Royal Caribbean Group Loses $1.3 Billion in Q3, Talks Cash Burn

Odyssey of the Seas
Odyssey of the Seas(Photo by Royal Caribbean)

Royal Caribbean Group, the world's second largest cruise company, reported a $1.3 billion net loss in third quarter 2020, and is burning cash at a rate of $250 million to $290 per month.

The good news is that the company recently bolstered its liquidity through the sale of common stock, senior guaranteed notes and a convertible bond issue. The group's third quarter financial statement said the company is working "to prioritize and bolster its liquidity, working to ensure it is well positioned for recovery."

Booking Update

As for its quarterly booking update, Royal Caribbean Group said: "The cumulative booked position for sailings in the second half of 2021 is within historical ranges with prices that are down slightly year-over-year when including the negative yield impact of bookings made with future cruise credits (FCC) and the company's 'Lift and Shift' program."

Separately, some 50 percent of the guests booked on cancelled sailings have requested refunds.

Resumption of Cruises

In December, the company will begin its first sailings by the Royal Caribbean International brand since early spring; those Quantum of the Seas' voyages from Singapore are solely for Singaporeans. Royal Caribbean Group has also operated cruises over the past few months on TUI Cruises, Hapag-Lloyd Cruises and, for a brief time, on one Silversea Cruises' ship. But for now, most of the company's brands and ships are not sailing. 

Financial Impact

The company said that it's continuing to work with government and health authorities worldwide to address the challenges presented by COVID-19 and expects to restart its global cruise operation in a phased manner. While restarting is a positive factor as it encourages new bookings, it also incurs costs. For example, a restart involves bringing ships out of various levels of lay-ups, returning crews to ships, complying with new health/safety protocols and restarting sales and marketing activities. 

"We continue to aggressively manage our spend and take opportunistic actions to bolster our financial position," said Jason Liberty, executive vice president and CFO, in the update. "Moreover, we are optimistic that with the gradual resumption of cruise operations, our cash flow from operations will sequentially improve, driven by an increase in the influx of customer deposits."

As of September 20, the company's liquidity was approximately $3.7 billion including $3 billion in cash.

Upcoming capital expenditures include the new ship deliveries of Silversea's Silver Moon, being delivered this week; Royal Caribbean's Odyssey of the Seas arriving during the first quarter 2021 and Silversea's Silver Dawn, with delivery set for fourth quarter 2021.

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