Q3 2021 Carnival Corp & Carnival PLC Business Update Call
[music].
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 telephonic lead by our Chairman Micky Arison, as well as David Bernstein, Our Chief Financial Officer, and Beth Roberts senior.
Anybody 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.
We are absolutely thrilled to be back doing what.
Bill.
Liberated amazing memorable vacation experiences to our guests.
Our team members are overjoyed with the backhaul board and his shows.
I guess are having a phenomenal time, our onboard revenue spray guests are off the charts in our net promoter scores have been exceptionally strong.
We've I've had the pleasure of visiting a number of shifts in recent weeks both here in the U S and abroad and I can tell you the ship looks spectacular and the crew has an amazing energy.
There's such an incredible spirit onboard.
Our protocols have been working well beginning with a seamless embarkation experience.
Strong and have enabled us to build occupancy levels.
Mythical paid as we return more ships to service.
Our brands executed extremely well in this initial phase about returned to service.
Particularly given our significant restrictions on international travel hampering our ability to offer a normal.
Normal content rich deployment options.
As well as the operating requirements in certain jurisdictions that limit our normally high occupancy levels.
Our January planners came up with creative deployment alternative a marketing department made them accessible with little investment are you a manager's price.
Them appropriately to achieve occupancy targets very close them and coupled them with bundled packages to drive exceptionally strong revenue onboard.
And despite all of the additional protocol.
Crude deliberate and amazing guests experience, the combination of which enabled us to deliver cruise vacations at.
Scale, while producing significant cash from these restricted voyages.
Now, while we normally don't disclose this level of information we try to find a way to give you a sense of why we're viewing the restart it's hugely successful beyond enthusiasm by our guests and cruise and the unprecedented net.
Promoter scores.
It became complicated because most of our boys just Wildcats Roe positive.
Program that could not be compared to 2019 and in most cases would normally be priced lower than the 2019 alternatives.
For example in the U K.
We're only able to offer.
Phoenix is without any imports of coal and that's all version of a vacation.
Which were not comparable in ticket prices to peak season, Mediterranean or Baltic sailings offered in the summer of 2019.
That said, even with occupancy limitations. These cruise has generated cash for all stakeholders.
They supported a return for our workforce and they successfully served GAAP, resulting in high satisfaction level.
Now at Carnival cruise line, where we were able to offer more comparable what generates the 2019, our revenue per Dms were up 20% compared to 2019 and that's included.
Inclusive of the impact of incentives from previous cancellation.
And that's despite the quota and nature of the bookings.
In fact carnival cruise lines restarted more ships out of the United States than any other cruise brand.
Phil.
<unk> occupancy above 70%.
All of which combined to generate an even greater cash contribution.
Clearly carnival cruise line as a brand that continues to outperform.
While the Delta Varian and its corresponding effect on consumer confidence has certainly created a myriad of operating challenges for us to navigate the near term and has left with some bookings.
Volatility in August.
Date, it has not had a significant impact on our ultimate plan to return our full fleet to guests operations in the spring of 2022.
On our last quarterly business update we said that we expected the environment to remain dynamic and it certainly.
Half of.
Of course agility has been a key strength of ours over the last 18 months and we continue to aggressively manage to optimize given the ever changing landscape.
In fact, while by design, we're not yet at 100% occupancy we have individuals' sailings with over 4000.
To date, we have carried over half a million guests this year already.
And on any given day, we have now successfully carrying around 50000 go and expect that number to continue to rise as we introduce more capacity and as we increase occupancy over the coming months.
The Delta Varian has clearly.
[noise] impacted our protocols, which will continue to evolve based on the local environment.
Markets like the U S, where case counts are higher we've taken swift actions to reinforce our already strong protocols such as additional testing requirements and indoor mass requirements with all U S daily operating under the CDC.
D C vaccination requirements.
Our protocols go above and beyond the terms of the conditional sale of water in a much more rigorous than comparable land based alternatives.
Again.
Our highest responsibility.
And therefore, our top priority is always compliant.
Environmental protection, and the health safety and well being of everyone. Our guests.
People in the communities, we touch and serve and of course, our Carnival family, our team members' shipboard and shore side.
The Delta Varian has also created some disruption in our supply chain.
Impacted the timing of opening and put some destinations.
And created a heightened level of uncertainty that has been reflected in the broader travel sector and in our own booking trends.
We quickly adjusted our deployment to push out the start date on a few select voyages.
With some of our more exotic wanted appointments like.
Our popular wild cruise as we rebuild guests out 'twenty 'twenty three departures.
Secondly, we've managed down near term capacity to optimize the current environment, yes, as we indicated we would.
Modifications, we've made to the pace of the rollout of our fleet will optimize our cash position in the near term.
Looking forward, we continue to work towards resumed full operations in the spring and.
In time for an important summer season, where we make the lion's share of our operating profit.
Of course, we have ample liquidity to see us through to full operation and we can continue with a prudent focus on cash management to ensure.
Sure we have flexibility under a multitude of scenarios.
The current environment, while choppy has improved dramatically since last summer and it should improve even further by next summer if the current trend of vaccine rollout.
And advancements in therapy continues for instance in markets like the U K where vaccination.
It's an H M rates are already higher consumer confidence remains strong and we are seeing strong momentum.
So far we even though the resumption of the guests cruise operations.
71 ships through next spring naphtha across eight of our nine brands.
We're evaluating the remaining shifts through next spring with a continue.
<unk> focus on maximizing future cash flow, while delivering a.
Great guest experience in a way that serves the best interests of public health.
Importantly, even at this very early stage of our rollout our ships are generating positive cash flow.
Based on our current rollout we expect.
Cash from operations for the whole company to turn positive at some point early next year.
Looking forward, we believe we have the potential to generate higher EBITDA in 2023 compared to 2019, given despite a modest growth rate.
Additional capacity.
Our improved cost structure.
As further insight into the booking trends, we are well positioned to build on our solid book position and intensely and constrained capacity for the remainder of 2021 and into the first half of 2022.
With the existing demand and limited capacity, we are focused on maintaining price.
Even recently with heightened uncertainty from the Delta variant affecting travel decisions broadly we continue to maintain price.
We have also opened bookings earlier for cruises in 2023, and we're achieving those early bookings with strong demand and good prices and based on that process we began.
To launch 'twenty 'twenty four sailing even earlier in.
In fact, these efforts contributed to the $630 million increase in guests deposit.
Our long term, yes deposits and that's deposits on bookings beyond 12 months.
Our three times historical levels driven.
And in part by our proactive efforts to open more inventory for sale in outer years.
Now, we expect GAAP deposits to continue to grow through the restart as we return more ships to service and as we build occupancy level.
Again, these favorable trends continue despite dramatically reduced advertising.
That makes sense.
We continue to focus our efforts on lower cost channels like direct marketing to our sizable past guest database of over 40 million guests.
And earned media as we build on our multiple new ship launches and restart newsworthy.
Of course, and most importantly, we are.
Delivering on our guest experience.
Out remains the number one reason people take their first cruise.
As I mentioned, our net promoter scores are well above historical levels across our shifts that have returned to service so far.
During the quarter, we furthered our strong track record of responsibly managing the balance sheet.
We completed two refinancing transactions among other efforts, resulting in a meaningful reduction in annual interest expense.
We have many more opportunities for refinancing ahead and are working through them at an aggressive pace.
Also importantly, we have continued to make advancements in our sustainability efforts.
Last week we.
We published our 11th annual sustainability report sustainable from ship to shore, which can be found on our sustainability website www dot carnival sustainability dot com.
In the report we build on the achievement of our 2020 goals by sharing more details on our 2030 goals.
And our 2050 aspiration.
The reports shed additional light on the six focus areas that will guide our long term sustainability vision, including climate action circular economy that waste reduction sustainable tourism health and wellbeing.
Mercy equity and inclusion.
Losing and biodiversity and conservation.
Now these areas align with the United Nations sustainable development goals.
Climate action as a top sustainability focus area.
We are committed to de carbonization, and we aspire to be carbon neutral by 2050.
As we have previously shared the spike.
25% capacity growth since that time, our absolute carbon emissions peak in 'twenty, 11th and will remain below those levels.
We are working toward transitioning our energy needs to alternative fuels and investing in new low carbon technologies.
Now because of the pause and.
Yes cruise operations, the 'twenty 'twenty sustainability performance measures are not comparable to prior year data.
That said there was a lot of valuable information on the progress we've made in our sustainability journey. Despite what was an incredibly challenging year.
We were clearly among the most impact the company.
Company by Covid, 19, and I'm very proud of all we've accomplished collectively to sustain our organization through these challenging times include.
Including all we did file a loyal guests all we did for other many stakeholders and all we did for each other within our Carnival thing.
In many regards I.
Our collective response to the pandemic is strong testimony to the sustainability of our company.
With that I again express my deepest appreciation to all Carnival team members, both shipboard and shore side, who consistently went above and beyond.
I am very humbled by the dedication.
<unk> I've seen these past 18 months.
Of course, we couldn't have done it without the overwhelming support from all of you who are listening on this call all of our stakeholders. So once again thank.
Thank you to our valued guests thank.
Thank you to our travel agent partners.
Thank you so all the many communities and governments.
Philippe to getting our cruise vaccinated.
Thank you to our suppliers and our other many stakeholders and of course, thank you to our investors for your continued confidence in us and for your ongoing support.
We continue to move forward in a very positive way throughout the pause.
We've been proactively managing to resume operations as an even stronger operating company.
Our strategic decision to accelerate their put up 19 ships.
Left us with a more efficient and effectively and it's lowered our capacity growth to roughly 2.5% compounded annually from 2019 grew 2025.
And that's down from 4.5% pre COVID-19.
