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Carnival Corporation & plc provides a business update, expect to dispose 13 vessels

Details: Written by Teijo Niemelä Teijo Niemelä; Category: Top Headlines Top Headlines; Published: 10 July 2020 10 July 2020

Carnival Corporation & plc provides a business update and additional financial information for the second quarter ended May 31, 2020.

In the face of the global impact of COVID-19, the company paused its guest cruise operations in mid-March. The company expects to resume guest operations, with ongoing collaboration from both government and health authorities, in a phased manner. Specific brands and ships are expected to return to service over time to provide guests with unmatched joyful vacations in a manner consistent with the company's highest priorities, which are compliance, environmental protection and the health, safety and well-being of its guests, crew and the communities its ships visit.

AIDA to resume cruise operations

AIDA previously announced it will resume guest cruise operations from ports in Germany beginning August 2020 with three of its ships, making it the first of the company's nine cruise brands to resume guest cruise operations. AIDA will introduce additional safety and protective measures which will include pre-boarding health questionnaires and temperature checks for both guests and crew, physical distancing guidelines, routing systems on arrival, departure and onboard, increased mitigation and sanitation efforts in all cabins and public areas, as well as closely managing capacities at onboard experiences. These enhanced measures have been developed with advice from medical experts and align with the current guidance from the World Health Organization ("WHO") and the German Robert Koch Institute ("RKI"), as well as other governmental and health authorities.

Capacity reduced by ship delivery deferrals and 13 expected ship dispositions

The company 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. As previously announced, the company intends to accelerate the removal of ships in fiscal 2020 which were previously expected to be sold over the ensuing years. The company sold one ship during June 2020 and has agreements for the disposal of five ships and preliminary agreements for an additional three ships, all of which are expected to leave the fleet in the next 90 days. These agreements are in addition to the sale of four ships, which were announced prior to fiscal 2020. In total, the 13 ships expected to leave the fleet represent a nearly nine percent reduction in current capacity. The company currently expects only five of the nine ships originally scheduled for delivery in fiscal 2020 and fiscal 2021 will be delivered prior to the end of fiscal year 2021. In addition, the company expects later deliveries of ships originally scheduled for fiscal 2022 and 2023.

Carnival Corporation & plc President and Chief Executive Officer Arnold Donald noted, "We have been transitioning the fleet into a prolonged pause and right sizing our shoreside operations. We have already reduced operating costs by over $7 billion on an annualized basis and reduced capital expenditures also by more than $5 billion over the next 18 months. We have secured over $10 billion of additional liquidity to sustain another full year with additional flexibility remaining. We have aggressively shed assets while actively deferring new ship deliveries. We are working hard to resume operations while serving the best interests of public health with our way forward informed through consultation with medical experts and scientists from around the world."

Donald added, "We will emerge a leaner, more efficient company to optimize cash generation, pay down debt and position us to return to investment grade credit over time providing strong returns to our shareholders."

Maximizing liquidity

Since the pause in guest operations, the company has taken significant actions to preserve cash and secure additional financing to maximize its liquidity. While maintaining compliance, environmental protection and safety, the company significantly reduced ship operating expenses by transitioning ships into paused status. The company also reduced its administrative expenses, non-newbuild capital expenditures by $1.3 billion for 2020 and expects to reduce its newbuild capital expenditures by over $600 million for 2020, (net of export credit facilities). Additionally, since March, the company has raised over $10 billion through a series of financing transactions, including transactions that have occurred in the last three weeks, as follows:

– Borrowed an aggregate principal amount of $2.8 billion in two tranches under a first priority senior secured term loan facility on June 30, 2020
– Negotiated Debt Holiday amendments, deferring certain principal repayments otherwise due through March 2021. (Certain export credit agencies have offered a 12-month debt amortization and financial covenant holiday ("Debt Holiday"))

In addition, the company has $8.8 billion of committed export credit facilities that are available to fund ship deliveries originally planned through 2023.

Carnival Corporation & plc Chief Financial Officer and Chief Accounting Officer David Bernstein noted, "Quickly recognizing the financial situation, we took swift action to improve our liquidity by reducing expenses and leveraging our strong balance sheet to complete several capital transactions".

During the pause in guest operations, the monthly average cash burn rate for the second half of 2020 is estimated to be approximately $650 million. This rate includes approximately $250 million of ongoing ship operating and administrative expenses, working capital changes (excluding changes in customer deposits and reserves for credit card processors), interest expense and committed capital expenditures (net of committed export credit facilities) and also excludes scheduled debt maturities. The company continues to explore opportunities to further reduce its monthly cash burn rate.

