Q1 2022 Carnival Corp & Carnival PLC Business Update Call
Good morning, and welcome to our business update conference call.
Donald President and CEO of Carnival Corporation and plc.
Today, I'm joined telephonic lead by our Chairman Micky Arison, our Chief Financial Officer, David Bernstein, and Beth Roberts Senior Vice President Investor Relations.
We like to 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.
Prior to getting into the details of the update I. Just first wanted to say my heart goes out to all those affected by the invasion of Ukraine.
I know thousands of members of our Carnival family are directly impacted and have loved ones in the area, we along with the rest of the world.
<unk> for a peaceful resolution.
Now concerning our business, we're well on our way back to full crews operations with three fourths of our capacity, having resumed guest operations and our plans to return the balance of the fleet for the summer season.
While the conversation around COVID-19 is greatly reduced we still have two and are successfully actively managing our.
Our enhanced protocols have helped us become among the safest forms of socializing and travel with far lower incident rates than on land. In fact, we have carried more than $2 million since resuming guest operations. Our guests are enjoying great vacations, and we are enjoying historically high guest satisfaction score.
Ours.
Of course, we have not lost sight of our highest responsibility and therefore, our top priority, which is always compliance.
<unk> protection, and the health safety and well being of everyone. Our guests people and the communities, we touch and serve.
And of course, our carnival family, our team members' shipboard and shore side.
I'd like to start today by sincerely thanking our carnival team members for their significant contributions, which collectively have gotten us to where we are today, despite a multitude of challenges.
Through their collective efforts. So far we successfully returned 64 shifts to guest operations.
Enabled over 70000 crew members to return to work happy healthy and vaccinated through our team's considerable efforts to secure and distribute vaccines.
We opened our eight owned and operated private destinations and port facilities.
About half of our guests have experienced since resuming operations.
<unk> key half Moon Cay Grand Turk Mahogany Bay Amber Cove caused the mail Pan accrues to Tenerife and Barcelona.
And most importantly delivered $2 2 million joyful vacations and counting.
At the same time, we also manage down operating costs, reducing our monthly adjusted EBITDA losses by 40% since mid 2020.
Completed a continuous stream of capital raising exceeding 29 billion.
Refinance more than $9 billion of debt improving interest rates.
Amended over 100 different lender agreements and successfully address our maturity tower out through 2024.
All of.
Which culminated in a consistent liquidity position exceeding $7 billion.
An integral part of reinforcing stakeholder confidence.
At our scale the sheer volume of these accomplishments is no small feat.
Yet these challenging operational deliverables were achieved while encountering strong headwinds like Delta Army crime complex constraining and constantly changing regulations and protocols and more recently, the very troubling invasion of Ukraine.
All of which undermine consumer confidence and generated greater friction on cross border travel labor supply chain itinerary planning and more.
Now concerning the invasion of Ukraine.
For the four 6% of our capacity that was expected to call on Russian ports and the remainder of the year, we have decided to totally withdraw from Russia and have found attractive alternatives.
That said Tam Petersburg was a marquee port for us and while there have been times, where we were unable to offer certain high unit itineraries and this helps us to close and nature of the deployment change does lead to some reasonable disruption and recent book and planners.
Now while the invasion has added some volatility to our business and does impact consumer confidence with 50 years under our belt. We have successfully managed through a plethora of headwinds like spikes in fuel prices the Gulf War Arab Spring September 11th Ebola Zika.
<unk> <unk> and more.
And once again the mobility of shifts continues to be an asset.
Time and time again, we are seeing guests traveled through challenges in fact Carnival cruise line turned 50. This month and recently enjoyed is three best weeks of bookings since resuming operations.
As we previously disclosed we had experienced an impact on booking patterns more broadly at the start about fiscal year due to the army crime variant.
Despite army crime gas carried grew by nearly 20% in the first quarter.
Of course, albeit less than we would have otherwise achieved without the elevated cancellations, which occurred in part due to a higher incidence of pre travel positive Covid test results as well as the difficulties that many prospective guests experience obtaining timely tests. Moreover.
That was just an overall impact omicron head on our society over the course of our first quarter.
However, we did maintain price as we said we would.
And we fully expect an extended wave season.
In fact, we're already achieving occupancies in the month of March that are nearing 70% with more than body sailings exceeding 100% occupancy.
Testament to the underlying demand for cruise and closer in nature of booking patterns.
Concerning recent fuel prices is certainly not the first time, we've seen a dramatic spike in fuel prices, helping to address that we aggressively manage our consumption.
And we are stepping up our efforts to further reduce consumption.
Now historically, we have not used fuel derivatives and while there is an optics benefit of smoothing earnings.
Overtime prices have gone up and they have also come down, but there is an economic cost to derivatives.
Over the past few years, we're very glad not have speculated with few derivatives because it would've been a further drain on cash.
With our proactive efforts to reduce our carbon footprint since 2007, we have reduced our unit fuel consumption nearly 30%.
And carbon intensity nearly 25% through 2019.