We've opportunistically rebalance our portfolio through the ship exits as well as our future ship transfer any modification to our newbuild schedule.
To optimize our asset allocation maximize cash generation and improve our return on invested capital.
While our capacity growth is constrained we will benefit from an exciting roster of new ships spread across our brands, enabling us to capitalize on the pent up demand and drive even more enthusiasm and excitement around our restart plan.
And we will achieve a structural benefit to unit costs.
<unk> and 'twenty 'twenty three as we introduce these new larger more efficient ships, coupled with the 19 ships, leaving the fleet, which were among our least efficient with.
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 operation.
Once we return to full operations, our cash flow will be the primary driver to return to investment grade credit overall.
Creating greater shareholder value.
Yeah.
Thank you for your support and.
And we can't wait to welcome everyone back on board.
With that I'll turn the call over to David.
Thank you Arnaud I will start today with a review of our guests cruise operations along.
With our third quarter monthly average cash burn rate.
Then I'll provide an update on booking trends and finish up with some insights into our refinancing activity.
Turning to guidance cruise operation.
So great to be talking about operations again.
We started the quarter with five ships in service.
During the third quarter, we successfully restarted ships across each of our brands.
We ended the quarter with 35% of our food.
Capacity in service.
Our plans call for another 27 ships.
To restart gets cruise operations during the fourth quarter and the month of December.
So on new year's day, we anticipate celebrating with 55 ships or nearly 65% of our free capacity back in service.
For the third quarter.
Occupancy was 54% across the shifts in service.
Our brands executed extremely well.
I can see it did improved month to month through the quarter and in the month of August occupancy reached 59% from 39% in June and 51.
Percents in July.
I can see for our North American brands reflects our approach are vaccinated cruises, which for the time doing it does limit the number of families with children under 12 that can scale with them.
I can see for our European brands reflects capacity restrictions.
Friction such as social distancing requirements for our continental European brands and the thousand person cap per sailing for some of the quarter in the U K.
For third quarter, our North American brands occupancy was 68% while for our European brands.
Occupancy was 47%.
Revenue per passenger cruise days, the third quarter 2021 increase compared to a strong 2019 despite.
I think the current constraints on itinerary offerings, which did not include any of the higher yielding destination franchise.
Tenors offered in 2019.
As Arnold indicated our guests are having these phenomenal times and our net promoter scores have been incredibly strong.
Always happy guests seem to translate into improved onboard revenue.
Our onboarding.
And other revenue premiums were up significantly in the third quarter 2021 versus the third quarter 2019 in part due to the bundled packages as well as envoy credits utilized by guests from cruises canceled during the part.
We had great growth in onboard and other.
Premiums on both sides of the Atlantic.
Increases in bar Casino shop Spa, and Internet led the way on board.
Over the past two years, we have offered and our guests have chosen.
More and more bundled package option.
Indiana.
The benefit of these bundled packages in onboard and other revenue as we did during the third quarter 2021.
As a result of these bundled packages the line between passenger ticket revenue and onboard revenue seems to be blurry.
For accounting purposes.
We allocate the total price paid by the gap between the two categories there.
And therefore, the best way to judge our performance is by reference to our total cruise revenue metrics.
As we previously guided the shifts in service during the third quarter were in fact cash flow positive.
They generated nearly $90 million of ship level cash contribution.
This was achieved with only a two month U S based restart during the third quarter as our North American brands began guests cruise operations in early July we expect the ship level cash country.
Countries version to grow over time as more ships returned to service and as we build on our occupancy percentages.
For those of you who are modeling our future results I did want to point out that due to the cost of a portion of our fleet being in Pas that is securing.
During the first half of 2022.
Restart related expenses.
And the cost of maintaining enhanced health and safety protocols.
We are projecting ship operating expenses in 2022 for available lower birthday or per a L. E D. As it is.
More commonly called to be higher than 2019, despite the benefit we get from the 19 smaller less efficient ships, leaving the fleet.
Remember that because a portion of the fleet will be in pause added during the first half we are spreading costs over less <unk>.
We do anticipate that most of these costs and expenses will end with 2022 and will not reoccur in fiscal 2023.
Now, let's look at our monthly average cash burn rate.
For the third quarter 2021, our cash burn rate was.
$510 million per month, which was better than our previous guidance and was in line with the $500 million per month for the first half of 2021.
The improvement versus our guidance was due to the timing of capital expenditures, which are now likely to occur in the fourth quarter.
Yeah.
And some other small working capital changes.
With the timing of certain capital expenditures now shifting to the fourth quarter. The company expects its monthly average cash burn rate for the fourth quarter to be higher than the monthly average rate for the first nine months of the year.
Other good news positive factors impacting the fourth quarter, our restart expenditures.
To support not only the 22 ships that will restart during the fourth quarter, but also the additional ships that will restart in the first quarter of 2022.
Along with the significant increase.
Increase in dry dock days during the fourth quarter driven by the restart schedule.
All of these expenditures have been anticipated and given the announced restarts. Many of them are now occurring in the fourth quarter.
Also during the fourth quarter, we are forecasting.
Being positive cash flow from the 50 ships that will have guessed cruise operations during the quarter and <unk> for the fourth quarter are expected to be $13.0 million, which is approximately 47% of our total fleet capacity.
Now turning to booking trends.
Our booking volumes for the all future cruise is during the third quarter 2021, well higher than booking volumes during the first quarter.
That trend continued over the first couple of months of the third quarter, such that we expected the third quarter would end at higher booking levels then.
In the second quarter, but we did manage to achieve that because of the lower booking volumes in the month of August when the Delta variant impacted travel and leisure bookings generally the impact on bookings in August was mostly seen on near term sailing however.
However, the impact quickly stable.
<unk> in the month of August and in recent weeks, we have started to see a welcome uptick in booking volumes.
Cumulative advance book position for the second half of 2022 is ahead of a very strong 2019 and is that a new historical high pricing.
On our second half 2022 book position is higher than pricing on bookings at the same time for 2019 sailings driven in part by the bundled pricing strategy for a number of our brands, but excluding the dilutive impact of future cruise credits or more commonly known.
Known as the FCC's.
If we were to include the dilutive impact of future cruise credits pricing on our second half 2022 book position is now in line with pricing at the same time for 2019 sailings.
This improved position as a result of pause.
Positive pricing trends, we have seen during the third quarter.
This is a great achievement given pricing on bookings for 2019 sailings is a tough comparison as that was the high watermark for historical yield.
Finally, I will finish up with some insight.
Insights into our refinancing activity.
We are focused on pursuing refinancing opportunities to extend maturities and reduced interest expense.
Date through our debt management efforts, we have reduced our future annual interest expense by over two.
$250 million per year.
And we have completed cumulative debt principal payment extension of approximately $4 billion, improving our future liquidity position.
The 4 billion dollar extension results from three things first digital.
The July refinancing of 50% of our first lien notes for $2 billion.
Second the completion of the European debt holiday amendments, which deferred $8.0 billion of principal payments.
The deferred principal payments will instead be made over a five year period beginning.
Beginning in April 2022.
And third the extension of a $300 million bilateral loan with one of our banking partner.
As we look forward given how supportive the debt capital market investors and commercial banks have been we will be pursuing additional refinancing opportunity.
These to meaningfully reduce our interest expense and extend our maturities overtime.
And now I'll turn the call back over to Arnold.
David.
<unk>. Please open the call for questions.
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One moment please for the first question.
And our first question is from the line of Steve Wise and ski with Stifel. Please go ahead.
Hey, guys. Good morning, good morning, Good morning, David.
Doing well.
So Arnold in your prepared remarks, you, but you know I think I heard this right, but you talked about how youre expecting 2020, Three's EBITDA should be higher than 2019, EBITDA and I you know look I understand theres, new net capacity in there that's going to help drive part of that EBITDA.
But can you also help us maybe.
If you think about at a higher level you.
You know what some of your longer term assumptions are in order to get to that EBITDA level, meaning how are you guys thinking about whether it's.
The pricing environment load factors.
Anything else you would point out that that could kind of bridge that gap.
Sure I'll make some.
Comments, and then David a chance as well Hum.
By 'twenty three.
Again, if things continue to trend the way they're going.
Should have the coal fleet will have as you mentioned additional capacity with the.
The exciting news shifts more efficient we've got some cost.
Infrastructural improvements.
Some are coming out later.
The cost structure.
We're more efficient on those ships most of them up.
Standpoint.
As well as an operating standpoint.
In addition to that we expect to be back at your occupancy levels are more comparable to historical.
Sure Okay.
Even better given.
Given the fact that while there will be some capacity growth at that point in the industry is going to be well below the capacity growth that would have occurred absent the pandemic.
David any additional comments, yeah, I'd just point out a few things.
So you know the 19 ships.
Sure.
Between the 19 ships that left the fleet, which Arnold indicated our smaller less efficient ships and all the new capacity coming in we certainly have a much richer richer cabin mix onboard the vessels.
We had indicated the cabin the balcony cabin mix was about six.
Six percentage points higher.
So that does give us the opportunity to generate more revenue.
The combination of the ships, we said before those leaving the fleet in the Newbuild give us a unit cost at the ship operating level of 4%.
Production on the fuel consumption just the change in the fleet that I described is 3%.
In total it is at 10% capacity increase net of the shifts that left the fleet. So with all of the pent up demand and all of the things the revenue management things.
Yes.
Bundled packages that we're offering which is driving onboard revenue.
And everything else, we're doing we feel as Arnold said that we have the opportunity for stronger EBITDA in 2023 compared to 2019.
Okay. Great that is that's that's great color. Thanks, guys and then.
Second question as we start to think about 2022 is there any way for you to help us think about.
How do you know how 'twenty two is sold at this point I guess, what I'm trying to understand is how much of your capacity is actually available for sale at this point and then how you think about opening up more capacity for 'twenty two.
