Royal Caribbean issued an update on Friday on how the COVID-19 pandemic has impacted its business.

The cruise line has not offered any cruises since it announced a voluntary suspension of its global cruise operations from March 13, that will last through at least June 11, 2020. More cancelled cruises are possible, as continued disruptions to travel and port operations in various regions may result in further suspensions. 

Royal Caribbean also said it is working towards, "developing a comprehensive and multi-faceted program" that addresses the public health challenges posed by COVID-19. These efforts will include among other things, enhanced screening, upgraded cleaning and disinfection protocols and plans for social distancing.  

The Company will continue to work with the Centers for Disease Control and Prevention, global public health authorities and national and local governments to enhance measures to protect the health, safety and security of guests, crew and the communities visited when we are out of service and once operations resume.

Cruise Bookings Situation

It should come as no surprise to hear that the COVID-19 outbreak has taken a hit on the cruise line's bookings.

Prior to the pandemic, Royal Caribbean began the year in a strong booked position and at higher prices compared to the previous year. But since the virus, booking volumes for the remainder of 2020 are meaningfully lower than the same time last year at prices that are down low-single digits.

Due to the suspension in sailings, booking trends reflect elevated cancellations for 2020 and more typical levels for 2021 and beyond. 

Although still early in the booking cycle, the booked position for 2021 is within historical ranges when compared to same time last year with 2021 prices up mid-single digits compared to 2020.

As of March 31, 2020, the Company had $2.4 billion in customer deposits.  This includes approximately $0.8 billion of future cruise credits related to previously announced voyage cancellations through June 11, 2020.

Liquidity Situation

"Since late January, we have undertaken several proactive measures to mitigate the financial and operational impacts of COVID-19." said Jason T. Liberty, executive vice president and CFO.  "Our focus is on bolstering liquidity through significant cost cutting, capital spend reductions, and other cash conservation measures.  In addition, the Company is considering additional financing sources.  We continue to evaluate all options available to us to further enhance liquidity."

As of April 30, 2020, the Company had liquidity of approximately $2.3 billion all in the form of cash and cash equivalents.  On May 4, 2020 the company increased the 364-day senior secured credit facility and drew $150 million, further enhancing the Company's liquidity profile.

In order to cut costs, Royal Caribbean has taken the following actions:

Reduced Operating Expenses

The Company has taken significant actions to reduce operating expenses during the suspension of its global cruise operations:

• Significantly reduced ship operating expenses, including crew payroll, food, fuel, insurance and port charges
• The Company's ships are currently transitioning into various levels of layup with several ships in the fleet transitioning into cold layup, further reducing operating expenses
• Eliminated or significantly reduced marketing and selling expenses for the remainder of 2020
• Reduced workforce by approximately 26 percent of more than 5,000 shoreside employees in the US
• Suspended travel for shoreside employees and instituted hiring freeze across the organization.

The Company estimates that its average ongoing ship operating expenses and administrative expenses is approximately $150 million to $170 million per month during the suspension of operations.  The Company may seek to further reduce this average monthly requirement under a prolonged non-revenue scenario.

Reduced Capital Expenditures

Since the last earnings call, the Company has identified approximately $3.0 billion and $1.4 billion of capital expenditure reductions or deferrals in 2020 and 2021, respectively. The 2020 reductions and deferrals are comprised of:

• $1.2 billion, of non-newbuild, discretionary capital expenditures and
• $1.8 billion in reduced spend or deferred installment payments for newbuild related payments which the Company is currently finalizing.

The Company believes COVID-19 has impacted shipyard operations and will result in delivery delays of ships previously planned for delivery in 2020 and 2021.

Debt Maturities, New Financings and Other Liquidity Actions 

Since the last earnings call, the Company has taken several additional actions to further improve its liquidity position and manage cash flow:

• Increased the capacity under its revolving credit facilities by $0.6 billion, and fully drew on both facilities
• Entered into a $2.35 billion 364-day senior secured credit facility with an option to extend (secured by 28 ships with a net book value of approximately $12 billion as of March 31, 2020) 
• Obtained a $0.8 billion, 12-month debt amortization and financial covenant holiday from certain export-credit backed facilities
• Amended its non-export-credit backed bank facilities to incorporate a 12-month financial covenant holiday
• Agreed with its lenders that it will not pay dividends or engage in stock repurchases.

As of May 5, 2020, expected debt maturities for the remainder of 2020 and 2021 are $0.4 billion and $0.9 billion, respectively. 

