Q2 2021 Carnival Corp & Carnival PLC Business Update
[music].
Good morning, everyone.
Welcome to our business update conference call I'm, Arnold Donald President and CEO of Carnival Corporation <unk> plc.
Today, I'm joined telephonic lead 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.
Excitedly, we are on a path to return the full fleet operations and we are very happy to continue to welcome our loyal guests back onboard as well as the welcomed a new GAAP.
Now, we're working diligently to have offerings that sort of all of our guests in a way that is compliant in the home portion of the destinations we touch while serving the best interest of the public health.
So far we've announced the resumption of operations of 42 shifts across 8 of our 9 brands by fiscal year end of.
And that represents over half of our fleet capacity returning to guests cruise operations.
And this includes what we expect to be of.
Very successful relaunch of cruising in the U K later this week with piano cruises Britannia.
And failing 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.
We're 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, our highest responsibility.
And therefore, our top priority is always complying.
Environmental protection, and the health safety and wellbeing of our guests.
Of the people and the communities, we touch on the third and of course, our carnival.
Our team members shipboard and shore side.
We continue to work toward resuming operations also in Australia and in Asia.
While we can't predict the pace of the ramp up the full fleet operations. We continue to expect full operations well before our important summer 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 in the near term will be impacted by restricted deployment options of NN.
Not all of the 700 of course, we visit are receiving guests just yet.
As more people will receive vaccines as treatments continues 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 the 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 ships has lowered our capacity growth to roughly 2.5% compounded annually from 2019 through 2025.
That's down from 4 and a half per cent pre COVID-19.
Moreover, we have opportunistically rebalance our portfolio of through the ship axis as well as the ship transfer any modifications or on the Newbuild schedule.
The combination of which will transfer of 8000 birds from our continental European brands to America's favorite cruise line Carnival cruise line the optimize the current environment.
<unk> 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 point.
Nearly every brand we also have a new ship welcoming guests for the first time, beginning with our namesake brand carnival, introducing the new Mardi Gras.
Now it's no small task to successfully address the challenge of.
Honoring the original Mardi Gras.
The ship that began the advent of our corporation that has been said the advent of modern day cruising, but the new Mardi Gras does just that.
Recently from channel and good morning America Mardi Gras.
Many features including the first day of a roller coaster at sea.
And Trust me I.
No from personal experience it is in the thrill to ride.
Premium brands Holland America will introduce the new router NAV sister ship to the very successful Kony, Sam and new stock there.
Princess will welcome guests aboard of another new medallion class ship and chance of Princess.
Ultra luxury brand Seabourn will welcome seaborne venture with this world Class expedition team and spectacular 360 degree views of submarine.
For the U K, we enjoy the phenomenal virtual lanes of ceremony, but Iona.
And 1 of his inaugural scaling will be August 7th.
The Germany, we will introduce LNG powered I E. The cosmos.
To the also highly successful I eat in the end.
For the southern Europe constant or in day, and LNG powered hospitalist, Ghana will replace the exit of several of less efficient ships.
We enjoy of structural benefits of revenue from these exciting new ship due to the richer mix of the premium price balcony cabins, which will increase <unk> 6 percentage points to 55 per cent of our fleet in 2000 of 'twenty 3.
And we will achieve a part of the 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 out of at least the Cushing.
Again, the combination of which will generate a 4 per cent reduction and ship level unit cost and a 3% reduction in unit fuel consumption going forward.
Neighboring us to deliver more revenue to the bottom line.
Moreover, we continue to find efficiencies across our existing fleet to reduce all costs for other as well as planning per screen line shortsighted operations as we ramp back up the 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 the parents of higher cost traditional channels.
In fact, we have outstanding public relations of opportunities coming up such as the 50 year anniversary of both our namesake brand Carnival cruise line.
The origin of our Corporation.
Also we celebrated the 25th anniversary of Cryolife either Brian.
8 of initiated an exclusive cooperation with Germany's number 1 newspaper.
Conjunction with the Jubilee and their return to service.
The free Stakes went viral creating continuous news and onboard content that captured the front page news, both print and online.
