Norwegian Cruise Line Holdings' Frank Del Rio is brimming with optimism for his company, despite Covid-19’s yearlong shutdown of sailing that cost the industry billions of dollars.
In fact, the chief executive actually expects the Miami cruiseship owner to have its greatest year ever next year.
“The proof is in the pudding,” he said during an interview held last week with Goldman Sachs chief executive David Solomon.
“In terms of future bookings, they’re strong as they've ever been and … if we can indeed operate the itineraries we’re selling, 2022 could be a record year. That's how much pent-up demand there is.”
As of 31 March, Norwegian had $1.3bn of advance ticket sales, including about $850m of future cruise credits.
Pent-up demand
Del Rio said 50m Norwegian passengers put their cruise plans on hold for 2020 and 2021, and they are eager to sail again as soon as they can.
“They want to come back to the high seas,” he said.
And Norwegian is ready and able to accommodate that demand for years to come with nine ships on order that will be delivered in the next few years, he said.
What makes the expected rebound almost miraculous, Del Rio said, is that Washington nearly killed the entire industry with restrictions that no other US sector came close to facing.
On top of that, the business received absolutely no help from Uncle Sam, he said.
“No industry took it on the chin like ours did,” he said. “We had to fend for ourselves.”
Del Rio gave huge thanks to Goldman Sachs for providing New York-listed Norwegian with $2.4bn in loans in one afternoon during the pandemic’s early days.
“While I was talking to your team in the morning, I was talking to bankruptcy counsel in the afternoon because had we not been successful doing what you guys did, we would have had to file,” he said.
Standing up to Uncle Sam
Looking back, Del Rio said his industry should have not let the US Centers for Disease Control and Prevention (CDC) label it as a Covid-19 “superspreader” and shut it down for so long with no direction.
“We thought the issue would go away a lot faster than it did and we didn't want to make waves with our regulator,” he said.
“We just allowed ourselves to be put in a corner, be labelled what we were labelled erroneously and I think that sort of just perpetuate itself.
“If I had to do it all over again, I would have been a lot more aggressive, a lot more vocal that we should not have been treated differently. They would literally not talk to us.”
Del Rio said Covid-19 also taught his company to carry much more liquidity on its balance sheet as a precaution against unexpected events like the pandemic.
Norwegian has $3.5bn in cash against $12.2bn in debt as of 31 March. On 6 May, it posted a $1.37bn deficit for the first three months of 2021, marking its fifth consecutive quarter of losses.
Having the extra cash will also protect Norwegian from inflation, he said, but he’s not too worried about that anyway.
“I see that we've been able to raise prices even more, so I'll take a 5% inflationary factor on pricing and on cost,” he said.
Vaccine to the rescue
Norwegian also got an early start on meeting the CDC’s requirements for sailing by forming a Healthy Sail Panel led by former US Food and Drug Administration commissioner Scott Gottlieb and former Utah governor Mike Leavitt, but the CDC still would not cooperate with the company.
“We teamed up with Royal Caribbean Group — one of our nemeses,” he said.
“The CDC did nothing with it, so our saviour has been the vaccine.”
At the end of the day, Norwegian is well-positioned for success in the post-Covid era, especially since it has billions of dollars in borrowed cash on its books, he said.
“What do I do with all this cash? I can't buy back debt yet and I can't buy stock yet, and it would be stupid to a dividend I can't pay back,” he said.
“There may be an acquisition in the future because we we've got cash and and we know how to run a cruise line.”
