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Royal Caribbean Releases Q2 Earnings; New Cruise Ships Delayed 10 Months

The two-level pool deck on Odyssey of the Seas (Image: Royal Caribbean)

August 10, 2020

Aaron Saunders

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By Aaron Saunders

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(2 p.m. EDT) -- Royal Caribbean Group released its second-quarter earnings results on Monday, detailing a net loss of $1.6 billion and announcing that most newbuild projects will be delayed by approximately 10 months.

The Group, which counts Azamara, Celebrity, Royal Caribbean and Silversea among its portfolio of cruise line brands, also gave an update on its Spanish subsidiary Pullmantur and revealed that demand for bookings across the Group remains "within historic ranges" for 2021, particularly for the second quarter and beyond.

"We continue to take substantial actions to bolster our financial position," said Jason Liberty, Royal Caribbean Group executive vice president 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."

Newbuild Delays

On an early-morning call with investors, Liberty confirmed the expected launch dates of three vessels: Odyssey of the Seas, which will debut in the first quarter of next year; and Silversea sister-ships Silver Moon and Silver Dawn. Silver Moon is expected to be delivered in October, while Silver Dawn will emerge in the fourth quarter of 2021.

Liberty noted that all other newbuilds will be delayed approximately 10 months. This would include Wonder of the Seas, Celebrity Beyond, and could include the lead vessel in Royal Caribbean's new LNG-powered Icon Class, originally set to debut in the second quarter of 2022.

Royal Caribbean was originally scheduled to take delivery of five vessels between now and the end of 2021. Due to the COVID-19 pandemic, that number will now drop to just three.

Existing Ships Could Be Sold as A Last Resort, Pullmantur Fleet Scrapped

Sovereign departing Civitavecchia, the port for Rome, at sunset (Photo: Aaron Saunders/Cruise Critic)

When asked by investors if Royal Caribbean had plans to sell or scrap a portion of its existing fleet, Liberty stated that all options are on the table, but only if it makes sound economic sense.

"Typically, our philosophy on it is if we don't think we have a good plan for that ship to be generating sizeable returns or its difficult to make a strategic fit with our brand, we sell the ship," said Liberty. "In this time, we are evaluating opportunities to sell ships or take other actions with ships. As that information comes live, we would of course update the investment community on that."

He noted that Royal Caribbean Group's collective fleet is the product of a sizeable investment, both in terms of newbuild cost and that of subsequent refits performed throughout the years.

"We put a lot of money into these ships, they do exceptionally well, and it can be a very difficult decision to part with a ship," said Liberty.

Liberty did confirm that Spanish subsidiary Pullmantur's entire fleet will be scrapped. This includes Monarch and Sovereign, which are already on the beach in Aliaga, Turkey being cut down; and Horizon, the former Celebrity Cruises vessel built in 1990. Currently alongside in Piraeus, it is presumably awaiting its own turn at the breakers.

Strong Bookings for 2021

As Carnival Corporation and Norwegian Cruise Line Holdings announced in their respective second-quarter earnings results, Royal Caribbean Group reported strong bookings for 2021 that were within historic ranges, particularly for the second quarter of 2021 and beyond into the summer and fall months.

Royal Caribbean CEO Michael Bayley stated that younger customers were part of this strong booking demand, as are members of Royal Caribbean's Crown and Anchor past passenger loyalty program.

"We did see that younger customers were more inclined to be booking," said Bayley. "We also saw a huge response from our loyalty customers. The key core for bookings at the moment is loyalty cruisers; people who understand what cruising is."

CFO Jason Liberty noted that more than 60 percent of bookings received since May have been new bookings.

"We've been both encouraged and humbled by the level of bookings we are seeing for 2021," said Liberty, later adding, "This is taking place with very limited to no marketing activity."

On the subject of cancellations, Liberty noted that voluntary cancellation rates -- those outside of sailings cancelled due to the ongoing global health crises and continued sailings suspensions by the U.S. Centers for Disease Control and Prevention and the Cruise Lines International Association -- have been low.

COVID-19 Testing Likely Part of Return of Cruise Service

Bayley stated that COVID-19 testing will likely be a part of any planned restart, noting that the line's Healthy Sail panel, created in conjunction with Norwegian Cruise Line Holdings, is looking into it as a possible requirement to the resumption of cruise service. Confirmation of that, however, is still a way off.

“We have not yet reached a point in our protocols where we’re ready to publish and release for discussion, said Bayley.

Royal Caribbean chairman and CEO Richard Fain reiterated that he expects resumption of service across all four brands to be a slower process equivalent to a dimmer switch.

"One of the things we've seen abut COVID is this is an ongoing process," he remarked. "We'll start to see some things early fall, but then there will be changes. I think this will be a continual process (to restart). I think it would be a mistake to assume it all ends at one time."

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