Of course, we always levers day excitement around new builds to draw of media attention. So just a couple of weeks ago. The arrival of money go out into the U S. In port Canaveral attractive extensive media attention.
And just last month.
Virtual naming ceremony that I mentioned earlier, the piano U K Iona captured record breaking media coverage, we see the billions of media impressions far exceeding the reach of any prior of U K name any of them.
Meanwhile, despite of our minimal advertising expense, we continue to experience an acceleration in booking trends globally, including capturing significant latent demand from new sailings opening this summer the.
Strong initial demand has affirmed confidence in our future and indicates the potential from pricing strength all the time at.
Also we see the potential for improved EBITDA in the 2023 compared to 2019, driven primarily by the revenue growth from the introduction of new ships, along with the potential for higher revenue you get the pent up demand and the benefit of a richer mix of premium cabinets cabos.
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 here, David Bernstein, and our entire financing but.
But they're very successful efforts in helping us to manage the balance sheet.
As we said in our press release this morning the key.
Company successfully refinanced.
$2.8 billion term loan and the annual future interest savings of over 120 million of valves 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.
You can find in the press release issued earlier this week and online at our sustainability website.
Www Dot carnival sustainability dotcom.
A key focus of those sustainability of is our continued emphasis on the important issue of <unk>.
Carbon emission reduction.
As we previously shared our absolute level of carbon emissions peaked in 2000 all of that's despite or with 20 per cent capacity growth since that time.
And it will remain below those levels as we capitalize on our industry, leading the effort to develop and rollout of new technology.
This includes the examples such as shore power.
Over 40% of our fleet is capable of plugging in while the import.
And liquefied natural gas.
We have 11 LNG ships by the currently in the fleet Bart on the construction, which will power of nearly 20% of our total fleet capacity by 2025.
In addition of 77 of our ships are fitted with advanced air quality systems, which benefit our overall the emissions profile.
And we will continue to aggressively exploring new technology as we work towards net zero emissions overtime.
During this call we have made continuous improvements the other environmental social and governance areas.
We consider the food waste on the other important place to focus our efforts.
The production much of which is wasted.
Is among the largest contributors of global warming.
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.
Among the many efforts to honor our commitment to reduce the 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.
And we are honoring our commitments of 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 by.
By Board says America's best large employers as well as America's best employers for diversity and America's best employers for women.
We were named the Glassdoor Employees' Choice Award winner of 2021, recognizing the company as 1 of the best places to work.
But we are of skills driving the diversity at all levels and in all areas of our greater enterprise.
Therefore, we are working proactively to engineer diversity through out of recruiting and development of outflows were.
Also striving for greater inclusion.
Where every employee feels they have the opportunity to make the contribution they want to be recognized and rewarded for those contributions.
And to realize their individual career aspiration.
The agility has been a key strength over the last 15 months, we expect the environment to remain dynamic as we roll out of our fleet, while continuing to adapt to an ever changing situation.
So we're working aggressively to return all of fleet.
The operations as quickly as practical while still serving the best interest of public health.
With the aggressive actions, we've already taken of optimizing our portfolio of reducing capacity, we are well positioned to capitalize on pent up demand and to emerge a leaner more efficient company.
And of course in our global industry, leading position.
We have secured sufficient liquidity to see us through to full operations at once we return the 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 to our value guests.
Thank you 2 out of travel agent partners.
Thank you to the core communities, who are continuing to work with us to prepare for a successful restart of around the world.
Thank you to the governments and health agencies and numerous countries in the states who have partnered with US vaccinate. So many of our thousands and thousands of crew members.
Thank you to our other many stakeholders for their ongoing support.
Thank you because of the dedicated members of our Carnival family.
<unk> Board and shore side, who have worked tirelessly to get us to this turning point in our global restart the alpha.
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 Arnaud.
I'll start today with an update on booking trends.
I'll provide on monthly average cash burn rate of la.
Along with the summary of our second quarter cash flow and then finish up with some insight into our financial position.
Turning to bucking trends are.