Thanks accelerated efforts across the board upon reaching full fleet operations, we anticipate that we will achieve a further 10% reduction in unit fuel consumption and 9% reduction in carbon intensity as compared to 2019.
In fact, we've been working hard to resume operations not only a strong operating company, but a more sustainable better all around the company.
We made further strides towards those efforts again this quarter during.
During the quarter, we enhanced our fleet optimization efforts delivering three new shifts.
The test Ghana, Aida Cosmos, and discovery Princess, bringing the total to nine larger more efficient ships delivered since 2019.
Moreover, we've announced the removal of an additional three smaller less efficient ships, bringing the total to 22 ships to be removed from the fleet all sorts of 2019.
The accelerated removal of these less efficient ships has lowered capacity growth to.
Two 2% compound annually from the previous four 5% through 2025, which should enable us to capitalize on pent up demand unintentionally constrained capacity.
The fleet optimization effort will also foster higher revenues through a seven percentage point increase in premium price balcony cabins, and an even better platform for onboard revenue opportunities as well as generating a 5% reduction in ship level unit costs, excluding fuel going forward.
Enabling us to deliver more revenue to the bottom line.
Upon returning to full operations nearly a quarter of our capacity will consist of newly deliberate shifts expediting, our return to profitability and improving our return on invested capital.
Again, we have long sales recognized the importance of reducing our carbon footprint.
Having peaked our absolute carbon emissions more than a decade ago.
And we are continuing to innovate to effect change.
Aida Prima will become our first ship to pilot battery power, enabling her to optimize the efficiency of the engines, while at sea reducing emissions. We also signed groundbreaking agreements through our subsidiary <unk> to partner in the production of Green bio LNG generated from waste sources and <unk>.
<unk>, we continue to invest to drive energy efficiency Rolling out our fourth in a series of 23 shifts with innovative air lubrication system, which reduces drag on the hull and generates nearly 5% reduction in carbon emissions.
We've also taken strides to reduce our impact on climate change and mitigate climate risk in our business.
We are working toward full adoption of the recommendations of the task force on climate related financial disclosures at Tcf D and have begun by reinforcing our strong governance framework with my assuming the role of Chief client officer, and with the formation of our strategic risk evaluation Committee.
To further support climate related strategic decision, making and risk management processes.
Having broaden our commitment to ESG with the introduction of our 2030 sustainability goals in our 2050 aspiration. We are tracking ahead on both.
Our important food waste and single use plastic reduction efforts and we are nearing completion on the rollout of more than 600 food waste biodot gestures across our fleet. The most advanced technology of its kind.
We believe we have clearly maximize our return to service and we have positioned our company well to withstand volatility on our path to profitability.
Throughout the pause we have been proactively managing to resume operations as an even stronger and more efficient operating company to maximize cash generation and to deliver double digit return on invested capital over time.
Again, our cash flow will be the primary driver to return to investment grade credit over time, creating greater shareholder value.
There have been multiple demonstrations of the resilience of the human spirit and the resilience of our business.
It is heartening.
The company can be a part of bringing our guests much needed social enjoyment with family and with friends.
Along with the excitement of experiencing new destinations and cultures, all dearly Miss throughout the pandemic.
I referenced Carnival cruise line celebrating 50 years 50.
50 years, frankly seen such a short time ago that Tad Arison started carnival cruise lines and along with Mickey built the modern day cruise industry.
Bringing joy for millions upon millions of guests and creating hundreds of thousands of jobs with all that means and creating better quality of life around the world.
Of course.
Not have been done without the overwhelming support from everyone.
Once again.
Thank you to our valued guests. Thank you to our travel agent partners. Thank you to our home port in destination communities.
Thank you to our suppliers and other many stakeholders and of course, thank you to our shareholders bondholders banks and export credit agencies for your continued confidence in us and for your ongoing support.
And again I would like to thank our team members for their dedication their commitment and outstanding execution.
We are excited to welcome everyone back onboard.
With that I'll turn the call over to David.
Thank you Arnold.
Start today with a review of Cats cruise operations, along with a summary of our first quarter cash flows.
Then I'll provide an update on booking trends and finish up with adjusted EBITDA and net income expectation.
Turning to guests cruise operation.
During the first quarter 2022, we restarted 10 additional ships, resulting in 60% of our fleet capacity and guests cruise operations for the whole of the first quarter.
This was a substantial increase from 47% during the fourth quarter 2021.
As of today.
75% of our fleet capacity has resumed guests cruise operation.
Agility.
Recently, you adapt to the ever changing landscape has been one of our greatest strengths during the pandemic.
In the first quarter, we continued to demonstrate the scale and we adjusted restart date to optimize our guests cruise operations and we now expect each brand's full fleet to be back and gas cruise operations for its respective summer season, where we historically generate.
A largest share of our operating income.
I am happy to report that just last week, we announced plans for our Australia restart commencing at the end of note. After the government advice that cruising would be promoted beginning in April .
