Page 29: of Maritime Reporter Magazine (February 2021)

CRUISE SHIPPING

By Barry Parker n early 2021, the somber news from the cruise sector con- tinued. For some cruise brands, their own version of “lock- downs” will have spanned an entire year. By late January,

I 2021, Carnival and others were hesitantly pegging their restarts for April/May 2021, and for some markets, late summer, under a Conditional Sail Order promulgated late last year by the

Centers for Disease Control and Prevention (CDC).

What else to do but look ahead?

In preliminary earnings guidance, Carnival Corporation (NYSE: CCL), CEO Arnold Donald, stressed that the mar- ket leader was “… well positioned to capitalize on pent up demand and to emerge a leaner, more ef? cient company, rein- forcing our industry leading position.” The damage wrought by the industry’s shutdowns in the wake of the Covid-19 pan- demic has been staggering, spawning a defensive posture of vessel scrapping, delayed vessel deliveries, fresh equity rais- es, re? nancing of existing debt with high yield obligations, or even sales of brands to outside investors (as CCL competi- tor RCL did with its Azamara brand), to bolster cash reserves for riding out the ? nancial storm. Carnival Corporation, with 87 vessels in brands including Cunard, Princess and Holland

America, was reporting a loss of $2.2 billion during the quar- ter ended Nov 30, 2020; Royal Caribbean, with a smaller ? eet (61 vessels at end 2020) and a roster including the Celebrity brand, booked a loss exceeding $1.3 billion during the quarter ended Sept 30.

In terms of cash burn, Carnival said average monthly cash burn rate for Q4 2020 was $500 million, and the Q1 2021 number 2021 to be approximately $600 million/month, and its Chief Financial Of? cer noted that, with $9.5 billion in cash at end 2020, “we… have the liquidity in place to sustain our- selves throughout 2021, even in a zero-revenue environment.”

The CCL assertion comports with security analyst estimates;

Truist Securities (BB&T Corporation and SunTrust Banks), in a late 2020 research brie? ng, estimated that the company had 17 months of staying power. Their New York-based ana- lysts, C. Patrick Scholes and Gregory J. Miller, wrote: “In- vestors at the moment, despite continued bad news on sailing delays, consensus estimate cuts, and dilutive equity and debt offerings that impair longer term ability to drive earnings, are looking past these negatives and taking the (very) long view on the eventual vaccine-driven recovery.” In the same report, after noting the uncertainties regarding the timing of wide- spread vaccine roll-outs, they cautioned that: “…we believe that cruise companies will need to raise additional capital to stay a? oat, further depressing earnings.” An example of the deleterious impact on earnings came with RCL’s $201 million www.marinelink.com 29

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