Our booking volumes have been very strong given the circumstances and are clearly improving.
Williams for all future current during the second quarter 2021 were 45 per cent.
<unk> of peripheral volume during the first quarter.
The increase was driven by both public and thoughtful of south.
With the recent restart announcements as well as strong volume for 2022.
A clear demonstration of the pent up demand for cruises as well as of the long term potential cause of the market.
Yes, the positive our cumulative advanced bookings position for the full year 2022 is the head 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 book position.
Very encouraging.
They were at <unk>.
Advertising and promotional activity.
Pricing on our full year 2022 book position is higher than pricing on Brooklyn.
The time for 2019, failing driven in part by the bundled pricing strategy for a number of our brands, but excluding the dilutive impact of the future cruise credits or more commonly known as the FTC.
This is a great achievement given pricing on bookings for 2019 for scaling is a tough comparison as it was the high watermark for historic O'neil.
Over the past year of cell, who have offered and our guests have chosen more and more of a bundled package option.
In the end, we weren't seeing the benefit of the <unk>.
Bundle of packages in onboard and other revenue.
I just want to remind everyone that as soon as the pie gets cruise operations.
The current peripheral trends are being kind of parents of Buffalo trend for 29th failing and not the prior year.
Now, let's look at our monthly average cash burn rate.
For the first half of 'twenty 'twenty, 1 our cash burn rate with $500 million from us.
Which was better than the previous forecast of $550 million.
The improvement was mainly due to the timing of cash receipts from hip sales.
Before the end of the second quarter.
The other small working capital changes.
During the third quarter, we are forecasting positive cash flow from the 27 share that we'll have gas cruise operations during the quarter.
However, keep in mind that many of those share do not begin operations until late in the quarter.
The runs all the.
Bailable, lower birthdays, or Haley, who as many of them more commonly called because the third quarter will only be $3.8 million. However, as we have previously discussed not all of the L. E will be sold from our third quarter cruises.
Despite the forecasting positive free cash flow from GAAP cruise operations, we are anticipating increased in the third quarter of monthly cash burn rate versus the first half of 'twenty 'twenty, 1 because of several good years positive fact.
First restart expenses are accelerating as we have announced 42 ships for the won't get the 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 the future new builds which are the time to be payable during the third quarter.
All of these expenditures have been anticipated and given the announced restart Lenny 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 cash.
Capital expenditures as well as the exact amount of revenue associated with third quarter guest cruise operations. As a result of the 8 corporate of course short booking window given that he's cruises were announced so quote the departure, we will not be providing a forecast of the third.
The monthly average cash burn rate.
But those of you who are trying to model off of future result, don't forget that margins on the third quarter cruises will be.
Less than our normal margins 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.
We believe we have enough liquidity to get it back to the full GAAP cruise operations.
Spring of 2022.
Next I'll provide a summary of our second quarter cash flows.
During the second quarter, our total cash burn was $1.5 billion, formerly of monthly average cash burn rate of 500 million per month I'm sorry.
And we used an additional $1 billion of cash primarily for debt principal payments.
This was somewhat offset by a 300 million dollar increase in customer deposits.
During the second quarter customer deposits on the new bookings exceeded the impact of green bonds, driven partially by the receipt of payments from guests per cruises failing in the current quarter.
This is a welcome the milestone and truly a sign that we are now solidly on the roads full resumption of gas cruise operations.
Finally, I will finish up with some insights into our financial position.
As I said before when you believe we have sufficient liquidity to get us back for guests crews operations yeah.
Therefore, we are focused on pursuing the refinancing opportunities.
The maturities and reduced interest expense.
During the second quarter free European export credit agencies.
Jay Hermes and pulled era provided approval in principle debt holiday to the.
Zero of approximately.
In dollars of principal payments that would have otherwise can do over a 1 year period.
These transactions can be completed during the third quarter.
The deferred principal payments on debt made.
You made over the 5 year period, following the completion of the transaction extending the.
The maturity profile of these loans.
I want to thank everyone involved the lease transactions because the support that they have demonstrated towards the company.
