With two-thirds of the fleet operational, the tide has turned with Royal Caribbean, and the Company can now go full steam ahead towards a successful 2022. In its 3rd quarter financial update, the second-largest cruise company in the world reports largely optimistic forecasts towards the fourth quarter and the entire of 2022.
That being said, Royal Caribbean has still lost more than a billion dollars in the last quarter. With ships restarting and flying thousands of crew members to various ports worldwide, costs still trump income significantly.
The restart of operations is going well for Royal Caribbean; in fact, it’s going much better than ever expected. Currently, two-thirds of the fleet is operational. By the end of the year, Royal Caribbean Group expects 51 out of 60 ships to be at sea, more than 80% of the capacity worldwide. Considering that the Company started sailing in June in the United States, it is a strong showing from the Miami-based Company.
Since the company restarted operations, more than 500,000 guests have sailed aboard its ships. This number will have more than doubled by the end of the year, as ships sail with increased capacities and more ships become operational.
Jason T. Liberty, Executive Vice President, and CFO: “As cases have come down, demand has come surging back. Consumers are showing their resilience and desire to vacation, and the growing affinity of Royal Caribbean’s leading brands, ships and crew. Although there are many uncertainties going forward regarding COVID-19, as well as cost and supply chain pressures, we continue our pathway forward and anticipate positive cash flow for the Group by spring of 2022 and generating positive earnings for the full year 2022,”
While the Delta variant did slow proceedings for Royal in the short term, overall, the Company sees few issues that will seriously affect the financial position. Cruises in 2022 continue to receive considerable attention, and bookings are within historical data ranges.
Even though cruises are more expensive, even when FCC’s are included in the calculations, expectations for 2022 show positive numbers.
Is it all positive? No, for 2021, the Company is still forecast to make huge losses, something the 3rd quarter results confirm.
Restart and Bookings Forecast
for the immediate future, things are starting to look up for Royal Caribbean. The cruise line resumed operations with 11 additional ships in the third quarter. As of today, 40 ships from the Company’s five brands, or approximately 65% of its capacity, have resumed sailing.
By the end of the year, this number will be at 50 out of 61 ships, or 80% or more of total capacity, with ships sailing at 65-70% occupancy. The others in the fleet are expected to come back to operations by Spring 2022.
Bookings are looking positive, with the third quarter doing significantly better than the second quarter, which had been affected by a dip due to the Delta variant surge. Royal Caribbean expects to return to historical occupancy and bookings by the second half of 2022, with higher pricing. The Group expects to be cash flow positive by spring and profitable for the full year 2022.
Third Quarter 2021 and Beyond
The continued impact of COVID-19 on Royal Caribbean’s business results are still felt in significant ways. The Company achieved a load rate of 44% in its core business areas such as Caribbean, Alaska, and Europe itineraries.
But, bringing ships back to operational status, which includes flying in thousands of crew members, did ensure a loss in the third quarter. Royal Caribbean reported an adjusted net loss of $(1.2) billion.
Richard Fain, Chairman & CEO said: “The health standards that have been set up in cooperation with the CDC did instill consumer confidence. On October 25, 2021, the United States CDC issued a temporary extension of the Conditional Sail Order through January 15, 2022. After this date, the CSO will transition to a voluntary order. Royal Caribbean will likely continue to cooperate with the CDC.”#
“We are very pleased with the continued and constructive partnership with the CDC and the U.S. government’s COVID-19 interagency Group. This is a great example of how close collaboration between the cruise industry and the CDC results in health and safety protocols that have demonstrated cruising can be one of the safest forms of vacation.”
Although the Company is not out of the woods just yet, it looks like the Company is well-underway to achieving at least a partial recovery from the effects of COVID-19. Despite the Billion dollar plus losses, it’s certainly not all bad news for the Royal Caribbean Group.