The corporate view as to the future of cruising

[caribill]

CCL Corp, which owns Princess, had a stock analysts conference call Wednesday. Topics included when cruising will resume for the USA, if vaccines will be required, booking trends and environmental issues.

 

Here is some of the information from that call. Unless Princess is mentioned specifically, the numbers apply to all the brands of CCL Corp.

 

All 30 of our ships in U.S. waters, and that fall under the conditional sail order, have achieved green status.

 

We have announced resuming operations so far with 9 ships, representing 12% of our fleet.

 

While we will have a limited number of sailings carrying to those who have already received vaccines, our decisions about vaccines and all of our health protocols continue to be informed by our global medical and science experts and the requirements of the places we operate and visit.

 

59 of our 90 ships are outside the U.S. conditional sail order.

 

For the UK Seacations, Princess had its second biggest booking day ever in the UK. The strong initial demand has affirmed our confidence and indicates the potential for further pricing strength.

 

Princess will introduce 2 new ships, both of which will feature MedallionClass which is now on the entire Princess fleet.

 

We will further benefit from the 19 ships leaving the fleet, which are among our least efficient ships. In fact, 17 of the 19 ships have already left the fleet. The combination of all of that will generate a 4% reduction in ship level unit costs and a 3% reduction in unit fuel consumption going forward, enabling us to deliver more revenue to the bottom line.

 

Despite fleet-wide capacity growth of 25% from 2011 to 2019, our absolute carbon emissions peaked in 2011, and we delivered a more than 30% reduction in our carbon intensity since 2005. We also lead the industry in the development of shore power. Over 40% of our fleet is capable of plugging in well in port, enabling power for more sustainable sources. To date, only 16 of the more than 700 ports we visit worldwide offer this shore power capability.

 

We now have 11 LNG ships either currently in the fleet or under construction, representing nearly 20% of our overall fleet capacity.

 

While we have secured the liquidity to sustain us well into 2022 even with zero revenue, our cash flow, once we return to full operations, will be the primary driver to return to investment grade credit over time

 

We have lowered our capacity growth to roughly 2.5% compound annually through 2025.

 

Our cumulative advanced book position for the full year 2022 is ahead of a very strong 2019, which was at the high end of the historical range. Booking volumes and book position are very encouraging given that they were achieved with minimal advertising and promotional activity. All the repeat cruisers have gone almost a full year now without being able to cruise and have a huge pent-up demand there.

 

Pricing on our full year 2022 book position is higher than pricing on bookings at the same time for 2019 sailings if you normalize for bundled packages and exclude the dilutive impact of future cruise credits or more commonly known as FCCs. This is a great achievement given pricing on bookings for 2019 sailings is a tough comparison as that was a high watermark for historical yields.  (Due to the pause in guest cruise operations, the company's booking trends are being compared to booking trends for 2019 sailings and not 2021.)

 

Over the past year or so we have offered and our guests have chosen more and more bundled package options. In the end, we expect to see the benefit of these bundled packages in onboard and other revenue.

 

We are currently in a solid liquidity position with $11.5 billion of cash and short-term investments on our balance sheet at the end of the first quarter. Even better, this is $2 billion more cash than we had on the balance sheet at the end of the fourth quarter.

 

Total customer deposits were unchanged this quarter compared to the fourth quarter 2020 at $2.2 billion with cash inflows from new bookings offsetting cash refunds.

 

But as released on April 2,the CDC specifications are not necessarily a workable or practical solution. We want to share the optimism that we can be sailing in July. By working together with the CDC, we can all make that happen.

 

But if we're unable to sail from U.S. home ports, then obviously we will consider home porting elsewhere.

 

We want to be having prearranged agreements with what are we going to do if there's a Covid-19 case onboard.  If it's in the community, there's a chance of it being onboard.

 

Today everybody doesn't have access to vaccines. Children are not yet really eligible for vaccines. Hopefully, that'll change over time. Hopefully, the availability of the vaccine so everyone will have access will also change over time. And we would encourage everyone to be vaccinated. We would. Today, we can't buy vaccines to do anything. So we just have to let this play out. And keep in mind, we are currently sailing (almost 400,000 guests so far overseas) without any major incident, without anybody being vaccinated and with protocols in place.

 

The key thing is mitigating risk. We can't be -- prefer not to be -- hopefully won't be -- asked to stand up to a zero risk standard because, frankly, nowhere else in society is that being considered. We just like to be treated similar to the rest of travel and entertainment and tourism sector. And so if we do that, we'll be fine.

 

As to timing for a U.S. restart, our biggest constraint right now to have departures from U.S. ports is being able to ramp up with crew. And so, it will take us minimum 60 up to 90 days to be able to get a crew on board, trained up with new protocols, etc., to be able to execute a sailing. So you can backtrack from that in terms of when we'd be able to go with an announcement. And so that's the biggest challenge we have is ramping. But we do have the opportunity from a demand standpoint, assuming we have the crew available and ready to go and trained up that we can do closer in announcements on itineraries and sailings because the demand is there.

