Carnival Corporation has provided its third quarter 2021 business update.

Key Notes: 

• U.S. GAAP net loss of $2.8 billion and adjusted net loss of $2.0 billion for the third quarter of 2021.
• Third quarter 2021 ended with $7.8 billion of liquidity, which the company believes is sufficient to return to full cruise operations, according to a statement. 
• Voyages for the third quarter of 2021 were cash flow positive and the company expects this to continue.
• As of August 31, 2021, eight of the company’s nine brands have resumed guest operations as part of its gradual return to service.
• Booking volumes for all future cruises during the third quarter of 2021 were higher than booking volumes during the first quarter of 2021, albeit not as robust as the second quarter of 2021, primarily as a result of lower booking volumes in August 2021, reflecting the impact on overall U.S. consumer confidence resulting from heightened uncertainty around the COVID-19 Delta variant.
• Cumulative advanced bookings for the second half of 2022 are ahead of a very strong 2019.
• Customer deposits increased $630 million in the third quarter of 2021, marking the second consecutive quarter since March 2020 the company has seen an increase in customer deposits.
• Through its debt management efforts, the company has reduced future annual interest expense by over $250 million per year and has completed cumulative debt principal payment extensions of approximately $4.0 billion, improving its future liquidity position.

Third Quarter 2021 Results and Statistical Information

Carnival Corporation & plc President and Chief Executive Officer Arnold Donald noted: “We are very glad to be back doing what we do best, delivering memorable vacation experiences for our guests, while doing so in a way that best serves the interests of public health. Our team members are executing exceptionally well on our return to service, exceeding the expectations of our guests and taking guest satisfaction to new heights. Even at this early stage with intentionally constrained occupancy levels, our voyages are already cash flow positive.”

For the cruise segments, revenue per passenger cruise day (“PCD”) for the third quarter of 2021 increased compared to a strong 2019, despite the current constraints on itinerary offerings, which did not include many of the destination rich itineraries offered in 2019. The increase was driven in part by exceptionally strong onboard and other revenue, according to Carnival. 

Occupancy in the third quarter of 2021 was 54%, building consistently month-to-month from 39% in June to 59% in August

.Available lower berth days (“ALBD”) for the third quarter of 2021 were 3.8 million, which represents 17% of total fleet capacity. ALBDs are expected to be 10.3 million for the fourth quarter of 2021, which represents 47% of total fleet capacity.

Donald noted: “Beyond the enthusiasm of our guests and crew and the unprecedented net promoter scores, it is difficult to demonstrate just how successful our restart effort has been because many cruises, while generating positive cash flow, were limited to scenic cruises without ports of call, and generally priced well below the attractive destination rich cruises we normally offer. Carnival Cruise Line resumed operations in July offering Caribbean and Alaska sailings somewhat comparable to prior years and achieved 20% higher revenue per PCD than 2019 peak levels, despite onboard credits from cancelled cruises. Even with the unusually short booking window and capacity limitations, the brand achieved occupancy of approximately 70%, which speaks to the strong underlying demand for our core product.”

The company’s monthly average cash burn rate for the third quarter of 2021 was $510 million, which was better than previous guidance and in line with the $500 million monthly average cash burn rate for the first half of 2021.

Carnival said the monthly average cash burn rate includes revenues earned on voyages, ongoing ship operating and administrative expenses, restart spend, working capital changes (excluding changes in customer deposits), interest expense and capital expenditures (net of export credit facilities), and excludes scheduled debt maturities as well as other cash collateral to be provided.

As the company continues its return to service, it expects to continue incurring incremental restart related spend, according to a statement, including the cost of returning ships to guest cruise operations, returning crew members to its ships and maintaining enhanced health and safety protocols. The company expects the monthly average cash burn rate for the fourth quarter to be higher than the prior quarters of 2021, due to the timing of incremental restart expenditures.

The gradual resumption of the company’s guest cruise operations continues to have a material impact on all aspects of its business, including the company’s liquidity, financial position and results of operations. The company said it expects a net loss on both a U.S. GAAP and adjusted basis for the quarter and year ending November 30, 2021.

Resumption of Guest Cruise Operations

Donald added: “Being the largest in our industry, it is not surprising that we are now successfully operating at a larger scale than anyone else in the industry. Our protocols have been working well and are enabling us to build occupancy levels as we return more ships to service. Looking forward, we continue to work towards resuming full guest cruise operations by next spring, in time for our important summer season, where we make the bulk of our operating profit.”

As of August 31, 2021, eight of the company’s nine brands have resumed guest cruise operations as part of its gradual return to service, with 35% of its capacity operating with guests onboard. The company has already announced plans to resume guest cruise operations with 50 ships, or 61% of its capacity, by November 30, 2021 and 71 ships, or 75% of its capacity, by June 2022, with more announcements forthcoming for the remaining ships. 

Consistent with its planned gradual resumption of guest cruise operations, the company continues to expect to have its full fleet back in operation in the spring of 2022. While the company will benefit from the disposal of 19 smaller, less efficient ships since the beginning of the pause in guest cruise operations, the company is forecasting its ship operating expenses, on a per ALBD basis, for 2022 to be higher than 2019. This is driven by a portion of its fleet being in pause status for part of the year, restart related expenses and the cost of maintaining enhanced health and safety protocols, according to a press release. 

Update on Bookings

Donald added: “Our booked position for the second half of 2022 is at a new historical high, including our seasonally strong third quarter with all our ships planned to be in operation, despite reduced marketing spending. The broader environment for travel, while choppy, has improved dramatically since last summer and we believe it should improve even further by next summer, if the current trend of vaccine roll outs and advancements in therapies continues. We have also opened bookings for further out cruises in 2023, with unprecedented early demand.”

Booking volumes for all future cruises during the third quarter of 2021 were higher than booking volumes during the first quarter of 2021, albeit not as robust as the second quarter of 2021, according to the cruise company, primarily as a result of lower booking volumes in August 2021, reflecting the impact on overall U.S. consumer confidence resulting from heightened uncertainty around the COVID-19 Delta variant. Cumulative advanced bookings for the second half of 2022 are ahead of a very strong 2019 as of August 31, 2021. (Due to the gradual resumption in guest cruise operations, the company’s current booking trends will be compared to booking trends for 2019 sailings.)

Total customer deposits increased $630 million to $3.1 billion as of August 31, 2021 from $2.5 billion as of May 31, 2021. For the second consecutive quarter since March 2020, the company has continued to see an increase in customer deposits.

Refinancing

Carnival Corporation & plc Chief Financial Officer David Bernstein noted: “We ended the third quarter with $7.8 billion of liquidity. We believe we have sufficient liquidity to get us back to full operations and continue to be focused on pursuing refinancing opportunities to reduce interest rates and extend maturities. To date, through our debt management efforts, we have reduced our future annual interest expense by over $250 million per year and have completed cumulative debt principal payment extensions of approximately $4.0 billion, improving our future liquidity position.”

During the third quarter of 2021 the company:  

• Completed the repricing of its first-priority senior secured term loan facility, reducing the overall interest rate and future annual interest expense by over $120 million per year.
• Completed additional European Debt Holiday amendments, resulting in cumulative deferred principal of $1.7 billion.
• Issued $2.4 billion of new bonds and repaid $2.0 billion of existing higher rate debt, effectively extending maturities to 2028 and reducing interest expense by $135 million annually.
• Under the stock swap program, repurchased 4.6 million shares of Carnival plc ordinary shares with the proceeds from selling the same amount of Carnival Corporation’s common stock, increasing liquidity by $10 million as a result of the difference in market price for the company’s two listings.