In addition last month, we repriced, our $2.8 billion dollar term loan debt.
It was an incredibly successful transaction it was well oversubscribed, which is unusual in the term loan with the market.
The U S dollar portion of the turnaround the facility now has an interest rate of LIBOR plus the margin of 3 per pad, which is 4 and a half percentage points less than the LIBOR margin was before reprisal.
The euro portion of the term loan facility now has an interest range of Euribor plus the margin of $3.75 per ton.
3.7 percentage points less pending arrival marching was before repricing.
This was the largest repricing of change of a term loan ever achieved by any company in the term loan b market and will reduce our future of annual interest expense by over 100 of $24 million per year.
Clearly this transaction is an affirmation from investors on a bright future and their confidence in our management team.
As we look forward given how supportive of the debt capital market investors from commercial banks have been we will be pursuing additional refinancing opportunities.
We reduced our interest expense and income.
And 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 press. The 1 followed by the 4 on you touched on the phone you'll hear of a treat to them from technology request. If you had the question has been answered and you'd like to as Tony legislation passed the 1.
By the Chi.
Once again, ladies and gentlemen, first of 1 followed by the force now to register for the question.
Thank you Hi, the first question comes from the line of Robin Farley with UBS. Please go ahead.
Great. Thanks, good morning.
Wanted to ask you about your comment on them.
Pricing for 'twenty, 2 'twenty 'twenty 2 cruises.
Excluding the future cruise credits it seems like of future cruise credits or you know about 15% of of bookings and maybe the only a 20 per cent discount on average then it would basically be kind of of low single digit impact here of pricing.
So I guess my question is is is pricing the the checks that we do is showing very strong pricing for 22 and a lot of that is probably the bundling impacting that but if you include of that sort of 3 per cent impact ourselves from future cruise credits.
With pricing up the first 19 levels for 2022, and then sort of part B of that question is just given that you know you.
Do you expect the ships to the in service of all ships by the spring.
Maybe potentially not all of it 100% of occupancy yet at that point on.
Does that give you the ability to them to have a little more price if the sort of lowest 10 per cent of of cabins on the ship you know don't don't guess help thanks.
Yeah. Thank you, Rob and good morning all.
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.
The fleet of.
Of course, we have to see what evolves around the world you know there's still pockets of.
And the large pockets of still serious challenges.
But with the COVID-19.
All of the scale of that unfolds.
But we expect to have the the fleet of failing and pool.
The next summer and the <unk>.
The environment is strong David.
Yes.
So robyn the.
When you think about 'twenty 'twenty 2 as Arnold said the environment is strong, but remember we only have.
A portion of 2022, 1 of the book so the FCC re bookings represent.
And meaningful part of the overall bookings for 2022 and as a result of that you're.
You're seeing that in the short term you mentioned 3 per cent. The number is actually larger than that kind of impact at the moment given the east.
The number of bookings we have the the other thing to keep in mind is that there were a lot of rebooking into 'twenty 'twenty 2 from 'twenty to 'twenty 1.
People as we did pause and cancel some cruises we re book people at the same price in 2022.
So the impact is for the.
The FCC is a bit larger than what you had indicated however, I will say is we continue to book of the remaining portion of 'twenty 'twenty 2.
The FCC re bookings will become a smaller.
All are in smaller portion of the total and I do expect that when all of sudden done the FCC impact will just be a few percentage points on the ultimate final yield for 2022.
Yeah, that's that's very helpful. Thanks.
Understanding the timing of that right that the FCC portion of the kind of moved down as there's no more new bookings or taken the.
Reasonable to think that debt.
Debt, you're pacing win because right now that you have on the book. He mentioned is the rebooked a lot of re book and a lot of F. C C.
The portions moved down as a percentage of total is it reasonable based on the strength.
You're seeing in new bookings coming in but that price will be ahead of 2019 months of next year.
So you know we're not really it's early days and we're not in the position to give guidance.
But as Arnold said you know.
The pricing environment is very strong our brands have done a lot to raise price over time, there's a lot of pent up demand out there and we feel very good about our overall position booking volumes as we said have been increasing as and so on.
