Profit

Omicron delays return to profits but impact subsides: Royal Caribbean

Reporting a bigger than expected loss in the fourth quarter – $4.78 per share on an adjusted basis from Wall Street expectations of $3.92 – Royal Caribbean said fourth quarter occupancy was 59%, or 65% on major routes. Total revenue per cruise-passenger day increased 10% from record highs in 2019, driven by strong onboard revenue. Total cash flow from vessels in operation turned positive.

Twelve additional ships returned to service.

1.3 million passengers transported in 2021

“In 2021, we made significant progress towards our recovery with over 85% of our capacity back in operations and delivering safe and memorable experiences to approximately 1.3 million customers with record satisfaction scores,” said President and CEO Jason Liberty.

“We expect 2022 to be a solid transition year as we return the rest of our fleet to service and reach historic occupancy levels,” he continued. “Omicron created short-term operational challenges that unfortunately weighed on close bookings. While Omicron’s timing has been particularly unfortunate for H1 2022 bookings and will likely delay our return to profitability for a few months, we do not expect it to affect our overall recovery trajectory and strong demand. cruising.

By the end of 2021, the Group had returned to service 50 of the 61 vessels of its five brands, representing more than 85% of its global capacity. Record spending on board per passenger was recorded.

Omicron caused service disruptions and canceled several first quarter sailings, but Royal Caribbean still expects to operate around 95% of its planned capacity this quarter.

Reservations back to pre-Omicron levels

Fourth quarter bookings were sequentially higher than the third quarter. Due to Omicron, sales declined in December and remained lower through the holiday season, but have started to increase every consecutive week since the start of 2022 and are now back to pre-Omicron levels.

Cumulative early bookings for the second half are within historical ranges and at higher prices, with and without future cruise credits.

The Group plans to return the entire fleet to service before the summer season and with load factors close to historic levels in the third quarter.

Positive cash flow at the end of spring, return to profit in the second half

Royal Caribbean also expects positive operating cash flow in late spring. A net loss in the first half is expected, with a return to profitability in the second half.

Q4 results

Net loss under US GAAP was $1.4 billion, or $5.33 per share, compared to a loss of $1.4 billion, or $6.09 per share a year earlier. Adjusted net loss of $1.2 billion, or $4.78/share, compared to loss of $1.1 billion, or $5.02/share a year ago. Revenue were $982 million, below consensus expectations of $1.04 billion.

Silversea

During the fourth quarter, the company eliminated the three-month reporting lag for Silversea Cruises to reflect the brand’s financial condition, results of operations and cash flows concurrently and in accordance with Royal Caribbean’s fiscal calendar. This resulted in a negative impact of approximately 25 cents per share, which has been excluded from the Group’s adjusted results for transparency and comparability purposes.

52 of the 62 vessels will be in service by the end of the first quarter

Royal Caribbean said service disruptions in the first quarter have eased recently as COVID cases have declined and the overall return to service trajectory remains unchanged. By the end of the first quarter, the Group expects 53 of its 62 vessels to be back in service, with the rest of the fleet returning before the summer season.

First quarter load factors are expected to be lower than originally forecast due to the impact of Omicron, particularly on January departures. As a result, load factors of around 60% are expected on the main routes with sequential monthly improvement. The company expects around 7.7 million cruise passenger days on average in the first quarter and cash flow from ships in operation will be positive.

Australia and China lag behind

Australia should open up to cruises for its summer season. China remains closed and the company has for the time being redeployed vessels planned for China to other key markets, but said it remained optimistic about seizing long-term growth opportunities in China.

Second half load factors in historical ranges at higher prices

First half 2022 Sailing load factors are expected to remain below historical levels, while second half passenger load factors continue to be booked within historical ranges, at higher prices with and without FCC.

Delayed and prolonged wave period

“After a record-breaking Black Friday and Cyber ​​Weekend in the US, the spread of the Omicron variant led to slower booking volumes and increased short-term cancellations,” said CFO Naftali Holtz. “Similar to our experience after Delta, we expect reservations to increase significantly as we move past the peak of cases. We are already seeing cancellations decline and bookings improving to pre-Omicron levels, and we have adjusted our sales and marketing efforts in anticipation of a delayed and extended wave period.

Customer deposits

As of December 31, the company had approximately $3.2 billion in customer deposits, an improvement of approximately $400 million from the prior quarter despite the significant quarter-over-quarter increase in revenue recognition and short-term write-offs due to Omicron, both of which reduce customer deposit balances. The customer deposit balance at the end of the year for Q2 2022 forward crossings was greater than the balance held at the end of 2019 for Q2 2022 forward crossings.

Approximately 32% of customer deposit balances are linked to FCCs, compared to 35% in the previous quarter, a positive trend indicating new demand.

Liquidity

As of December 31, liquidity was $3.5 billion, which excludes proceeds from the January 7 $1 billion debenture issue.

In 2021, the company restored access to unsecured markets and refinanced $2.3 billion of secured and/or guaranteed debt, in some cases reducing the coupon by up to 600 basis points.

In January, the Group issued $1 billion of 5.375% senior unsecured notes due 2027. The company plans to use the proceeds to repay the principal of debt maturing in 2022.

There are currently $2.3 billion in debt maturities scheduled for 2022.

See also “Bayley Predicts Downgrade of CDC Cruise Warning, Relaxing Protocols” and “We See Opportunity”: Bayley on Genting Hong Kong’s Disappearance”