Two.
Ultimately impacting your pricing ability.
Yeah.
So go ahead, David Yeah, no happy to.
So for all intents and purposes I think in most cases, we have announced the restart date for 71 shifts out of the 90.
Five that will be in the fleet in the spring of 2022.
But even those ships, where we have not announced the restart date in most cases.
We have cleared the inventory for the dates that we don't expect to sale and we are only selling it.
At this point the dates that we do anticipate sailing we just have not made a formal announcement on the remaining 24 ships, but those will be forthcoming in the days and weeks ahead.
What is out there today more or less give or take there may be some changes.
A little.
Little bit on the margin, but more or less what's out there today is what we're selling we talked about the back half of the year being at a new historical high in terms of the booked position and we were very pleased with that people are booking further out and so where we're seeing.
Seeing the benefit of that the first half of the year. The only reason we didn't give a detailed year over year comparison of 22 versus <unk> 19 is because it is a bit of an apples and oranges comparison.
While we are very pleased and look at the first half of the year and for the voyages.
Just that we're selling we feel they are at the high end of the historical booking curve that the reason for the apples and oranges comparison is in the first half we're not running most of the world cruises and all of the long exotic voyages and they tend to book much further out.
<unk> because they are much longer. So if we gave you the numbers that would be an apples and oranges comparison, but it is fair to say that we feel very comfortable with the.
The pricing and the book position for the first half of 2022.
When Steve, but I said in the prepared.
Thomas we will have.
But we're planning.
The coal Creek on.
Hello Bill.
The summer season, where we make the bulk of our profit so for the second half of 'twenty two.
We're looking to do.
Oh of course.
Go ahead.
Yeah.
Dave If you if you just.
47% of our capacity.
We will be sailing in the year.
Our capacity will be sailing in the fourth quarter.
We ended the calendar year.
We said with nearly 65% of our.
City. So during the first half of the year, we're going to go from somewhere around 60% on December 1st up to 100% at the end of the first half. So you can begin to see that the first half of the year is going to be somewhere in between that depending on the exact ramp up of the capacity.
But to be clear, so if I'm going to make this up so.
Lets take lets take a random lets take the carnival conquest I'm going to make a ship up here.
For the second half of next let's let's look at the second half of next year are you selling.
100% of that capacity today or are you still.
Are you still kind of holding back some of that capacity because you don't want to try to get up to that 100% level and hopefully that makes sense.
And no we're not for future voyages out there because obviously.
We're nowhere near selling out yet.
Obviously, if we did we would have under priced it.
We're not restricting the capacity that we're selling for the back half of 2022.
No look I think to us.
Jeremy Thanks, Susan.
Thank you guys I appreciate it thanks, Mike Thanks for the color.
Thanks, Matt.
Our next question is from them.
Line of Robin Farley with UBS. Please go ahead.
Great. Thank you I wanted to.
Clarify your commentary on the expenses I know you mentioned some expenses next year, obviously would not be recurring the capacity out of service the restart costs.
And then maybe the piece of it that is would be that you know enhance.
The protocols so if.
If you looked at only the period, where everything is operating and so the restart expense would not be in there and then the.
The burn of ships out of service.
For that period forward and then I guess this would also mean for 2023 is it fair to say that your expense per pass.
Passenger cruise days would be below 2019 levels. When you exclude those sort of a onetime restart costs.
Well so.
Oh go ahead, David I was hoping to go ahead.
So.
When you when you exclude all of those costs and looking to 2023, I mean, we had indicated.
<unk> that the benefit of the change in fleet was on the ship operating expenses with 4% per <unk>.
We also have found efficiencies shore side as well and so there are cost efficiencies.
We have.
We were also.
So as the whole world is we are seeing some inflation.
We're working hard to mitigate all of that inflation.
We don't see it.
Nearly as much as people in the United States in terms of the the labor given.
Our employment base comes from Neely.
Nearly 150 countries around the world onboard our ships. So we have a much more of an opportunity there and so we're working hard but I'd be hesitant to give guidance on 2023 cost structure.
I think it's just fair to say to give you all the pieces that are out there.
And then well.
We'll give guidance as we get closer.
Okay.
Okay.
That's helpful too would you venture whether for 2020 to weather the short side efficiencies would offset.
You know inflation and enhanced protocols just for the for 'twenty two if you exclude the.
You get pass through the restart expenses, yes, I'd be hesitant to give guidance at this point clearly the short side efficiencies.
<unk> will flow through and since we're still working through.
All of the details relating to in sourcing and making changes in mitigating.
Some of the inflationary costs I'd be hesitant to give guidance, but you can be sure that we've got people focused on those items.
Optimize the situation.
Great helpful. Thank you and then.
My other question is just to clarify the commentary on price for next year. If we're just looking.
<unk> I can have one it's a little more comparable and then you said you know excluding the future cruise kind of discounts that pricing is about in line with 2019 levels I just wanted to make sure I understood.
When you gave your earlier commentary about how you know there is more bundling now so more of what is being booked now.
At the second half compared to 2019 has more of sort of some of the onboard expense rate kind of in the ticket price because of the bundling if if I'm understanding your commentary and so I guess I just want to clarify when you are seeing price in line with 2019 is that sort of you have that's.
Sort of you've allocated some of the bundled ticket price to onboard or no.
So I guess I'm, just trying to think about how we've tried to normalize it and do some level of allocation.
To be an apples to apples comparison.
Okay perfect. Thank you very much thanks.
Athletes Robyn.
Our next question is from the line of Ben Chaiken with Credit Suisse. Please go ahead.
Hey, How's it going.
Good morning, Matt.
Good morning, Hey, you're at risk of getting overly granular.
But I'll try it anyway, if you think about the profitability of the ships. If you think about the profitability of the ships coming online in your new capacity over the next couple of years. So remember next two or three years.
And then compare that to the remaining legacy fleet obviously excluding.
The 19 disposed of ships is there any way to ballpark compare.
What are those two kind of like sets of assets, whether it's margin EBITDA revenue premiums like that's something that's anecdotal.
Italy talked about an industry, but.
That didn't make sense I can try it differently or we can take it offline no. We have we wont bomb about.
Overall benefit of neutral relative to the fleet.
Are those JV you might want it.
So.
From a cost perspective.
If you just look at the unit cost for a <unk>.
Our new ships coming in they tend to be 15% to 25% lower on a unit basis than the existing fleet.
So the fuel consumption perspective, we're talking more like 25% to 35% more fuel efficient on a unit basis. So.
We do see the enhanced profitability.
And when you start adding in of course, the better cabin mix the more opportunity.
And from our onboard revenue because there are more.
There's more public space in the larger ships.
So all of that does bode well.
For an improved return on the new ships versus the existing fleet.
Q4, Okay cool that up that makes sense I appreciate it.
They don't tell me.
Our next question is from the line of Jamie Katz with Morningstar. Please go ahead.
Good morning, Thanks for taking my question.
Sure.
Good morning are starting to be deployed do you have a little bit more visibility on capex demand over the next year or two that you'd be willing to share with us I mean, I know we have the cat that the cash burn, but it would be helpful to hear the difference between maybe capex and opex going forward.
Yes, we can share with you our capex projections with without a doubt so looking at 2022 and <unk>.
I'll give you the two pieces of Capex.
The non new build Capex, we're projecting about 1 billion and a half.
And the Newbuild is $9.0 billion. So it's about $6 billion in total keep in mind, you remember that most of the new build is financed with the export credits that are already committed.
In 2023.
The non new build where we're forecasting about.
And about 1 billion and a half and the Newbuild is $9.0 billion for a total of 4.2.
So we are expecting an increase in capex in 'twenty, two and 'twenty three from where we are today in 'twenty, one, but we're not expecting to go back pre COVID-19.
Also you had probably indicated.
A sort of a steady state capex of call it $2 billion.
Non new build Capex and we do believe we will probably get back there at some point in the future but in the next two years, our best guess at this point is about 1 billion and a half.
Okay.
And then just going back to Robin's question on bundling I'm curious, whether you guys are thinking that the bundling behavior or something thats more secular so overtime.
It's going to remain that the pricing component is less important than it was historically and that the onboard component is more important than it was historically.
Okay.
And I'm not sure if there's anything to read into that but.
No.
A new secular trends are transitory.
Yeah again, I think we have nine brands.
There are a lot of variability across the brands.
And so we.
Bundling has been around <unk>.
It's not a new thing.
There has been a more recent trend.
The GAAP seem to prefer to have certain.
Thanks.
Very experienced bundles and so there has been an increase.
In some aspects of that.
Whether that's an ongoing trend.
While no probably but we're going to stay flexible and dynamic and you have the guests what they want.
And I think one of the <unk> that can add to what Arnold 10, what are the benefits of the bundle package I mean, it gives the consumer a choice and any choices you give the consumer.
Creates hopefully more demand.
And better pricing in the long run, but you know keep in mind that when somebody.
Bundles.
When somebody pays for like their drink package and their internet ahead of time.
Well first of all that of course benefits the agent because they get a commission.
And to the whole package, so definitely does make the travel agents happy, but when the people getting onboard they really have a fresh wallet.
Because they've already paid for certain items. So they have a fresh wallet, they're starting over again and we believe that with the fresh while it does.
Mission of antiviral more onboard spend in total so we would expect our onboard to be higher in the long run as a result of the bundling and we did see it in the third quarter I mean, the onboard and other per Dms were up significantly compared to 2019.
And so some of that is the fresh wallet of people getting onboard.
Thank you that's helpful.
Thank you.
Okay.
Our next question is from the line of Asia, George <unk> with Infiniti Research. Please go ahead.
Hi, Good morning, guys. How you think you have been doing a great job and are probably very happy to be so busy which we started so congratulations I have.
