(Noon EDT) -- Carnival Corporation & plc reports bookings continue to be strong for 2021, particularly for the latter half of the year where reservations continue to be at the higher end of historical ranges, and expressed confidence that cruises can resume in the United States before the end of the year.
Speaking on the company's third quarter earnings call Thursday, Carnival Corporation president and CEO Arnold Donald stated that the successful restart of limited cruise operations in Europe with the Costa and AIDA brands, and the positive feedback from customers regarding those sailings, has put the company in a good position as it heads into the end of the fiscal year.
"We're very pleased with the experience in Europe at this point," said Donald during the earnings call with investors. "What those early sailings have been about is not occupancy -- we have purposely kept the occupancy low -- but they have gone well. Bookings generally have been strong. We have seen some increased interest.
"At this time we have every reason to be optimistic that we will be sailing the U.S. before the year's end."
Carnival Corporation reported it currently had $8.2 billion in cash on hand at the end of the third quarter -- enough liquidity to last 16 months in a zero-revenue situation. In the third quarter, monthly cash burn was $770 million. That is expected to fall to $530 million per month in the fourth quarter.
Carnival Corporation CFO David Bernstein noted that the withdrawal of 18 vessels from the corporation's overall fleet has aided with a reduction of maintenance costs associated with these less-efficient vessels, along with a reduction in capacity.
Repeat Cruisers Driving "Pent-Up Demand"
In his opening remarks, Bernstein noted that approximately 60 percent of bookings taken during the first three weeks of September were new bookings. The remainder were passengers using Future Cruise Credits (FCC's) garnered from past cancellations.
Past passengers make up 55 percent of all bookings for 2021, while the remaining 45 percent were cruisers that were "new-to-brand", meaning they had not sailed with that brand before, but may have cruised in the past.
Bernstein noted that Carnival Corporation's brands, which include Carnival, Cunard, Holland America Line, Princess and others, continue to attract "new-to-cruise" passengers; an interesting trend given that spending on advertising and marketing is essentially nonexistent at this time.
"We cancelled some cruises on Carnival the other day, and for the cruises we had remaining in that timeframe, the bookings tripled," said Donald, alluding to the November voyages still scheduled from Miami and Port Canaveral. "There is pent-up demand for cruising. We have a huge previous cruisegoer base and they are comfortable on cruise ships."
"Two-thirds of FCC's still have to be applied to future bookings," said Bernstein. "We've seen a number of instances where we saw a spike in bookings when people believed we would start sailing again. The uncertainty around return to service has caused the closer-in booking trends to be different from the further-out booking trends."
Both Donald and Bernstein again referenced the strong position of bookings for the latter half of 2021, while noting that the uncertainty about when cruises may restart, and how big that restart will be, has had an effect on bookings for the immediate future.
"Keep in mind, we have pent-up demand from people who are very anxious to cruise," said Donald. "We are not going to be able to bring all the ships back at once. The destinations are not going to open all at one time. So, it is going to be a staggered restart."
The Wild Card: The CDC's No-Sail Order
Numerous investors on the earnings call asked pointed questions of Donald and Bernstein about the CDC's current No-Sail order, which was extended at the 11th hour to run through October 31.
While Royal Caribbean Group and Norwegian Cruise Line Holdings have formally scrapped their November 2020 sailings from North America and beyond, Carnival Cruise Line still has limited departures from PortMiami and Port Canaveral on the books. Both Donald and Bernstein gave no indication that would change any time soon.
If the No-Sail order were to expire on the evening of October 31, "De-facto that is approval," to restart cruising, said Donald. "They may have advice or warnings for people with certain underlying conditions, which we would as well, but that is, in effect, saying, 'You're free to sail.'"
Donald reiterated that cruises wouldn't resume in the United States until Carnival felt that its health and safety protocols were fully vetted. However, the restart of its Costa and AIDA brands in Europe, operating under strict regulations from local EU authorities, are serving as the test bed for the resumption of cruise in the Americas.
"I don't want to try to interpret the rationale behind certain comments made by the CDC," said Donald when questioned about the agency's overriding negativity towards the industry. "We will only sail when we feel we are honoring the best interests of public health. We believe we have a way to go forward that will reduce the risk to no worse than if you were shoreside. And we are optimistic and aspirational that we can get to less risk than similar activities shoreside."
"The CDC has had a daunting task, too," continued Donald. "They're trying to mitigate the spread of this COVID-19. I think it's clear to them that we, as an industry, are totally committed to doing that as well."
Overall, both men commented that Carnival Corporation and its brands are in a better place now than they were at the end of the second quarter, as they feel there is optimism that things are moving in the right direction for the restart of cruise.
"The No-Sail order was only extended 30 days," said Donald. "We've got multiple testing regimens becoming more readily available. We have the successful sailings in Europe with the enhanced protocols and operating procedures. We've been collaborating here in the U.S. with all the various companies. Everyone has been informed by global health experts. We all have very similar recommendations and the industry has been able to align around protocols and operating procedures.
"We have, at this time, every reason to be optimistic that we will be sailing in the U.S. before year end."