Royal Caribbean Updates COVID-19 Impact, Will Extend Cruise Suspension
Royal Caribbean Cruises Ltd. was forced to cancel 130 sailings during the first quarter of 2020 after ceasing operations in mid-March due to the outbreak of COVID-19, prompting the cruise giant to report US GAAP net loss of $1.4 billion for the year’s opening quarter compared to US GAAP net income of $249.7 million in the first quarter of 2019.
On Wednesday’s conference call with investors, Royal Caribbean executives also confirmed that the company will extend its temporary suspension of global cruise operations through July 31, with the exception of its China business.
“Responding to the dramatic change in business conditions caused by COVID-19 has required focus, dedication, ingenuity and improvisation from all our people, and their efforts have been nonstop,” said Richard D. Fain, Chairman and CEO. “We understand that when our ships return to service, they will be sailing in a changed world. How well we anticipate and solve for this new environment will play a critical role in keeping our guests and crew safe and healthy, as well as position our business and that of our travel agent partners to return to growth.”
Royal Caribbean’s booking volumes for the remainder of 2020 are expectedly lower compared to the same time last year but the company says that the booked position for 2021 is still within historical ranges by comparison to last year with prices up mid-single digits versus 2020.
In addition to cash refunds, the company is offering 125 percent future cruise credits on canceled sailings. As of April 30, 2020, a majority have opted for the future cruise credit, with about 45 percent of canceled guests requesting refunds.
Jason T. Liberty, executive vice president and CFO, said the company has noticed that younger travelers are more likely to seek a refund while families, older travelers and especially loyalty program members are more likely to utilize the future cruise credit.
The company is still working on repatriating crew members to their home countries, with nine ships currently in the process of returning about 10,000 staff.
Royal Caribbean’s next focus will be its Healthy Return to Service program, which comprises four key principles that the cruise company outlined on Wednesday, including ensuring the safety of guests and crew; proactively enhancing liquidity; protecting its brands and defining and preparing for a “new normal.”
While Fain wasn’t able to provide a timetable on when Royal Caribbean or cruising at large might return he does predict it will be slow in the beginning. “We think it will be a gradual start a little like how society’s opening up now,” he said. “We would start with fewer ships and more likely drive markets in the beginning and evolve and grow from there.”
In the meantime, Royal Caribbean has been moving to enhance its liquidity, just recently securing $3.3 billion via debt issue and bolstering the company’s liquidity position by approximately $1 billion.