The Company estimates its cash burn to be, on average, in the range of approximately $250 million to $275 million per month during a suspension of operations.  This range includes ongoing ship operating expenses, administrative expenses, and debt service expense, hedging costs, expected necessary capital expenditures (net of committed financings in the case of newbuilds) and excludes cash refunds of customer deposits as well as cash inflows from new and existing bookings.  The Company is considering ways to further reduce the average monthly requirement under a prolonged out-of-service scenario and during start-up of operations.

The Company continues to identify and evaluate further actions to improve its liquidity.  These include and are not limited to: further reductions in capital expenditures, operating expenses and administrative costs and additional financings.

On March 10, 2020, the Company withdrew its first quarter and full-year 2020 guidance.  The magnitude, duration and speed of COVID-19 remains uncertain.  As a consequence, we cannot estimate the impact of COVID-19 on our business, financial condition or near or longer-term financial or operational results with reasonable certainty, but we expect to incur a net loss on both a US GAAP and adjusted basis for the first quarter ended March 31, 2020 and the 2020 fiscal year; the extent of which will depend on the timing and extent of our return to service.

Royal Caribbean announced today it has extended its global voluntary suspension of sailings through June 11, 2020 due to the COVID-19 pandemic.

As a result of this new extension of cancelled sailings, Royal Caribbean expects to return to service on June 12, 2020.

This is the third time Royal Caribbean has cancelled sailings due to the health crisis, with the first set of cancelled sailings through April 10, then they cancelled all cruises through May 11.

Royal Caribbean had already cancelled all Canada, New England, and Alaska sailings through June 30, due to Canada closing all of its cruise ports.

There is a slight change to the policy on Future Cruise Credits for guests who had cancelled sailings between May 12 - June 11, 2020. They can choose between a 100% refund or 125% Future Cruise Credit. Future cruise credits must be redeemed by January 1, 2021 and sail by April 30, 2022. In addition, the deadline to request to change a future cruise credit to a refund deadline is December 31, 2020. 

Guests who had cancelled sailings between March 14 - May 11 must redeem their future cruise credits and sail by December 31, 2021.  They may request a future cruise credit to be changed to refund by December 31, 2021.

Any pre-purchased amenities and packages, such as internet, beverage, dining or RoyalUp upgrades, will be automatically refunded. Royal Caribbean Travel Protection will also be refunded.

Guests can opt-in to convert all Cruise Planner purchases into an Onboard Credit valued at 125% of the total amount paid. This offer is available to choose before it expires on May 4, 2020.

The announcement comes a day after Royal Caribbean reduced its U.S. workforce by 26%, and less than a week after the U.S. Centers for Disease Control and Prevention issued an extended “no-sail” order for cruise ships operating out of U.S. ports. The “no-sail” order could remain in effect through late July.

Competitor Carnival Cruise Line announced earlier this week it would cancel all of its worldwide sailings through June 30.

Helpful resources

• What should you do if Royal Caribbean cancels your cruise because of coronavirus pandemic?
• Should you reschedule your Royal Caribbean cruise in 2020 or 2021?
• How to cancel your Royal Caribbean cruise if you are concerned about Coronavirus
• More information on the Cruise with Confidence program

Royal Caribbean has advised travel agents that a decision on more cruise cancellations could come in the next day or two.

Royal Caribbean Senior Vice President of Sales and Trade Support & Service Vicki Freed spoke to travel advisors in a weekly webcast and started off the call with an update on the impact of future sailings being affected by the recent 100 day 'No Sail Order' by the CDC.

Freed indicated that while Royal Caribbean "is still evaluating" what the 'No Sail Order' means to the cruise line, she said, "we are going to come out with a statement on our suspensions in the next day or so."

Later in the call, a question was asked about the possibility of Royal Caribbean offering cruises later this summer in Europe (and a similar question was asked about Alaska), and Freed answered, "We do hope to be cruising in August out of Barcelona, and that's why when we announce suspensions, we are only announcing at 30 days in advance.

"Things can change rather quickly with this coronavirus, so our goal is to be cruising in Europe, but again, we all have to take it day by day."

Royal Caribbean has already cancelled all of its sailings from March 14 through May 11, in addition to all Canada, New England, and Alaska sailings cancelled through June 30.

Carnival Cruises has already announced it will cancel its sailings through the end of June.

Royal Caribbean has reduced its workforce by 26% through a combination of permanent layoffs and 90-day furloughs with paid benefits.

The Miami Herald reported the workforce reduction, as confirmed by Royal Caribbean chief communications officer Rob Zeiger.