Question is related.
Again, Arnold I think that what you've done has been fantastic and yeah.
Switzerland is towards the end of the year.
My question was it a little more in terms of sourcing and destinations.
With the ships going back to warmer climates, including the Caribbean during the winter months do you find any difficulties in terms.
Yeah, we're getting international passengers, especially from Europe with more stringent entry requirement into the U S and secondly, I'm.
Australia seems to continue.
Continues to be a wildcard, even though it's a small market relatively speaking in terms of the capacity you have there.
But it's also somewhat important market during winter.
Yes, Australia.
Important Martin for certain them.
Travel restrictions.
Absolutely play a part in term.
So what we can do.
With occupancy ultimately.
Theyre urging sign as things continue to loosen up things continue to improve.
You can see in the UK, where theres good momentum.
Momentum.
Further ahead on vaccinations et cetera.
You're seeing the U S recently made an announcement.
One of the world.
Letting.
Other income travels from Europe come in and starting in November but all of those things in near term are impacting those square certain and they will continue to evolve.
Absolutely, Australia will open well will be there.
I'm excited about that and ready to take full advantage of it and our team over there is working.
Booking cruise is going forward and so on in anticipation that you definitely will open.
But the world is just processing itself through this pandemic.
And as we said and as I say it enough.
In the remarks earlier prepared remarks.
Choppy, but there's movement forward.
And the most important thing is that there is pent up demand people are there.
Very interested in the cruise experience not just repeat cruise scores, but we're.
Seeing lots of new to brand and new cruise or some booking and so that's a positive.
Positive side, but we do have to get.
When you know that we will get there where it was kind of back to some kind of a normal where people are free to grow.
And if I can just add if I yeah, Yeah, let me ask David.
In terms of your question about.
Pete Europeans traveling to the United States for their.
The winter season, so keep in mind, we have multiple brands.
And our European brands, essentially our home porting in other places in the Caribbean. So you know I don't remember everything Homeport I mean piano in the UK I think home ports out of Barbados.
Caribbean.
And Costa and Aida in other places in the Caribbean They choose home ports, where there is great airlift from their home countries. So most of the Europeans who are coming to the Caribbean are going on our European brands and going somewhere in the Caribbean.
<unk> embark on their vessel the North American brands, which are sailing out of the United States. The overwhelming majority of their guests probably.
North American sailing onboard the ships in the winter time so.
It's.
Travel restrictions are easing people are starting to be able.
And I won't repeat everything that you've probably already now.
But it's not as big of an issue for US is given the structure of where people start their cruises.
I think the Comporting point that you've made are there is great and I should have thought about that.
Second question your yield management guys are are probably working very hard because now they have even more you know levers.
The work words. So in addition to trying not to underprice in yet reaching.
Occupancy levels were at a shipboard level at least a we're getting a cash benefit.
Has there been any change any.
Restrictions in terms of occupancy or is it more a you know a continuation of what the what you've been doing for Deca.
<unk> trying to get the best price.
We've intentionally.
Very good occupancy for a host of reasons.
Some related and because of again the brands all over the place in terms of jurisdictions. So some just to be a compliance.
Some places others.
<unk> somebody ramp up too because we have new Coca Cola I forget.
The cool experience with it and experience with the guests to make sure we work on in the courts and some you know an artifact of the compliance measures, whether it's physical distancing in Europe.
Other requirements and so at this point yes.
To get them intentional constraint, but as we said.
Where we have like normal cruises and the Caribbean.
Vaccinated cruises, but.
You know Carnival brand has.
Been at 70% occupancy, which is fantastic given the number of ships.
We had another Coca Cola.
Yes, Theres no we intentionally tapped that.
As we begin to open up more.
Obviously.
Management folks.
Well have to sharpen their.
Hum.
I was going to say it pencils when nobody uses pencils anymore.
There are people more.
And go to work on it but it's.
We have good momentum.
It's very disciplined.
We have manage the timing of it.
Resource with some chips thinking through these matters.
And so that's a very proactive and today well managed though.
Giving us an opportunity to have scrubbed on pricing going forward.
Well the whole process is obviously well above my pay grade so I still use benefits. Thank you.
My questions and did not tired me in yield management not good enough for that anymore.
Thank.
Good luck.
Thank you.
Uh huh.
Our next question is from the line of Brent on tour with J P. Morgan. Please go ahead.
Yes.
Hey, good morning, everybody. Thanks for taking my questions. So David Good morning, David I was wondering if.
You guys would maybe give us your view.
On how bookings cadence progressed throughout delta, but just focused on a sale.
Sailings for the second half of 'twenty, two and then if there was a wobble at all how did the industry respond to that in terms of pricing.
Yeah. So you know as I said in my prepared remarks.
The impact in August.
The Delta variant.
On bookings was really much more of a near term phenomenon in terms of call. It the next.
Six months, maybe nine months of bookings.
The further out you go it is really hard to even spot or distinguish delta varying trend in the booking patterns. So that the second half remained strong and throughout the month of August.
And you know in terms of pricing I think Arnold said this in his notes.
In his prepared remarks.
We all believe that the Delta variant people would.
We would get past this and so our view was to maintain price.
And two to make sure that we optimized revenue in the long run.
Not yet bookings during the month of August we still have plenty of time. Since we're ahead, we still have plenty of time to.
To fill the ships to the occupancy levels, we're targeting.
For both the fourth quarter and for the first half of 2022 so.
So we are holding price and we're in a good position.
Excellent. Thanks for that and then as a follow up I know you're targeting cash flow cash flow from operations breakeven sometime early in 2002.
But you didn't give a specific month on that which we can appreciate I'm. Just curious what are you assuming in that for.
Customer deposit inflows.
If anything it.
It might still be elevated at that time, and so I'm just curious what's baked in for that.
Yeah, well you know customer deposits.
And I know the end of the third quarter with $4.0 million.
The last two quarters they did increase.
Our expectation is that they will continue to increase.
Of course.
Steady state environment remember that the overwhelming majority of the customer deposits at.
At this point in time or the final payments for the next three months of cruises. So has the capacity for the next three months continues to build towards the 100%.
Next spring you should see an increase in customer deposits over.
At any time as we continue to get more and more final payments.
Keep in mind like for the fourth quarter, we only have 47% of the capacity in service.
So there is only half of probably the final payments that you would see come next may.
So.
Over you will continue to see an increase.
Driven by that factor and that should be a positive cash flow inflow to us.
Over that timeframe.
Okay, but maybe to ask a different way do you need.
Elevated customer deposit inflows to breakeven on cash flow.
No patients in the first half of next year.
Ill.
EBITDA.
We'll also breakeven in the early part of 2022 so.
I'll give you that hopefully.
Answers your question that's helpful Greg and.
In a much more direct way.
So.
Alright, great. Thanks, guys and best of luck.
Thank you.
Okay.
Our next question is from the line of Stephen Grambling with Goldman Sachs. Please go ahead.
Hey, thanks for taking the questions.
Could you just talk about the pricing and booking.
And mix between what you saw on Carnival versus maybe some of the other brands specifically looking at second half of 'twenty two as itineraries normalized did you see any difference more recently in close in bookings that may inform how that trajectory could evolve.
I would say you'd begin where we see strength across.
Dino.
Brian the portfolio.
And and deaths.
Very encouraging to us, but go ahead, David with any specific comments you might want to make.
You know for the back half of 'twenty. Two I mean is there any let's say all the brands are strong things are going well, it's all the we're getting back to.
I don't know of a normalized comparison of full itinerary, a full breadth of itineraries across the whole fleet.
And so we feel very good about that as I said the back half of 2022 was.
At a historical high.
And we saw a great.
Sort of in all brands and in both sides of the Atlantic So Theres nothing particular to note there.
Closer in.
Some of that is just a function of itineraries in marketplaces.
But we are seeing good occupancy and.
Trend across all the brands.
I gave you the occupancy figures for the third quarter clearly the European brands had more capacity restrictions in the third quarter.
UK restrictions go away.
But the.
Continental Europe social.
And seeing restrictions remain at least for part of the quarter.
So there's.
Theres nothing worth, noting I think we're seeing good.
Comparisons in good booking trends across all the brands there are small differences, but some of that also has to do with.
This itinerary lengths.
Between the different brands in the marketplaces.
Well, it's a great question operator I'm sorry go ahead. This will be the last question go ahead.
Well I I may have missed this but I was I was wondering if you had any way you can quantify the potential kind of sustained structural cost increases that you.
Some of the health actions.
And as you mentioned there was some supply chain disruption. So I'm wondering if you can help frame kind of the level of inflation.
Inflation, you may be seeing whether it's in labor commodities. Thanks.
Yeah real quickly I'll I'll make a general comment I think from a.
Half of it will cost standpoint, a lot of.
Protocols and startup costs of course will go away a lot of protocol costs will also go away because all the time.
Protocols won't be required.
Once we get to.
Point, whereas only protocol Cogs.
Sustaining.
On the so called zones.
Versus per ship versus millions of dollars per chip or whatever.
And again, we suspect that goes will reduce over time as well.
Yeah.
I agree with Arnold and I will tell you I'm reluctant at this point to try to.
<unk>.
Pegged this because there's so many moving parts and variables and so many things were working on.
And that when we get closer we'll have much better clarity.
But theres a lot of opportunity out there for us and you can be sure we're working hard to maximize those opportunities in every.
With every supplier in and every item, we source as well as the labor and other things so.
Well, we'll give you more guidance as time goes on but just recognize we're clearly focused on this on an ongoing basis.
And thank you everyone.
Way, we really really appreciate.
Your support and ongoing interest in <unk>.
We're very excited.
To be having the results we're having at this point. Thank you so much.
Thank you everyone.
Yeah.
