Royal Caribbean delays newbuilds, considers ship sales amid $1.6 billion Q2 loss

Royal Caribbean Cruises, the parent company of Royal Caribbean International, Celebrity Cruises, Azamara and Silversea Cruises has announced a series of measures intended to conserve cash flow amid the ongoing global cruise shutdown.

During the cruise company’s second quarter earnings call, Jason Liberty, Executive Vice President and Chief Financial Officer, Royal Caribbean Cruises, confirmed that it was considering selling or retiring some ships, while the delivery of several newbuilds would also be pushed back by up to 10 months.

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Royal Caribbean Cruises currently plans to take delivery of Silversea’s new ships Silver Moon and Silver Dawn in 2020 and 2021, while Royal Caribbean’s Odyssey of the Seas is expected to be delivered in the first quarter of 2021.

Based on Liberty’s indication of an average 10-month delay for all other ships, additional newbuilds expected in 2021, such as Wonder of the Seas and Celebrity Beyond, will be pushed back until 2022.

Royal Caribbean International has an additional four cruise ships due for delivery between 2022 and 2025, while its sister cruise line Celebrity has two ships due in 2022 and 2024.

After the delivery of Silver Dawn, Silversea will have an additional two cruise ships on its order book, due in 2022 and 2023, while the German line TUI, of which Royal Caribbean Cruises owns a 50% share, has three cruise ships on order.

Of the four new cruise ships on order for Royal Caribbean, three are its new 200,000-gross ton Icon-class, while the fourth is its sixth Oasis-class ship, due to be the largest in the world at 131,000-gross tons.

Celebrity Cruises two ships on order are sister ships to the 129,500-gross ton Edge-class, of which Celebrity Beyond will be the latest member, joining Celebrity Edge and Celebrity Apex.

In addition to the announcement of newbuild delays, Liberty also indicated that the company was actively considering selling off some of its older ships.

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With a US $1.6-billion loss reported for the second quarter of the year, Royal Caribbean is likely looking for ways to reduce cash flow and tighten capacity ahead of what some fear might be a future cruise industry with less demand than pre-coronavirus.

Liberty noted that Royal Caribbean typically sells around two ships per year, but with all three Pullmantur cruise ships having been sold for scrap, its already exceeded that level.

Pullmantur was a Spanish cruise line that declared bankruptcy and scrapped its entire fleet earlier this year, Royal Caribbean owned a 49% stake in the line.

“We put a lot of money into these ships; these ships do exceptionally well,” Liberty said during the earnings call. ”It’s a difficult decision to part with a ship because it generates so much cash.”

During the last four months, however, Royal Caribbean’s fleet of ships have been a financial drain rather than the cash cow they were before the pandemic. Without the ability to sail cruises, the company’s fleet cannot earn any revenue and is costing around $400 million per month.

Royal Caribbean currently has a fleet of 54 cruise ships, when the seven vessels of TUI Cruises are included.