Carnival Corporation speeds up ship disposals

Carnival Corporation is speeding up the disposal of ships after registered a $2.4 billion adjusted net loss in the three months to May 31 as the Covid-19 pandemic shut down global cruise operations.

The parent company of UK brands P&O Cruises and Cunard admitted that “the longer the pause in guest operations continues the greater the impact on the company’s liquidity and financial position”.

The cruise giant added: “The pause in guest operations is continuing to have material negative impacts on all aspects of the company’s business.

“The company expects a net loss on both a US GAAP and adjusted basis for the second half of 2020.”

Carnival Corporation’s second quarter ended with $7.6 billion of available liquidity.

The company expects to further enhance future liquidity, including through refinancing scheduled debt maturities.

The corporation has $8.8 billion of “committed export credit facilities” that are available to fund ship deliveries originally planned through 2023.

The group disclosed that the total customer deposits balance at May 31 was $2.9 billion, including $475 million related to cruises during the second half of 2020.

The monthly average cash burn rate for the second half of 2020 is estimated to be about $650 million during the pause in operations.

“Preliminary agreements” are in place for the disposal of six ships which are expected to leave the fleet in the next 90 days. Carnival is currently working toward additional agreements.

Future capacity is expected to be “moderated” by the phased re-entry of its ships, the removal of capacity from its fleet and delays in new ship deliveries.

This will include the acceleration of plans to remove ships which were previously expected to be sold over the ensuing years.

Carnival said: “The company expects to resume guest operations, after collaboration with both government and health authorities, in a phased manner, with specific ships and brands returning to service over time to provide its guests with enjoyable vacation experiences.”

Initial sailings will be from a “select number of easily accessible homeports”.

The company is co-operating with various medical policy experts and public health authorities to develop enhanced procedures and protocols for health and safety on board its ships.

The corporation added: “Despite substantially reduced marketing and selling spend, the company is seeing growing demand from new bookings for 2021.

“For the six weeks ending May 31, 2020, approximately two-thirds of 2021 bookings were new bookings.

“The remaining 2021 booking volumes resulted from guests applying their FCCs (future cruise credits) to specific future cruises.”

Currently 62 of the company’s ships are in their final expected pause location.

“The company expects substantially all of its ships to reach their full pause status during the third quarter,” Carnival added.

The company has reacted to the freeze in operations by “significantly” cutting marketing and selling expenses and implemented a combination of layoffs, furloughs, reduced work weeks and salary and benefit reductions across the company, including senior management.

A hiring freeze has been imposed across the organisation, while consultant and contractor roles have been cut.

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