That does conclude the conference call for today.
Thank you for your participation and ask that you. Please disconnect your lines.
Yeah.
Okay.
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Good morning, everyone.
So our business update conference call.
I'm Arnold Donald President and CEO of Carnival Corporation and 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.
So it's really.
We are absolutely thrilled to be back doing what we do bill delivering an amazing memorable vacation experiences to our guests.
Our team members are overjoyed to be back onboard and it shows.
Guests are having a phenomenal time, our onboard revenue.
Perhaps or I guess are off the charts in our net promoter scores have been exceptionally strong.
I've had the pleasure of visiting a number of ships in recent weeks both here in the U S and abroad and I can tell you. This.
Chip looks spectacular and the.
Crew he has an amazing energy.
As such.
Well spirit onboard.
Our protocols have been working well beginning with a famous embarkation experience and have enabled us to build occupancy levels at a significant pace as we return more ships to service.
Our brands executed extremely well in its initial phase about returned to serve.
Incredibly, particularly get a significant restriction on international travel hampering our ability to offer a normal content rich deployment options.
As well as the operating requirements in certain jurisdictions that limit our normally high occupancy levels.
Alright January planners came up with creative deployment alternatives.
Our marketing department made them accessible with little investment.
Are you a manager's priced them appropriately to achieve occupancy targets very close them and coupled them with bundled packages to drive exceptionally strong revenue onboard.
And despite all the additional protocol.
Our crude.
Turning to deliberate and amazing guests experience the combination of which enabled us to deliver cruise vacations at scale, while producing significant cash from these restricted voyages.
Now, while we normally don't disclose this level of information we try to find a way to give you a sense of why we're viewing the restarted.
Crude and hugely successful beyond the enthusiasm by our guests and crew and the unprecedented net promoter scores.
It became complicated because most of our Voyager as well cash flow positive.
A program that could not be compared to 2019 and in most cases would normally be priced.
Started in the 2019 alternatives.
So for example in the U K, we're only able to offer thing that cruise is without any ports of call.
The algorithm the vacation.
Which were not comparable in ticket prices the peak season of Mediterranean or Baltic sailings operating in the summer of 2019.
Lower that even with occupancy limitations. These cruise has generated cash while stakeholders. They supported a return for our workforce.
And they took definitely serve GAAP, resulting in high satisfaction level.
Now at Carnival cruise line, where we were able to offer more comparable <unk>.
The 2019, our revenue per Dms were up 20% compared to 2019, and that's inclusive of the impact of incentives from previous cancellation.
And that's despite the quote the nature of the booking.
In fact carnival cruise lines restarted Morris shifts out of the United States than any.
That Ruth's brand.
Bill.
Cheap occupancy above 70%.
All of which combined to generate an even greater cash contribution.
Early Carnival cruise line as a brand that continues to outperform.
While the Delta Varian and its corresponding effect on consumer.
Although it certainly created a myriad of operating challenges for us to navigate the near term.
Anne has lessened some booking volatility in August to.
To date it has not had a significant impact on our ultimate plan to return our full fleet the guests operation in the spring of 2022.
On our last.
<unk> quarterly business update we said that we expected the environment to remain dynamic and it certainly have.
Of course agility has been a key strength of ours over the last 18 months and we continue to aggressively manage to optimize given the ever changing landscape.
In fact, while Baidu.
Last time, we're not yet at a 100% occupancy we have individuals salience with over 4000 go.
Date, we've carried over half a million guests this year already.
And on any given day, we are now successfully carrying around 50000 go and expect that number to continue to rise as we.
That's more capacity and as we increase occupancy over the coming months.
The Delta Varian has clearly impacted our protocols, which will continue to evolve based on the local environment.
Markets like the U S, where Cape town, so higher we've taken swift actions to reinforce our already strong protocols.
We entered such as additional testing requirements and indoor mass requirements with all U S daily operating under the CDC vaccination required.
Our protocols go above and beyond the terms of a conditional sale of water at a much more rigorous than comparable land based alternatives.
Again.
On the call our highest responsibility.
And therefore, our top priority.
As always compliant.
Environmental protection and the health safety and.
Well being of everyone our guests.
People in the communities, we touch and serve and of course, our Carnival family our team members ship.
Our and shore side.
The Delta variance has also created some disruption in our supply chain.
Impacted the timing of openings in some destinations.
And created a heightened level of uncertainty that has been reflected in the broader travel sector and in our own booking trends.
We quickly adjusted.
Or our deployment to push out the start date on a few select voyages.
Some of our more exotic wanted appointments like our popular wild cruise as we rebuild guests out 'twenty 'twenty three departures.
Effectively we've managed down near term capacity.
Optimize the current environment, yes, as we indicated we would.
Just the amount of patients we've made to the pace of the rollout of our fleet will optimize our cash position in the near term.
Looking forward, we continue to work towards resuming full operations in the spring.
In time for an important summer season, where we make the lion's share of our operating profit.
Of course, we have ample.
Whether it either.
For full operation.
And we continue with a prudent focus on cash management to ensure we have flexibility under a multitude of scenarios.
The current environment, while choppy has improved dramatically since last summer and it should improve even further by next summer.
The current trend of vaccine rollout and advancements in therapy continues.
In some markets like the UK, where vaccination rates are already higher consumer confidence remains strong and we are seeing strong momentum so.
So far we even though the resumption of the guests cruise operations.
71 ships.
If the crew next spring NAFTA class eight about nine brands.
We're evaluating the remaining ships through next spring with a continued focus on maximizing future cash flow.
Delivering a great guest experience in a way that serves the best interests of public health.
Importantly, even at this very.
Chip stage of our rollout.
Our ships are generating positive cash flow.
Based on our current rollout, we expect cash from operations for the whole company to turn positive at some point early next year.
Looking forward, we believe we have the potential to generate higher EBITDA in 2023 compared.
Earnings for 2019, given there.
Despite a modest growth rate.
Additional capacity in our improved cost structure.
As further insight into the booking trends, we are well positioned to build on our solid book position.
And intensely and constrained capacity for the rig.
<unk> 2021 and into the first.
<unk> till 2022.
With the existing demand and limited capacity, we are focused on maintaining price even recently with heightened uncertainty from the delta variant affecting travel decisions broadly we continue to maintain price we.
We have also opened booking earlier for cruises in 2020 three.
First half and we're achieving those early bookings with strong demand and good pricing and based on that so we began to launch 2024 sailing even earlier.
In fact, these efforts contributed to the $630 million increase in guests deposit.
Our long term.
It causes some deposits on bookings beyond 12 months.
Our three times historical levels.
Driven in part by our proactive efforts to open more inventory for sale in outer years.
Now we expect deposits to continue to grow through the restart as we return more shifts the service and as we build.
Yes.
Again, these favorable trends continue despite dramatically reduced advertising expense.
We continue to focus our efforts on lower cost channels like direct marketing to our sizable past guest database of over 40 million guests.
And earned media as we.
Built a multiple new ship launches and restart newsworthy.
Of course, and most importantly, we are delivering on our guest experience word of mouth remains the number one reason people take their first cruise and as I mentioned, our net promoter scores are well above historical levels across our ships that are returned to service.
Build on that far.
During the quarter, we furthered our strong track record of responsibly managing the balance sheet, we completed two refinancing transactions among other efforts, resulting in a meaningful reduction in annual interest expense.
We have many more opportunities for refinancing ahead and are working through them at an aggressive.
So.
Also importantly, we have continued to make advancements in our sustainability efforts last week, we published our 11th annual sustainability report sustainable from ship to shore, which can be found on our sustainability website www dot carnival sustainability dot com.
In the report we build on the achievement of our 2020 goals by sharing more details on our 2030 goals that are 2050 aspiration.
The reports shed additional light on the six focus areas that will guide our long term sustainability vision, including climate action.
I don't have any of that waste reduction.
Sustainable tourism health and wellbeing.
The equity and inclusion and biodiversity and conservation now these areas align with the United Nations sustainable development goals.
Climate action as a top sustainability focus area.
We are committed.
Income carbonization, and we aspire to be carbon neutral by 2050.
As we have previously shared despite 25% capacity growth since that time, our absolute carbon emissions peak in 'twenty, 11th and will remain below those levels.
We are working towards transitioning our energy.
The need to alternative fuels and investing in new low carbon technology.
Now because of the pause in yachts cruise operations. The 20th 20 sustainability performance measures are not comparable to prior year data.
That said there is a lot of valuable information on the progress we've made in.
<unk> sustainability journey, despite what was an incredibly challenging year.
We were clearly among the most impacted companies by COVID-19, and I'm very proud of all we've accomplished collectively to sustain our organization through these challenging times.
Including all we did file a loyal guests all.
And I would say for our other many stakeholders and all we did for each other within our Carnival thing.
In many regards I believe our collective response to the pandemic is strong testimony to the sustainability of our company.
With that I again express my deepest appreciation to all carnival team.
We disposed shipboard and shore side, who consistently went above and beyond.
I'm very humbled by the dedication I've seen these past 18 months of course, we couldn't have done it without the overwhelming support from all of you who are listening on this call all of our stakeholders. So once again.
And thank you to our valued guests.
Thank you to our travel agent partners.
So all of the many communities and governments that facilitated getting out cruise vaccinated.
Thank you to our suppliers and our other many stakeholders.
And of course, thank you to our investors for your continued confidence.
And for your ongoing support.
We continue to move forward in a very positive way.
The path, we've been proactively managing to resume operation as an even stronger operating company.
Our strategic decision to accelerate back that up 19 ships left us with a more efficient enterprise.
The police and it's lowered our capacity growth to roughly 2.5% compounded annually from 2019 grew 2025, and that's down from four and a half or so pre COVID-19.