For the first quarter occupancy was 15, 4% across the ships in service.
We never expected to achieve our historical 100 plus percent occupancy for the first quarter.
Many of these tailings were confirmed just a number of months before departure, which resulted in less than a normal booking lead time.
However, we had anticipated first quarter occupancy would exceed a 58% achieved in the fourth quarter of 2021.
We started the quarter with over 55% cabin occupancy booked for the first quarter and expect it to improve upon that during the quarter.
However, during the first quarter 2022, as a result of the Army Kron Darien.
Experienced an impact on bookings for near term sailings, including higher cancellations, resulting from an increase in pre travel positive test results challenges in the availability of timely pre travel tests and disruption than hanmi crime caused <unk>.
During this time.
All of this and inhibited our ability to build on our cabin occupancy book position for the first quarter 2022 during the first quarter, resulting in occupancy for the first quarter 2022 at 54% being lower than the 58% occupancy we achieved.
In the fourth quarter of 2021.
Despite all of that.
During the first quarter, we carried over a million guests, which was nearly a 20% increase from the fourth quarter 2021.
Once again.
<unk> executed extremely well with net promoter scores continuing at elevated levels compared to pre COVID-19 scores.
Revenue per passenger day for the first quarter 2022 increased approximately seven 5% compared to a strong 2019.
Spite, our lucrative world cruises and exotic voyages being shell this year.
Our revenue management team held on price when we experienced an impact on bookings for near term sailings optimizing our longer term prospects for future revenue and pricing.
Once again, our onboard and other revenue per Dms were up significantly in the first quarter 2022 versus the first quarter 2019 in part due to the bundled packages as well as onboard credits utilized by guests from cruises canceled during the pause.
We had great growth in onboard and other <unk> on both sides of the Atlantic.
Increases in bar casino shops.
And then that led the way on board over the past two and a half years, we have offered and our guests have chosen more and more bundled package option.
In the end, we will see the benefit of these bundled packages in onboard and other revenue.
As a result of these bundled packages the line between passenger ticket and onboard revenue is blurred.
For accounting purposes, we allocate the total price paid by the gap between the two categories.
Therefore, the best way to judge our performance is by reference to our total cruise revenue metrics.
On the cost side, our adjusted cruise costs without fuel per available lower birthday or <unk> as it is more commonly called for the first quarter 2022 was up 25%.
I did say adjusted cruise cost and not net cruise cost a term we had previously used.
The calculation of adjusted cruise costs and net cruise costs are the same.
However, we felt the new name more appropriately lined up with our other non-GAAP measures.
Adjusted net income and adjusted EBITDA, which are also reference in our business update press release issued earlier this morning.
The increase in adjusted cruise costs without fuel per <unk> is driven essentially by five things.
First the cost of a portion of the fleet being impasse status.
Restart related expenses.
Third 15 ships being in dry dock during the quarter, which resulted in nearly double the number of dry dock days during the first quarter versus the first quarter 2019.
Fourth the cost of maintaining enhanced health and safety protocols and finally inflation.
Remember that because a portion of the fleet was in pause status during the first quarter and the higher number of Drydock days, we spread costs over less <unk>.
I did want to point out that in the second quarter of 2022, we expect a further 24 ships to enter dry dock as part of a resumption of cruising ramp up.
Optimizing our dry dock schedule, while the ships are not in service and ensuring that the ships are great. When they welcome that first guests back onboard.
This will again result in a doubling of the dry dock days during the quarter compared to 2019, which will impact adjusted cruise costs without fuel per <unk> during the second quarter.
We anticipate that many of these costs and expenses driving adjusted cruise costs without fuel per <unk> higher will end during 2022 and will not reoccur in 2023.
As a result of all of the above we expect to see a significant improvement in adjusted cruise costs, excluding fuel per <unk> from the first half of 2022 to the second half of 2022 with a low double digit increase expected for the full year 2020.
To compare to 2019.
Next I'll provide a summary of our first quarter cash flows.
We ended the first quarter 2022, with $7 2 billion in liquidity versus nine four at the end of the fourth quarter.
Looking forward, we believe we remain well positioned given our liquidity.
The change in liquidity during the quarter was driven essentially by four things first an improved negative adjusted EBITDA of $1 billion due to our ongoing resumption of guests cruise operations. Despite the impact of the army cranberry.
We had thought adjusted EBITDA was going to improve more.
As I said before the army Kron Varian inhibited our ability to grow occupancy during the quarter, which limited the improvement in adjusted EBITDA.
Second our investment of $400 million in capital expenditures net of export credits.
<unk> $500 million of debt principle payments and for $400 million of interest expense during the quarter.
Now, let's look at booking trends.
Since the middle of January we have seen an improving trend in booking volumes for future sailings.
Recent weekly booking volumes have been higher than at any point since the restart of guests cruise operations.
During the first quarter, we increased our book to occupancy position at the second half of 2022, albeit not at the same pace as a typical wave season due to the omicron variant.
As a result, the cumulative advance book position for the second half of 2022 is that the lower end of the historical range.