 

We're trying to hold back on additional home porting outside the U.S., but it could be sooner rather than later on that. But I continue to be very much focused on working with the CDC and the administration to come up with a solution that works for American workers and American public, and I think we can.

 

To my knowledge, there is no major country today that is mandating vaccines for travel. And so the option is vaccines or testing or whatever. We want to encourage people to take the vaccine. And then what our ultimate policies will be, we'll have to get that evolve and see. In the UK, we have some -- we've announced some other sailings in the UK. We just announced one in Seabourn where it's available to people who have vaccinations, but we do not have a company or brand policies right now around vaccinations. And we're going to allow that to play out in line of with what makes the most sense.

 

Our UK sailings and some of the other sailings are starting with less than 50% occupancy, but that will ramp up pretty quickly as we make certain that the execution is in place and going well.

 

30% to 50% occupancy is better than breakeven financially for us for a given ship (using 2019 numbers). In terms of the overall fleet, we are going to come back staggered no matter what. We will be bringing in a few ships in a brand at a time. Hopefully, if we were approved to go and the destinations were all up and running, and we have all the various itineraries and all that, ideally, we'd like to be able to have the fleet fully going by the end of this year, early next year. And that's our aspiration and what we're working hard with various parties around the world to accomplish.

 

If we had the top 25 ships in our fleet operating with full operations with full occupancy, they would generate enough cash flow to cover the pause cost for the other 60 ships in our fleet as well as cover the full $2.4 billion of SG&A that we had in 2019.

[capriccio]

Thank you for posting this (and all the other write-ups of conference calls you have done in the past)!

 

The comments were informative but in the discussion of vaccines I did not notice any discussion, much less a promise, of all crew being vaccinated.  Did I miss that?  I was also disappointed by the wishy-washy discussion about whether passenger vaccinations will be required or not.

 

While I'm sure we all assumed that cruise lines have been working hard on developing protocols that will ensure a safe experience for their passengers and crews and meet the CDC requirements for those ships sailing into/out of the US, it was nice to see some of the ideas and challenges discussed.

[caribill]

2 hours ago, capriccio said:

 

The comments were informative but in the discussion of vaccines I did not notice any discussion, much less a promise, of all crew being vaccinated.  Did I miss that?

 

Nope, it was not mentioned at all.

 

Neither was anything mentioned about cruising to Alaska although they mentioned how some lodges and hotels will be open this summer.

[susancruzs]

Thanks so much for posting this.   It is interesting about the no mention of vaccinations for crew.  I'm hopeful things will be more normal by Fall.  However, the upswing in variants is a concern.

[niehauscr]

We have booked two cruises.  If vaccines are not required for crew and passengers, we will cancel. As much as we love cruising, our health is more important. Let’s hope the CDC will give their approval for the summer sailings from Florida.

[mjmalino]

I was on a webinar with Princess a few weeks ago and, at that time, it was stated that they did not have immediate plans to require crew to be vaccinated mainly because many crew members did not have easy access to vaccines, if any access at all, in their countries. This can certainly change as more and more countries start vaccinating, but that was the last I heard on the subject.

[cricketcj1]

Thanks for this post. Very interesting as we are booked Volendam 1/4/2022 74 nts. Sure its a go. 

[Coffeeluvr05]

Thanks for sharing that!  It does concern me a bit that they did not seem to want to make a commitment to returning to cruising requiring all to be vaccinated (except children of course).  I think the crew would be especially important for them to keep them safe and working.  

 

Given the Princess age demographic, I cannot imagine anyone sailing and not being vaccinated.  I feel like you would be crazy not to.  Me and my husband are in the lower end of their age demographic and we wouldn't cruise without being vaccinated. 

[CalLuvsCrusingToo]

Ditto what Coffeeluvr said.

 

Vaccine requirement mandatory, or thats a deal breaker!

 

NCL already said they Will be requiring vaccines.

 

I see a beeline away from Princess if they don't follow suit.

 

[LACruiser88]

I echo what was previously mentioned.  And, I strongly believe that if the CDC gives NCL approval to cruise with vaccinated crew/passengers, then the other cruise lines will follow suit...

[CynCyn]

7 hours ago, niehauscr said:

We have booked two cruises.  If vaccines are not required for crew and passengers, we will cancel. As much as we love cruising, our health is more important. Let’s hope the CDC will give their approval for the summer sailings from Florida.

Same.  I hope this doesn't push me to another line.  I am hopeful that they will change their wishy-washy stance.  I did not enjoy my NCL cruise, but would give it another try if it were the only line requiring vaccinations.  I am disappointed in CCL right now.

[CynCyn]

4 hours ago, LACruiser88 said:

I echo what was previously mentioned.  And, I strongly believe that if the CDC gives NCL approval to cruise with vaccinated crew/passengers, then the other cruise lines will follow suit...

Let's hope so.  I think they are scared to make a statement either way right now, but that can turn people off as well.  

