RCL Earnings CALL on 5/20/20

[kwokpot]

I'm listening to the Earnings call for RCCL. I started over 30 minutes late, so missed alot.

 

Anyway an analyst asked about once you start-up cruising again what will happen in the event a passenger does contract Covid-19? They would not answer the question and said it was premature to discuss those plans. They said they will be fully transparent with their plans once they are closer to restarting sailings.

 

They also just said that there will most definitely be an acceleration of ships leaving the fleet and that FUTURE new builds will be PERMANENTLY affected- there is NO WAY to Catch Up on newbuilds.

Edited May 20, 2020 by kwokpot

[marieps]

56 minutes ago, kwokpot said:

I'm listening to the Earnings call for RCCL. I started over 30 minutes late, so missed alot.

 

Anyway an analyst asked about once you start-up cruising again what will happen in the event a passenger does contract Covid-19? They would not answer the question and said it was premature to discuss those plans. They said they will be fully transparent with their plans once they are closer to restarting sailings.

 

They also just said that there will most definitely be an acceleration of ships leaving the fleet and that FUTURE new builds will be PERMANENTLY affected- there is NO WAY to Catch Up on newbuilds.

I was very disappointed their press release did not address a return to service target date or address the speed at which refunds are being issued.  45% of passengers opting for the cash.  

[kk99]

I listened to the entire call . Some of the takeaways include

1. 150-175 million per month in costs. Ships in warm layup cost 2-2.5 million a month per ship,  cooler layup costs per ship per month are 1-1.5 million.

2. New builds will slow and there will be a permanent shift.

3. All cruises cancelled through July 31st, only exception may be China operations.  Announcement later today.

4. Guests other than N. America are choosing cash refunds at a higher rate, 45% overall cash requests as opposed to future cruise credits. Baby boomers are choosing more fcc.

5. Currently all ships available for sailing in 2021.

6.  Newer ships need a 30% load factor, older ships a 50% load factor for break even. Mr. Liberty did not estimate what current load factors are.

7. Ships in the industry will be retired at a higher rate or be sold.

8. In discussions with over 40 ports about when the ports might reopen.

9. Their goal is to get back to an investment grade rating.

 

The call did not address any future cancellations beyond July 31st , what the slow return to service would involve, or any consumer issues.

 

 

[Fouremco]

45 minutes ago, kk99 said:

I listened to the entire call . Some of the takeaways include

Thank you. Some interesting tidbits of information.

[marieps]

I have to assume Bayley made the announcement on the call rather than on paper in the release to manage information flow.

[kwokpot]

1 hour ago, kk99 said:

I listened to the entire call . Some of the takeaways include

1. 150-175 million per month in costs. Ships in warm layup cost 2-2.5 million a month per ship,  cooler layup costs per ship per month are 1-1.5 million.

2. New builds will slow and there will be a permanent shift.

3. All cruises cancelled through July 31st, only exception may be China operations.  Announcement later today.

4. Guests other than N. America are choosing cash refunds at a higher rate, 45% overall cash requests as opposed to future cruise credits. Baby boomers are choosing more fcc.

5. Currently all ships available for sailing in 2021.

6.  Newer ships need a 30% load factor, older ships a 50% load factor for break even. Mr. Liberty did not estimate what current load factors are.

7. Ships in the industry will be retired at a higher rate or be sold.

8. In discussions with over 40 ports about when the ports might reopen.

9. Their goal is to get back to an investment grade rating.

 

The call did not address any future cancellations beyond July 31st , what the slow return to service would involve, or any consumer issues.

 

 

Thanks for the summation. My takeaway was that they are far from ready to restart cruises. The lack of detailed mitigation information was very telling. The other two pieces of info that was of interest was the talk of newbuild schedule being forever impacted and the acceleration of fleet departures, all of which makes perfect sense. Finally the information about load factor break even points was enlightening and again makes perfect sense. 

Edited May 20, 2020 by kwokpot

[mahdnc]

@kwokpot and @kk99, thanks for the information.

[WrittenOnYourHeart]

31 minutes ago, kwokpot said:

The lack of detailed mitigation information was very telling.