However, we believe we are well situated with our current second half 2022 book position given the recent improvement in booking volumes, coupled with closer in booking patterns and our expectation for an extended wave season.
We continue to expect that occupancy will build throughout 2022 and returned to historical levels in 2023.
And importantly, I am happy to report that prices on these bookings for the second half of 2020 to continue to be higher with or without future cruise credits are more commonly called FCC's normalized for bundled packages as compared to 2019 sailings.
Our cumulative advance book position for the first half of 2023 continues to be at the higher end of the historical range also at higher prices with or without FCC's normalized for bundled packages as compared to 2019 sailings.
This is a great achievement given pricing on bookings for 2019 sailings has a tough comparison as that was a high watermark for historical yields.
I will finish up with our adjusted EBITDA and net income expectations.
We all know that booking trends are a leading indicator of the health of our business.
With improved recent booking trends, leading the way driving customer deposits higher positive adjusted EBITDA is clearly within our sights.
Over the next few months, we expect ship level cash contribution to grow as more ships returned to service and as we build on our occupancy percentages.
However, as I've already said adjusted EBITDA over the first half of 2022.
Has been or will be impacted by the restart related spending and dry dock expenses is 39 ships over 40% of our fleet will have been in dry dock during the first half of fiscal 2022.
Given all these factors combined we expect monthly adjusted EBITDA to continue to improve and turn consistently positive at the beginning of our summer season.
We continue to expect.
Net loss for the second quarter of 2020 to.
Both the U S GAAP and adjusted basis.
We expect the profit for the third quarter of 2022.
For the full year, we do expect a net loss.
Looking to brighter days ahead in 2023 with.
With the full fleet back in service all year.
8% more capacity than 2019.
And improved fleet profile with nearly a quarter of our capacity consisting of newly delivered ships.
Continuing momentum on our outstanding net promoter scores.
And occupancy returning to historical levels, we are looking forward to providing memorable vacation experiences to nearly 14 million guests and generating potentially greater adjusted EBITDA in 2019.
And now I'll turn the call back over to Arnold.
David Operator, please open the call for questions.
Thank you and if you would like to register a question. Please press the one four by the four on your telephone.
Three Tom prompt nausea request.
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Once again I'll answer any questions or comments, you may have either tier one four on your telephone keypad.
And we'll proceed with our first question on the line from Robin Farley with UBS go right ahead.
Great. Thank you good morning.
<unk> revenue is one expense question.
For expenses, you talked about I think of this as the non fuel expense of 25% in Q1 and sort of up low double digits for the year, So that's kind of up 11% or 12% per year.
It sounds like it would be close to flat with 2019 by by the end of this year. So I wanted to make sure. We're thinking about those numbers right. In your comments include the idea that with the ship sales you'll have a 5% reduction in operating expense ex fuel in <unk>.
2023 versus 19, so I know youre not giving.
Giving full guidance for 'twenty, three but is that the way to think about non fuel expense.
Flat by the end of this year, and then kind of down 5% next year.
That's the expense question.
On the revenue side.
Obviously lots of positive news about the incremental.
Volume build I wonder if you can.
Comment a little bit more specifically I'm sort of.
European itineraries versus.
The rest switch.
Just to think about.
How price may be holding up outside of Europe , and then also how the incremental European cruises you might have a lot at high prices from kind of the last 12 months that had been shifted there for the summer, but maybe how that incremental European demand.
In terms of price impact thank you.
Yes, Hi, Rob and good morning to you.
I'll have David comment a little bit on both but but directionally on the costs.
Question as he articulated we had.
A lot of capacity out and dry dock et cetera, So we're doing stuff over.
Waller number of birds and <unk>.
Looking at the cost increases and we had lots of onetime costs.
And so on so we're not giving guidance for next year, but as he indicated as you look through the second half of the year and see how how the cost increases.
Be softer.
In the right direction, and we've done a lot of things going forward, including with.
The change in the fleet.
Civic and part of our capacity, 25% being.
Being new shifts, which are inherently more efficient, but also all the active management things we've done with the existing fleet of pre existing fleet.
Accident less efficient ships and so on and then shore side as well and we're doing a number of things to offset inflation.
And to just make ourselves.
A company from a cost infrastructure standpoint.
So David I'll, let you comment on the costs I think we can get back to the revenue David go ahead.
Directionally robbing your math is correct I mean overall speaking to.
To get back to a low double digit for the year.
You do have to.
Sort of get Directionally towards that flattish area by the by the end of the year, but let's.
I'll remind you of one thing that I've said many times before.
Costs do vary by quarter because of variety of things drydock advertising et cetera.
So.
As Arnold said, we're not giving guidance.
For 2023.
And overall he mentioned all of the.
I guess tailwind that help us achieve.
We achieved improved.
Operating costs and adjusted crews.
Cruise costs for 2023.
We'll also mentioned that we have 8% more capacity so we get leverage.
2019, we also get some shore side SG&A leverage.
