Carnival Corp. Talks Liquidity, Ship Sales, Delayed Deliveries, Bookings and More

The world's largest cruise company, Carnival Corporation (CCL) provided a business update to financial analysts on Friday—touching on fleet capacity, the sale of ships, delayed ship deliveries, liquidity, the phased return to service and future bookings.

“We have been transitioning the fleet into a prolonged pause and right-sizing our shoreside operations," said Arnold Donald, the company's president and CEO, in a statement. "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."

He continued: "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.”

He said that Carnival Corp. "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."

Perhaps most notably, the company's liquidity has improved, critical in an era when cruising is "paused." Robin Farley, financial analyst, UBS, told her firm's investors in an update email: "With additional liquidity of $2.8 billion as of end of June, and north of $10 billion of total liquidity, CCL has now extended its 'no-revenue runway' beyond mid-2021 to now through September/October 2021."

Here are key elements of Carnival's announcement:

Selling Ships

CCL will continue to accelerate the removal of ships from its global fleet in fiscal 2020. Thirteen ships are expected to leave the fleet—a 9 percent reduction in current capacity. One ship was sold in June and CCL has agreements for the disposal of five other ships. It also has preliminary agreements for an additional three ships, all of which are expected to leave the fleet in the next 90 days.

All the above are in addition to the sale of four ships announced prior to fiscal 2020.

New Ship Deliveries

Carnival Corporation said only five of nine new ships originally scheduled for delivery in fiscal years 2020 and 2021 will be delivered prior to the end of fiscal year 2021. 

In addition, the company expects delays in deliveries of ships originally slated to be delivered in fiscal years 2022 and 2021. 

The company said that future capacity will be moderated by: Reduced capacity caused by ship delivery schedule changes/deferrals; 13 ships to be sold and leave the global fleet; and phased re-entry of ships. 

Farley's note to investors stated: "We calculate delay in new ship deliveries reduce 2021 capacity by four percent to 5 percent, while additional disposals lower capacity by roughly 6 percent. So 2021 capacity is now 10 percent to 11 percent below pre-pandemic levels which would put CCL capacity roughly even with 2019 levels."

Pause in Operations

Cruise operations have been "paused" since mid-March and Carnival Corporation's press statement says it "expects to resume guest operations, with ongoing collaboration from both government and health authorities, in a phased manner."

The company's European brand serving German speakers, AIDA, will become the first Carnival Corp. brand to resume guest cruise operations with three ships sailing from German ports starting in August. 

AIDA will introduce new health/safety protocols, including pre-boarding health questionnaires; temperature checks for guests and crew; physical distancing guidelines; routing systems on arrival, departure and onboard; increased mitigation and sanitation efforts in all cabins and public areas; and managing ship capacity.

The new measures were developed based on medical advice and align with current guidance from the World Health Organization and the German Robert Koch Institute, as well as other governmental and health authorities.

Maximizing Liquidity

Carnival Corporation has raised over $10 billion through a series of financing transactions, and since the "pause" in guest operations has taken actions to preserve cash and secure additional financing to maximize its liquidity. Here are highlights of the liquidity discussion:

  • 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
  • It expects to reduce its newbuild capital expenditures by more than $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. It also has $8.8 billion of committed export credit facilities that are available to fund ship deliveries originally planned through 2023.

“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," said David Bernstein, chief financial officer and chief accounting officer, Carnival Corporation.

Cash Burn Rate

During the pause in guest operations, Carnival Corporation's average cash burn rate for the second half of 2020 is estimated at $650 million per month. That includes $250 million for ongoing ship operating and administrative expenses, working capital changes, interest expense and committed capital expenditures and also excludes scheduled debt maturities.

The company's press release said: "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."

Carnival Corp. also said that "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 also said it expects a net loss on both a U.S. GAAP and adjusted basis for the second half of 2020

Update on Bookings

Despite a substantially reduced marketing and selling "spend," the company continues to see demand from new bookings for 2021. For the first three weeks in June 2020, almost 60 percent of 2021 bookings were new bookings. The remaining 2021 booking volumes resulted from guests using their Future Cruise Credits (FCCs) issued for cancelled bookings. Guests on those line-cancelled cruises either receive an FCC or a cash refund.

Carnival said that, as of June 21, 2020, approximately half of guests affected have requested cash refunds. 

As of June 21, 2020, cumulative advanced bookings for the full year of 2021 capacity currently available for sale remain within historical ranges. That said, pricing is down in the low to mid-single digits range, 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. Some $121 million of Carnival Corp.'s customer deposit balance relates to third quarter sailings and $353 million relates to fourth quarter sailings.

The statement said: "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."

Guests and Crew

The company said it returned more than 260,000 guests to their homes, coordinating with a large number of countries. In addition, it has worked with governments, used its own ships and chartered hundreds of aircraft to repatriate shipboard team members to their home countries. Approximately 77,000 crew members have been sent to more than 130 countries across the glove. 

Carnival Corp. said that's essentially all the onboard workforce with the exception of those who will stay on the ships for "safe manning" while the ships are on hiatus and docked/anchored in ports or offshore at destinations across the globe.

"I could not be more proud of how collectively our team has handled this," said Donald. "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.

He continued: "Also, thanks to our loyal guests, travel partners, shareholders and other stakeholders for their support during this challenging time."

Throughout the pause in guest cruise operations, Carnival Corp. has teamed with the World Travel and Tourism Council and will host an online Global Scientific Summit on COVID-19 on July 28. It's open to the public and free of charge. To register, visit

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