beth.

Beth your pricing when because right now that you have on the books you mentioned is the rebooked.

Lot of Reebok and a lot of FTC.

<unk> portions move down as a percentage of total is it reasonable based on the strength.

Youre seeing in new bookings coming in but that price will be ahead of 2019 level for next year.

So we're not really it's early days and we're not in a position to give guidance.

But as Arnold said.

The pricing environment is very strong.

Our brands have done a lot to raise price over time.

A lot of pent up demand out there and we feel very good about.

Overall position.

Booking volumes as we said have been increasing as and so all the signs point in the right direction, but I do think it's premature for me to give guidance at this point.

Okay. Okay understood. Thank you I'll hop back in the queue for my other questions. Thanks.

Thanks Robert.

Thank you Ms. Finally.

Up next we have a question from the line of Steven with Shinskie with Stifel. Please go ahead Sir.

Hey, guys good morning.

So for.

First question would actually be a clarification and I guess I think I well I feel like I'm hearing you guys, a little bit of 2 different ways and what I mean by that is when you guys talk about getting your full fleet back in operation by the spring of 'twenty..2 does that mean, the actual number of ships in operation or does that mean all of your ships are going to be operating at normal.

Capacity levels.

Yes, I think there's some confusion out there with a lot of investors that we are talking to.

Okay. Thanks, So the question though.

First of all definitely we hope to have all of our ships and our planning for that.

But we also are optimistic that we can be.

At capacity at that point in time, but we've got many months to go here to see but we're.

We're hopeful that we'll be selling you know with that capacity.

Over the full fleet.

Okay got you second question Uzi, if I can add 1 thing I point out the fact that you know.

We have a number of voyages different cruise is out there and keep in mind that the voyages that we have that are for vaccinated guests. There are no social distancing requirements.

For capacity requirements on those voyages.

Just keep that in mind as you kind of round out and project the future.

Okay got you thanks, David for that.

And then second question I guess, just maybe if you could give us an update on where you guys are with the state of Florida. The Governor at this point, obviously there is.

There's a little bit of confusion out there as well in terms of.

The way he once kind of the state to work versus you guys wanting most of your passengers and crew to be vaccinated.

Can you just kind of give us an update in terms of where you guys are at this point.

Sure first of all.

We're really looking forward to welcome me our guests' onboard.

We as you know I've had a few failings over in Europe.

Doing this.

This pandemic, but but it's really exciting for us and our people to be looking across not only here in Florida, but we have the <unk>.

They're starting on July 3rd in Galveston, The Breeze on July 15th in Galveston Carnival Miracle.

Hum.

July 27th them in Seattle.

Mardi Gras will start selling along with horizon Horizon's volume fourth Mardi Gras at July 31st in Florida, and then all of our other brands around the world. So it's Jeff.

Really busy time and a 10th of an exciting time and of course, there was a lot of noise. You know, there's lots of different jurisdictions and different perspectives on how things should go so where we are is that we're looking to work for us to welcome our guests onboard.

We're continue to be in dialogue with the Governor's office.

We continue to be in dialogue with the C. D. C. As you know there is.

The court ruling that affected the conditional sale order.

Through still in play for conditional sale other from CDC through July 18, and at this point, we were prepared for sale.

Under that order.

With primarily vaccinated cruises that will be on vaccinated people in those cruise is not 100% vaccinated.

And so we're very.

Optimistic and working very hard to ensure that.

We can try to make everyone happy, but we are welcoming our guests onboard horizon Jill.

Lie forth in Florida.

Okay got you David can I ask you 1 quick housekeeping question I guess, you talked about I think you said you were expecting $3.8 million <unk> in the third quarter.

And based on what you guys have announced today I'm not sure I can answer this but is there any way to help us think about maybe what the fourth quarter would look like as well.

Yeah, I don't have that calculation handy with me Steve.

If you call Beth I'm sure she can provide it for you.

Okay, great. Thanks, guys appreciate it.

Thank you. Thank you for your question.

And.

Next we have for questions from the line of James Hardiman with Wedbush Securities. Please go ahead Sir.

Hey, good morning, Thanks for taking my call so David.

Sort of open the door.

Good morning.