The pause in guest operations is continuing to have material negative impacts on all aspects of the company's business. The longer the full or partial pause in guest operations continues, the greater the impact on the company's liquidity and financial position. The company continues to expect a net loss on both a U.S. GAAP and adjusted basis for the second half of 2020.

Demand continues for 2021 sailings

The company's brands have announced various incentives and flexibility for certain booking payments on select sailings to support guest confidence in making new bookings. These incentives vary by brand and sailing and include onboard credits and reduced or refundable deposits. In addition, the company is providing flexibility to guests with bookings on sailings cancelled due to the pause by offering guests the flexibility of enhanced future cruise credits ("FCC") or an election for a refund in cash. Enhanced FCCs increase the value of the guest's original booking or provide incremental onboard credits. As of June 21, 2020, approximately half of guests affected have requested cash refunds. Despite substantially reduced marketing and selling spend, the company continues to see demand from new bookings for 2021. For the most recent booking period, the first three weeks in June 2020, almost 60 percent of 2021 bookings were new bookings. The remaining 2021 booking volumes resulted from guests applying their FCCs to specific future cruises.

As of June 21, 2020, cumulative advanced bookings for the full year of 2021 capacity currently available for sale remain within historical ranges at prices that are down in the low to mid-single digits range, on a comparable basis, including the negative yield impact of FCCs and onboard credits applied.

As of May 31, 2020, the current portion of customer deposits was $2.6 billion, the majority of which are FCCs. $121 million of the company's customer deposit balance relates to third quarter sailings and $353 million relates to fourth quarter sailings. The company continues to expect any decline in the customer deposits balance in the second half of 2020, all of which is expected to occur in the third quarter, to be significantly less than the decline in the second quarter of 2020.

Protecting the health and safety of guests and team members

Throughout the pause in its guest cruise operations, the company has acted to protect the health and safety of guests and shipboard team members. The company returned over 260,000 guests to their homes, coordinating with a large number of countries around the globe. In addition, the company worked around the clock with various local governmental authorities, utilized its ships and chartered hundreds of planes to repatriate shipboard team members as quickly as possible. The company is extremely pleased with its ability to successfully repatriate approximately 77,000 of its shipboard team members to more than 130 countries around the globe, which is substantially all of its onboard workforce other than the safe manning team members who will remain on the ships, and thanks the numerous governments who worked closely with the company during the repatriation process.

Donald commented, "I could not be more proud of how collectively our team has handled this. We looked after our guests, each other and the over 700 places we go each year. Thanks to our crew for continuing to exceed guest expectations through challenging circumstances and our shoreside operations for working 24/7 to enhance our liquidity and to repatriate our guests and our crew. Also, thanks to our loyal guests, travel partners, shareholders and other stakeholders for their support during this challenging time."

Active consultation with science and medical experts

Throughout the pause in guest cruise operations, the company has been consulting and assembling the best minds in medical science, public health and infectious disease. These individuals include a robust line-up of world renowned medical, epidemiology and public health experts to provide the company with the latest science and medical evidence to inform practical, adaptable and science-based solutions for detection, prevention and mitigation of COVID-19.

In coordination with the World Travel and Tourism Council, the company is hosting an online Global Scientific Summit on COVID-19 on July 28, a forum which is open to the public and free of charge. Speakers and panelists include the company's expert advisors, representing a diverse range of science, research and business backgrounds, including amongst others, members of Scientists to Stop COVID-19, who have volunteered to participate. The company is grateful to bring together a select group of science and medical experts who will bring such relevant insight into COVID-19. To register for the Summit, please go to CovidScienceSummit.com.

Royal Caribbean Group acquires remaining interest in Silversea

Details: Written by Teijo Niemelä Teijo Niemelä; Category: Top Headlines Top Headlines; Published: 10 July 2020 10 July 2020

Royal Caribbean Group has purchased the remaining shares of Silversea Cruises, a pioneer and leader in ultra-luxury and expedition cruising.

The move to full ownership comes two years after Royal Caribbean Group acquired a two-thirds share of the cruise line in July 2018.

"Silversea has been a great fit for our company from the very first day," said Richard D. Fain, Chairman and CEO of Royal Caribbean Group. "The cultures of the two organizations have proven to be harmonious, and guests have responded favorably to the combination."

Manfredi Lefebvre d'Ovidio, who took over the company from his late father, will serve as chairman of Silversea. Roberto Martinoli will remain the brand's president and CEO.

