Cruising outlook as presented to stock analysts by CCL Corp

[caribill]

Summary of CCL Corp stock analysts conference call on 7/10/2020

 

Of course Princess is part of CCL Corp, so is included as part of the information presented.

 

So far 53 ships are in full pause mode. Ships have sailed over 400,000 nautical miles to return crews home. Less than 10,000 crew members remain to get home.

 

The company has raised $10 billion in capital. Combined with earlier debt, average interest rate on loans is 5%.

 

Current burn rate is $650 million a month. With $7.6 billion liquidity, the company can go at least a year with no income. More money can be raised if needed. Expenses are still being cut. Marketing is essentially suspended. They are working to extend maturities of loans due to be paid in 2021.

 

Nine ships were scheduled to be delivered in 2020 and 2021. With delays averaging five months, there will now be five ships delivered in this time period, two in 2020 and three in 2021. There are no plans to cancel any ships that are contracted to be built.

 

There are plans to eliminate 13 ships from the current fleet, a reduction of 9% of passenger capacity. So far only two have been announced. Ships are being sold to areas where they will not be competing with CCL Corp brands.

 

It will be 2022 before capacity will again reach 2^nd quarter 2020 capacity. With less efficient ships being the ones leaving the fleet and the newer ships being more efficient, when the capacity again reaches 2020 capacity, the fleet will be more efficient that it was in 2020.

 

If the top 15 ships in 2019 revenue were to sail again at full capacity, it would cover basic corporate and operating expenses. An additional 10 ships, also at full capacity, would cover the cost of the remaining ships being in pause mode.

 

Carnival Corp ships had less than their market share of Covid-19 incidents, but being the largest company received the most media attention.

 

Germany is closest in being able to resume cruising. Italy is next closest. (AIDA, a German brand will resume sailing with three ships in August, all on cruises with no ports on the itinerary other than the home port.)

 

Many of their brands have passengers from one area being over 90% of their customers. These include AIDA (Germany), P&O UK (UK), Costa (Europe), P&O Australia (Australia) and Carnival (USA). This can allow reopening with local cruisers as is being done in August with AIDA.

 

As of June 21, 2020, cumulative advanced bookings for the full year of 2021 capacity currently available for sale remain within historical ranges at prices that are down in the low to mid-single digits range, on a comparable basis, including the negative yield impact of FCCs and onboard credits applied. (The historical range includes going back to 2011.) Many FCCs exist that await new bookings that will utilize them.

 

Average passenger age on future bookings is 45. World cruise bookings are not doing as well as shorter cruises, probably because potential passengers do not know if the itineraries can actually be kept.

 

As of May 31, 2020, the current portion of customer deposits was $2.6 billion, the majority of which are FCCs. $121 million of the company's customer deposit balance relates to third quarter sailings and $353 million relates to fourth quarter sailings. So over $2 billion is for cruises after 2020.

 

There was an apology for the delay in providing refunds. As of June 21, 2020, approximately half of guests affected have requested cash refunds. Despite substantially reduced marketing and selling expenses, the company continues to see demand from new bookings for 2021. For the most recent booking period, the first three weeks in June 2020, almost 60 percent of 2021 bookings were new bookings. The remaining 2021 booking volumes resulted from guests applying their FCCs to specific future cruises. By the end of the third quarter this year, it is expected that incoming deposits will match outgoing refunds.

 

The company is not yet in serious discussions with the CDC on cruise resumption other than meeting the criteria for the current CDC hold on US sailings. Once governmental permission is given to resume cruising from Florida, cruising can resume in about 30 days. If a new crew must be quarantined first, it could take longer than 30 days.

 

The AIDA sailings will initially be at reduced capacity with social distancing (which they prefer to call physical distancing) in public venues. They will follow local guidelines for this which in Germany is currently 1.5 meters. They will start slow and observe behavior.

 

There is a built up demand for cruising. They will restart country by country, destination by destination. Over 1000 bookings were made the first day the AIDA August cruises were announced.

 

There was nothing mentioned about reduced capacities in the future for any of the Carnival Corp cruise brands, but expect bookings to follow the willingness of society to socially gather. Demand is expected to be more than needed to fill the ships in a staggered restart.