The layoffs and furloughs are a result of the COVID-19 pandemic that has greatly impacted the entire cruise industry. Royal Caribbean has been under a voluntary global shutdown since mid-March that extends through mid-April, although that could certainly be extended as well.

The CDC has issued a 100-day no-sail order, and Carnival Cruise Line has already cancelled sailings through the end of June.

Royal Caribbean has stated it is "studying" the new CDC regulation before making any changes.

In light of the global health crisis, Royal Caribbean Cruises Ltd. has altered the loans it took out to finance Anthem of the Seas and Spectrum of the Seas in order to take advantage of a 12-month debt holiday.

The deal was made between Royal Caribbean Cruises Ltd and Euler Hermes Aktiengesellschaft on April 8, and it essentially means Royal Caribbean to skip a few payments without accruing additional interest. Moreover, it provides the cruise line with $200 million of incremental liquidity through April 2021.

The deferral period is between April 1, 2020 and March 31, 2021. The deferred money will be repayable in eight equal semi-annual installments between April 2021 and October 2024.

In addition, Royal Caribbean amended the export-credit backed loan facility incurred to finance Celebrity Reflection in order to incorporate the benefits of the Debt Holiday. Across these three facilities, the Debt Holiday initiative will generate $200 million of incremental liquidity through April 2021.

Royal Caribbean is also looking into taking advantage of the debt holiday initiative across the remainder of their Hermes-backed facilities.

The loan amendment has a few stipulations, including Royal Caribbean Cruises Ltd. may not take certain actions including:

• Payment of dividends
• Repurchase of stock
• Issuance of debt or equity other than for liquidity

With the news of the CDC announcing measures to prohibit cruises from the United States until the COVID-19 pandemic passes, many have been wondering what Royal Caribbean will do as a result.

Royal Caribbean Cruises Ltd. issued a brief statement that they are aware of the order, "and are studying how best to respond to its provisions."

The cruise line reiterated its current plan, which has all cruises suspended around the world through May 11, 2020. Royal Caribbean has already cancelled sailings for Canada, New England and Alaska until July 1, 2020.

It stands to reason that Royal Caribbean is evaluating options based on this new order, as well as the daily changing events related to the spread and containment of COVID-19.

Late on Thursday, the Centers for Disease Control and Prevention extended its “No Sail Order” for all cruise ships by 100 days, or if certain other conditions are met.

There are three conditions the CDC set forth as means to end the current provision:

1. The expiration of the Secretary of Health and Human Services’ declaration that COVID-19 constitutes a public health emergency
2. The CDC Director rescinds or modifies the order based on specific public health or other considerations
3. 100 days from the date of publication in the Federal Register

Royal Caribbean has not had any cruises in operation since they ended them in mid-March. Since then, they have extended their suspension an additional 30 days, with a plan to resume sailings on May 12, 2020.

The Centers for Disease Control and Prevention extended its “No Sail Order” for all cruise ships by 100 days.

The No Sail Order aims to combat the spread of COVID-19 in the United States by ceasing operations of cruise ships in US waters. It requires that cruise lines develop a comprehensive, detailed operational plan approved by CDC and the USCG to address the COVID-19 pandemic through maritime focused solutions, including a fully implementable response plan with limited reliance on state, local, and federal government support. 

The order will remain in operation until the earliest of these three situations:

1. The expiration of the Secretary of Health and Human Services’ declaration that COVID-19 constitutes a public health emergency
2. The CDC Director rescinds or modifies the order based on specific public health or other considerations
3. 100 days from the date of publication in the Federal Register

In the meantime, cruise ship operators are not allowed to disembark travelers (passengers or crew) at ports or stations, except as directed by the USCG, in consultation with HHS/CDC personnel, and as appropriate, as coordinated with federal, state, and local authorities.

Additionally, cruise ship operators should not embark or re-embark any crew member, except as approved by the USCG, in consultation with HHS/CDC personnel, until further notice.

“We are working with the cruise line industry to address the health and safety of crew at sea as well as communities surrounding U.S. cruise ship points of entry,” said CDC Director Robert Redfield.  “The measures we are taking today to stop the spread of COVID-19 are necessary to protect Americans, and we will continue to provide critical public health guidance to the industry to limit the impacts of COVID-19 on its workforce throughout the remainder of this pandemic.”

Currently, there are approximately 100 cruise ships remaining at sea off the East Coast, West Coast, and Gulf Coast, with nearly 80,000 crew onboard.

The CDC is aware of 20 cruise ships at port or anchorage in the United States with known or suspected COVID-19 infection among the crew who remain onboard.