This idea that obviously the voyages that have 95% plus vaccinated.

You don't have the social distancing requirement.

Or the capacity requirements that but if you don't have that you do can you maybe walk us through at least based on what you. Currently know obviously a fluid situation. What you expect your mix of both of those categories to be in.

How we should think about the occupancy ramp.

Uh huh.

Within shifts that that did not meet that vaccination hurdles.

So it's very difficult to give you an.

An exact mix of what we expect going forward.

Because you know.

This gets into the evolution of.

Covid.

Litigation.

We're very clear and we're out there with all the cruise as we've recently announced.

What you chip will be and how it will work, but as we go along we do expect things to continue to evolve and change and everything has been evolving in a very positive way and we're hopeful that that continues and so that should put us in a better situation in the days and weeks.

The months ahead.

So because it is difficult to project.

It's very hard for me to answer that question with great detail, but.

My expectation is that we will be able to have higher and higher occupancy levels over time.

And there are a lot of projections out there that talk about potentially.

70% of the globe getting vaccinated by some point in early 2022, if that's the case then you know a lot of these protocols for potentially Ken can start to be removed low.

Just have to see how things progress over time as Arnold mentioned in his prepared remarks agility has been 1 of the greatest things that have.

Gotten us to this point and we are going to have to remain agile to try to react to circumstances moving forward.

I think adjusted well understood well go ahead.

Wed like to reinforce what David is saying is that things are moving in a positive direction.

It would be it's probably going to be a little choppy around the world and we're a global business and it's probably going to be a little choppy.

So we've said for quite some time.

The rest of 'twenty, 1 early 'twenty, 2 will be a transition period, but we're on the path to getting to a great place to world is.

With the vaccines for various vaccines day advancements in treatments et cetera.

But it could be choppy.

But by 'twenty, 2 and beyond hopefully with their advancements in science.

It will be in a position.

Today for the sale.

As 1 of the.

People ask for.

For occupancy and full fleet.

Yes.

That's really helpful and then.

The other.

I did so.

Similarly difficult to say.

Quantify with any specificity, but if I think about.

Spring of 2022 being some some return to normality.

I think 1 of the most difficult thing.

1 of the most difficult issues in terms of valuing.

Your company and other cruise companies is just sort of figuring out what the balance sheet looks like at that point. So I guess are we any closer to figuring out.

When we will get back to maybe a cash flow breakeven number I I get that theres going to be some incremental restart costs here.

In the near term.

But is there any any color you can give us any way to think about price.

Cash flow break even or sort of an interest expense number once once we're on on the other side of this.

Yeah, so the difficult part remember.

So many variables that we just talked about.

But if we do get back in the spring of 2022.

We have the full fleet back in operation.

Able to.

Get to more normal type.

Occupancy levels.

Then we should be.

Have significant positive EBITDA.

Particularly in the summer months.

'twenty 2.

And we'll move forward from there.

I feel like we're in it's very hard to project from where we are today.

With 5 ships in operation 295 ships in operation next spring, we have 90 ships in our fleet today, but remember we have.

For new builds coming that'll be back in service. So we'll have 95 ships in operation next spring and we do expect at some point during that process to get into a positive EBITDA, but with the seasonality of our business.

And a lot of the other restart expenses that we mentioned.

It's difficult to project the exact month, where EBITDA goes positive for cash flow. It goes positive.

<unk> isn't very far away and we're looking forward to.

To that and keep in mind that you know.

If you look at our historical results.

Everybody is always seem that the third quarter is our strongest quarter. If you actually had in the months and as a for months may through August represent just a third of the calendar year, but it represents 2 thirds of our.

Our EBITDA for operating profit.

So it's.

We are focused on getting the full fleet back in service.

By next spring in order to capture.

Great Summer of 2022.

Got it I think that makes sense and just to clarify we should not be then based on everything you. Just said assuming that you get to that breakeven level significantly before that that spring of next year, it's tough to say at this point.

Well I wouldn't say you know I'm I'm.

I'm not giving guidance is it's tough to say because of so many other factors with restart expenses and everything else involved.

It is tough to say.

Okay fair enough thanks, guys.

Thank you.