All of the signs pointing 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 from my other questions. Thanks.
Thanks Robyn.
Thank you Mr <unk>.
Next we have of questions from the line of Steve Rucinski with Stifel. Please go ahead Sir.
Hey, guys good morning.
So for the.
First question would actually be a clarification and then I guess I think I well I feel like I'm hearing you guys a little bit of 2 different ways of it 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.
The capacity levels, that's up I think there's some confusion out there with the with a lot of investors that we are talking to.
Okay. Thanks for the question of them.
First of all definitely we hope to have all of our ships and in our planning for that.
But we also are optimistic that we can be you know at capacity at that point in time, but you know we've got many months to go here to see but you know where we're hopeful that we'll be selling youll.
The the full suite.
Okay got you second question, if I can add 1 thing I point out. The fact that you know we have a number of voyages are different cruises out there and and keep in mind that the voyages that we have that are of 4 vaccinated gas there are no social day.
The same requirements or capacity requirements on the was 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 and the governor of at this point, obviously, Theres I think theres, 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 can you just kind of give us an update in terms of where you guys are you know at this point.
Sure first of all.
We're really looking forward to welcoming our guests on board.
As you know I've had a few sailings over in Europe.
The 1 you know this pandemic, but but it's really exciting for us and our people to be looking across not only here in Florida, but you know we have.
The Vista starting on July 3rd in Galveston, The Breeze on July 15th in Galveston Carnival Miracle and.
July 27th of them in Seattle, Mardi Gras, well sales.
Along with Horizon Horizon study of them fourth Mardi Gras July 31st from Florida, and the all of our other brands around the world. So it's just the.
Really busy time and in the test time and exciting time and of course, there's a lot of noise. You know there's lots of different jurisdictions of different perspectives on how things should go so where we are is that you know we're looking to walk the floor is a 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. You know as you know.
No there is.
The court ruling that affected the conditional sale of water.
And that's true.
Still in place the conditional sale order from CDC through July 18.
And at this point, we were prepared to sail under that order.
Primarily vaccinated cruises, there will be an vaccinated of people on those schools of thought 100 per cent vaccinated and so we're very.
I'm optimistic I'm working very hard to ensure that.
We can try to make everyone happy, but we are welcoming of our guests onboard horizon July 4th in Florida.
Okay got you and 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, but if you call back I'm sure. She can provide it to you.
Okay, great. Thanks, guys appreciate it.
Thank you. Thank you for your question.
Up next we have the question 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 Oh good morning.
This idea that obviously the voyages that have 95 per cent plus vaccinated.
You don't have the social distancing requirement.
Or the the capacity requirements the but if you don't have that you do can you maybe walk us through at least based off of what you. Currently know obviously of a fluid situation. What you expect your mix of of both of those categories to be and how we should think about the the occupancy ramp.
Hum.
Within shifts that that did not meet that vaccination of hurdle.
So it is very difficult to give you.
An exact mix of what we expect going forward.
Because you know this gets into the evolution of <unk> co.
Covid and the mitigation.
You know, where you were very clear and we're out there with all of the crews 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.
News.
And so that should put us in a better situation in the days and weeks and months ahead of them. So because it is difficult to project.
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 you know there are a lot of projections out there they talk about potentially 70 per cent of the globe getting vaccinated.
<unk> by some point in early 2022, and if that's the case then you know a lot of these protocols of potentially can you can start to be removed and we will just have to see how things progress over time as Arnold mentioned in his prepared remarks, you know 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 the circumstances moving forward.
I think I just understood Oh go ahead of just.
Wed like to reinforce what David is saying is that you know things are moving in a positive direction. It it wouldn't be is 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 you know.
The rest of 'twenty, 1 early 'twenty, 2 will be a transition period, but we're on the path to 2 of getting to a great place the world is with.
With the vaccines the various vaccines the advancements of treatments et cetera.
But it could be choppy.
But by 'twenty, 2 and beyond hopefully with the advancements of science.
It will be in a position.
Today with the sale as 1 of the.
