Photo: Image courtesy: Royal Carribean/Meyer Werft

Two newbuilds to join Royal Caribbean’s fleet in 2021 as cruise liner reports massive $5.8 bn loss

 Odyssey of the Seas, Royal Caribbean’s second Quantum Ultra Class cruise ship, is set to join the company’s fleet by the end of the first quarter of this year.

Meyer Werft floated out Odyssey of the Seas in December 2020. The ship then moored at the outfitting pier in the shipyard harbour to receive its masts and chimney.

The ship is the first of a total of two newbuild deliveries slated for this year, Royal Caribbean said reporting its business results for the fourth quarter of 2020 and the entire last year.

The second ship set for completion and delivery in the fourth quarter of the year is Silver Dawn, which is being built by the Italian shipbuilder Fincantieri.

The two ships make up the majority of the company’s capital expenditures planned for this year totaling in $2.1 billion.

Driven primarily by the profound impact of the Coronavirus pandemic, for the full year of 2020, the company reported US GAAP Net Loss of $5.8 billion compared to US GAAP Net Income of $1.9 billion in the prior year. The adjusted net loss stood at $3.9 billion compared to adjusted net income of $2.0 billion in 2019.

For the fourth quarter alone, US GAAP net loss was $1.4 billion a major drop from a net income of $273.1 million for the same period in 2019.

“The COVID-19 pandemic is having a painful and profound impact on our world and our business; unquestionably, this crisis is the most difficult in the company’s history,” said Richard D. Fain, Chairman and CEO.

“We are encouraged to see the sharp decline in cases and the growing availability of vaccines. We can’t wait to get back to the business of showing people the world and making great memories.”

As it relates to 2022, the company has two ship deliveries scheduled, both with committed financing: Wonder of the Seas and Celebrity Beyond

Since the suspension of operations and during 2020, Royal Caribbean divested three ships from its fleet: Celebrity Xperience, Majesty of the Seas, and Empress of the Seas.

The company also divested three ships being used by its Pullmantur affiliate. Additionally, the company announced it entered into a definite agreement to sell its Azamara brand which includes three vessels: Azamara Journey, Azamara Quest and Azamara Pursuit.

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Since the suspension of its global cruise operation, the cruise shipping firm has been working aggressively to bolster its liquidity. Its latest efforts include:

  • Completed a $1.0 billion equity offering;
  • Amended its export credit facilities to defer $0.8 billion of principal amortization due before April 2022 and to waive financial covenants through at least the end of the third quarter of 2022;
  • Received approvals from its export credit agencies to defer an additional $0.4 billion of principal amortization due before April 2022 which are expected to be completed in Q1 2021;
  • Amended over $4.9 billion of commercial bank facilities to provide covenant waivers through the end of the third quarter of 2022 and to reset covenant levels for the balance of 2022 and 2023.

The company estimates its cash burn to be, on average, in the range of approximately $250 million to $290 million per month during a prolonged suspension of operations.

Royal Caribbean has already begun some limited operations. For example, in December, Quantum of the Seas started operating out of Singapore. In addition, its TUI Cruises affiliate has had three vessels operating in the Canary Islands since November. 

“As the company starts returning its fleet into service, it has (with respect to existing operations) and will incur incremental spend as it brings the ships out of their various levels of layup, returns the crew to the vessels, takes the necessary steps to ensure compliance with the recommended protocols and gears up its sales and marketing activities,” the company said.

When it comes to the outlook for 2021, the results are still subject to the impact of COVID-19. However, Royal Caribbean expects to incur a net loss on both a US GAAP and adjusted basis for its first quarter and the 2021 fiscal year.