Thank you for your question. This is a net to all the audience on hand, if remember if for your question has been answered press. The 1 followed by the 3.

Up next we have a question from the line of Jamie Katz with Morningstar. Please go ahead.

Hi, good morning, I actually wanted to share.

Im version.

James's question.

Some visibility into what capital markets look right now it looks like right now and you have been able to refinance the debt and so as we think about the full year is there a way that we should think about that service costs.

You are able to make the changes that you would like to make.

So I do apologize, but you broke up for me.

Halfway through the question. So I do apologize if you could repeat it because I'm not sure why sure no.

Problem.

But since we know what the debt capital markets look like right now and the ability to refinance it.

It's fairly easy I guess is there a way that we should be thinking about debt service costs for the current year given that you probably have some intended plans for refinancing over the last 6 months out for 2021.

So.

Have you talked about interest expense.

Expense.

The interest expense.

Our current forecast is.

$1 billion 6 for 2021 last quarter.

I think I had said $1.7 so.

So we do expect a.

The decrease as a result of our refinancing efforts and.

And I think if you look at the principal repayments.

In the business update we did give the principal repayments, but keep in mind.

Net those principal repayments were prior to what we expect to close in the third quarter.

Is the billion dollar debt deferral with the Tet holiday too so those numbers will come down as well.

Right.

Then I know the U S is really leading.

The way out of the Covid period, but if you have any color on European or Asia Pacific demand that would love to hear that.

Thanks.

Yes, so just in general in terms of the environment, obviously the U S.

As the head of many places although there are pockets in Europe that.

It has done well as well.

Vaccines.

And again, we encourage everyone to.

To get a vaccination is the best way to keep yourselves and your loved ones safe.

And so in that regard.

There is.

There's more moving here in the U S from an environment standpoint.

Although there are good pockets up in Europe.

And elsewhere.

I'll talk about Asia and Australia.

David comment on the general booking.

Situation abroad, but.

Asia and Australia are in particular, China, and Australia are still.

Pretty much a lockdown when it comes to travel.

So we continue to be in constant dialogue with the Covid.

Players there.

Eventually it will open up it will be ready to go when it does.

David you wanted to give some comments on other booking.

So I guess the best way to phrase it we said that for 2022 book position was ahead of our very strong.

2019, and that's actually the case both for our <unk>.

NAA brands as well as our EAA brands. So we are as Arnold indicated we are seeing good.

Strong bookings on both sides of the pond.

As.

As things continue to rebound.

Thank you.

Thank you.

Thank you for your question.

Next we have a question from the line of Patrick Scholes with <unk> net.

Alright, good morning, everyone.

Good morning, Patrick for this morning for the ceilings in.

3 Q and for Q can you give us an update on <unk>.

Limitations on occupancy.

What occupancy you are targeting for.

Ships. Thank you.

Sure So broadly right now as David mentioned earlier.

For those sailings that are under.

1 for the conditional so audit for primarily batch David.

The way things are today.

There are any restrictions, that's low physical distancing et cetera.

So yes.

We are slowly ramping up our occupancy on sales of that type.

2 of them first of all Gebara COO, a chance to get oriented because we are still having enhanced.

Protocols onboard.

From a crew management standpoint, and other things and so you know those cruises at that point in time.

Get pretty close to full occupancy by that point in time.

To the extent we have cruises.

Do have some outside the U S and other places that are under a separate set of protocols because there are a lot of vaccinated people onboard.

Then there some other occupancy so that would be limited by the physical distancing requirements.

As long as they persist then again that can all change and evolve.

Community spread lessons.

Herd immunity increases.

And so there's a hodgepodge at this point as David already kind of reference is hard to predict exactly.

Where we're gonna be.

On those because we have to look at for specific itinerary for destination requirements the whole port requirements.

What the environment is at the time.

We're all pretty optimistic right now and hopefully that trend will continue.

So directionally, we think it will be moving more to higher and higher occupancy and therefore occupancy, but but we're not forecasting at this point David.

Okay.

I think that was well said Arnold.

Okay. Thank you, Okay, just I guess to think of as a starting point for that.

The limited capacity that did go out last quarter, what was the occupancy on that.

