Carnival Corp. has taken the necessary steps to ensure the company withstands the pause in operations "beyond 12 months into late next year even in a zero-revenue scenario," President and CEO Arnold Donald said Friday during a conference call with financial analysts.
Carnival Corp., the operator of nine cruise brands and more than 100 ships, outlined the steps it has taken to survive the global COVID-19 pandemic as all its ships are at standstill except those still taking a few thousand crew members home.
"We will emerge a leaner, more efficient company to optimize cash generation, pay down debt and position us to return to investment grade credit over time providing strong returns to our shareholders," Donald said in a company statement.
"We have been transitioning the fleet into a prolonged pause and right-sizing our shoreside operations," he said. "We have already reduced operating costs by over $7 billion on an annualized basis and reduced capital expenditures also by more than $5 billion over the next 18 months. We have secured over $10 billion of additional liquidity to sustain another full year with additional flexibility remaining. We have aggressively shed assets while actively deferring new ship deliveries. We are working hard to resume operations while serving the best interests of public health with our way forward informed through consultation with medical experts and scientists from around the world."
As far as shedding assets, the company expects 13 ships to leave the fleet within the next 90 days, for a nearly nine percent capacity reduction.
Newbuild deliveries also are being delayed, and only five of nine ships originally scheduled for delivery in fiscal 2020 and fiscal 2021 will be delivered by the end of fiscal year 2021. In addition, the company expects later deliveries of ships originally scheduled for fiscal 2022 and 2023.
One bright spot: Its German brand AIDA plans to start cruising from ports in Germany beginning in August with three ships, making it the first Carnival Corp. brand to resume guest cruise operations. AIDA won't call at any ports and will introduce additional safety measures such as less than 50 percent passenger capacity, temperature checks for guests and crew, physical distancing guidelines, increased mitigation and sanitation efforts.
Donald noted in the conference call that AIDA took more than 1,000 bookings in one day when reservations opened. "There's a lot of pent-up demand," he said.
Demand continues for 2021 sailings. "Despite substantially reduced marketing and selling spend, the company continues to see demand from new bookings for 2021," Carnival said in the statement. "For the most recent booking period, the first three weeks in June 2020, almost 60 percent of 2021 bookings were new bookings. The remaining 2021 booking volumes resulted from guests applying their future cruise credits (FCCs) to specific future cruises."
The Carnival brands offered refunds or enhanced FCCs higher than the amount paid, and as of June 21, about half of guests requested cash refunds.
"We're very encouraged by booking patterns we're seeing right now," Donald said. "We even have new-to-cruise, which, given the current state the world is in, is testament to how strong a vacation experience and value cruising is."
Carnival Corp. is hosting an online Global Scientific Summit on COVID-19 on July 28, in coordination with the World Travel and Tourism Council. The forum is open to the public and free of charge. Speakers and panelists include the company's expert advisors, representing a diverse range of science, research and business backgrounds, including amongst others, members of Scientists to Stop COVID-19, who have volunteered to participate.
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