We've opportunistically rebalance our portfolio through the ship exits as well as our future ship transfer any modification tower.
Any furniture.
Optimize our asset allocation maximize cash generation and improve our return on invested capital.
While capacity growth is constrained we will benefit from an exciting roster of new ships spread across our brands, enabling us to capitalize on the pent up demand and drive even.
<unk>, whose album and excitement around a restart plan.
And we will achieve a structural benefits of unit cost in 2023 as we introduce these new larger more efficient ships, coupled with the 19 ships, leaving the fleet, which were among our least efficient.
With the aggressive actions.
More and be 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 operation.
We've already once we return to full operation.
Cash flow will be the primary driver to return to investment grade credit overtime create.
Creating greater shareholder value.
Again.
Thank you for your support and we can't wait to welcome everyone back on board.
With that I'll.
Or is it all over to David.
Thank you Arnaud I will start today with a review of our guests cruise operations, along with our third quarter monthly average cash burn rate.
Then I'll provide an update on booking trends and finish up with some insight into our refinancing activity.
I'll turn the turning to guests cruise operation.
So great to be talking about operations again.
We started the quarter with just five ships in service.
During the third quarter, we successfully restarted ships across eight of our brands.
We ended the quarter with 35%.
Pivot off peak capacity in service.
Our plans call for another 27 ships to restart gets cruise operations during the fourth quarter and the month of December.
So on new year's day, we anticipate celebrating with 55 ships are nearly six.
5% of our fleet capacity back in service.
For the third quarter occupancy was 54% across the shifts in service.
Our brands executed extremely well.
Occupancy did improve month to month through the quarter and in the month ago.
Occupancy reached 59% from 39% in June.
51% in July.
I can see for our North American brands reflects our approach are vaccinated cruises, which for the time deal does limit the number of families with children under 12.
August inhale with them.
I can see for our European brands reflects capacity restriction, such as social distancing requirements for our continental European brands and the thousand person cap per sailing for some of the quarter in the U K.
A full third quarter.
Our North American brands occupancy was 68% while for our European brands Occupancies with 47%.
Revenue per passenger cruise days, the third quarter 2021 increase compared to a strong 2019 despite.
Right.
Constraints and itinerary offerings, which did not include many of the higher yielding destination rich itinerary offered in 2019.
As Arnold indicated our guests are having a phenomenal time and our net promoter scores have been incredibly strong.
Current always happy get seem to translate into improved onboard revenue.
Onboard and other revenue premiums were up significantly in the third quarter 2021 versus the third quarter 2019 in part due to the bundled packages as well as onboard credits utilized.
And cruises canceled during the part.
We had great growth in onboard another pretty hands on both sides of the Atlantic.
Increases in bar Casino shop.
Internet led the way on board.
Over the past two years, we have offered.
Thank you I guess have chosen more and more bundled package option.
And again, we will see the benefit of these bundled packages in onboard and other revenue as we did during the third quarter 2021.
As a result of these bundled packages the line between passenger ticket revenue.
And our and onboard revenue.
Could be blurry.
For accounting purposes, we allocate the total price paid by the gap between these two categories. Therefore.
Best way to judge our performance is by reference to our total cruise revenue metrics.
As we previewed.
And usually guided the shifts in service during the third quarter weren't back cash flow positive.
They generated nearly $90 million of ship level cash contribution.
This was achieved with only two months U S based restart during the third quarter as our.
The American brands began gets cruise operation in early July.
Expect the ship level cash country division to grow over time.
More ships returned to service and as we build on our occupancy percentage is.
For those of you who are modeling our future result.
Just wanted to point out that due to the cost of a portion of our fleet.
And part of that is during the first half of 2022.
Restart related expenses.
And the cost of maintaining enhanced health and safety protocols.
We are projecting ship operating expense.
I did it in 2022 per available lower birthday, or a L. E D. As it is more commonly called to be higher than 2019. Despite the benefit we get from the 19th smaller less efficient ships, leaving the fleet.
Remember that because a portion of that.
And we'll be impart added during the first half we are spreading costs over less L. D D.
We do anticipate that most of these costs and expenses will end with 2022 and will not reoccur in fiscal 2023.
Now.
Please look at our monthly average cash burn rate.
For the third quarter 2021, our cash burn rate with $510 million per month, which was better than our previous guidance and was in line with the 500 million per month for the first half of 2021.
The improvement.
Versus our guidance was due to the timing of capital expenditures, which are now likely to occur in the fourth quarter.
And some other small and working capital changes.
With the timing of certain capital expenditures now shifting to the fourth quarter the company expects its months.
Average cash burn rate for the fourth quarter to be higher than the monthly average rate for the first nine months of the year.
Other good news is positive factors impacting the fourth quarter, our restart expenditures to.
To support not only the 22 ships that will restart during the fourth quarter.
But also the additional ships that will restart in the first quarter of 2022.
Along with a significant increase in dry dock days during the fourth quarter driven by the restart schedule.
All of these expenditures have been anticipated and given the announced restart.
Many of them are now occurring in the fourth quarter.
Also during the fourth quarter, we're forecasting positive cash flow from the 50 ships that will have guess cruise operations during the quarter and a L. P fees for the fourth quarter are expected to be $13.0 million.
Which is approximately 47% of our total fleet capacity.
Now turning to booking trends are booking volumes for the all future cruise is during the third quarter 2021, well higher than booking volumes during the first quarter.
That trend continued.
Over the first couple of months of the third quarter, such that we expected the third quarter with hidden get higher booking levels than the second quarter, but we did manage to achieve that because of the lower booking volume in the month of August when the Delta there is impacted travel and leisure bookings generally.
The impact on bookings in August with mostly seen on near term tailing. However.
However, the impact quickly stabilized in the month of August and in recent weeks, we have started to see a welcome uptick in booking volume.
Cumulative advanced book position for the second half of 'twenty.
Two is ahead of a very strong 2019 and is that a new historical high pricing on our second half 2022 book position is higher than pricing on bookings at the same time for 2019, failing driven impart by the bundled pricing.
'twenty gravity for a number of our brands, but excluding the dilutive impact of future cruise credits or more commonly known as the FCC's.
If we were to include the dilutive impact of future cruise credits pricing on our second half 2022 book position is.
Missing some line with pricing at the same time for 2019 failing.
This improved position as a result of positive pricing trends, we have seen during the third quarter.
This is a great achievement given pricing on bookings for 2019 sailings is a tough comparison.
And that was the high watermark for historical yield.
Finally, I will finish up with some insight into our refinancing activity.
We are focused on pursuing refinancing opportunities to extend maturities and reduced interest expense.
Now eight through our debt management efforts, we have reduced our future annual interest expense by over $250 million per year.
And we have completed cumulative debt principal payment extension of approximately $4 billion improving our.
Future liquidity position.
The 4 billion dollar extension results from three things.
First the July refinancing a 50% among first thing you know for $2 billion.
Second the completion of the European debt holiday amendments, which deferred one.
Hey, Devin billion of principal payment.
The deferred principal payments will instead be made over a five year period, beginning in Haynesville 2022.
And third.
Pension of about $300 million bilateral loan with one of our banking partner.
As we look forward.
Supporting the debt capital market investors and commercial banks, and then we will be pursuing additional refinancing opportunities to meaningfully reduce our interest expense and extend our maturities overtime.
And now I'll turn the call back over to Arnold.
Thanks, David operator please.
In house on the call for questions.
Thank you.
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One moment please for the first question.
And our first questioner.
Please from the line of Steve Wise and ski with Stifel. Please go ahead.
Yeah, Hey, guys. Good morning, good morning, Arnold commodity David doing well.
So you know Arnold in your prepared remarks, you you know I think I heard this right, but you you talked about how youre expecting 2020, three's EBITDA should be higher than 2019.
<unk> EBITDA and I, you know look I understand theres, new net capacity in there that's going to help drive part of that EBITDA.
But can you also help us maybe think about at a higher level you know what some of your longer term assumptions are in order to get to that EBITDA level, meaning no. How are you guys thinking about whether it's a you know the pricing environment.
So the factors.
Else you would point out that they could kind of bridge that gap.
Sure I'll make some comments and then give David a chance as well Hum.
By 'twenty three you know again, if things continue to trend the way, they're going we should have the coal fleet will have as you mentioned.
Love additional capacity with the exciting news shifts more efficient we've got some cost infrastructure.
Infrastructure improvement somewhat coming out later.
Is that a cost structure.
We're more efficient on the ships both from a fuel standpoint, as well as an operator.
Mentioned in point in addition to that we expect to be back at you know occupancy levels are more comparable to historical or potentially even better given the fact that while there will be some capacity growth at that point in the industry is going to be well below the capacity growth that would have occurred.
And then you know the pandemic I'm going to David any additional comments, yeah, I just point out a few things. So you know the 19 ships.
Between the 19 ships that left the fleet, which Arnold indicated our smaller less efficient ships and all the new capacity coming in.
Certainly have a much richer richer cabin mix onboard the vessels days I think we had indicated the cabinet in the balcony cabin mix was about six percentage points higher so that does give us the opportunity to generate more revenue and the combination of the shifts we said before those.
We certainly did in the Newbuild give us, saying Hey, you got unit cost at the ship operating level, a 4% reduction on the fuel consumption just the change in the fleet that I described at 3% in total it is at 10% capacity increase.
Leaving net of the ships that left the fleet so with all of the pent up demand and all of the things the revenue management things that the young bundled packages that we're offering which is driving onboard revenue and everything else. We're doing we feel as Arnold said that we have the opportunity.
Create stronger EBITDA in 2023 compared to 2019.
Okay. Great that is that's that's great color. Thanks, guys and then second question as we start to think about 2022.
Any way for you to help us think about.
How do you know how 'twenty two is sold at this point I guess, what I'm trying to understand.