So it was very limited or like 440000.

<unk> that was 1 chip that started in March and then there were for other ships that started in may.

The occupancy started.

Good day improved as the quarter went on.

And we were seeing ships that were at 50% or above by the end of the quarter, but you do have to understand the background.

I'll give you a great example.

1 of the ships for Aida was sailing in the Canary Islands, and so the Germans that went on this ship because of the restricted travel requirements in Germany that people had to quarantine.

When they came home, but then once the quarantine and the travel restrictions started to reduce.

You started to see better and better occupancy and better and better cash flows on the ship. So while we did invest early on we did see positive cash flows on the ships later in the quarter. So we were very pleased with the overall ex.

Experience.

Yeah, and we proactively managed on the occupancy early on because again, we had a bad case.

We had extensive protocols universal testing enhanced medical screening and physical distancing mask wearing.

Enhanced sanitation enhanced their haley <unk> as a whole lot of different protocols and so.

On those we really were pretty stringent.

Really.

On the occupancy on that ourselves.

<unk> thing to see better occupancy is as time goes on for all the reasons that we talked about.

Sure sure.

Right. Thank you got it makes sense and certainly.

Good luck for certainly in Florida are coming up thank you.

Thank you.

Thank you for your question.

And up next we have a question from the line of James <unk> with Citi. Please go ahead.

Yeah. Good morning, everybody. Thanks for taking my question.

Good morning.

Morning, uninterested in and just dig into you.

Yes, Jeff commitments, a bit more but that kind of 40% reduction in carbon emissions by 20 Soc.

Can you just flesh out a bit more about the tools and mechanisms you need to get there.

Can you help us with what the potential cost implications might be I'm thinking maybe you might need to buy some credit things like that.

Any color on that would be very helpful.

Sure we've been on a concerted march on reduction of carbon emissions.

Sometimes.

We've already effected a 30% reduction.

Baseline of 2006, and we achieved a number of different ways so for more.

More basic things like Jeff really being rigorous in Tony.

Our engines and carefully planning itineraries and so on too you know.

Much more investment.

Required.

Oriented ways of licensed games and technologies.

Handily waste and density on the ships.

And then of course, we made a hard commitment early before there was even.

For structure in place.

Natural gas so we were the first LNG ship.

Alright, either brand, we did that Frank we've made the commitment to do that we weren't even sure how we're going to fuel the ship.

But we had time during the construction phase and what not to work out a deal with with shell and now we've got infrastructure in place and as I said, we have 11 ships in total now either selling or are under construction.

As you know LNG is the cleanest burning fossil fuel. It also gives us a 20%.

Smaller footprint.

From a carbon emission standpoint.

So those are the the the way we have gotten there and plan to get there, but ultimately our goal is.

A net zero emission.

Platform over time and to do that.

You have to have science and technology work with us other form of.

Better and combinations of lithium ion battery technology fuel cell technology, Biofuels et cetera.

But we are in a hard March and we have a line of sight for the 40% reduction, but I need some technology have asked us to get to the net zero.

Oh Boy I answered your question yes.

Thanks, Jeff.

LNG ships on their own.

Oh about 40% of reduction will come from from them on that day.

Was that said we're already at 30.

As we move forward.

We will continue with the new ships inherently a more efficient.

Because everything is engineered from day 1.

To be that way, but the LNG ships will represent.

Once we get to the 11th 1 above.

20% of our fleet.

So there will be a significant contributor.

To us being able to achieve and hopefully be low 40% target.

Okay, great. Thank you.

Thank you.

Thank you once again.

We now have for questions from the line of credit get.

That is she canyon.

Well suddenly research. Please go ahead.

Hey, guys, it's actually Fred Wightman on for Greg.

We think about the possibility that the full hey, guys.

If we think about the possibility that the full fleet is back in the water next summer David touched on some of the seasonality considerations just looking at the third quarter specifically.

Should we expect some yield headwinds just from reduced access to international travel or do you think that we could be in a more normalized sourcing and deployment mix by then.

Yeah.

Again, we're not trying to give any guidance.

At this point, but what I would say is that.

Hmm.

We've exited 19 ships or will.

No.

<unk> said in the remarks earlier.