With Royal Caribbean suspending all of its sailings until the current crisis clears, many cruisers are wondering what it will be like once cruising resumes.

Last week a Harris poll indicated few would be eager to return to cruising anytime soon, but RoyalCaribbeanBlog readers were quick to point out the sample size was small and not indicative of cruise fans.

Part of the conundrum facing not only Royal Caribbean, but also cruise fans is when they would feel comfortable going back onboard.  To that point, I asked our Facebook followers if they would feel comfortable going on a Royal Caribbean cruise once it resumes.

This not-so-scientific poll ran for about 24 hours, and a lot of people responded fairly quickly.

At the time of writing this post, over 2,100 responses were received, and an overwhelming 1,300 people answered yes, they would feel comfortable going on a Royal Caribbean cruise right away.

On the other hand, 604 people said no they would not, with a smaller fraction (220) answering "maybe".

In addition to the poll, there were plenty of comments and rationale for how everyone voted.

"YES! A GA-ZILLION TIMES YES!!!!"

Of the comments made to the poll, a significant amount were simply stated along these lines.  A lot of cruisers seem to be ready, willing and able to hop back onboard once conditions are right.

"We should expect severe changes in cruising. Medical reports from doctors prior to boarding. Hand washing required or you will removed from the ship. Less chairs by the pool."

Responses like this were not uncommon.  While cruising will resume at some point, the onboard experience may look significantly different, especially in the first few months.

Royal Caribbean has not commented on what changes we can expect onboard, but a heightened approach to guest cleanliness is almost certainly to be expected.

"Maybe. We're booked for November and I still plan on going but I want to see conditions before I am 100% sure. If covid comes back with a new wave, no, I don't want to chance it. Right now it's just too soon to tell."

While the votes for "maybe" were the least voted on option, a great deal of comments erred on the side of cautious optimism. It seems many want to vote yes, but were hesitant to fully commit until the overall situation is clearer.

"If Royal Caribbean says it's time to cruise , Its time to cruise, I trust this company more than I trust most people."

Being that this is a blog about Royal Caribbean written by, and for, Royal Caribbean fans, it was not too surprising to see comments like this. Many cruisers are eager to return to their favorite kind of vacation on their favorite cruise line.

"I answered “Yes” but honestly it’s with a pretty big asterisk. We will definitely cruise again - just not sure how soon I want to congregate with so many people in confined space. That said, we are still booked on an Alaskan cruise in August ... and would likely go if it’s not another wise cancelled; my thought bring it might not be an overly crowded sailing."

This comment raised an interesting observation that in the short term, ships may be far less crowded than we were used to prior to the pandemic outbreak. This remains to be seen, but it may put some concerns at ease if ships are not completely full off the bat.

The winner for the best GIF reaction to the poll was this:

Your thoughts

If you missed out on the poll, let us all know in the comments below what you think. Will you be ready to cruise as soon as Royal Caribbean resumes? Or will you be waiting a few weeks or months before getting back onboard?

Two crew members from Royal Caribbean's Oasis of the Seas were evacuated off Oasis of the Seas in Port Everglades on Sunday evening.

The Miami Herald reports the two crew members were "showing COVID-19 symptoms."  The evacuations were made possible with the assistance of the U.S. Coast Guard.

Oasis of the Seas is not conducting cruises with guests onboard.  Royal Caribbean has been shutdown since mid-March, but their ships remain sailing until the industry is ready to resume service.

At least 14 crew members on board have tested positive for COVID-19 on Oasis of the Seas.

On March 30, one Oasis of the Seas crew member and one Symphony of the Seas crew member were evacuated with respiratory problems. On April 2, two more Oasis crew members were evacuated to Broward Health hospitals.

The U.S. Centers for Disease Control and Prevention (CDC) has updated its recommendations for cruise ship travelers during the COVID-19 pandemic.

These new recommendations were released over the weekend, and are aimed at ensuring cruisers get home as quickly and safely as possible.

The CDC is coordinating these efforts with the Coast Guard, Customs and Border Protection, port authorities, local and state health departments, and Department of State.

Most notably, the CDC recommends that cruise lines get passengers who have no symptoms or mild symptoms off the ship as quickly and safely as possible in the United States, and ensure they get home directly via chartered or private transportation.

The CDC specifically says commercial flights and public transportation should not be used.

Prior to this recommendation, the CDC said it was acceptable for passengers who exhibited no symptoms and passed a temperature check to travel on on commercial flights or public transportation, assuming they wore a face mask and self-isolated for 14 days once home.