How much of your capacity is actually available for sale at this point and then how you think about opening up more capacity for 'twenty two.
Without ultimately impacting your pricing ability.
So go ahead, David Yeah, no happy to.
So for all intents and purposes I think in most cases, we have it now.
Restart date for 71 ships out of the 95 that will be in the fleet in the spring of 2022, but even those ships, where we have not announced the restart date in most cases.
We have cleared the inventory for the data that we don't expect to sale and we are only selling at this point the dates that we to anticipate sailing we just have not made a formal announcement on the remaining 24 ships, but those will be forthcoming.
The days and weeks ahead.
So what is out there today more or less give or take there may be some changes I'm a little bit on the margin, but more or less what's out. There today is what we're selling we talked about the back half of the year being at a new historical high.
In terms of the book position and we were very pleased with that people are booking further out and so where we're seeing the benefit of that the first half of the year. The only reason we didn't give a detailed year over year comparison of 22 versus 19.
Hi, and this is a bit of an apples and oranges comparison, you know while we are very pleased and look at the first half of the year and because of voyages that were selling are we feel you know they're at the high end of the historical booking curve that the reason for the apples and oranges comparison is.
Does it in the first half we're not running most of the world cruises and all belonged exotic voyages and they you know tend to book much further out because they are much longer. So if we gave you the numbers it would be an apples and oranges comparison, but it is fair to say that we feel very comfortable with the.
Is the pricing and the book position for the first half of 2022.
But Steve I, but I said in the prepared comments, we will have but we're planning to have.
You know the whole clique on many times about the summer season, where we make the bulk of our profit so.
For the second half of 'twenty two.
We're looking to being equal of course.
GAAP on it.
If you if you just are you know 47% of our capacity.
We'll be sampling in the.
Yeah, a lot of capacity.
<unk> sailing in the fourth quarter, we ended the calendar year, we said with nearly 65% of our capacity. So you know during the first half of the year. We're gonna go from somewhere around 60% on December 1st up to 100%.
He will be at the end of the first half. So you can begin to see that.
The first half of the year is going to be somewhere in between that depending on the exact ramp up of the capacity.
But to be clear so if I'm gonna make this up so if you know lets take lets take a random lets take the carnival conquest I'm going to make a ship up here.
But for the second half of next lets you know it looks like in the second half of next year are you selling 100% of that capacity today or are you still on.
Are you still kind of holding back some of that capacity because you don't want to try to get up to that 100% level and hopefully that makes sense.
And now where we're.
You know for future voyages out there because obviously.
You know, we're nowhere near selling out yet obviously.
Obviously, if we did we would've underpriced it.
We're not restricting the capacity that we're selling for the back half of 2022.
Theres never got into us.
Got you okay. Thanks Leland.
You got it I appreciate it thanks, Mike Thanks for the color.
Stay safe.
Our next question is from the line of Robin Farley with UBS. Please go ahead.
Great. Thank you I wanted to.
Clarify your.
Your commentary on expenses I know you mentioned some expenses next year, obviously would not be recurring the capacity out of service to restart costs.
And then maybe the piece of it that is would be that you know enhanced protocols. So if.
If you looked at only the period, where everything is operating and so you have the restart.
Spence would not be in there and then the burn of ships out of service.
For that period forward and then I guess this would also mean for 2023 is it fair to say that your expense per passenger cruise days would be below the 2019 levels when you.
What are those sort of one time restart costs.
Well so.
Whereas when I get Oh go ahead, David it's Okay go ahead.
So.
When you when you exclude all of those costs and looking to 2023 I mean, we had indicated that the benefit of the change in plea was on the ship operating expenses with 4% per a L E D.
We also have found efficiencies shore side as well and so there are cost efficiencies that.
That we have we were also you know as the whole world is we are seeing some inflation, we're working hard to mitigate all of that inflation.
We don't see it.
Nearly as much as people in the United States in terms of the the labor given.
You know our employment base comes from you know near.
150 countries around the world onboard our ships. So we have a much more of an opportunity there and so we're working hard.
But I'd be hesitant to give guidance on 2023 cost structure and I think it's just fair to say to give you all the pieces that are out there.
And then you know, we'll we'll give guidance as we get closer.
Okay.
Okay.
That's helpful.
So would you venture whether for 2020 to weather the short side efficiencies would offset the inflation and enhanced protocols just for the for 'twenty. Two if you exclude the he get passed through the restart expenses.
I I'd be hesitant to give guidance at this point clearly the short side efficiencies.
Will flow through and since we're still working through.
All of the details relating to in sourcing and making changes in mitigating some of the inflationary costs I'd be hesitant to give guidance, but you can be sure that we've got people focused on those item.
To optimize the situation.
Okay great helpful. Thank you and then.
My other question is just to clarify the commentary on price for next year. If we're just looking at the second half when it's a little more comparable and then you said you know excluding the future cruise kind of discounts that pricing is about in line with 2019.
Levels I just wanted to make sure I understood. When you gave your earlier commentary about how you know there is more bundling now so more of what is being booked now for second half compared to 2019 has more of sort of some of the onboard expense rate kind of in the ticket price because of the bundling.
If I'm understanding your commentary until I guess I just want to clarify when you are seeing price in line with 2019 is that sort of you have that's after you've allocated some of the bundled ticket price to onboard for that.
Sorry, I guess I'm, just trying to think about how come that way we've tried to normalize.
Normalize it and do some level of allocation.
To be an apples to apples comparison.
Okay perfect. Thank you very much thanks.
Thanks Robyn.
Our next question is from the line of Ben Chaiken with Credit Suisse.
Please go ahead.
Hey, How's it going.
Good morning Beth.
Good morning, Hey at risk of getting overly granular.
And I'll try it anyway, if you think about the profitability of the shifts if you think about the profitability of the ships coming online in your new capacity over the next couple of years.
So whenever the next two or three years, and then compare that to the remaining legacy fleet obviously excluding.
You know the 19 disposed of ships is there any way to ballpark compare those those two kind of like sets of assets, whether its margins EBITDA revenue premiums like that's something that's anecdotally talked about industry, but.
Yeah that didn't make sense I can try a different way or we can take it offline no we have read lymphoma about.
Overall benefit of loot should relative to the fleet. So maybe you might want to come.
Yeah.
Cost perspective.
If you just look at the unit.
And it costs for a in the our new ships coming in they tend to be 15% to 25% lower on a unit basis than the existing fleet and from a fuel consumption perspective, we're talking more like 25% to 35%.
Fuel efficient on a unit basis.
So we do see the enhanced profitability.
When you start adding in of course, the better cabin Max either more opportunity for onboard revenue because there are more Ah there's more public space in the larger ships. So all.
All of that does bode well.
For an improved return on the new ships versus the existing fleet.
Okay cool that that makes sense I appreciate it.
Yeah.
That's all for me.
Our next question is from the line of Jamie Katz with Morningstar. Please go ahead.
Good morning, Thanks for taking my question.
I'm sorry.
Good morning are starting to be to play do you have a little bit more visibility on the capex demand over the next.
Here to you that you'd be willing to share with us I mean, I know we have to catch that.
The cash burn, but it would be helpful to hear the difference between maybe capex and opex going forward.
Yeah, we can share with you our capex projections with without a doubt so looking at 'twenty.
1022.
And I'll give you the two pieces of Capex.
The non new build Capex, we're projecting about 1 billion and a half and the Newbuild is four and a half billion. So it's about $6 billion in total keep in mind, you remember that most of the new.
Build is financed with the export credits that are already committed.
In 2023.
The non new build we're forecasting about also about a billion and a half and the Newbuild is $9.0 billion for a total of four point to.
So we are expecting an increase in capex in 'twenty, two and 'twenty three from where we are today in 'twenty, one, but we're not expecting to go back pre Covid, we had probably indicated.
A sort of a steady state capex of call It 2 billion.
Non new build Capex and we do believe we will probably get back there at some point in the future but in the next two years, our best guess at this point is about 1 billion and a half.
Okay, and then just going back to Robin's question on bundling I'm curious, whether you guys are thinking that the.
Bundling behavior or something that's more of a calculator so overtime.
It's going to remain that the pricing component is less important than it was historically and that the envoy component is more important than it was historically and you know I'm not sure if there's anything to read into that but you know I don't know if that.
A new secular trend or transitory.
Thanks Laurie.
Yeah again, I think you know we have nine brands you know a lot of variability across the brands.
So we bumped and he's been around a while it's not a new thing but.
But there has been a more recent trend that seem to prefer.
To have certain.
Aspects of their experience bundles and so there has been an increase.
Some aspects of that well.
That's an ongoing trend.
Probably but we're gonna stay flexible and dynamic and you have the guests what they want.
And I think.
One is the pinnacle had that can add to what Arnold 10, what are the benefits of the bundled package I mean, it gives the consumer a choice and any choices gives the consumer create hopefully more demand and better pricing in the long run, but you know keep in mind that when somebody bundles.
You know.
When somebody pays for like their drink package and their internet ahead of time.
Well first of all that of course benefits the agent because they get a commission on the whole package. So definitely does make the travel agents happy but when the people get on board they really have a fresh wallet.
And because they've already paid for certain items. So they have a fresh wallet, they're starting over again and you know we believe that with the fresh quality. It does incentivize more onboard spend in total so we would expect our onboard can be higher in the long.
As a result of the bundling and we did see it in the third quarter I mean, the onboard and other premiums were up significantly compared to 2019.
And so some of that is the fresh wallet of people getting on board.
Thank you that's helpful.
Thank you.
Okay.
Our next question is from the line of Asia, George Hubert with Infiniti Research. Please go ahead.
Hi, Good morning, guys. How are you think are you have been doing a great job and probably very happy to be so busy.
When we started.
So congratulations I have Mike.
