Royal Caribbean has provided an outlook on its current situation and there could be further suspensions depending on developments.
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Royal Caribbean which owns several cruise brands including Royal Caribbean Caribbean International and Celebrity Cruises has provided as business update and its response to the global pandemic.
The cruise company provided details on the current status of bookings, possible further suspensions depending on the current situation, and many financial aspects such as reducing expenditure to cope with the pause in operations.
We already know that Royal Caribbean cruise operations are suspended from March 13 through June 11, 2020. At the moment the first embarkations are set to begin on June 12 but if things don’t start to improve that may not happen. The cruise company posted “Continued disruptions to travel and port operations in various regions may result in further suspensions.”
We are already seeing some other major cruise lines such as Holland America Line and Princess Cruises cancel even further cruises until 2021. What Cruise Hive is expecting is a slow return to regular operations. Carnival Cruise Line has already announced that it expects just eight Carnival ships to resume sailings again in August and then slowly start other sailings. By 2021 we’re hoping all the major cruise lines will be back up to full capacity in terms of cruise ship usage.
Richard D. Fain, Chairman and CEO, said:
“Our top priority is to ensure the safety of our guests and crew during the suspension period and when we resume operations.”
“The Company’s fleet is now either in port or at anchor and we have developed strict protocols to protect our crew that is still onboard our ships.”
There is light ahead for Royal Caribbean as cruise bookings continue and for 2021 the cruise company stated it’s “within historical ranges when compared to the same time last year with 2021 prices up mid-single digits compared to 2020.” New customer deposits and final payments on bookings for 2020, 2021, and 2022 are still coming in however as expected for this year it is significantly lower.
The Company has instituted several programs in order to best serve its guests: for cancelled cruises, guests are offered the choice of future cruise credits valued at 125% of the initial cruise fare paid in lieu of providing cash refunds.
As of April 30, 2020, approximately 45% of the guests have requested cash refunds. For non-cancelled cruises, the Company has implemented a “Cruise with Confidence” policy. You can read our post on the new extension to the policy recently announced.
As of March 31, 2020, the Company had $2.4 billion in customer deposits. This includes approximately $0.8 billion of future cruise credits related to previously announced voyage cancellations through June 11, 2020.
Worth Reading: How Will Coronavirus Affect My Future Cruise?
Reducing expenses is a major factor of how well Royal Caribbean can come out on the other side. At the moment the cruise brands are working on repatriating crew members back home via arranged charter flights and cruise ships sailing back directly. We’ve already seen Royal Caribbean operated vessels anchored in Manila, Philipines to repatriate crew there.
There is a reduced workforce of around 26% of more than 5,000 shoreside employees in the United States. Onboard crew payroll, fuel, insurance, and port charges have also all been reduced. Some ships will be in cold layup to reduced expenses even further and Royal Caribbean Ltd marketing is being reduced too to save money.
Royal Caribbean has revealed an estimated expense of $150 million to $170 million per month to keep the cruise company going during the current pause in operations. This could change as further reductions are made depending on the pandemic impact on the cruise industry.
The cash burn per month is around $250 million to $275 million. This range includes ongoing ship operating expenses, administrative expenses, and debt service expense, hedging costs, expected necessary capital expenditures (net of committed financings in the case of newbuilds), and excludes cash refunds of customer deposits as well as cash inflows from new and existing bookings.
New cruise ship deliveries are expected to be delayed due to shipyard being closed and limited workers. Ships that were planned for delivery in 2020 and 2021 are not going ahead as scheduled.
For now, we’ll just have to wait and see how COVID-19 impact Royal Caribbean cruise brands and how fast cruises can return to some normality. We know that cruise lines will have to make changes and be more prepared for virus outbreaks with more procedures in place to protect passengers and crew.