(1:15 p.m. EDT) - Royal Caribbean Group announced its second quarter earnings results on Wednesday, reporting a US GAAP Net Loss for the second quarter of 2021 of $1.3 billion. That news, however, was tempered by the Group’s ambitious restart plans that are already underway.
Royal Caribbean Group is already operating 29 ships across its fleet of brands that include Royal Caribbean International, Celebrity Cruises, and luxury line Silversea. That number will rise to 36 ships back in service by the end of August, while a full 80 percent of the Group’s global fleet is expected to be back in operational revenue service by the end of 2021.
"As we look forward, there is very positive momentum with our ships resuming operations and a healthy demand environment" said Jason T. Liberty, Executive Vice President and CFO. "We are very optimistic with our accelerated start in the United States and globally. We anticipate 80 percent of our fleet to be back in service by year-end delivering the world's best vacations. That is the first step on our pathway back to delivering superior returns."
“No business school has a course on how to succeed with zero revenue,” said Royal Caribbean Group chairman and CEO Richard Fain in a call with investors Wednesday morning. “It seems like only yesterday people were asking me if cruises would resume by December. Suddenly, we have almost half of our ships sailing.”
The Flywheel Effect and Vaccines
Fain describes the process of restarting its global fleet as a flywheel: once cruise operations resume and people begin sailing, it increases the Group’s revenues, makes it easier to restart the rest of its fleet, and gives cruisers confidence that cruises can resume safely and responsibly. Because Royal Caribbean Group began this process earlier than other operators, it continues to lead the global cruise restart – and that is continuing to drive bookings, with an increase of $530 million in future cruise deposits over the last quarter.
On Tuesday, Royal Caribbean International announced its full fleet restart dates through the fall and winter, with the line’s last vessel returning to service next May.
Fain also referenced its Healthy Sail Panel protocols, noting that land-based resorts and hotels do not have the stringent requirements for testing, mandatory vaccinations, and enhanced health protocols that have been implemented by the Group.
“The steps we are taking are designed to prevent the isolated cases [of COVID-19] from becoming outbreaks,” Fain said, noting that elimination of all cases of COVID-19 onboard is impossible, as it is on land.
“The vaccines are the ultimate weapon,” Fain said. “And they work. In most of our positive cases, even the cabin mate of the infected individual has tested negative. We have gone from cruises being a cause for concern to cruises being an exemplar for how to handle cases responsibly.”
When asked about concerns surrounding the Delta variant of COVID-19, Royal Caribbean Cruises president and CEO Michael Bayley was bullish.
“Over the last two weeks, the positive environment continues but it hasn’t been at such a trajectory as it was,” Bayley told investors. “When we look into 2022, we see no material impact at all. I think customers see this for what it is -- it’s a blip and a bump -- we feel encouraged by the protocols we’ve got in place.”
Bayley again outlined the benefits of Royal Caribbean’s Healthy Sail Panel, noting cruisers have written in to the company to express their appreciation for the measures the company is taking to mitigate the spread of COVID-19 onboard its vessels.
“The feedback we get from our customers is recognition and relief,” Bayley said.
Cruising Into the Future
Supply chain problems and rising inflation currently affect many industries, and the recent rise in the price of steel had investors asking the Group about whether newbuilds will be impacted by the price of steel.
Royal Caribbean Group CFO Jason Liberty, however, noted that both lines and shipyards have protected themselves against such an occurrence.
“It really does not have an impact on our order book or on our costs,” Liberty told investors. “Typically, when we order ships, the yards also lock in their purchase of steel and fixes those prices. So, there’s not really an impact there. We’re excited about the capacity that’s coming on [in the future].”
When asked about the resumption of more international itineraries, Fain -- who has been the head of the company since 1988 -- cautioned that border restrictions and changing requirements for travelers would continue to complicate the market in the near-term.
"We were cautious not to try to make too many predictions about the way this goes," Fain said. "Clearly today, countries are doing more local [travel], so you see tremendous growth -- actually it’s surprising, really -- in domestic travel as opposed to international travel.
"But the other thing we’ve seen in this is how quickly it all changes. We’ve gone from people wondering if we’re going to be back in service at all this year to having our fleet in service in a matter of weeks.
"The vaccine is the game changer here."