"Manfredi and Roberto have brought a fresh point of view to our company, as well as deep knowledge of their brand's unique audience," Fain said. "Their skills – and Manfredi's inimitable style – will continue to play an important role in growing Silversea into the future."

Said Lefebvre: "The combination of our companies has been everything I hoped for. The skills and resources of Royal Caribbean Group have helped us grow and flourish. We share a vision about the bright future of cruising, and I look forward to being a shareholder in the broader Royal Caribbean Group."

Added Martinoli: "Thanks to the incredible resources and skills of Royal Caribbean Group, Silversea will grow and thrive. Today marks another key step in our drive to uncontested leadership in ultra-luxury and expedition cruising."

The remaining one-third stake held by Heritage Cruise Holding Ltd. was paid for in the form of 5.2 million shares of Royal Caribbean Group common stock, which represents about 2.5% of the total common stock.

Perella Weinberg Partners LP served as financial advisor and Skadden Arps, Slate, Meagher & Flom LLP served as legal advisor to the company regarding this transaction. Barclays Bank PLC served as financial advisor to Manfredi Lefebvre and Morgan, Lewis & Bockius LLP provided legal counsel.

Don’t go on a cruise yet – British foreign affairs ministry

Details: Written by Kari Reinikainen Kari Reinikainen; Category: Top Headlines Top Headlines; Published: 10 July 2020 10 July 2020

The British ministry of foreign affairs has issued a statement in which it advises against cruise travel, tightening its recommendation as in march it only advised those over he age of 70not to cruise.

“The Foreign & Commonwealth Office advises against cruise ship travel at this time. This is due to the ongoing pandemic and is based on medical advice from Public Health England,” the ministry said, adding that the government would continue to review its cruise ship travel advice based on the latest medical advice.

“If you have future cruise travel plans, you should speak to your travel operator, or the travel company you booked with, for further advice,” the ministry said.

The Foreign & Commonwealth Office continues to support the Department for Transport’s work with industry for the resumption of international cruise travel, it concluded.

While the recommendation does not mean an outright ban for British nationals to cruise, going on a cruise holiday during the time the recommendation is in force may invalidate the travel insurance of those doing so.

Carnival Corporation names Antorcha to lead Holland America Line, Palomba as COO for Carnival Cruise Line

Details: Written by Teijo Niemelä Teijo Niemelä; Category: Top Headlines Top Headlines; Published: 09 July 2020 09 July 2020

Carnival Corporation & plc today announced two important moves within its global leadership team as part of the company's broader efforts to enhance operations and best prepare the organization for the eventual resumption of cruising.

Gus Antorcha, currently chief operations officer for Carnival Cruise Line, has been named president of Holland America Line, effective immediately. Antorcha will report directly to Stein Kruse, group CEO of Holland America Group and Carnival UK.

Neil Palomba, currently president of the company's Italy-based Costa Cruises, has been named executive vice president and chief operations officer for Carnival Cruise Line, effective immediately, reporting directly to Christine Duffy, president of the brand. During Palomba's transition, the Costa Cruises leadership team will continue to report to Michael Thamm, CEO of Costa Group and Carnival Asia.

"As part of our ongoing efforts to continue enhancing our global operations, these moves clearly demonstrate the depth and strength of our leadership team," said Arnold Donald, CEO of Carnival Corporation. "We are using this pause in guest operations to evaluate every aspect of our business, including our leadership structures, and make changes where appropriate to improve our business. Gus and Neil are both proven and strategic leaders within our organization, and we are looking forward to their contributions and success in these new roles as we position our company and our brands for a bright future."

Antorcha will lead one of Carnival Corporation's most storied brands, Holland America Line, an award-winning, premium cruise line known for immersive, authentic experiences onboard and shoreside. In this role, he will guide Holland America Line's return to cruise operations and plans for future growth, including sales and marketing, revenue management, deployment and itinerary planning, public relations, guest services operations and strategic planning.

As an industry veteran with over nine years of service at Carnival Cruise Line, Antorcha held several key leadership roles supporting the brand's continued growth and popularity amongst cruisers. Prior to becoming chief operations officer, Antorcha served as Carnival Cruise Line's executive vice president, guest services, responsible for onboard operations, and senior vice president, guest commerce. He previously served as a partner and managing director for Boston Consulting Group.

Palomba assumes the role of chief operations officer for Carnival Corporation's namesake and largest brand, Carnival Cruise Line. In this role, his responsibilities include oversight of all hotel operations, guest services, guest commerce and guest care.

