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The Big Three Cruise Corporations Continue to Burn Cash. Here’s How Much.

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Carnival Corporation, Royal Caribbean Group and Norwegian Cruise Line Holdings are still burning through cash as some ships emerge from lay-up back into operations. 

Cash burn numbers may be up in the third quarter with added costs to reactivate ships, needed maintenance, potential drydocks, procurement, getting crew back and more.

Only one out of the three big cruise companies provided estimates on third-quarter cash burn, indicating it would be up close to 45 per cent. 

Carnival Corporation

For Carnival Corporation, the company’s cash burn for the first half of 2021 was $500 million per month, which was better than a previous forecast of $550. The improvement was mainly due to the timing of cash received from ship sales just before the end of the second quarter and some other small working capital changes.

With ships quickly relaunching, and a short booking window for cruises announced close to departure, the company said it will not provide a forecast for its third-quarter cash burn rate.

Independence of the Seas in Southampton Photo credit Dave Jones

Royal Caribbean Group

Royal Caribbean reported its average monthly cash burn rate for the second quarter of 2021 at approximately $330 million, slightly higher than the prior quarter as the company returned additional ships into operation. 

Similar to Carnival, Royal Caribbean would be not providing a forecast for the third quarter.

“The environment remains fluid, and for this reason, we are not providing a cash burn estimate or the related offsets generated by revenue and new customer deposits. I will highlight that the burn rate for the ships that are kept at layoff is expected to be consistent with our previous expectations,” said Jason Liberty, executive vice president and CFO, on the company’s second-quarter earnings call.

Norwegian Star in Mexico Photo Credit Dave Jones

Norwegian Cruise Line Holdings

Norwegian Cruise Line Holdings said its average cash burn in the second quarter was $200 million per month, higher than its guidance of $190 million driven by the announcement of additional ship relaunches in the company’s voyage resumption plan and the associated restart expenses.

“As for the third quarter, we expect our average monthly cash burn rate to increase to approximately $285 million as restart expenses accelerate with additional vessels entering service,” said Mark Kempa, executive vice president and CFO. “Restart expenses are primarily related to repositioning, provisioning and stopping of vessels, implementing new health and safety protocols and a measured ramp-up of demand-generating marketing investments.”

Royal Caribbean extends Anthem of the Seas Season.

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Anthem of the Seas entering the river Mersey, Photo credit Dave Jones
Royal Caribbean International has extended Anthem of the Seas’ UK-based season until October and announced plans to welcome international guests onboard from next month.

The ship returned to the UK for the first time in six years in July to restart Royal’s domestic cruise programme.

In September “eligible international guests” will also be able to sail from Southampton, subject to the latest UK government travel advice and their country of residence.

Fully vaccinated travellers from the US and EU were granted exemption from UK quarantine requirements this week.

Anthem’s British Isles sailings feature calls to Liverpool, Belfast and Kirkwall and Glasgow. All adults must be fully vaccinated and all passengers must provide a negative Covid test result before boarding.

Anthem’s extended season opened for bookings on Wednesday (4 August).

Ben Bouldin, Royal’s vice-president EMEA, said the line was “thrilled” with the response to its UK programme since restarting, with cruises achieving “peak guest satisfaction levels”.

“We welcome the recent update from the UK government, which lifted advice against international cruise travel. While this marks a positive step forward in the global return of cruise, there are still complexities to navigate when calling at multiple European ports of call from the UK,” he added.

“This, coupled with the popularity of our British Isles sailings to date, has led to our decision to extend our sailings around the British Isles, and I’m delighted to welcome international guests to experience these itineraries, starting in September.”

Royal Caribbean: Cash Flow Positive in Six Months

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Independence of the seas photo credit Dave Jones 

The Royal Caribbean Group expects to be cash-flow positive in about six months, Jason Liberty, senior vice president and CFO, said on the company’s Q2 earnings call.

Liberty noted that the third and fourth quarters of this year will continue to be “painful” and cautioned that 2022 will not be a normal year although trends to normalcy should be picking up during the year.

Going from four ships in service at the end of April, the group now has 29 out of 68 ships sailing and will introduce seven more this month.

By the end of the year, Liberty said, 85 per cent of the Royal Caribbean fleet should be sailing.

As for the newbuilds, Liberty said they will be introduced on 10-month delays from when they originally were expected to enter service.

Richard Fain, chairman and CEO, noted how Royal Caribbean is focused on operating their cruises safely and safer than other vacation alternatives, while still exceeding pre-pandemic guest expectations, and doing so in a fiscally prudent manner.

He underscored that their safety protocols are working and that the ships allow them to control the environment to an unusual extent: 100 per cent of the crew is vaccinated, and in July, 92 per cent of the passengers were vaccinated.

“We have had people test positive, but since people around them have been vaccinated, it means these have been isolated cases,” Fain said. “The vaccines are the ultimate weapon and they work.

“In light of the Delta variant, we have strengthened our protocols further.

“Cruises have become the example of how best to deal with COVID-19,” Fain added.