Former VP at Carnival Cruise Line
- Recent cruise industry developments impacting Carnival Corp (NYSE: CCL)
- Impact of CDC (Centers for Disease Control and Prevention) cruise travel classification on industry recovery timelines
- Carnival's cash burn setbacks and bookings recovery outlook
Could you share the developments that you’re following in the cruise industry?
How could COVID-19 vaccine news – including Pfizer’s vaccine being up for review for emergency use by the FDA [Food and Drug Administration] – impact near-term cruise-booking behaviour from consumers?
Could you segment out the rough mix of cruise enthusiasts vs average cruises customers vs new-to-cruise customers in the industry’s consumer base? What percentage of Carnival’s mix might be cruise enthusiasts, broadly speaking?
How would you split out Carnival consumer demand for smaller ships vs larger ships and adventure cruising vs luxury? Could you also comment on how the consumers split between older and younger and US vs international?
Do you think Carnival might have lost any market share to smaller boat operators due to the pandemic, given the demand trends you outlined?
What are your thoughts on the latest conditional order framework for sailing from the CDC [Centers for Disease Control and Prevention]? How could the framework impact Carnival’s operations and profitability?
How feasible do you think it is to process 1,000-4,000 PCR [polymerase chain reaction] tests at the port before departure? Do the cruise lines have that ability, irrespective of cost?
How much could it cost to build labs on ships that can process PCR tests?
You seem to believe that it may be better for operators to delay the start of cruising until there is a vaccine that passengers have received, given the potential expense of the labs. However, the operators would likely then require more capital to get through 2021. What would be the rationale for operators to build labs and perform testing if they’ll barely make any money while they do it, and in the process open themselves up to legal liability? Do you expect any of the major operators to go one route vs the other?
Do you think the industry can generate any excess free cash flow once it returns to 2019 EBITDA levels? For most cruise lines, interest costs have spiked. CAPEX requirements were mostly delayed, not cancelled. Assuming Royal Caribbean in particular has over USD 1bn in interest expenses and about USD 3bn of likely yearly CAPEX, but only generated USD 3.6bn in 2019 EBITDA, how could they and the broader industry fix this?
The CDC seems to have made it clear that all crew members should have their own cabins. Could we assume that they typically sleep 2-4 to a room?
How many revenue cabins might Carnival have to set aside on a 3,000-4,000-passenger ship so that crew members could have individual cabins, as well as to provide a quarantine area for potentially sick passengers?
What is your view on the sale of Carnival’s 18 ships? What level of additional cash will it free up? Some estimates point to around $2 billion-plus based on vessels sold to-date. Anything to be said on the merits of these sales, perhaps on improved efficiency per ship of its younger remaining fleet?
When is the soonest that you think ship pricing might recover?
How might Carnival adjust where its fleet is placed in the near vs longer term?
Do you think it’s realistic for cruise lines to push up their CAPEX requirements on new builds? The industry seems to currently be on a 6-12-month delay, but could the cruise lines postpone ships to 2-3 years further out?
Consensus estimates from Bloomberg for Carnival’s top-line point to USD 8.73bn in 2021, USD 17.893bn in 2022 and USD 20.917bn in 2023. How realistic do you think these estimates are?
Any closing remarks on Carnival or the broader cruise industry?
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