Norwegian Cruise Line Holdings faces ‘long road of recovery’

Cruise faces a “long road of recovery” but pent-up demand exists for future sailings, according to Norwegian Cruise Line Holdings.

The company revealed $1.2 billion of advance ticket sales at the end of September, including about $850 million of future cruise credits.

A framework for a resumption of sailing in the US by the Centres for Disease Control and Prevent (CDC) represents a step forward but “significant uncertainties” remain, including technical instructions for future phases.

“The company will continue to work with both the CDC and its expert advisors to refine its comprehensive health and safety strategy and to comply with all aspects of the conditional order,” the parent company of Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises said.

A ‘Healthy Sail Panel’ team of 11 experts assembled in collaboration with Royal Caribbean Group provided a 66-page report in September, including 74 detailed best practices across five areas of focus to improve health and safety for passengers and crew, and reduce the risk of infection and spread of Covid-19 on cruise ships.

Marketing is now focused on the second half of 2021 and beyond “consistent with the planned gradual resumption of voyages”.

With ships at a standstill, NCLH reported a loss in the normally buoyant summer three months to September 30 of almost $640 million against net profit of $481.5 million in the same period last year.

Revenue fell to $6.5 million compared to $1.9 billion year-on-year due to the complete suspension of voyages in the quarter.

The total debt was $10.9 billion and the company’s cash and cash equivalents was $2.4 billion at the end of the three months.

“The company was in compliance with all debt covenants as of September 30, 2020,” NCLH said, adding that it had a monthly average cash burn of $150 million in the third quarter, expected to rise to $175 million a month in the current quarter.

The financial action plan has seen $1.5 billion of cash injections, work furloughs, extended 20% pay cuts for all non-seafaring staff and “significant” cuts or deferrals in marketing expenses.

The world’s third largest cruise group said: “While booking volumes since the emergence of the Covid-19 global pandemic remain below historical levels, there continues to be demand for future cruise vacations, particularly beginning for sailings operating in the second half of 2021 and beyond, despite limited marketing efforts.

“Our overall cumulative booked position for the first half of 2021 remains below historical ranges as expected due to the current uncertain environment, however, for the second half of 2021 it is in line with historical ranges.

“Pricing for full year 2021 is in line with pre-pandemic levels, even after including the dilutive impact of future cruise credits.

“Pent-up future demand for cruising is further demonstrated by record booking achievements in September and October.”

This included an Oceania Cruises’ upgrade sale over Labour Day in the US, described as the most successful holiday promotion in the line’s history.

RSSC achieved a new opening day booking record for its 2023 world cruise and a new all-time largest single booking day with the launch of its 2022-23 programme.

The company has also extended its modified final payment schedule for all voyages through to April 30, 2021 which requires final payment 60 days prior to embarkation instead of the standard 120 days.

However, the impact of the pandemic on shipyards where new vessels are being built or are due for construction has resulted in “minor delays” to deliveries.

“The impact of Covid-19 could result in additional delays in ship deliveries in the future, which may be prolonged,” the company warned.

President and chief executive Frank Del Rio said: “The new framework for conditional sailing order issued by the US Centers for Disease Control and Prevention is a step in the right direction on the path to the safer and healthier resumption of cruising in the US, reinforcing our existing rigorous commitment to health and safety.

“We will continue to collaborate with the CDC on next steps to relaunch operations with a shared goal of protecting the health and safety of our guests, crew and the communities we visit.”

He added: “While we have a long road of recovery ahead of us, we are encouraged by the continued demand for future cruise vacations, especially from our loyal past guests, across all three of our brands.”

Chief financial officer Mark Kempa said: “We are focused on positioning the company to not only withstand an extended Covid-19 disruption but to emerge from this period with a clear path for long-term financial recovery.

“Our swift actions to adapt to this unprecedented environment by reducing costs, conserving cash and enhancing our liquidity profile will bolster our efforts to navigate through Covid-19, relaunch our vessels and, over the longer-term, optimise our balance sheet and resume our consistent track record of strong financial performance.”

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