Royal Caribbean Group posts US$1.6 billion loss for Q2

MIAMI — Royal Caribbean Group has reported a net loss for the second quarter 2020 of US$1.6 billion.

Sailings on the cruise company’s ships, as with those of its competitors, have been halted for almost five months in line with the No Sail Order from the CDC, following the global outbreak of COVID-19.

Last year at the same time the group’s Q2 result was a gain of $472.8 million. 

Royal Caribbean Group owns Royal Caribbean, Celebrity Cruises, Azamara Cruises and Silversea.

“The COVID-19 pandemic is posing an unprecedented challenge to our industry and society. Our teams are working tirelessly to return to service soonest and doing so by developing new health and safety protocols to protect the well-being of our guests, crew and destinations we visit,” says Richard Fain, Chairman and CEO.

He adds: “In the meantime, we are using this time to refine our operations to be as efficient as we can while providing the great experiences that so many people are eagerly awaiting.”

Last month Royal Caribbean announced it was teaming up with NCLH to create the Healthy Sail Panel, a group of experts in areas of science and public health with backgrounds in medical practice, research, infectious disease, biosecurity, hospitality and maritime operations.

The panel has been working for more than a month, and its initial recommendations could be released by the end of August. All of the panel’s recommendations will be ‘open source’, meaning they can be freely adopted by any company or industry that would benefit from the group’s scientific and medical insights.

In reporting its Q2 results, Royal Caribbean Group says it continues to prioritize and bolster its liquidity, working to ensure it is well positioned for recovery. The company has taken further actions since Q1 to enhance its liquidity, preserve cash and secure additional financing.

“We continue to take substantial actions to bolster our financial position,” says Jason T. Liberty, the group’s EVP and CFO. “We have accessed the capital market in an opportunistic manner and continue to aggressively manage our spend. We are prepared to navigate a volatile period while making decisions that position the company well for the recovery.”

During this complete suspension of operations the cruise company estimates its cash burn rate at $250 million – $290 million per month.

The company says it is “considering ways to further reduce its average monthly cash burn under a further prolonged out-of-service scenario and during re-start of operations.”

As of June 30, 2020, the company had liquidity of approximately $4.1 billion all in the form of cash and cash equivalents.

Expected capital expenditures for the remainder of 2020 and 2021 are $0.6 billion and $1.8 billion, respectively, mostly related to new-build ships.

With COVID-19 negatively impacting shipyard operations, the group says it expects that three of its five ships originally scheduled for delivery between July of 2020 and December of 2021 will be delivered within that time frame. Two of these ships are Silver Moon and Silver Dawn, with capacity lower than 600 berths.

The CDC’s No Sail Order is in place until at least Sept. 30. Meanwhile CLIA’s ocean-going cruise line members, including Royal Caribbean Group’s cruise lines, have voluntarily suspended operations through Oct. 31. Both dates have been extended more than once. With so many unknowns, not surprisingly Royal Caribbean Group reports that bookings for the remainder of 2020 are “meaningfully lower than same time last year and at lower prices.”

However the group says its booked position for 2021 is trending well and is within historical ranges. Approximately 60% of its 2021 bookings are new and the rest are due to the redemption of FCCs and its ‘Lift & Shift’ program.

As of June 30, 2020, the company says it had $1.8 billion in customer deposits of which about $300 million correspond to Q4 2020 sailings. Approximately 48% of the guests booked on cancelled sailings have requested cash refunds.

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