 

OR they don't want to say anything before they have a plan. Theme parks are not saying anything until their plans are finalized and approved because they don't want the telephone game going on where people are pulling up speculation.

 

It may not be some omen of doom.

[kwokpot]

Dup

Edited May 20, 2020 by kwokpot

[kwokpot]

4 minutes ago, WrittenOnYourHeart said:

 

OR they don't want to say anything before they have a plan. Theme parks are not saying anything until their plans are finalized and approved because they don't want the telephone game going on where people are pulling up speculation.

 

It may not be some omen of doom.

Exactly my point. If they don't have a finalize plan they can give out the public there's no way they will restart cruises on August 1st, which is two months away.

[bikerunner]

1 hour ago, kwokpot said:

Exactly my point. If they don't have a finalize plan they can give out the public there's no way they will restart cruises on August 1st, which is two months away.

The plan and finalizing it is so fluid right now.  Until they get the information from the ports, and how this is progressing on opening, supply chain being started back up and so many factors hard to keep track of.  I think by mid/end of June there will be a clearer picture (ie where the virus stands and if numbers gone way down) but who knows.  No place can give a definitive date on anything at this point.  This has to be very slow moving forward right now.  

[mnocket]

5 hours ago, kk99 said:

6.  Newer ships need a 30% load factor, older ships a 50% load factor for break even. Mr. Liberty did not estimate what current load factors are.

 

Boy was I mistaken.  I thought that the cruise fares for a full sailing just covered the cruise line's costs - profits were the result of on-board spending.  This can't be right if ships can reach break even at  a 50% load factor.  Learn something new every day!

[Fouremco]

2 minutes ago, mnocket said:

 

Boy was I mistaken.  I thought that the cruise fares for a full sailing just covered the cruise line's costs - profits were the result of on-board spending.  This can't be right if ships can reach break even at  a 50% load factor.  Learn something new every day!

Or 30% with the newer builds. Is it any wonder that mega ships are so popular with cruise lines?

[Baron Barracuda]

32 minutes ago, mnocket said:

 

Boy was I mistaken.  I thought that the cruise fares for a full sailing just covered the cruise line's costs - profits were the result of on-board spending.  This can't be right if ships can reach break even at  a 50% load factor.  Learn something new every day!

Last year RCL had net income of just under $2B on $11B in revenue.  How can they possibly break even if revenue drops 50% to $5.5B?  Perhaps he meant to say 50% load allows them to cover variable costs (crew, food, fuel).  

[wrk2cruise]

1 hour ago, Fouremco said:

Or 30% with the newer builds. Is it any wonder that mega ships are so popular with cruise lines?

 

I guess those high Edge prices help as well.

[Fouremco]

3 minutes ago, wrk2cruise said:

 

I guess those high Edge prices help as well.

So true!

[Georgia_Peaches]

4 hours ago, WrittenOnYourHeart said:

 

OR they don't want to say anything before they have a plan. Theme parks are not saying anything until their plans are finalized and approved because they don't want the telephone game going on where people are pulling up speculation.

 

It may not be some omen of doom.

Ye, I was thinking this as well.  They are likely waiting until mitigation plans are finalized and approved.  No need to hint at it if it's only going to be changed.

[Covepointcruiser]

They have to wait until they get full instructions from the CDC.   The U.S. government appears to be running the cruising business.    The CDC will give them rules that have to be followed.   So far there is no word from the CDC.    Someone on the board said Trump was good friends with the Carnival CEO so why can’t he get the CDC to publish their rules.

[Want2Cruise 701]

51 minutes ago, Covepointcruiser said:

They have to wait until they get full instructions from the CDC.   The U.S. government appears to be running the cruising business.    The CDC will give them rules that have to be followed.   So far there is no word from the CDC.    Someone on the board said Trump was good friends with the Carnival CEO so why can’t he get the CDC to publish their rules.

Just because there is no word from the CDC, doesn't mean that they're not working with the cruise lines as we speak.  This is probably going to take quite some time.  RCI wasn't exactly open at first with the guidelines the CDC put in place to send the crew home.  The CDC also has to hear and work with the cruise line and vice versa before a plan is put in place.  It's not as cut and dry as it may seem that the CDC just puts out a plan, and the cruise line follows it.  I wish it was, but we are dealing with unprecedented times here.