 

All Carnival Corp brands can operate between 30% and 50% capacity and generate positive cash flow. The number varies by ship size.

[JEH]

Thank you for posting this information .  To me you have always posted great trip reports and now great financial  reports Thanks .

[dickinson]

Thanks for posting.

[LACruiser88]

Very interesting and positive information.  Hopefully, this will calm down some of the naysayers.  Thank you!!!

[ontheweb]

Thanks, and naturally they are going to sound optimistic.

 

But, the one sentence that caught my attention was that they were not yet in serious discussion with the CDC about starting cruises in the USA. To me, that negated much of what they said about pent up demand and what percentage they could sail at and still turn a profit.

[caribill]

34 minutes ago, ontheweb said:

 

But, the one sentence that caught my attention was that they were not yet in serious discussion with the CDC about starting cruises in the USA.

 

That bothered me also.

[paradiselivin1]

Hard to anticipate how they're going to successfully launch from Florida for a long time to come if we can't get our number of cases to diminish. FL is the #1 hotspot in the world; especially Miami/Dade...Hanging on by a thread hoping for the best for the 2021 WC leaving FLL in early January but thinking that's just a dream that's going up in smoke..

[ontheweb]

3 hours ago, caribill said:

 

That bothered me also.

To me it seemed that they were trying to hide that one sentence among all the positive things that they wanted to reveal.

[Mike45LC]

Another "thanks for the report."  I am still hoping for an effective vaccine to restore the OLD normal.

[Geoffa30]

Assuming its the CDC not speaking to them rather than the other way around?

 

Interesting to hear about the five month delay to new ships. We are on the November 21 Discovery Princess TA and were already considering switching to Enchanted Princess when its TA goes on sale. Looks like it might be a good plan to do so. Hopefully Discovery will be ready for March 22 in time for our Mexican and Californian cruises.

[caribill]

5 hours ago, ontheweb said:

To me it seemed that they were trying to hide that one sentence among all the positive things that they wanted to reveal.

 

Actually, it was not part of the main presentation but came out as a response to a question during the Q&A period.

[caribill]

46 minutes ago, Geoffa30 said:

 

Interesting to hear about the five month delay to new ships. We are on the November 21 Discovery Princess TA and were already considering switching to Enchanted Princess when its TA goes on sale. Looks like it might be a good plan to do so. Hopefully Discovery will be ready for March 22 in time for our Mexican and Californian cruises.

 

Remember that the presentation covered all of the Carnival Corp plans, so it may or may not apply to the Discovery.

[mnocket]

7 minutes ago, caribill said:

 

Actually, it was not part of the main presentation but came out as a response to a question during the Q&A period.

That's a pretty important piece of information.  I'm glad a questioner was on the ball enough to ask about it.

[mnocket]

Also, on their prior conference call he said they could break even on an EBITDA basis.  EBITDA and Cash Flow are often conflated (even by CEOs) even though they are different.  I wonder if he really meant Cash Flow or EBITDA?

https://www.investopedia.com/ask/answers/012015/what-difference-between-cash-flow-and-ebidta.asp

 

[caribill]

1 minute ago, mnocket said:

Also, on their prior conference call he said they could break even on an EBITDA basis.  EBITDA and Cash Flow are often conflated (even by CEOs) even though they are different.  I wonder if he really meant Cash Flow or EBITDA?

https://www.investopedia.com/ask/answers/012015/what-difference-between-cash-flow-and-ebidta.asp

 

 

They said "cash flow" numerous times and never said "EBITDA.'"

[Geoffa30]

1 hour ago, caribill said:

 

Remember that the presentation covered all of the Carnival Corp plans, so it may or may not apply to the Discovery.

Here’s hoping. I shall have a look online to see which ships were due before the end of 2021 across the Corporation.

[ontheweb]

6 hours ago, caribill said:

 

Actually, it was not part of the main presentation but came out as a response to a question during the Q&A period.

Then instead of trying to hide it by just casually slipping it in, they were actually trying to ignore it completely. Makes you wonder what else they are hiding.

