Carnival Corporation Reports Almost $3B Loss in Q3 as Royal Caribbean Loses $1.2B

The cruise industry continued sailing through rough waters during Q3 2020 as was seen from the performance of top cruise line operators. According to its earnings reports for the period, Carnival Corporation, the largest cruise company globally, was the worst hit.

For its third quarter, which ended on August 31, 2020, Carnival Corporation’s losses amounted to $2.9 billion. Its revenue for the three months totaled $31 million, down from $6.53 billion in Q3 2019. It was a drop of more than 99.5%.

According to the research data analyzed and published by Stock Apps, it saw adjusted net income dropping from $1.82 billion to a net loss of $1.69 billion. Every month during Q3 2020, the company suffered a $770 million cash burn on average.

Based on its forecast for Q4 2020, it expects the burn rate to fall to $530 million per month as it removes older ships from its fleet. All in all, Carnival plans to get rid of 18 ships, 12% of its pre-pandemic capacity. It also plans to sell shares worth $1 billion so as to improve liquidity.

Top 3 Cruise Lines Lost $8 Billion in Q2 2020

Royal Caribbean, the second largest cruise line globally, suffered a $1.2 billion net adjusted loss during Q3 2020. In the period which ended on September 30, 2020, it softened its previous quarter’s loss by $100 million.

The slight improvement came as its German cruise brand, TUI, resumed services in Germany. Moreover, Royal Caribbean International got approval from the government of Singapore to resume operations on Quantum of the Seas.

During the quarter, the group had a cash burn rate of between $250 million and $290 million per month.

According to the report, the company will focus on bolstering liquidity. To achieve this, it highlighted an increase of $1.5 billion in liquidity by a combined common stock public offering and convertible bond issuance.

On the other hand, Norwegian Cruise Line announced its earnings on Monday on November 9, 2020. According to an earnings outlook report by Benzinga Insights, it was estimated to generate only $10.61 million in revenue. Comparatively, its revenue for Q3 2019 was $1.91 billion.

If it matches the consensus estimates, that would translate to a 99.45% decline in revenue. Zack’s consensus estimate projected a 100% decline year-over-year (YoY) to $0.76 million.

According to data published by Statista, Carnival’s revenue dropped by 85% YoY during Q2 2020. It went from $4.84 billion to $0.74 billion. During the same period, Royal Caribbean suffered a 94% YoY revenue drop, going from $2.81 billion to $0.18 billion. Norwegian Cruise Lines lost 99%, dropping from $1.66 billion to $0.02 billion within the duration.

The global cruise market consists of more than 50 cruise lines as well as over 270 ships according to KPMG. However, these three giants control about 75% of the cruise industry. As such, their performance gives a reliable impression of the state of the industry as a whole.

Global Cruise Industry to Shrink by 72% to $7.79 Trillion

As of November 9, 2020, Carnival stock had declined by 72.81% YTD, Royal Caribbean by 56.13% and Norwegian Cruise Lines by 70.95% according to Marketwatch.

This comes as no surprise given that cruise ships were a focal point of the pandemic from the get-go. Carnival-owned Diamond Princess, which was one of the first on the line, had hundreds of infected passengers stuck off the coast of Japan.

Westerdam, Grand Princess, Costa Luminosa and the Zaandam soon followed suit. These incidents contributed to cruise ships being referred to as “floating petri dishes.”

Prior to the global pandemic, the cruise industry was one of the fastest growing markets worldwide. According to KPMG, during the period between 2015 and 2019, demand in the industry increased by 20.5%.

In 2017, around 26.7 million people wanted to go on a cruise and in 2018, the number had risen to 28.5 million. In 2019, the cruise ship industry served about 30 million passengers and created 1.11 million jobs. Before the pandemic, it was estimated that the figure will reach 32 million.

According to Cruise Lines International Association, cruise suspensions cost the US economy over $25 trillion and 164,000 jobs. Statista projects that the global cruise industry revenue will shrink by 71.6% YoY in 2020, to reach $7.79 trillion.

At the end of October 2020, the Center for Disease Control lifted its no-sail order that had been in place since March 2020. However, passenger voyages will only resume after operators undergo rigorous testing on their ability to handle an outbreak in case the virus is detected on board.

Following the announcement, Carnival shares rose by 7% as Royal Caribbean and Norwegian soared by 6% and 5%, respectively. However, most cruise companies announced that they would resume operations in 2021.