Another Big Loss For Carnival, But Green Shoots Emerge

Carnival Corporation earned $1.6 billion in revenue for the first quarter of 2022, a massive jump from $26 million in Q1 2021, when the entire industry was shut down. But recovery is still a long way away for the cruise giant, which posted a $1.9 billion loss for the quarter ended February 28. That followed a massive loss of nearly $8 billion in 2021.

During a conference call with financial analysts, Carnival President and CEO Arnold Donald focused on the positive.

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"Despite the impact of Omicron, guests carried grew by nearly 20% in the first quarter compared to the prior quarter, while simultaneously increasing revenue per passenger cruise day,” Donald said.

Overall occupancy in the first quarter was 54%. That number would have been higher, if not for a surge in cancellations after the Omicron variant exploded in December and January. But guests are definitely ready to indulge, with revenue per passenger day up 7.5% over 2019 levels, driven largely by “extraordinary” onboard spending.

As of March 22, 2022, 75% of Carnival Corp.’s capacity had resumed guest cruise operations, a total of 64 ships. The company expects each brand's full fleet back for the summer season, where it historically generates the largest share of its operating income.

"We believe we have positioned the company well to withstand volatility on our path to profitability and have been working hard to resume operations as a stronger and more sustainable operating company, to maximize cash generation and to deliver double digit returns on invested capital over time," Donald told financial analysts.

While everyone hopes the worst of the pandemic is in the rear-view mirror, the global situation is still throwing curveballs at Carnival and the rest of the cruise industry.

Going into the second quarter, Carnival stated that the "uncertainty given the current invasion of Ukraine, including its effect on the price of fuel, are collectively having a material impact on its business." The company has cancelled all Russian port calls in 2022, where just under 5% of its overall capacity was scheduled to visit.

As a result, Carnival expects a net loss for the second quarter of 2022, followed by a profitable third quarter. For the full year of 2022, the company expects a net loss.

Still, momentum appears to be building, with recent weekly booking volumes at their highest level since Carnival launched its restart last July.

There was some good news for travel advisors in the quarterly results. For the three months ending February 28, Commissions, Transportation & Other totaled $251 million. It’s still far off 2019 levels, but a big jump from $159 million three months earlier.

The Carnival Corporation of 2022 is leaner and more efficient than pre-pandemic. The company announced that three additional ships are expected to leave the fleet in 2022 as part of its ongoing fleet optimization strategy.

In total, this represents the removal of 22 smaller, less-efficient ships since the beginning of the cruise shutdown in 2019. During that period, Carnival has also added nine larger, more fuel-efficient vessels.

During the first quarter, the company boosted its booked occupancy position for the second half of 2022, though the Omicron variant slowed the normal ‘wave season’ booking surge. As a result, cumulative advance bookings for the second half of 2022 are at the lower-end of the historical range. However, advanced bookings for the first half of 2023 are at the higher end of the range and at higher prices.

Donald says that in its response to the pandemic, cruising has proved itself to be “among the safest forms of socializing and travel.” Carnival Corp. has carried some 2.2 million guests since resuming operations, and reports the guest satisfaction scores are higher than ever.

Reflecting on the past two years and summing up the current situation, Donald said:

“We’ve endured a multitude of challenges. But we’ve brought 70,000 crew members back to work, healthy, happy and vaccinated. We’ve reopened eight privately owned islands and port operations and returned 64 ships to operation. And we have liquidity exceeding $7.2 billion.”