My question is related.
Yes, again Arnold done I think the what you've done has been fantastic and yeah, Cleveland cause towards the end of the year.
My question was it a little more in terms of sourcing and destiny.
Destinations.
With the ships going back to warmer climates, including the Caribbean during the winter months do you find any difficulties in terms of getting international passengers, especially from Europe.
More stringent and true.
Requirements into the U S and secondly, I'm.
Australia seems to continues to be a wildcard even though it's a small market relatively speaking in terms of the capacity you have there, but it's also somewhat important mark and during winter.
Yes.
Australia, the an important market for certain on the travel restrictions.
Absolutely play a part in.
In terms of what we can do with it.
With occupancy ultimately another encouraging sign is things continue to loosen them up things continue to improve.
You can see in the U K, where theres good momentum.
Momentum there are further ahead on vaccinations et cetera.
The U S recently made an announcement.
Fully aware of.
Oh.
Travels from Europe come in and starting in November, but all of those things. The near term are impacting you know of course certain.
And they will continue to evolve.
That's really Australia will open well it will be very.
Excited about that and ready to take full advantage of it and our team over there is working you know booking cruises going forward and so on in anticipation that you mentioned.
They will open.
But the world is just cross selling itself through this pandemic and as we said and as I've said enough.
Amongst early your prepared remarks, you know it was choppy, but theres movement forward.
The most important thing is that there is pent up demand you know people are.
Barry.
Are we interested in their cruise experience not just repeat cruise scores, but we're seeing a lot of co club noga, Brian and new cruise or some booking.
So that's a very positive sign but we do have to get to the point that we will get there where it's kind of back to some kind of a normal where people are afraid to travel.
And if I can just add if I yeah.
Let me ask David.
In terms of your question about peak Europeans traveling to the United States for the Caribbean. The winter season. So you know keep in mind, we have multiple brands.
And you know our.
Our European brands.
Essentially our home porting in other places in the Caribbean. So you know I I don't remember everything Homeport I mean piano in the U K I think home ports out of Barbados, and Costa and Aida in other places in the Caribbean, They choose home ports where theirs.
It is great airlift from their home countries. So most of the Europeans who are coming to the Caribbean are going on our European brands.
And going somewhere in the Caribbean to embark on their vessel the North American brands, which are sailing out of the United States. The overwhelming majority of their guests.
So probably in north.
North American sailing on board ships in the winter time so.
It's you know travel restrictions are easing people are starting to be able to come on I won't repeat everything that you've probably already know.
But it's not as big of an issue for us is.
Given the structure of where people start their cruises.
I think the Comporting point that you've made are is great and I should have thought about that.
And second question your yield management guys are are probably working very hard because now they have even more.
Sure you know.
The levers are.
To work with so in addition to trying not to underprice in yet reaching occupancy levels, where there's some board level at least a we're getting a cash benefit.
Jim.
Then any change any.
Restrictions in terms of occupancy or is it more a you know a continuation of what you've been doing for decades trying to get the best price.
We've intentionally.
Restricted occupancy for a host of reasons.
Hum some related and because of again the brands all over the place in terms of.
Your addictions.
Tom just to be in compliance.
Cases, others to give a ramp up to because we have new protocols, we have to get.
The cool experience with it and experience with the guests to make sure we work on them.
And some you know an artifact of the compliance measures, whether it's physical distancing or.
Other requirements.
And so at this point, yes, theres been intentional constraint, but as we've said.
Where we have like normal cruises and the Caribbean.
It's back made a cruise with us but you.
Carnival brand has been.
And then 70% occupancy, which is fantastic given the number of ships.
We had another Coca Cola and.
We essentially tap that so.
So as we begin to open up more.
Obviously.
Ill.
Management folks.
We'll have to sharpen their.
Hum.
I would say pencils when somebody uses pinnacle's anymore.
There are people with more.
And go to work on it but it's.
We have good momentum.
It's very disciplined we.
Have manage the timing of it.
Resources. Some chips, you know thinking through these matters and and so is this a very proactive and today well managed though relaunch them, giving us an opportunity to have strength in pricing going forward.
Well the whole process is obviously.
Well above my pay grade so I still use pencils. Thank you.
Question, and <unk> did not meet and yield management not good enough for that anyway.
Thank you guys. Good luck.
Thank you.
Uh huh.
Our next question is from the line.
Line of Brent on tour with J P. Morgan. Please go ahead.
Hey, good morning, everybody. Thanks for taking my questions. So David.
David I was wondering if you could maybe give us your view.
On how bookings cadence progressed throughout delta, but just.
<unk> focused on sailings.
Sailings for the second half of 'twenty, two and then if there was a wobble at all how did the industry respond to that in terms of pricing.
Yeah. So you know as I said in my prepared remarks, you know the impact.
In August.
The Delta variant.
On bookings was really much more of a near term phenomenon in terms of.
Call. It the next you know.
Six months, maybe nine months bookings.
The further out you go it is really.
Really hard to even spot would distinguish delta varying trend in the booking patterns. So that the second half remained strong and throughout the month of August.
And you know in terms of pricing I think Arnold said this in his notes.
In his prepared.
Third remarks.
We all believe that the Delta variant people would.
We would get past this.
And so our view was you know to maintain price.
And two to make sure that we optimized revenue in the long run not yet.
Bookings during the month of August we still have plenty of time. Since we're ahead, we still have plenty of time to.
To fill the ships to the occupancy levels, we're targeting for both the fourth quarter and for the first half of 2022.
So we are holding price.
And we're in a good position.
Excellent. Thanks for that and then as a follow up I know you're targeting cash flow cash flow from operations breakeven sometime early in 'twenty, two and I know that you didn't give a specific months on that which we can appreciate I'm. Just curious what are you assuming.
And that for customer.
Customer deposit inflows.
If anything more.
It might still be elevated at that time, and so I'm just curious what's baked in for that.
Yeah, well you know customer deposits at the end of the third quarter were $4.0 million.
The last two quarters they did increase.
<unk>.
Our expectation is that they will continue to increase.
Of course, you know.
A steady state environment remember that the overwhelming majority of the customer deposits at any point in time or the final payments for the next three months of cruises so has that.
The capacity for the next three months continues to build towards the 100%.
You know next spring you should see an increase in customer deposits over time as we continue to get more and more final payments keep in mind like for the fourth quarter.
We only have 47% of the capacity in service.
So there's only half of probably the final payments that you would see come next may.
So you will continue to see an increase.
Driven by that factor in and that should be a positive cash flow.
Inflow to us.
Over that time frame.
Okay, but maybe to ask it a different way do you need.
Elevated customer deposit inflows to break even on cash flow from operations in the first half of next year.
EBITDA.
Well also.
So breakeven in the early part of 2022 so.
I'll give you that hopefully.
And since you are quite yeah, that's helpful Frank and a much more direct way.
[laughter] alright, great. Thanks, guys and best of luck.
Thank you.
Yeah.
Our next question is from the line of Stephen Grambling with Goldman Sachs. Please go ahead.
Hey, thanks for taking the questions.
Could you just talk about the pricing and booking dynamics between what you saw on carnival versus maybe some of the other brands specifically looking at second half of 'twenty two is.
As itineraries normalized did you see any difference more recently in close in bookings that may inform how that trajectory could evolve.
I would say.
It began with weakness.
Across.
Ryan the portfolio.
Hum.
Very encouraging to us.
David with any specific comments you might want to make.
For the back half of 'twenty two I mean is there any let's say all the brands are strong things are going well.
All the we're getting back to sort of a normalized comparison of full itinerary a full breadth of itineraries is across the whole fleet.
But and so we feel very good about that as I said the back half of 2022 was.
At a historical high.
And we saw great trends in all brands and in both sides of the Atlantic. So you know there's nothing particular to note there close.
They are in.
Some of that is just a function of itineraries in marketplaces.
But we are seeing good occupancy and.
Across all the brands.
I gave you the occupancy figures for the third quarter clearly the Europe.
Some brands had more capacity restrictions in the third quarter.
The U K restrictions go away.
But the continental Europe, social distancing restrictions remain at least for part of the quarter.
So theres.
European worth, noting I think we're seeing good.
Comparisons in good booking trends across all the brands there are small differences, but some of that also has to do with <unk>.
Itinerary lengths.
Between the different brands in the marketplaces.
Okay great.
Nothing that question off Arena I'm sorry go ahead. This will be the last question go ahead.
I I may have missed this but I was I was wondering if you had any way you can quantify the potential kind of sustained structural cost increases that you have from some of the health actions.
And as you mentioned there was some supply chain disruption. So I'm wondering if you can help.
So that's kind of the level of inflation.
Inflation, you might be seeing whether it's in labor commodities. Thanks.
Yeah real quick well I'll make a general comment I think Shlomo.
Sustainable cost standpoint, a lot of.
Protocols to startup called so close will go away a lot of protocol.
Frames will also go away because over time and all the protocols.
Won't be required once we get to a point, where it's only protocol cogs.
Or.
And the hundreds of thousands you know versus per ship versus millions of dollars per chip or whatever.
And again, we suspect that goes will reduce over time as well.
Yeah, I agree with Arnold and I will tell you I'm reluctant at this point to try to.
Pegged this because there's so many moving parts and variables and so many things were working on.
And that you know when we get closer we'll have much better clarity.
But there's a lot of opportunity out there for us and you can be sure. We're working hard to maximize those opportunities in every way with every supplier and in every item, we source as well as the labor and other things so.
Well, we'll give you more guidance as time goes on.
But just recognize we're clearly focused on this on an ongoing basis.
And thank you everyone, we really really appreciate.
Your support and ongoing interest in <unk>.
We're very.
I mean to be having the results we're having at this point. Thank you so much.
Thank you everyone.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.