People as you know the block.
Full occupancy and full fleet.
Yes.
That's really helpful and then another.
I did so.
And it's it's similarly difficult to say.
The quantify with any specificity, but if I think about.
Spring of 'twenty 'twenty, 2 being some some return to normality.
I think 1 of the most difficult thing.
The 1 of the most difficult issues in terms of value in.
Your company and other of cruise companies, it's just sort of figuring out what the balance sheet looks like at that point, So I guess I.
Are we any closer to figuring out.
When we will get back to maybe a cash flow breakeven number I I get that there's going to be some incremental restart costs here in.
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 of it 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.
We're able to.
Get to more normal type of occupancy levels.
Then we should be.
Have significant positive EBITDA.
Particularly in the summer months of the 2022.
And we'll move forward from there so I feel like we're in it's very hard to project from where we are of today.
With 5 ships in operation 295 ships in operation next screen, we have 90 ships and of fleet today, but remember we have a.
Aside from where are 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 of the restart expenses that we mentioned it.
It's difficult to project the exact months, where EBITDA goes positive for cash flow of it goes positive, but we're very hopeful the spring 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 month of May the 4 months may through August represent just the third of the calendar year, but it represents 2 thirds of our of our EBITDA or operating profit.
So it's you.
We are focused on getting the full fleet back in service.
The next spring in order to capture a 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, but yeah, well I wouldn't say you know I'm not giving guidance here, it's tough to say.
Because of so many other factors with the restart expenses and everything else involved.
It is tough to say.
Okay fair enough thanks, guys.
Okay.
Thank you for your question just as a note to all of the audience on hand, if we remember if your question has been the answered the first 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.
The version of thank you of James's question and that we have some visibility into what capital markets book right now looks like right now and you have been able to refinance the debt and so as we think about the full year in there of way that we should think about debt service costs.
You are able to make the changes that you would like to make.
So I do apologize, but I you broke up for me.
<unk>.
Halfway through the question. So I do apologize if you could repeat the okay I'm not sure why sure.
No problem.
I said, you know that since we know what debt capital markets look like right now and the ability to refinance the thing I'm fairly easy I guess is there a way that we should be thinking about debt service cost for the current year given that you probably have some intended plans for refinancing over the.
The last 6 months of 2021.
So.
Have you talked about interest expense.
On the interest expense.
Our current forecast is a 1.
Billion 6 for 2021 last quarter.
I think I had set of billion 7 so.
So we do expect a of decrease as a result of our refinancing efforts and.
And I think if you look at the principal repayments.
In the the business update we did give the principal repayments, but keep in mind that those principal repayments were prior to what we expect to close in the third quarter, which is the billion dollar debt deferral with the Tet holiday too so those numbers will.
Come down as well.
Right and 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.
Yeah. So the just in general in terms of the environment, obviously the U S.
As the head of of many places although there are pockets in Europe, the that have done well as well.
With with 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 more of a little bit here in the U S. The from an environment of standpoint.
Collectively although there are good pockets up in Europe and.
And the elsewhere.
I'll talk about Asia, and Australia, and then I'll call the.
David kind of it on the general booking.
Situation of abroad, but.
Asia and Australia are in particular, China, and Australia are still pretty much of a lockdown when it comes to travel and so we continue to be in constant dialogue with the COVID-19.
Of players there.
And you know eventually it will open up and it will be ready to go when it does David you wanted to give some comments on some of the bookings.
So I guess, the the best way to phrase. It you know, we we said that the 2022 book position was ahead of the very strong.
2019, and that's actually the case both for our <unk>.
N a H <unk> brands as well as our EAA brands. So you know 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 the question from the line of Patrick Scholes with true of stake.
Net.
Alright, good morning, everyone.
Good morning.
For the money for the ceilings in.
The weak Q and fourth 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 flow, though.
Those sailings that are under <unk>.
1 part of the conditional so all of the flow primarily batch Nathan.
The way things are today, there alright, any restrictions, there's no physical distancing et cetera.
So.
We are slowly ramping up our occupancy on sales of that type of.