That's a significant reduction in capacity, we are adding new ships, which we're very excited about.

And and therefore.

To get to.

Capacity comparable to what we had in 2019.

Eventually.

But the reality is that.

Eddie.

Much lower growth rate as an industry and as a company.

Then we were before.

With a lot of pent up demand keep in mind, but next spring.

A lot of repeat cruisers still may not have had the opportunity to cruise again.

And we have a huge base of repeat cruisers across our.

Various brands and so there will still be considerable pent up demand.

That has been largely.

Unsatisfied so at that point in time.

The environment.

We're anticipating will be operating or net but we already gone so for us to try to predict them.

Yeah.

David I don't know if you want to add any color I know the day only other thing that I'll add is.

On travel restrictions.

Travel restrictions.

Our being reduce can change every day.

So you know the summer of 2022, I mean were talking you know.

11 months away 12 months away. So there's a lot of opportunity as we as things continue to evolve and improve.

To see many if not most or all of those restrictions disappear before the summer of 2022, I know I broke my my cruise in.

In December 2022, I expect to go to Turkey.

Kris and.

In Italy, and I'm really looking forward to it and looking forward to reduce travel restrictions.

And David definitely gets the.

Friends and family premium.

<unk>.

No.

No big price break for David.

Good day already here that for you David.

[laughter].

Yes.

Thank you.

Next we have for questions from the line of Ali.

<unk> with HSBC. Please go ahead.

Hi, Thanks for taking the question.

Just wanted to ask in terms of your views on leverage longer term would you look to deploy equity to maybe increase the pace to get to investment grade.

Real quickly look we we have.

Good liquidity in place now we feel to get us.

Back to you.

For the only other fleet.

Cash generation is the way in cash maximization is the way, we're going to accelerate repayment of debt, we're going to do some refinancings to lower the interest burden along the way, but basically.

That's the path we're on right now.

Understood and do you have a view as to what happens to pricing when this sort of pent up demand for cruising normalizes, because it happened in 2023 or beyond that.

I think and for our plans as I said on the call we were on our.

Growth rate of 4.5% pre COVID-19.

Through 25 with the moves we've taken and the new bills were already.

Coming in a little better growth rate annualized.

2 and a half percentage so that's a much lower growth rate.

And I think that again.

Continued pent up.

Demand.

People.

We have spent a lot of time in isolation and locked that people really want to experience things I think that's going to last for a while.

And so for.

Obviously, it's hard to predict the future growth.

Where.

Logically optimistic that that'll be a good environment for some years coming here.

And is it fair Kent.

So operator, given the time, we'll take 1 more question.

Thank you Sir.

The final question. Therefore, it comes from the line of Sharon Zackfia with William Blair. Please go ahead.

Hi, I'm convinced you guys go in alphabetical order. So next time, we get there for Sunday.

Our first.

I guess I just wanted to clarify something David.

Capex for the year are you raising the expectation or is it just weighted to the second half of the year and timing.

Oh, it's.

Weighted to the second half for the year timing.

We have because as part of during the pause we delayed.

A lot of Drydocks.

We have quite a few ships going into dry dock in the second half of 2021, and so you will see a.

Capital associated with.

Those ships and so that the timing is weighted towards the second half.

Perfect and then 1 other question and this maybe hard to ascertain just given the bundling aspect of what's what's being offered but what is the appetite or what are you seeing them pre book Ian for onboard spending.

And so the trends.

When you try to dissect them.

We're seeing similar trends to what we have seen historically.

On the onboard spend side, but but it is as you say, it's very very difficult because and I'm talking about people who are not booking the bundled packages.

When you when you talk to the various brands around the globe. They are still pushing as they always have onboard other onboard packages and things associated with the cruise and.

No significant changes in that front.

Okay. Thank you.

Okay. Thank you everyone.

Really appreciate your time.

It's a great feeling.

To have.

Then expanded opportunity to welcome guests onboard here in the coming months and we're very excited about it but.

But thank you very much thank you operator.

Thank you and that does conclude the conference call for today.

Thank you all see your participation and ask that you. Please disconnect your line.

Once again have a great day everyone.

Okay.

Okay.

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