Carnival Corporation has disclosed preliminary financial information for the quarter ended August 31, 2020.

Notable:

• U.S. GAAP net loss of $(2.9) billion for the third quarter of 2020, which includes $0.9 billion of non-cash impairment charges.
• Third quarter 2020 adjusted net loss of $(1.7) billion.
• Cash burn rate in the third quarter 2020 and the expected rate for the fourth quarter are both in line with the previously disclosed expectation.
• Third quarter 2020 ended with $8.2 billion of cash and cash equivalents. The company expects to further enhance future liquidity, opportunistically.
• Costa successfully resumed guest cruise operations on September 6, 2020.
• AIDA has announced plans to restart guest cruise operations during the fall 2020.
• A total of 18 less efficient ships have left or are expected to leave the fleet, representing approximately 12 percent of pre-pause capacity and only three percent of operating income in 2019.
• Cumulative advanced bookings for the second half of 2021 capacity currently available for sale are at the higher end of the historical range, despite minimal advertising or marketing.

The company’s monthly average cash burn rate for the third quarter 2020 was $770 million, which was in line with the anticipated monthly cash burn rate. The company expects the monthly average cash burn rate for the fourth quarter of 2020 to be approximately $530 million.

Carnival Corporation & plc President and Chief Executive Officer Arnold Donald noted: “Just six months after we paused cruise operations across our global fleet, this past weekend, we successfully completed our first seven day cruise on our Italian brand Costa. Soon a second of our nine World’s Leading Cruise Lines’ brands will resume guest operations, our German sourced brand AIDA. Our business relies solely on leisure travel which we believe has historically proven to be far more resilient than business travel and cannot be easily replaced with video conferencing and other means of technology. Our portfolio includes many regional brands which clearly position us well for a staggered return to service in the current environment.

“We continue to take aggressive action to emerge a leaner more efficient company. We are accelerating the exit of 18 less efficient ships from our fleet. This will generate a 12% reduction in capacity and a structurally lower cost base, while retaining the most cash generative assets in our portfolio.

“With two thirds of our guests repeat cruisers each year, we believe the reduction in capacity leaves us well positioned to take advantage of the proven resiliency of, and the pent up demand for cruise travel – as evidenced by our being at the higher end of historical booking curves for the second half of 2021,” Donald said. “We will emerge with a more efficient fleet, with a stretched out newbuild orderbook and having paused new ship orders, leaving us with no deliveries in 2024 and only one delivery in 2025, allowing us to pay down debt and create increasing value for our shareholders.”

Capacity

Carnival said it expects future capacity to be moderated by the phased re-entry of its ships, the removal of capacity from its fleet and delays in new ship deliveries.

Since the pause in guest operations, the company has accelerated the removal of ships in fiscal 2020 which were previously expected to be sold over the ensuing years.

The company now expects to dispose of 18 ships, eight of which have already left the fleet.

In total, the 18 ships represent approximately 12 percent of pre-pause capacity and only three percent of operating income in 2019.

The sale of less efficient ships will result in future operating expense efficiencies of approximately two percent per available lower berth day (“ALBD”) and a reduction in fuel consumption of approximately one percent per ALBD, Carnival said.

“The company expects only two of the four ships originally scheduled for delivery in 2020, following the start of the pause, to be delivered prior to the end of fiscal 2020. The company currently expects only five of the nine ships originally scheduled for delivery in fiscal 2020 and 2021 to be delivered prior to the end of fiscal year 2021,” Carnival said, in a press release.

“The company currently expects 9 cruise ships and two smaller expedition ships of the 13 ships originally scheduled for delivery prior to the end of fiscal year 2022 to be delivered by then.”

Based on the actions taken to date and the scheduled newbuild deliveries through 2022, the company’s fleet will be more efficient with a roughly 13 percent larger average berth size and an average age of 12 years in 2022 versus 13 years, in each case as compared to 2019.

Bookings

Carnival said bookings in the first half of 2021 reflect expectations of the phased resumption of its guest cruise operations and anticipated itinerary changes, as of August 31, 2020, cumulative advanced bookings for the second half of 2021 capacity currently available for sale are at the higher end of the historical range and similar to where booking positions were in 2018 for the second half of 2019

Increasing Liquidity

Carnival Corporation & plc Chief Financial Officer and Chief Accounting Officer David Bernstein noted: “We have over $8 billion of available cash and additional financing alternatives to opportunistically further improve our liquidity profile. We have recently begun to optimize our capital structure with the early extinguishment of debt on favorable economic terms and the extension of debt maturities. Once we fully resume guest cruise operations, we expect our cash flow potential will build a path to further strengthen our balance sheet and return us to an investment grade credit rating over time.”