But.
We'll remind you it is four years of inflation that is the headwinds so.
That is a challenge and so we will do everything we can to properly manage the costs for 2023, but it is a little bit premature for us to give guidance at this point.
Thanks, Dave wanted to start on the revenue David I know I can wrap up.
Yes, so on the revenue side, what's interesting when you look at.
All of the different itineraries.
We had mentioned the uptick in recent.
Booking volumes and we're actually seeing.
That uptick across all the different itineraries, whether it be in the Caribbean in the med.
And also even parts of northern Europe . The exception of course is we did have as Arnold said in his notes.
I guess for 6% of our capacity for the remainder of the year, that's actually three 8% for the whole year.
Touched on.
Saint Petersburg.
And we did.
I guess change we moved two ships.
And we changed the attractive itineraries for the remaining ships that are in the Baltic to go to other ports.
So we have seen.
Haven't seen the bookings for those ships impacted but remember it's early days and we just made the changes to those itineraries.
So we've got to get the message out.
For all of the rest of the itineraries across the board whether they be in the mid east West Med Caribbean and other parts of the World. We are seeing good solid booking trends had good solid pricing.
We mentioned in our revenue management teams are holding pricing.
And we are seeing good volume I will point out that for the second bookings for the second quarter, we've even seen volumes that exceed it.
2019 levels, which I guess is not.
Surprising from the perspective that we have more inventory to sell for the second quarter than we did for 2019.
But it's great that the demand is there and we are seeing the volume.
And as Arnold indicated in his notes.
The month of March we are seeing Occupancies approached 70% and we even had I think you said 40 voyages, where occupancy exceeded 100% or you expect to exceed 100%. So I think we are well positioned around the globe and we will also work very hard to get those remaining.
Itineraries booked.
Booking again now that we readjusted them with other attractive ports.
No no that's great. Thank you I think that that commentary just as so much of what investors have been concerned about and then just to clarify did I Miss hear when I I thought I heard you say, 5% reduction in operating expense ex fuel by 2023 versus 19 did I Miss that.
Does that go out that 5%, yes. So Arnold had indicated that 5% was in ship operating expenses and thats on an apples to apples basis, putting everything else aside as a result of the fleet optimization.
Just looking at.
A comparison to 2019 of course there is.
<unk> changed.
Changes in itineraries is also which impact that as inflation, which impacts that theres. Other cost savings that were working hard that was just the fleet optimization portion and that was obviously a great.
<unk> to help us reduce costs as we go into 2023.
Okay. Thank you very much thanks.
Thanks Robyn.
Thank you.
Our next question on the line of Steve.
Steve.
From Stifel Great ahead.
Hey, guys good morning.
So I wanted to ask about onboard revenues and I think there is a fear now that consumers might start pulling back on spending given whether it's higher fuel prices or other economic headwinds that might be out there. So.
Given you guys have real real time data in terms of onboard spend have you guys seen anything over the last couple of weeks that would make you believe that consumer might be starting to slow down.
Once they come on board and I guess is there have you seen any difference in spending patterns across your different geographies.
Haven't seen any.
Particular slowdown or anything like that in terms of onboard spend has been very strong as continued to be held.
Healthy.
Around the world.
It's been up everywhere.
So I don't see major this things.
<unk> from one geography than the next.
As we get to full occupancy and we carry more kids in the summer that kind of thing you can see the.
<unk>.
On a per deals maybe changed a little bit.
But overall the spending is significantly up and has continued to be so far.
Okay got you. Thanks for that Arnold and then second question would be around the liquidity position and.
It looks like you burned around 700 million a month in the first quarter and I guess with some disruptions around Ami crime and know the war in fuel just just maybe wondering at what level.
Quiddity, you would start to get I don't want to know if I'd use the word uneasy.
And I guess, a better way to ask that question might be do you see anything on the horizon that would make you believe you might need to increase your liquidity base moving forward.
We've had good liquidity through this period, we will obviously continue to monitor but as we move ahead and get more of our ships sailing and are able to generate obviously more revenue.
More customer deposits et cetera at this stage, we feel we're in good shape on liquidity and.
See that going forward, if something changes of course, obviously will.
Reported at that time, but right now we feel good about our liquidity position.
Okay got you.
David can I just first of all.
The one thing on the onboard revenue the only thing I would want to add that Arnold had mentioned is we have been raising price onboard.
There has been there is strong demand.
And obviously with.
The environment being what it is there has been an opportunity to raise price and we've been capturing that opportunity and as far as the liquidity I guess that.
Two things that we continue to think about in addition to what Arnold mentioned.
As we think about refinancing our two well notes, which are still out there and of course, we have three.
$3 billion of maturities in 2023.
We think about what is the optimal time to refinance that.
But other than that I, just wanted to add those concepts.
As we think through those in the ensuing months and quarters ahead.
Okay got you thanks, guys appreciate it.
Steve.
Hello, Ghansham next question on the line from the line of James Hardiman with Citi Go ahead.
