Carnival Corp. to Further Downsize Fleet, Disposing of 18 Ships

Carnival Corp. now says it is getting rid of 18 ships, up from the 13 ships it planned to dispose of in early July. The company did not reveal which ships would be sold or scrapped. Eight have already left the fleets of Carnival’s nine cruise brands, which operate more than 100 ships.

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

Carnival Corp. made the announcement as part of a financial summary in a filing to the SEC. The filing reported a U.S. GAAP net loss of $2.9 billion for the quarter ending Aug. 31 and an adjusted net loss of $1.7 billion.

The company also said it expects only two of the four ships originally scheduled for delivery in 2020 to be delivered by year’s end. Of the nine ships originally scheduled for delivery this year and next, only five will be delivered in 2021. The company planned for 13 ships to be delivered by 2022 but has curtailed that to nine ships and two smaller expedition vessels.

By 2022, the average age of Carnival Corp. ships will be reduced from 13 to 12 years.

“We will emerge with a more efficient fleet, with a stretched-out newbuild order book 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,” Donald said.

Carnival said bookings in the first half of 2021 reflect expectations of the phased resumption of cruise operations. As of Aug. 31, cumulative advanced bookings for the second half of 2021 are at the higher end of the historical range and similar to where booking positions were in 2018 for the second half of 2019.

As of August 31, 2020, approximately 45 percent of guests affected by the company's schedule changes have received enhanced FCCs, and approximately 55 percent have requested refunds.

Total customer deposits balance on Aug. 31, was $2.4 billion, the majority of which are future cruise credits (FCC) given to customers whose cruises were canceled.

About 55 percent of bookings taken during the third quarter were new bookings, as opposed to FCC re-bookings, despite minimal advertising or marketing.

The company’s monthly average cash burn rate for the third quarter 2020 was $770 million and is expected to be about $530 million for the fourth quarter. Since cruising ground to a halt in mid-March due to the COVID-19 pandemic , Carnival Corp. has taken actions to preserve cash and secure additional financing to increase its liquidity. Since March, the company has raised nearly $12 billion through a series of financing transactions.

Carnival Corp. expressed optimism that its Costa brand restarted cruising on Sept. 6 in Italy and that its German operation AIDA will start up this fall in the Canary Islands and the western Mediterranean.

“These brands are beginning the company’s anticipated gradual, phased-in resumption of guest cruise operations,” the SEC filing said. “The initial cruises will continue to take place with adjusted passenger capacity and enhanced health protocols developed with government and health authorities, and guidance from our roster of medical and scientific experts.”

Costa resumed operations with the Costa Deliziosa and plans to restart with the Costa Diadema from Genoa on Sept. 19. After that, Costa expects to gradually increase the number of ships that will resume operations for residents in Europe.

“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,” Donald said. “Our portfolio includes many regional brands, which clearly position us well for a staggered return to service in the current environment.”

The company said it is unable to predict when the entire fleet will return to normal operations, although a Carnival Cruise Line representative hinted at a possible return with short cruises in November.

Blog Author

Xiangdong Lai