2 of them first of all of Gebara COO of chance to get oriented because we are still having the enhanced.
Protocols onboard.
From a crew management standpoint, and the other things.
So you know those cruises at that point in time and kind.
We get pretty close to full occupancy by that point.
To the extent we have cruises.
We do have some outside the U S and all of the places that are under a separate set of protocols. Because there are a lot of non vaccinated people on board.
Then there are some of the occupancies of that'd be limited by the physical distancing requirements as long as they persist then again back at all changed and evolved this.
Community spread lessons.
Herd immunity increases.
And so there's a hodgepodge of at this point as David already kind of reference it was hard to predict exactly where we're gonna be upon those because we have to look at the specific itineraries the destination of requirements of the whole port requirements and what the environment is at the time no. We're all pretty optimistic right now.
Hopefully that trend will continue.
So directionally, we think will be moving more to hi, how are the occupancy and therefore occupancy, but but we're not forecasting at this point David.
Okay.
I think that was the well set of Arnold.
Okay.
I guess, if you think of of a starting point for the.
The the limited capacity that did go out last quarter of what was the occupancy on that.
So it was very limited, though like 440000 L. V. D's that was 1 chip that started in March and then there were 4 other ships that started in may.
The occupancy started did they improved as the quarter went on.
And we were seeing ships that were you know at 50% or above by the end of the quarter, but you do have to understand the background.
So I'll give you a great example of 1.
1 of the ships for Aida was sailing in the Canary Islands, and so the Germans that went on the ship because of the restricted travel requirements in Germany. The people had to quarantine.
When they came home, but then once the quarantine and the travel restrictions started to reduce.
You know you you started to see better and better Occupancies 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 experience.
Yeah, and we proactively manage the on the Occupancies early on because again, we had a bad case.
We had extensive protocols universal testing enhanced medical screening and physical distancing mask wearing.
Has the sanitation enhanced their he only so it was a whole lot of of the different protocols and so on.
Initially on those we really were pretty stringent in.
You know really.
On the occupancy on the ourselves kind of.
We're expecting to see better Occupancies as time goes on for all of the reasons that we talked about.
Sure sure that's great. Thank you got it makes sense and certainly.
Good luck for sort of land.
Florida.
Coming up thank you.
Thank you.
Thank you for your question and up next we have the question from the line of James <unk> with Citi. Please go ahead.
Yeah. Good morning, everybody. Thanks for taking my question.
Good morning.
Morning, I'm interested in just the beginning to you.
Yeah, she commitments a bit more of the kind of 40% reduction in carbon emissions by 20 Soc.
Can you just flesh out a bit more about the the tools of mechanisms you'd need to get there.
Can you help us with what the potential cost implications might be and I'm thinking maybe you might need to buy the problem credits and things like that so any color on that would be very helpful.
Sure we've been on the concerted March on reduction of carbon emissions club for some time.
And we've already effected 30 per cent reduction.
The baseline of of 2006, and we achieved a number of different ways from me.
The more basic things like you know just really being rigorous in tuning the rins.
And carefully planning of the itineraries and so on.
Too much.
A much more investment.
No required or.
In the ways of Hawaii schemes in technologies and.
Handling waste and density on the ships of.
And then of course, we made a hard commitment early before there was even kind of infer.
The structure in place of the call.
Natural gas so we would of course with the LNG ship.
In the fourth alright, either brand, we did that frankly, we made the commitment to do that we weren't even sure of how we're going to few of the ship.
But we had time during the construction phase of what not to work out of the deal with with shell and now we've got infrastructure in place and as I said, we have 11 ships in total now the either selling or or other construction as.
As you know LNG is the cleanest burning of fossil fuel. It also gives us the 20%.
Smaller footprint.
From a carbon emission standpoint.
And so those are the the the way we have gotten there and plan to get there, but ultimately our goal is you know.
A net zero emission.
The platform over time and to do that.
We're gonna have to have science and technology work with us in the form of better and combinations of lithium ion battery technology fuel cell technology, Biofuels et cetera.