[GonzoWCS]

Thanks caribill for this!

[donaldsc]

8 hours ago, Coffeeluvr05 said:

Thanks for sharing that!  It does concern me a bit that they did not seem to want to make a commitment to returning to cruising requiring all to be vaccinated (except children of course).  I think the crew would be especially important for them to keep them safe and working.  

 

Given the Princess age demographic, I cannot imagine anyone sailing and not being vaccinated.  I feel like you would be crazy not to.  Me and my husband are in the lower end of their age demographic and we wouldn't cruise without being vaccinated. 

Children can be asymptomatic Covid carriers.  Some lines have said that everyone must be vaccinated w/o exception.  If this means no children - so be it.

 

DON

[caribill]

4 hours ago, donaldsc said:

Children can be asymptomatic Covid carriers.  Some lines have said that everyone must be vaccinated w/o exception.  If this means no children - so be it.

 

DON

 

Some cruise lines have said that children can cruise with proof of a negative Covid-19 test.

[wowzz]

5 hours ago, donaldsc said:

Children can be asymptomatic Covid carriers.  Some lines have said that everyone must be vaccinated w/o exception.  If this means no children - so be it.

 

DON

Which is what P&O (UK) have done. No double vaccination,  no cruise,  including children. So, at least one part of the Carnival group is prepared to adopt a 100% vaccinated passenger policy. 

The only problem is that as yet, they have not said how you will prove that you have had the required vaccinations!   

[AF-1]

All my cruises are now scheduled for mid 2022;  hopefully by then things will get sorted out.  Thank you for posting this article.  

[Tak8]

Great info.  Thanks for sharing.  

[Earthworm Jim]

On 4/7/2021 at 10:28 PM, capriccio said:

....and meet the CDC requirements for those ships sailing into/out of the US...

 

I took this line to mean they will not be meeting the current CDC requirements, so unless the CDC eases their stance cruising isn't happening for CCL Corp.:

 

But as released on April 2, the CDC specifications are not necessarily a workable or practical solution.

[truckmaker]

We recently got our first shot of the Phyzer (sp?) vaccine and we were given a pretty official looking certificate that we have put in our passports ready to go. A second shot and another certificate coming in July. Our next cruise is a river cruise in France late August this year and we’re planning to go if it goes.

[NSWP]

18 hours ago, wowzz said:

Which is what P&O (UK) have done. No double vaccination,  no cruise,  including children. So, at least one part of the Carnival group is prepared to adopt a 100% vaccinated passenger policy. 

The only problem is that as yet, they have not said how you will prove that you have had the required vaccinations!   

And that requirement should be expanded across all the Carnival Corp brands, including Princess.

[mv_hana]

On 4/8/2021 at 10:34 AM, mjmalino said:

I was on a webinar with Princess a few weeks ago and, at that time, it was stated that they did not have immediate plans to require crew to be vaccinated mainly because many crew members did not have easy access to vaccines, if any access at all, in their countries. This can certainly change as more and more countries start vaccinating, but that was the last I heard on the subject.

This is very disappointing. I understand the logistics are extremely difficult regarding the crew. However, I'm curious how Royal Caribbean and Norwegian managed to insure vaccinations for their crew members. We're booked in 2022, but just testing the crew would not be acceptable. Vaccinations for all or we will have to make other plans.

[caribill]

5 hours ago, mv_hana said:

This is very disappointing. I understand the logistics are extremely difficult regarding the crew. However, I'm curious how Royal Caribbean and Norwegian managed to insure vaccinations for their crew members.

 

Maybe they have not yet managed to figure that out. The plan for the CDC just asks what they will do. If the plan is approved, they might then scramble to get a vaccinated crew.

[mv_hana]

4 hours ago, caribill said:

 

Maybe they have not yet managed to figure that out. The plan for the CDC just asks what they will do. If the plan is approved, they might then scramble to get a vaccinated crew.

I think they're looking at all angles. Carnival is a billion $ corp and no doubt they have operational analysts that look how to improve cost effectiveness across all platforms. Besides the logistics and cost of vaccinating the crew they have to have confirmation regarding which ports will accept their ships  worldwide. When I think about the logistics of supplying the ships while in various ports and how to guarantee no virus contamination while interacting with port personnel, and then the huge challenge of insuring excursions are safe while making a profit overall just to name a few -  it is all a massive undertaking.  They can't misjudge or their future is questionable. The short cruises that are starting up will be an indication of their future.  Meanwhile there's many of us that have had several cruises cancelled and took FCC. I hope I didn't make a mistake. 

[Ombud]

On 4/8/2021 at 11:36 PM, wowzz said:

Which is what P&O (UK) have done. No double vaccination,  no cruise,  including children. So, at least one part of the Carnival group is prepared to adopt a 100% vaccinated passenger policy. 

The only problem is that as yet, they have not said how you will prove that you have had the required vaccinations!   

So I wonder how they're going to deal with those who've gotten the Janssen vaccine