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Royal Caribbean Group reports first quarter loss, but cash flow approached breakeven in March

In:
05 May 2022
By: 
Matt Hochberg

Royal Caribbean Group posted its first quarter earnings on Thursday, which reported another billion dollar loss. 

Freedom of the Seas aerial at Nassau

The good news for the company is it expects a return to net profit for the second half of 2022. In fact, operating cash flow significantly improved throughout the first quarter and approached breakeven in March. Operating cash flow turned positive in April 2022.

Royal Caribbean Group had a first quarter 2022 operating loss of $1.2 billion. 

Cruise ships sailed with more passengers in the quarter, and total revenue per Passenger Cruise Day up versus record 2019 levels.

Royal Caribbean's quarter by the numbers

Royal Caribbean headquarters in Miami

Royal Caribbean Group shared some interesting facts in its update to Wall Street.

First and foremost, Royal Caribbean Group expects a return to net profit for the second half of 2022.

Read moreWho owns Royal Caribbean?

Voyager of the Seas in Estonia

By the end of the quarter, 90% of the company's worldwide fleet was back in service, with 54 out of 62 ships back in service. The plan is to return the full fleet to operations before the summer season of 2022.

Approximately 800,000 guests sailed on a Royal Caribbean Group ship in the first quarter.

Bookings in the first quarter were higher than in the fourth quarter of 2021, and throughout the first quarter, bookings improved each week. In March and April, booking volumes have been significantly higher than the same period in 2019.

Symphony of the Seas in PortMiami aerial

Looking to the future, 2023 is booked, "within historical ranges at record pricing."

The supply chain issues the entire world is dealing with is no stranger to Royal Caribbean Group.  The primary issues facing the cruise giant is mainly related to fuel and food costs, as well as transitory costs related to health and safety protocols, which are expected to weigh on 2022 earnings.   

First quarter results

Royal Caribbean Group posted a $1.2 billion dollar loss in the first quarter. The Company also reported Adjusted Net Loss of $1.2 billion.

The Net Loss and Adjusted Net Loss for the quarter are primarily the result of the continued impact of the COVID-19 pandemic on the business.

Cruise ships sailing in the first quarter averaged a capacity of 59%. Month-by-month, capacity generally went up with March capacity averaging 68%.

Total revenue per Passenger Cruise Day in the first quarter was up 4% versus record 2019 levels driven by continued strong onboard revenue performance. The term "onboard revenue performance" refers to passengers buying extras for their cruise, such as drink packages, wifi, or excursions.

In fact, spending onboard was so strong that cash flow from ships in operation was positive in the first quarter. 

Royal Caribbean Group Chief Financial Officer Naftali Holtz said getting back to profitability is the focus now, "Our near-term focus is to return to full operations and profitability as we execute on our recovery and build for long term success."

Bookings

Odyssey of the Seas

Booking volumes in the first quarter improved consistently week-over-week and reached typical Wave levels at the end of the quarter.  The term "wave season" refers to the sales period in the beginning of the year when cruise ship bookings are generally the best of the year.

Bookings have now been surpassing comparable 2019 levels for the last two months with particularly strong trends for North America based itineraries. 

The amount of cancelled cruises the company was seeing subsided to pre-Omicron levels in February.

Effect of the Ukraine War

Ukraine flag

Bookings for Europe sailings improved throughout the first quarter but softened due to the war in Ukraine with a bigger impact on Baltic itineraries.  

While bookings for Europe are now exceeding 2019 levels for the same period, the situation in Ukraine is expected to weigh on load factors in Europe this summer. 

Future cruise credits

Vision of the Seas sailing away

As of March 31, 2022, the company's customer deposit balance was $3.6 billion. This is a $400 million increase from the previous quarter.

Approximately 27% of the customer deposit balance is related to FCCs compared to 32% in the prior quarter, a positive trend indicating new demand. To date, approximately 56% of FCCs have been redeemed.