Carnival Corporation to accelerate ship disposals

Written by Nick Blenkey
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In a filing with the SEC yesterday, Carnival Corporation & plc reported preliminary third quarter 2020 results that included a U.S. GAAP net loss of $2.9 billion which included $0.9 billion of non-cash impairment charges. Third quarter 2020 adjusted net loss was $1.7 billion.

The company said that cash burn rate in the third quarter 2020 and the expected rate for the fourth quarter were both in line with the previously disclosed expectation.

The third quarter ended with $8.2 billion of cash and cash equivalents and the company said that it “expects to further enhance future liquidity opportunistically.

Carnival Corporation & plc President and CEO 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.”

Donald added that the company continues 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,” he said

Elsewhere in the filing, Carnival Corporation says that 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% 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. 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. The company currently expects nine 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.”

You can access the full filing HERE.

CARNIVAL CRUISE LINE SELLS TWO MORE

In line with Carnival Corporation’s plans to downsize its fleet, its Carnival Cruise Line brand today announced the sale of Carnival Fascination and Carnival Imagination, which had previously been put on long-term lay-up status and removed from published itineraries.

The sale of Carnival Fascination, launched in 1994, and Carnival Imagination, introduced in 1995, follows the sale of Carnival Fantasy and Carnival Inspiration which took place in July. On return to operations, Carnival will still operate four upgraded Fantasy-class ships – Carnival Ecstasy, Carnival Sensation, Carnival Elation and Carnival Paradise.

Carnival also advised guests and travel agents that it is delaying the return to guest operations for four ships until after scheduled dry dock enhancements are completed in the first half of 2021.

The four impacted ships and resulting canceled itineraries include:

  • Carnival Magic itineraries operating from Miami will be canceled until Mar. 13, 2021
  • Carnival Paradise itineraries operating from Tampa will be canceled until Mar. 19, 2021
  • Carnival Valor itineraries operating from New Orleans will be canceled until Apr. 29, 2021 (including the transatlantic cruise from New Orleans on Jan. 25, 2021 and the return from Barcelona on Feb. 26, 2021)
  • Carnival Spirit itineraries operating from Brisbane will be canceled through May 16, 2021, with the first sailing being the Singapore to Brisbane voyage embarking on June 12, 2021.

“This extended pause in our operations has also impacted shipyard availability, and we’ve had to reschedule required dry docks,” Duffy said

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