Since February 2015, Palomba has led Costa Cruises, with responsibility for managing all aspects of the brand, including strategy, product design, guest care, sales, marketing, revenue management and fleet deployment, among others. Under his leadership, Costa Cruises introduced its "Italy's Finest" brand positioning, debuted a number of guest and onboard experience innovations, and launched Costa Smeralda, the brand's first cruise ship powered by liquefied natural gas (LNG).

Prior to becoming president of Costa Cruises, Palomba served as the brand's senior vice president, hotel operations and guest experience beginning in January 2014. Previously, he held multiple leadership positions in the cruise industry, working up to corporate operating officer for a global cruise line, following multiple onshore and onboard roles, including positions in the hotel and deck departments on board a cruise ship and rising to serve as a second officer.

Hurtigruten returns 14 ships to operation – launches new September British Isles expedition cruises

Details: Written by Teijo Niemelä Teijo Niemelä; Category: Top Headlines Top Headlines; Published: 07 July 2020 07 July 2020

After a successful return to sailing last month, Hurtigruten has released its plans to further ramp-up operations with 14 of 16 ships returning in August and September. In addition, Hurtigruten launches a series of new itineraries in the British Isles over the coming months.

"With the safety and well-being of our guests and crew as our number one priority, the response to our successful return to sailing last month has been extremely positive from both the local communities, our guests and crew. As travel restrictions are lifted, we are now entering the next phase of our step by step return to full operation," Hurtigruten CEO Daniel Skjeldam says.

Hurtigruten marked the return of cruising as Finnmarken became the first ocean cruise ship in the world to return to sailing with her June 16 departure. With limiting capacity and strict hygiene measures, Hurtigruten currently operates five ships on international and domestic Norwegian itineraries.

Now the world’s largest expedition cruise company has stepped up its rebound strategy, with plans to bring 14 of their 16 ships back in operation by the end of September:

– Hurtigruten marks the return of Arctic expedition cruising, as battery-hybrid powered Roald Amundsen and Spitsbergen starting Mid-July will offer 6 to 15 day voyages on the Arctic archipelago of Svalbard.

– Step by step 7 additional ships will be introduced on the legendary Bergen to Kirkenes voyage along the Norwegian coast in August and September. As of this week, Hurtigruten already operates 4 ships in what’s known as “the most beautiful voyage in the world."

– Hurtigruten launches a series of exclusive British Isles itineraries on the world’s first battery hybrid powered cruise ship the Roald Amundsen. Departing from Portsmouth (Sep 2), Liverpool (Sep 7 and 17) and Glasgow (Sep 12), the short expedition cruises will take guests to off-the-beaten-track destinations such as Isles of Scilly, Fowey, Rathlin Island, Fortwilliam, Oban, Fishguard and Waterford.

"We are thrilled to announce our new British Isles itineraries, and put a lot of pride into handpicking the destinations. We wanted to make sure guests can enjoy the British Isles like never before, visiting remote isles, seeing rugged nature and amazing wildlife, and enjoying charming coastal cities, towns and villages while avoiding the mass tourism crowds," Skjeldam says.

In June, Hurtigruten also announced their 2021 plans for year-round expedition cruise departures from Dover and Hamburg to Norway, Southern Scandinavia and the British Isles.

"Our British Isles departures have proven extremely popular. With the addition of 2020 expedition cruises, we will offer guests a unique opportunity to explore unique destinations already this fal," Skjeldam says.

First international cruises

The newest addition to Hurtigruten’s fleet of custom built expedition cruise ships, battery-hybrid powered Fridtjof Nansen, marked the return of international cruises as she departed Hamburg, Germany on June 26 for the first in a series of summer 2020 expedition cruises to the Norwegian coast.

The 14 night itineraries will continue into September, exploring world heritage fjords, glaciers, bird cliffs, narrow inlets and other sites under the midnight sun - all the way to the iconic North Cape.

"As travel restrictions are lifted, we offer German and international guests two distinct and unique ways of exploring Norway. Expedition cruises departing from Hamburg, and the original voyages along the Norwegian coast. This summer, we will have the fjords all by ourselves. This is a once-in-a-lifetime opportunity to experience the rugged beauty of the Norwegian coast," Skjeldam says

Hurtigruten is the world’s largest expedition cruise line and has operated in polar waters continuously since 1893. As the most experienced operator on the spectacular Norwegian coastline, Hurtigruten is the only cruise line to offer year-round sailings on the Norwegian coast.

"We are seeing a strong demand across all markets and all destinations, including the Norwegian coast, the Arctic and Antarctica. The demand reflects our predictions that small-ship cruising, with all our advantages such as more flexibility and fewer guests, will prove even more popular post-COVID-19," Skjeldam says.