Royal Caribbean Group may sell some of its ships as it tries to survive the Covid-19 downturn, having already sent three to the scrap pile.
The Richard Fain-led owner of 59 vessels has yet to announce any decisions to offload more assets, but the company, which has posted losses for two consecutive quarters, is keeping that option on the table.
"Certainly in this time, we are evaluating opportunities to sell ships or take other actions with ships," chief financial officer Jason Liberty said Monday in its second-quarter earnings call with analysts.
"As that information comes live, we would of course update the investment community on that."
Royal Caribbean on Monday revealed a $1.64bn loss for the second quarter versus a $473m profit for the same period in 2019.
That makes for the second consecutive quarter showing a deficit, the first quarter coming in at a loss of $1.44bn against a $250m profit a year ago, well before the pandemic brought the cruise sector to its knees.
Headed to the scrap pile
Royal Caribbean has destined Pullmantur Cruises' 73,500-gt Sovereign (built 1987), 73,397-gt Monarch (built 1991) and 47,400-gt Horizon (built 1990) for scrapyards in Aliaga, Turkey.
These ships are headed for the cutting torch as Pullmantur goes through reorganisation under Spanish insolvency laws.
Liberty stressed, however, that scrapping any Royal Caribbean ship would be done reluctantly, given how much money has been put into these floating moneymakers.
"These ships do exceptionally well, so it's definitely a difficult decision to depart the ships because they do generate so much cash," he said.
But scrapping has always been part of doing business for Royal Caribbean, which typically scraps one or two vessels per year and has 13 newbuildings on order through 2025, according to VesselsValue.
"Our philosophy on this is if we don't think we have a good plan for that ship for it to be creating sizeable returns or it's difficult to make it a strategic fit to our brand by modernising and so forth, we have looked to sell ships," Liberty said.
Carnival Corp, Royal Caribbean's larger competitor, plans to sell 15 ships, a move that would bring its fleet count to 90 vessels as it navigates through the no-revenue pandemic.
Arnold Donald-led Carnival's orderbook consists of 18 newbuildings set for delivery through 2028, VesselsValue data shows.
Norwegian Cruise Line Holdings strives to keep all 28 of its ships with plans to add more vessels when Covid-19 is no longer a factor.
The Frank Del Rio-led owner has six newbuildings on order through 2027.
Good day on Wall Street
All three cruise majors have seen gains up to just before the closing bell in New York on Monday.
Royal Caribbean shares, which trade on the New York Stock Exchange as RCL, jumped 10% to $57.32.
Carnival's stock, which also trades on the New York Stock Exchange under the ticker symbol CCL, shot up 8.5% to $15.42.
Norwegian's units, which can be found on the Nasdaq stock market as NCLH, gained 9.8% to $57.14.
