Carnival Projects Full Fleet Operations and Return to Profitability

Carnival Corporation expects to return to profitability during the third quarter as they continue to make good progress with the restart of operations despite recent challenges. The world’s largest cruise company reports that it has successfully restarted three-quarters of its fleet with plans to have most operations back completely in the coming months. After significant cutbacks in its fleet in 2020, Carnival now plans more consistent levels of growth with fleet management removing three additional ships this year.

The cruise company under its different brands, reports that it has returned 64 ships to guest operations primarily in North America and Europe, as well as a few ships in South America, and starting in May 2022 will resume operations in Australia. The only major market that remains closed is China but regardless of the timeline for Asia, the company is confident that they are on course for their recovery after the pandemic. To date since the operational restart began Carnival said more than 2.2 million passengers have taken one of their cruises and more than 70,000 crew have returned to work.

Speaking to investors for an update, Arnold Donald, President and CEO of Carnival Corporation, highlighted the company’s achievements over the past two years saying that Carnival had been able to 
reduce monthly adjusted EBITDA losses by 40 percent since mid-2020 while also completing more than $29 billion in capital raising and refinancing more than $9 billion of debt.  

“We now expect each brand's full fleet to be back in guest cruise operations for its respective summer season where we historically generate the largest share of our operating income,” said David Bernstein, Chief Financial Officer of Carnival Corporation during the investor update. He highlighted that 10 additional cruise ships returned to service during the company’s first quarter of FY 2022, taking operating capacity from 47 percent of their fleet to 60 percent, and with additional ships returning to service have now reached 75 percent of the fleet based on capacity.

“With improved recent booking trends leading the way, driving customer deposits higher, positive adjusted EBITDA is clearly within our sights,” forecast Bernstein saying that while the company would still report a loss for the full year, they expect the company should reach profitability during the third quarter. For the next fiscal year, he projected that Carnival’s brands would carry nearly 14 million guests “generating potentially greater adjusted EBITDA than 2019.”

Occupancy aboard the cruise ships is also rebounding. Challenges including the surge in COVID-19 early in 2022 meant they experienced a lowered than expected 54 percent occupancy on cruises in January but they reported it is growing with nearly 70 percent occupancy so far for March and more than 40 sailings exceeding 100 percent occupancy. They are also experiencing strong onboard revenues from passengers which nearly equally ticket revenues in the quarter for total revenue of more than $1.6 billion. Drydocking and other expense increases including fuel contributed to a quarterly net loss of more than $1.9 billion.

Another factor helping to drive the company’s positive outlook is the ongoing revitalization of its fleet. Donald highlighted that a quarter of the company’s ships will be new or recently introduced when they complete the return to service. With the full fleet in service in 2023, the company will have an eight percent capacity increase over 2019, while having also accelerated the removal of 22 older and smaller ships from across the brands. 

This year, the company plans to remove three additional ships from the fleets. One of the ships, the Carnival Sensation, departed last week from Miami bound for the recycling operations in Turkey. Built in 1993 as the third vessel in the 70,000 gross ton Fantasy class, and with a capacity of 2,000 passengers, she at the time was among the largest cruise ships in service. Carnival Cruise Line announced earlier this year that it had decided not to return her to service after the pandemic and they are also planning to retire her sister ship the Carnival Ecstasy in the fall of 2022.

Carnival did not identify the third ship leaving the fleet but in January 2022 they sold the 1999 built AIDAMira. The 48,000 gross ton cruise ship had sailed for the company’s Costa and later AIDA cruise brands. The ship was delivered to a start-up cruise line named Ambassador Cruises that plans to return her to service in 2023 as the Ambition.

As the company continues to follow its strategy to rebuild the operations after the pandemic, Carnival Corporation noted that it has slowed its growth expectations. The corporation has reduced its capacity growth to 2.2 percent compound annually from its pre-pandemic rate of 4.5 percent. The expectation is that it should enable the corporation to capitalize on pent-up demand on intentionally constrained capacity.