Carnival Sees Q3 Loss of Around $3 Billion But Says Bookings Starting To Improve

Cruise line operator Carnival Corp said its third quarter loss is likely to approach $3 billion, but added that second half bookings are starting to improve as leisure travel slowly returns to pre-pandemic levels.

Carnival Corp.  (CCL) - Get Report said Tuesday that its expects a third quarter loss of around $3 billion and that it could sell around $1 billion in common shares as part of a capital raising plan.

Carnival said in a Securities and Exchange Commission filing Tuesday that its loss for the three months ending in August is expected to be $2.9 billion on a U.S. GAAP basis, a figure that includes non-cash charges of around $900 million. Its third quarter cash burn rate was pegged at $770 million, the company said, a figure it expects to slow to $530 million over the three months ending in November. 

However, it also said that second half bookings for its cruise ships were ahead of their historic averages, as customers return to the travel sector following months of coronvirus lockdowns in key markets around the world.

Carnival is expected to publish its formal third quarter earnings report on September 24.

"Our business relies solely on leisure travel which we believe has historically proven to be far more resilient than business travel and cannot be easily replaced with video conferencing and other means of technology," said CEO Arnold Donald. "Our portfolio includes many regional brands which clearly position us well for a staggered return to service in the current environment."

"We are accelerating the exit of 18 less efficient ships from our fleet. This will generate a 12% reduction in capacity and a structurally lower cost base, while retaining the most cash generative assets in our portfolio," he added. "With two thirds of our guests repeat cruisers each year, we believe the reduction in capacity leaves us well positioned to take advantage of the proven resiliency of, and the pent up demand for cruise travel - as evidenced by our being at the higher end of historical booking curves for the second half of 2021."

Carnival shares were marked 8.5% lower in early trading following the pre-earnings update to change hands at $16.34 each, a move that extends the stock's year-to-date decline to around 68%.

"It sounds like booking levels for 2H21 are at the high end of historical ranges (a positive sign for demand) and pricing is down mid-single digits relative to pre-COVID levels," said Credit Suisse analyst Benjamin Chaiken. "Keep in mind, this compression in pricing also takes into consideration FCC’s (future cruise credits that have been applied to customers canceled sailings) so down MSD is pretty good, in our view."

"Given the context of where cruise is: focusing on liquidity and working on if/when ships can get back in the water, the booking and pricing updates seem like a win, and the implied 1-2pts of pricing deterioration isn’t a big deal," he added. "This is a blended pricing number which includes the discounted FCC’s from customers, implying pricing on new bookings could be closer to flat.?