Norwegian Cruise Line Withdraws Forecast

Norwegian Bliss in Ponta Delgada photo credit Dave Jones

 Norwegian Cruise Line Holdings Ltd on Monday warned of a quarterly loss and withdrew its 2020 forecast, as the cruise operator struggles with the suspension of all voyages through the end of June due to the coronavirus crisis.

The pandemic has halted international travel and effectively shut down the cruise ship and airline industries, with companies, now bleeding cash and scrambling for new funds to ride out the slowdown that could last longer than expected.

Shares of Norwegian Cruise and rivals Carnival Corp and Royal Caribbean Cruises have taken a hit in the past few months as ships remain docked at ports and people wary of taking trips in the future.

The cruise liners are also not eligible to receive funding under the coronavirus stimulus bill since they were not incorporated in the United States, adding to further woes for the companies.

Norwegian Jade Photo was taken from a tender credit Dave Jones

Norwegian Cruise withdrew its forecast for the first quarter and the rest of the year but said it expects to report a loss for those periods. Royal Caribbean has also withdrawn its forecast, while Carnival, which operated two of the virus-stricken cruises, has predicted an annual loss.

Shares of the Miami-based Norwegian Cruise rose about 9%, while those of Royal Caribbean and Carnival were up about 8%. The stocks have lost about three-quarters of their value so far this year.

Norwegian Cruise said it would cut $515 million in spending to boost its cash reserves and estimated cash burn of about $110 million to $150 million per month as suspension of its three brands continue.

The company, which had about $1.4 billion in cash and cash equivalents at the end of March, said on Monday it had $1.8 billion of ticket sales as of March 31, that includes cancellations of about $850 million through June 30.

Despite growing cancellations, Chief Executive Officer Frank Del Rio, was optimistic about future demand, echoing Carnival’s CEO Arnold Donald who has predicted strong 2021 bookings.

“We believe the disruption to the travel industry, while swift and severe, will eventually subside,” Del Rio said.

Norwegian Cruise said booking trends indicate demand for cruise vacations for 2021 is essentially flat, although at lower prices.

Carnival Corp. eyes interbrand cooperation

By Tom Stieghorst

Carnival Corp. will step up efforts to have its 10 brands cooperate to produce cost savings and take advantage of the company’s scale of operations to boost profits, CEO Arnold Donald told analysts last week.

In a conference call to discuss fourth-quarter earnings, Donald indicated that strategy would be a cornerstone of his management of the $30 billion company.

“We do plan to change the focus of our efforts and how we work together,” Donald said. “The brands were fiercely independent in the past and even protected information from each other. So it is a culture change.”

But he reiterated that he will not merge any of the brands.

“Operating our brands independently has been successful, and it has led to our industry-leading position,” he said. “The brands will remain independent, especially at the guest-interface level as they become increasingly distinct in the psychographics of the guests they service.”

ArnoldDonaldDonald made his comments as Carnival reported a 29% drop in Q4 net income, to $66 million. Revenue fell to $3.6 billion, from $3.7 billion.

Carnival forecasted that 2014 profits will be in the range of between $1.08 billion to $1.39 billion after falling 16.8%, to $1.1 billion, this year.

Carnival Corp. Chairman Micky Arison said that having both Carnival Cruise Lines and Costa Cruises in recovery mode led to a fairly wide range in potential profitability in 2014.

“How Wave season shakes out becomes increasingly important,” Arison said.

To date, 2014 bookings for all Carnival brands are running behind the same period a year ago at comparable prices. Carnival said it expects revenue yields in the first quarter to be down 3% to 4% and to recover throughout the rest of the year, entering positive territory in the second half.

In Q4, ticket prices were down 3% and onboard spending was up 1%, producing a 2% decline in yield.

But yields from North American brands, primarily Carnival Cruise Lines, were down 6%. Donald said that public perception and recognition of the Carnival brand have recovered 75% from their low point, according to surveys.

He said the recovery has been faster than originally anticipated. A 6.5% jump in cruise costs in Q4 throughout Carnival Corp. was attributed partly to higher advertising.

Donald said Carnival will continue greater-than-usual marketing expenditures in 2014.

One analyst asked about a critical CNN report on the Carnival Triumph that aired last week. The story, based on discovery in a negligence lawsuit filed by Houston lawyer Frank Spagnoletti, alleged that Carnival officials knew the ship had a “propensity for fires.”

Donald called the lawsuit “frivolous” and said the CNN report “mischaracterized the situation.”

Asked about installing scrubber technology to reduce air pollution, Carnival Corp. CFO David Bernstein said the company now expected that the technology would save a “majority” of the $265 million Carnival had previously estimated it would cost to comply with 2015 requirements of the North American Emissions Control Area.

The company didn’t quantify savings from its planned interbrand collaboration initiatives but said onboard spending and price optimization would be two areas where revenues could be enhanced, while procurement, inventory management and port planning were among cost centers being studied.

Carnival Corp.’s Q4 profit falls, Q1 loss projected

By Tom Stieghorst

Carnival Corp. reported a fourth-quarter net profit of $66 million, a 29% decline from the $93 million earned in the 2012 fourth quarter.

Revenue fell to $3.6 billion from $3.7 billion.

Carnival forecast a loss for the first quarter of 2014 of between $62 million and $85 million on a non-GAAP accounting basis.

For all of 2014, bookings are running behind last year’s levels at comparable prices. Carnival Corp. CEO Arnold Donald said the company continues to believe cruise price comparisons will turn positive by mid-year.

“Even in a challenging year, our company continued to produce strong cash from operations approaching $3 billion,” Donald said, enough to fund capital improvements, a dividend and a stock repurchase program.