But we are in a hard March and then we have the line of sight for the 40 per cent reduction the knee some technology advancements to get to the net zero.
Oh by the answered the question.
Yeah. So the the LNG ships on their own how much of about 40% of reduction will come from from them on that day.
Was that said we're already at 30.
So yeah as we as we move forward we'll.
<unk> with the new ships inherently a more efficient because everything is engineered from day 1.
To be that way, but the LNG ship will represent.
Once we get to the 11th 1 of about 20% of our fleet.
So there will be a significant contributor.
To us being able to achieve and hopefully be the 40% target.
Okay, great. Thank you.
Thank you.
Thanks, Thank you once again.
We know of a question from the line of they get better she canyon.
Hum Research. Please go ahead.
Hey, guys, it's actually Fred Wightman on for Greg.
As we think about the possibility that the full hey, guys.
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.
The band.
Yeah.
Again, we're not trying to give any guidance or anything at this point, but what I would say is that.
We've exited the 19 ships of Wil.
And so as I said in the remarks earlier.
That's a significant reduction in capacity and now we are adding new ships, which we're very excited about AR and and therefore.
Get too.
Capacity comparable to what we had in 2019.
Eventually.
But the reality is that.
We're at a.
Much lower growth rate as an industry and as the 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 of the crudes again.
And we have a huge base of repeat cruises across all of that.
Areas of brands.
So there will still be the considerable pent up demand.
That has been largely you know unsatisfied at that point in time and that the environment debt.
The we're anticipating will be operating net but we already gone so far as to try to predict you know.
Yeah.
David on the other if you want to add any color I know the the only other thing that I'll add is.
Travel restrictions you know travel restrictions.
Are being reduced can change every day.
So you know the summer of 2022, I mean were talking you know 11 months away from having 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 and.
In December of 'twenty 'twenty, 2 I expect the go to Turkey, Greece, and in Italy, and I'm really looking forward to it and looking forward to reduce travel restrictions.
And David definitely get the.
The friends and family of premium when he when exactly.
Because of the vote.
No big price like the day with you.
Okay.
Good day already here that for you David.
[laughter].
Yes.
Thank you.
Up next we have a question 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.
Hum.
Good liquidity in place now we feel to get us back to you.
Full selling the other sleep.
The cash generation is the way in cash maximization is the way, we're going to accelerate the repayment of debt, we're going to do some refinancings to lower the interest burden of 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 the sort of pent up demand that's crazy normalizes because it happened in 2023 of will be on that.
I think of our plans as I said on the call we were on the.
Our growth rate of a 4 and a half per cent pre COVID-19.
Through 25 with the moves we've taken and the new bills you know we're already.
I have coming in with better growth rate annualized of.
2 in the half person so that's a much lower growth rate and I think that again.
The continued pent up.
Demand.
People.
That's been a lot of time in isolation and locked out of people really 1 of the experienced things I think that's gone the last a while.
And so we're.
Obviously, it's hard to predict the future book.
Where.
Logically optimistic that that'll be a good environment for some years from here.
And as per cap.
So operator, given the time, we'll take 1 more question.
Thank you Sir and 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 kept the price.
The first I guess I just wanted to clarify something David the Capex for the year are you raising the expectation or is it just weighted to the second half of the year of timing.
Oh, it's.
Weighted to the second half of the year of timing.
We have because as part of during the pause we delayed a lot of dry docks, we have quite a few ships going into dry dock in the second half of 'twenty 'twenty, 1 and so you will see our capital associated with those share.
And so the 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 in pre book in for onboard spending.
So the the trends you know when when you try to dissect them.
Where 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 <unk>.
No significant changes in that front.
Okay. Thank you.
Okay. Thank you everyone.
Really appreciate your time, it's a great feeling to.
It has been.
Then expanded opportunity to welcome guests onboard here in the coming months in and we're very excited about it but thank you very much. Thank you operator.
Thank you and that does conclude the conference call for today, we thank you all see of participation and ask that you. Please disconnect your line.
And once again have a great day everyone.
Okay.
True.
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Uh huh.
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