Hey, good morning, Thanks for taking.
A couple of my questions on the pricing front so.
You guys spoke to revenue per passenger cruise days Chris.
Tuesday.
Up seven 5% I think that number for the November quarter was was plus four.
Which is obviously encouraging right I think the concern was that.
Pricing benefited from the fact that these cruise ships more full in that the last whenever it's 1% to 30% of the rooms would come in at a discount and so we couldnt really take that pricing strength.
To the bank.
This is a sample of two obviously.
That pricing.
Actually accelerated as the ships got more full from <unk> to <unk>. So maybe speak to how we should contextualize the pricing numbers is there any reason to think those will.
Come in a bit as we get the last call it 30%.
Occupancy or is there the opportunity for that to continue to accelerate.
We're certainly thanks.
Thanks for your question first of all but we are certainly going to continue to work hard to make certain.
The prices hold and accelerate.
And we'll have to see and in where we're.
We're managing yield and so we want to optimize occupancy.
And price.
Right now Theres lots of.
The demand.
We obviously will be ramping up.
Our advertising and promotional efforts as time goes on.
We have increased already but it's still well below where we were in 2019.
We've gotten smarter and more efficient in how we do that.
So we want to create more demand in.
Keep it going but as you've heard from what we've reported so far pricing is strong in.
We've been able to maintain.
Maintain price.
David I'll know if you want to add any more color, yes. The only thing I wanted to add to what Arnold said as Jim do you really need to think about it a little bit differently because you.
You're sort of saying well.
When the last 30% comes in.
It doesn't at least 30% isn't going to come in at the last second remember that for the last few quarters. The booking window has been much shorter.
And so when we think about the future and we said, we don't expect to get to historical occupancy levels until 2023, but we do expect to see an improving level of occupancy every quarter as we go forward.
And what are the reasons is because for 2023 looking out today, we've got a much fuller booking curve, we'll manage pricing the way <unk> described along that booking curve and we will get to our historical occupancy levels and we're being very careful in the short term where the booking curve is shorter.
To manage that appropriately we're driving demand as Arnold mentioned with the advertising.
Although advertising these days seems to be the mix of advertising has changed tremendously and we will continue to evolve.
So think of it in terms of booking curve and with a longer booking curve towards next year, we can get to those occupancy levels, because there's a lot of demand out there people want to cruise we have a great product.
Still a good value compared to land based alternatives, although we're trying to make it a bit less of a value.
As we move forward into raise prices Arnold indicated.
That's really helpful. And then along those same lines, if everybody wants to compare sort of your pricing strength.
To your competitors as we look versus 2019 are there any sort of major differences you would call out that may make those comparisons not really apples to apples, obviously you have.
I guess.
A more of a global consumer base right I don't know if there are any major differences between that sort of the U S customers and sort of worldwide and then the other piece is just maybe a bit more of a mass market customer.
So how do we think about the potential for growth out of those both contingent.
Are all those things are right. It is apples and oranges there are a number of differences.
Not the least of which is we're on different fiscal quarters, and so even though Margaret.
Yes.
Timing then Youll also.
Obviously.
In addition to that as cabin mix.
Itinerary mix as you mentioned.
Composition of European Itineraries, and right now you have big itinerary changes because you know a lot of our lucrative itineraries, which would be similar for some of the others, perhaps too.
But we may have more of it in terms of world cruises and more exotic cruises and so on and so forth, but anyway, all those things are different.
When we try our best to kind.
Kind of normalize so all of that which is extremely difficult to do and try to match up month by month. When we've done that we see that we're doing as well off and in some cases better than the others.
In the recent times, one has done better on price, but at the same time, they've not done as well on occupancy and so we.
We don't see a big performance difference on that when we tried to match up but it is apples and oranges, David Although if you would.
Let me add some clarity to that so remember one of our competitors.
Had a lot less occupancy then asked during the <unk>.
Their fourth quarter periods, which probably leads to more balcony cabins.
And at a higher price.
As part of the overall mix and also some of our competitors one of them was not carrying any kids because of the vaccine requirement and kids are at a lower price.
So as a result of that too.
That affects the overall position Arnold mentioned, the itinerary differences, but what we did do.
Is we lined up the months October November and December and we can do that internally.
Our cells compared to our competition.
So.
If we try to also balance remember occupancy there's two sides to the equation this price and occupancy and the best way to balance that out is to look at the gross revenue per <unk> as opposed to the gross revenue per PCB, because I will tell you if all I did with cell.
One penthouse suite on one shift and didn't sell anything else my per PCB would be incredibly high but when you balance it all out.
The revenue per <unk> reduction because of course, the occupancy was down in all three companies.
What are they saying within two percentage points.
The reduction in revenue per <unk>.
<unk> was it two percentage points of difference between all three companies and so I think we are.
Donald said, we do embedded in some and we're well positioned.
Looking forward to as I said 2023.
<unk>.
Providing 14 million memorable vacation experiences to people around the globe.
That's really good color David Arnold. Thank you okay. Thank you.
