Specialist
Former Senior Director at Carnival Corp
Agenda
- Key trends and developments in the cruise operator industry
- Competitive dynamics, focusing on Carnival Cruise Line's (NYSE: CCL) positioning
- Coronavirus impact on demand, pricing, routes
- Medium- to long-term outlook
Questions
1.
What are your high-level thoughts on the direct impact of the novel coronavirus pandemic on Carnival and the cruise line industry?
2.
How long could this cruise ban last? What is a realistic estimate?
3.
How would you characterise the potential winners and losers in this environment? Which operator is best- equipped to handle the potential liquidity burden?
4.
What percentage of operators’ costs are truly fixed and how much does it vary across the major players?
5.
Food would typically be a fixed cost but is now more of a variable cost, given that operations are at a complete halt. What percentage of the total fixed cost base is food, relatively speaking?
6.
How much does it cost to lay up a ship with minimum personnel and port charges, as you mentioned? How are you assessing that daily, weekly, monthly or annually? What would it cost a company to have a ship in port for three months?
7.
How should we assess the potential storage costs as it relates to a cruise ship’s size?
8.
What would be a sensible cash burn rate for Carnival on a monthly basis?
9.
You said many of the operators are very focused on trimming costs. How much of the SG&A can get trimmed for each player?
10.
Are you aware of any renegotiations with suppliers to further cut OPEX spend, and if so, will it be across the board or on the large spend items only?
11.
How much can CAPEX realistically be reduced by? Is it reasonable to think the CAPEX plans for 2020 or maybe 2021 could be trimmed by 50%? What is reasonable to expect?
12.
What CAPEX would you estimate to replace or upgrade the HVAC [heating, ventilation and air conditioning] systems? The systems on cruise ships are generally not known to be great quality, with recycled air, unlike airlines which are said to have hospital-grade systems. What are your thoughts here?
13.
How would you assess Carnival’s new vessel orderbook, and to what degree can it defer new build payments and deliveries?
14.
Do you think the new ships will be delivered on time? Could we draw anything from what happened on the back of the 2008 financial crisis?
15.
How are you assessing the default risk to the export credit agencies? Can they pull back on already- committed financing for new builds?
16.
Evaluating the situation now, to what extent is it easier to obtain loans through export credit facilities?
17.
If a company has debt secured on a ship now, how easy is it to enforce the asset in case of a default, despite the assets being incorporated in Bermuda, for example?
18.
What do you think each player’s cruise ships would be worth, if any of the companies tries to sell assets?
19.
How does Carnival’s portfolio and value of its vessels compare to other players?
20.
If a ship is built today for USD 1bn, how much would it be worth in maybe 5-10 years, or even 15 years?
21.
How likely is it that ships could be re-purposed? Do you think people would be keen to buy them for another purpose, maybe a floating hotel or as temporary accommodation?
22.
Canada – which is a stopover for Alaska season – closed its ports. What could happen with that route if some players came back online after the 30 day ban?
23.
What do you think would be the trigger for resuming voyages?
24.
What would be some leading indicators that voyages are coming back? What would operators track to get the green light on resuming voyages?
25.
You made an interesting point about the potential approach with airlines. How dependent are the cruise lines on functioning and safe airlines? For example, what percentage of cruise customers fly in for a cruise?
26.
What cancellation rates do you think some of the players are experiencing right now? Obviously, there’s been a lot of heightened fear, and the situation has escalated in the US.
27.
Many of the operators have become more flexible and lenient with cancellation policies, even before the situation escalated. How do you estimate the refund mix across cash and credit?
28.
Royal Caribbean has shifted its refund window from seven days to 10 days to 30 days. How are you reading this? Does it suggest a significant cash crunch if refunds are being delayed?
29.
What are the booking dynamics? Are people still booking cruises?
30.
How is the booking window being affected for the operators? Are loyal cruise customers starting to book for Q3 or Q4 in hopes of normalisation by then?
31.
At what capacity or occupancy rate does it no longer make sense for a ship to sail at all? What level of bookings would an operator need before ships are no longer used? You mentioned some operators testing first, what are the thresholds considered?
32.
What degree of decline in customer deposits do you anticipate through the end of Q1 2020 for Royal Caribbean Cruises? I believe it was around USD 3.4bn year-end 2019.
33.
What redeployment pace are you expecting? Will voyages gradually resume all at once or in phases?
34.
What impact would cancellation rates have on customer deposits and working capital, in general?
35.
Once cruise voyages resume, how quickly will customers go back to cruise lines after the abatement of the virus? What is your outlook on occupancy levels following this crisis?
36.
Do you think the major operators will be relatively disciplined and not flood the market with capacity? If the market is flooded with capacity, who do you think will fare better?
37.
Do you think the major operators will be relatively disciplined and not flood the market with capacity? If the market is flooded with capacity, who do you think will fare better?
38.
How might pricing trend in light of the potential fovercapacity? What pricing discounts are likely, and what on-board revenue decline could occur, if so many free incentives are being handed out to retain deposits and encourage bookings?
39.
Is the situation with the Zaandam vessel comparable to any previous incident? How might Carnival Corp be impacted compared to peers in a similar situation?
40.
How should we think about the potential liability facing the operators due to the coronavirus situations on board their vessels?
41.
Do you expect operators to receive any government help from either the US or Europe, where their shipyards are? What happened during the 2008 financial crisis?
42.
What are your expectations for market positioning across operators, once we exit the pandemic? You said marketing investments will be a focal point, and obviously there will be brand loyalists. How does Carnival compare to peers across respective brand portfolios, pricing, target customer and geographic focus?
43.
How would you assess Carnival Cruise Line’s protocols and health, safety, environmental and sustainability standards vs Royal Caribbean’s and Norwegian’s? Might this have a post-coronavirus impact with temperature checks? Why is it that Carnival Cruise Line-operated vessels had coronavirus-related deaths, or cases in general, while some of the operators didn’t?
44.
What performance expectations do you have for 2021 relative to 2019? What yields could we expect and how could the major operators be positioned, relative to each other?
45.
Could you summarise your thoughts or key takeaways? What will you be tracking to assess industry developments?
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