[ontheweb]

5 hours ago, mnocket said:

That's a pretty important piece of information.  I'm glad a questioner was on the ball enough to ask about it.

Score one for journalists. They get such a bad rap these days, but the good ones are so necessary.

 

[caribill]

6 hours ago, ontheweb said:

Then instead of trying to hide it by just casually slipping it in, they were actually trying to ignore it completely. Makes you wonder what else they are hiding.

 

Actual full response to the question:

 

"At this point, the conversations with the CDC evolved in around the current pause and the handling of the ships during the pause which has exclusively crew onboard the ships. We have not actually gotten to the point of serious resumption of cruise discussions with the CDC but, of course, that's coming."

 

 

6 hours ago, ontheweb said:

Score one for journalists. They get such a bad rap these days, but the good ones are so necessary.

 

 

This was a stock analysts call, so score one for the stock analysts.

[caribill]

On 7/10/2020 at 1:18 PM, caribill said:

So far 53 ships are in full pause mode. Ships have sailed over 400,000 nautical miles to return crews home. Less than 10,000 crew members remain to get home.

 

 

Correction -- About 3000 crew members remain to go home.

[ontheweb]

2 hours ago, caribill said:

 

Actual full response to the question:

 

"At this point, the conversations with the CDC evolved in around the current pause and the handling of the ships during the pause which has exclusively crew onboard the ships. We have not actually gotten to the point of serious resumption of cruise discussions with the CDC but, of course, that's coming."

 

 

 

 

This was a stock analysts call, so score one for the stock analysts.

Thanks for the full response.

 

OK, score one for the stock analysts, but that does not in any way negate what I wrote about the importance of good journalism at a time that the new industry is being highly criticized. (And some of the criticism is deserved as there are so called journalists on both sides of the political spectrum who are more interested in making a point than getting the facts out.)

[caribill]

9 minutes ago, ontheweb said:

 

 

OK, score one for the stock analysts, but that does not in any way negate what I wrote about the importance of good journalism at a time that the new industry is being highly criticized. (And some of the criticism is deserved as there are so called journalists on both sides of the political spectrum who are more interested in making a point than getting the facts out.)

 

Agree 100%

[bstrauss3]

So does anyone else think they are selling Unicorn farts and Fairy glitter to pump up the stock price????

[PrincessLuver]

 

59 minutes ago, bstrauss3 said:

So does anyone else think they are selling Unicorn farts and Fairy glitter to pump up the stock price????

 

Exactly......the airlines are starting to find out too that people are not wiling to travel and they are curtailing their optimistic schedules and getting ready to let go of tens of  thousands of employees.  It has been pointed out too by other business leaders  that companies that say their Covid - 19 vaccine trials are moving to the next step have significant increases in their stock prices.  Hope does sell and does make money sometimes!!

[HaveWeMetYet]

3 hours ago, PrincessLuver said:

 

 

Exactly......the airlines are starting to find out too that people are not wiling to travel and they are curtailing their optimistic schedules and getting ready to let go of tens of  thousands of employees.  It has been pointed out too by other business leaders  that companies that say their Covid - 19 vaccine trials are moving to the next step have significant increases in their stock prices.  Hope does sell and does make money sometimes!!

Fridays price increase was similar across all travel stocks. It was a short covering rally as most of these stocks had fallen 32 percent from their recent highs.
The airlines are fixing to layoff a ton of people in October. The bailout money extension ends October 1st.
 

In a memo to employees, the Chicago-based airline (United) said 36,000 employees, or 45% of its front-line workers in the USA and more than a third of its overall workforce of 95,000, face layoffs on or around Oct. 1.

 

 American Airlines CEO Doug Parker said the airline will have "more employees than it has work for" in the fall if business doesn't improve, and Southwest Airlines CEO Gary Kelly told employees in a video this year that it will be a "drastically smaller'' airline if travel doesn't rebound by the summer.

 

Demand was just barely climbing back to 20% of last year and even those minimal gains evaporated over the last week due to surging COVID-19 cases across the country."

 

A lot of companies have been holding off layoffs thinking the Covid virus would blow over this summer. Instead it is blowing away this summer.