Yes.
And we'll proceed to our next question on the line from the line of Assia Georgieva with Infiniti Research go right ahead.
Good morning.
It's mind boggling, how many refinancings.
So.
David a question for you how.
How should we model interest expense going forward I think you probably has hit.
The lowest lying fruit at this point.
Do you expect that there could be further significant savings on interest expense into the back half of the year and possibly 2023.
Yes so.
In terms of interest expense, we did give a forecast.
In the business update which was a $1 billion five and it was the same interest expense forecast we gave back in December .
So that is our forecast for the full year.
2022.
You have the opportunity of that.
As I mentioned before to refinance the two L notes at some point in the future.
And we will carefully look at that opportunity and that might provide some interest savings over time.
But on the flip side.
We're all watching the fed and there is the possibility for rates to move up.
So at this point it is a little premature to to.
To forecast 2023, if you know exactly what the fed's going to do and now let.
Let me now, but it is difficult, but it's going to be in that neighborhood plus or minus.
As you think it through in 2023.
The fed Hasnt called me today, So I don't know what the latest thinking is.
Can I ask a couple.
One question on revenue.
It's related to it's great news that Australia.
He is opening up and.
Obviously that will be more helpful. During the winter season.
2022 of 2023.
Given that spirit will be permanently based in the U S.
Thinking of adding another carnival ship.
Now that you have a little bit more scale as opposed to just one ship and do you think that China is an opportunity that might.
Come online within the current fiscal year.
Well first of all were.
Delighted to see that the Australian government.
Not extending.
The ban on cruises beyond the April 17th.
And we've already announced as you are aware piano Australia.
Is going to start selling late may in Australia, and so we're happy to be bringing joyful cruise vacations to Australia is again.
And giving people who want to cruise in Australia, the opportunity to do so.
Excited about that.
China will have to see how things Pan out there right now is still not practical in.
As we've always said with China.
When we're able to do it profitably we will do it and when we can't we won't.
And so we continue to work with the authorities there and in other places that are still.
Not yet quite open.
To eventually get it open for crews in the way that makes sense for everyone. So for us that the fed Hasnt called me today, either by the way but.
No.
Yeah.
But I would say.
Overall.
Things are really looking good I mean, we're 75% of the ships are now sailing whether we'll put a another ship and so Australia for the Carnival brand.
Decisions will be made overtime, but almost certainly given the the demand in Australia historically for the various brands.
It would not be.
The logical to think at some point once things are up and going again.
Carnival.
Have uneven greater Brussels, so but at this point, we don't have any specific plans right now, we'll see how things pan out.
Thank you Donald and thank David.
David I'm, sorry, the only thing I wanted to remind everybody is that members Ccs Carnival cruise lines.
Move down six ships.
So during the pause in guest cruise operations and so as a result of that.
As Arnold said, we will re look at it but everything needs to be re examined to make sure we optimize.
The cash flow and profitability of Carnival cruise lines.
And by the way is we have some time for their season right. So.
There are still a few months to go.
Yeah, and Carnival is doing so well.
<unk> led the way period in terms of.
Occupancy has been strong yields we've had unbelievable bookings the past few weeks waived level bookings in the Carnival brand in the last few weeks here.
Super positive.
Brandon.
Good hopefully leading indicator for the overall industry.
It does seem that wave season is being extended.
And I imagine, it's not just the pause or the slowdown because of omnicom.
But also because people have been cooped up for two years and more.
It might be taken a little bit longer to make.
Decisions given.
Uncertainty COVID-19 or geopolitical.
So hopefully we will continue to see a great booking volumes too.
Over the next two weeks.
Absolutely Yeah, there's no question that consumer confidence uncertainty driven by all the various dynamics Colgate.
Invasion in Ukraine, all of that but.
But but clearly.
There is momentum.
Great. Thank you so much. Thank you both of you.
Okay.
Well go to our next question on the line from the line of towards Gordon with Barnboard go right ahead with your question.
Just a couple of points of interest.
On the dry dock fees could you just give some color on the number of feeds.
The Union.
Institute.
19.
So sue units you have it and then how does that should ship pumps between Q I'm, assuming you're pitching to a lawsuit.
Therefore, no be required next year and just the second.
Excellent.
Yes.
What was the damaged occupancy some cancellations.
And then if you could give us some flavor on that.
Keith.
Yes, I'll take the second part and let Dave I'd tell you about the Drydock days in terms of.
Omicron as we.
Sure.
The opening.
The opening comments.
It clearly had an effect on consumer confidence.
It caused.
Disruption people.
Either what's happening positive so they couldnt crews or they weren't able to get timely tests and then it was just the overall.
Yes, the impact on society, and uncertainty and uneasiness in Army grunts.
Created it's tough to quantify it and isolate it to say this was all on time and just with something else.
But the bottom line is it's had an impact it had an impact on on ways in which is why we feel partly why we feel now we have an extended wave season.