[takemewithyou]

11 hours ago, kwokpot said:

I'm listening to the Earnings call for RCCL. I started over 30 minutes late, so missed alot.

 

Anyway an analyst asked about once you start-up cruising again what will happen in the event a passenger does contract Covid-19? They would not answer the question and said it was premature to discuss those plans. They said they will be fully transparent with their plans once they are closer to restarting sailings.

 

They also just said that there will most definitely be an acceleration of ships leaving the fleet and that FUTURE new builds will be PERMANENTLY affected- there is NO WAY to Catch Up on newbuilds.

There goes the M class ships and the Azamara ships!

Edited May 21, 2020 by takemewithyou

[JennAngel9]

4 Unrelated Thoughts (all on topic):

 

1) Did anyone else notice that in the CC article summary (here: https://www.cruisecritic.com/news/5359/) RCL executives said "The newer ships have more public space per passenger and have great consideration for return to service, as well as other ships we've modernized."-- Can this possibly be true? I haven't run the calculations on the Edge class ships, but the revolutions all seem to add cabins without adding much public space (and allocating some of the existing public space exclusively for suite guests).

 

2) I wish someone had asked them (and maybe they did) about the average age of passengers on their remaining 2020/2021 sailings-- it sounds like they are saying millennials want cash back while "boomers and families" are just shifting their cruises out-- but that could be a big problem for the cruise lines if the CDC ends up with guidance similar to the March 2020 plan where anybody over a certain age isn't supposed to be traveling.

 

3) It sounds like they think countries with stricter public safety stay at home orders and more aggressive contract tracing are likely going to be up and cruising again first -- but I wonder how many of them are going to be willing to load their populations on megaships-- that goes double if they are mixing with US/Brazilian/Russian passengers flying in to sail.

 

4) I will be so sad if the M class ships all go away.  I understand why it might be necessary to eliminate some, but I think it's a smart decision to have a variety of sizes to appeal to different customers and ports/routes where bigger ships can't go.

 

 

[omeinv]

2 hours ago, JennAngel9 said:

 

4) I will be so sad if the M class ships all go away.  I understand why it might be necessary to eliminate some, but I think it's a smart decision to have a variety of sizes to appeal to different customers and ports/routes where bigger ships can't go.

 

 

It's important to remember that we're dealing with all ships under the RCL umbrella.  Since this is the Celebrity board, we naturally think of Celebrity's older ships, but in the grand scheme of things, Royal Caribbean and then some of the European subsidiaries have older ships.  The earnings call mentioned fleet reductions, in the broadest sense.  The biggest factors affecting fleet size will be the shape and speed of recovery.  If there is demand, there would be no reason to shed any of the Celebrity ships.  On the other hand Royal had a ship (I can't recall which off hand) that was only still in the fleet because it was doing the Cuba runs while they were allowed.  It was too old and too small to be viable for other Royal Caribbean needs. Those type of ships are going to go soon regardless. Historically they've gone to Royal's European lines and other lines in which Royal has an interest.  Finally, in the current environment, ships are likely to remain in the fleet, for lack of market elsewhere.  Of course this could lead to some variation of lay-up for some ships  That medium term solution is as likely to be based on the ship's position and previously scheduled itineraries as age.  For instance if Europe ends up a complete no-go this year, at least some of the ships are likely to be idled.  They can't all be moved to whatever markets are operating, as the presence of ships will not create demand. 

 

Harris

Denver, CO

[yorky]

I can’t see any way they will just dump a ship like Milly which has just had a fortune spent on it.

[mahdnc]

Here is the complete transcript of yesterday's Q1 2020 earnings call, courtesy of Motley Fool: link

[TeeRick]

4 hours ago, yorky said:

I can’t see any way they will just dump a ship like Milly which has just had a fortune spent on it.

Milly now easier to sell since it has been upgraded??  Same for Summit?

So maybe Connie and Infinity without renovations will be more difficult to dump.  

It is really hard to assess the market since all cruise lines will be trying to dump older ships.  All supply and no demand I think.