<unk> seen that rebound now, but we did get through it we got through it and just as we got through Delta and there's lots of momentum and things are clearly pointed in the right direction. So go ahead, David on the dry dock days, yes. So the Drydock days in the first quarter, we have 273 days versus.
<unk>.
141 in 2019 in the second quarter.
399 days versus 184 days in 2019.
For the full year this year right now.
Our plan is 802 dry dock days.
Some additional dry docks in the fourth quarter.
I only have at the moment.
First half of 2023 by the way most many of the dry dock you usually see that the first half of the fourth quarter, but the first half is down two and 'twenty three.
272 days there'll probably be some more in the fourth quarter, but you can see the number of dry dock days will be cigna.
Significantly less 802 is an unusually large number I don't think we ever exceeded I think something in the range of $5 50 was probably the largest number we've ever had but as I mentioned in my notes, we're bringing back the shifts we're optimizing the shifts are not in service.
And we wanted to make sure the ships are great when the.
When the guests get back on board and of course, we are cleaning the home because I will tell you you get those holes clean and it is incredibly much more efficient from a fuel perspective.
So we are optimizing the situation.
Don't have the full year 2019 at my finger tips, I do apologize, but perhaps that can get back to you on that one.
That's very helpful.
Go back to the first question I mean would it be safe to say, though.
If we were to see another beauty each each.
Regional DVD due to on the crude.
A recovering faster be seeing less of an impact.
And because.
Human nature, and as we're getting more used to that we have seen observation at least.
I think we'll have to see what happens with the variance but.
Clearly society is better prepared us better understanding of transmission of epidemiology of everything more people are vaccinated, that's the biggie of course.
And people and fewer and fewer people are getting really sick from whether it's omicron or are the b variant of Ami or whatever.
And so the focus is shifting more to where it should be which is hospitalizations.
Our worst long term effects are worse.
And as long as I think society doesn't see a huge ramp up in that from some variant then you're absolutely right.
People are learning how to live with it.
And live with this safely.
Comfortably and of course, our protocols have been.
Served us very well.
On the ships.
Far better than the equivalent incidents on land, partly because of the testing the vaccinations all the other protocols.
We have in place and so we are amongst the safest forms of socialization. There is and we've learned a lot about how to manage.
Through Delta through Omicron through all of those we have had much lower incidence than what you would find on land.
And have.
We've gotten pretty adept at serving the best interest of public health and dealing with it but overall society is getting used to it and as long as hospitalizations don't ramp up or worse.
Yeah.
I think the trend youre seeing today will continue.
Great. Thanks, so much I remember like much more available that'll be very helpful as well because in the first quarter that was a big issue for us the testing.
Yes.
Alrighty.
Yes understood. Thank you very much.
Thank you guys.
Great question.
That's probably be the last question. Okay. Thank you okay very good.
So first of all our final question from Fred Wightman with Wolfe Research go right ahead.
Hey, guys. Good morning, I was hoping you could give a little bit more detail on the sailings, where you are seeing occupancy over 100%. It sounds like that might be mostly concentrated in the carnival brand, but are those largely south Florida departures are you seeing pretty broad based strength in terms of where those are located or homeporting.
Anything else to add would be great.
Definitely more.
North American oriented.
Not only the Carnival brand.
I think.
The better characterization with the kind of traditional itineraries that.
People have been used to.
And so in a number of cases of course, we've had to alter itineraries because destinations weren't available or they have protocols et cetera that made it difficult to take us there and what have you.
But overall I think the most important aspect of that is you are talking a lot of sailings out of 100%, which is showing that things.
It's definitely coming back and in that we have the ability to scale at a 100% with protocols and still sort of fill in the best sense of public health with really good outcome.
From a health and safety standpoint.
So that.
I would characterize it.
There's still a lot of destinations elsewhere that.
I'll have restrictions, there's additional protocols around the regulatory ROE of nine brands are all over the world.
There's all kinds of regulations or protocols not just in home markets, but in destination markets that we have to deal with and all of that creates.
Challenge, but it is becoming less and we are moving towards.
Full occupancies, all the time and having all of the ship sails.
It makes sense in a housekeeping question. When you guys are making comments about forward earnings commentary for the back half of this year and then into 'twenty three or are you just assuming the current spot fuel price are you looking at the forward curve and assuming that that.
Yes so.
Our commentary was very broad.
I do assume that fuel will be better than the current spot price.
But the commentary is pretty broad and.
We're not giving specific guidance, so while fuel price matters to the bottom line.
It's it's.
Depending on the price. It's there is a wide range, where we're still within the guidance, we gave of a profit or loss.
Okay. Thanks, guys.
Thank you all.
Operator, thank you very much but everyone. Thank you we appreciate your interest.
<unk>.
Yes.
We're very excited about welcoming people back on board again.
Our heart goes out to all of those impacted.
But Ukraine invasion, and but we're looking forward to.
Piece, there and brighter days ahead.
Thank you very much that does conclude the call for today. We thank you for your participation. Please disconnect your lines have a good day everyone.
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