Royal Caribbean Cruises - Earnings Call - Q4 2020

Transcript

Speaker 0

Good morning. My name is Shelby, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Royal Caribbean Group's Business Update and Fourth Quarter twenty twenty Earnings Call. All participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.

I would now like to introduce Chief Financial Officer, Mr. Jason Liberty. Mr. Liberty, the floor is yours.

Speaker 1

Thank you, Shelby. Good morning, everybody, and thank you for joining us today for our business update and fourth quarter earnings call. Joining me are Richard Fain, our Chairman and Chief Executive Officer Michael Bailey, President and CEO of Royal Caribbean International and Carollo Mangolini, our Vice President of Investor Relations. During this call, we will be referring to a few slides, which have been posted on our investor website, www.rcinvestor.com. Before we get started, I would like to refer you to our notice about forward looking statements, which is on our first slide.

During this call, we will be making comments that are forward looking. These statements do not guarantee future performance and do involve risks and uncertainties. Examples are described in our SEC filings and other disclosures. Please note that we do not undertake to update the information in our filings as circumstances change. Also, we will be discussing certain non GAAP financial measures, which are adjusted as defined, and a reconciliation of all non GAAP historical items can be found on our website.

Richard will begin by providing a strategic overview of the business. I will follow-up with a recap of our fourth quarter and full year twenty twenty results. I will then provide an update on our latest liquidity actions and on the booking environment. We will then open up the call for your questions. Richard?

Speaker 2

Thanks, Jason, and good morning, everyone. Even though it's late February, I still wanna say happy new year because I expect that this year will be so much better in so many ways than the last year. At the same time, it's hard to believe that we're only seven weeks into 2021 because so much has already happened. It's been very intense for the last month and a half. And because things are happening so quickly, I think it's a good time to take a moment to review what we at the Royal Caribbean Group have been doing over the past year to adjust to the realities of the pandemic in The United States and wherever we sail and wherever we operate around the world.

As we've summarized on Slide two, 2020 was an unprecedented year in which our teams took on and accomplished actions that were unthinkable just twelve months ago. I think that there was not one job that stayed the same. In a few months, our teams moved our whole fleet into layup, repatriated more than 45,000 crew members to their hundreds of home countries, restructured our workforce, implemented new credit programs for our guests, took care of our travel agents, and raised billions of dollars in new capital, all while working from home. It's been incredibly challenging, but everybody seemed to worries to the occasion. Now the most important point to keep in mind is that while most of our ships are still sitting idle and while we suspended most of our global operations through April, at least through April, our company has also been moving ahead to create the conditions and to prepare for a healthy return to sailing.

As we continue to navigate this crisis, we've made continued progress on many fronts as noted on Slide three. I want to especially speak about how we're engaging with various stakeholders, particularly governments and other actors in the travel industry, to ensure that we can ramp up and restart quickly. I'll let Jason talk about the initiatives that we've taken on the finance side. First, let me recall what we've accomplished with our Healthy Sale Panel of medical, public health, maritime, biosecurity and other experts. We've taken their 74 recommendations for a healthy return to service as the basis for over 2,000 separate protocols from passenger testing before sailing to physical distancing on board, to disembarkation of COVID symptomatic persons.

All of these things will give our guests, our crew, and the destinations the confidence that the environment on the Royal Caribbean, Celebrity, Silversea, or TUI ship is safer than a walk down Main Street. We know that we not only need to provide an environment that protects our guests from COVID, but also works to protect all of our people from having their vacations disrupted due to an isolated case. At the same time, we have to recognize that the panel's recommendations were intended to address a pre vaccine environment. A lot has occurred over the last four months since their report was submitted, not the least of which is that we're regularly vaccinating over a million and a half people a day here in The United States and many elsewhere as well. And so we continue to work with the panel led by governor Mike Levin and doctor Scott Gottlieb to identify the safest pathway forward in the new post vaccine environment when we can protect our guests and crew as never before.

And these conversations and the conclusions we draw from them will inform and advance our dialogue with governments around the world, including the CDC under its new leadership. At the same time, I believe strongly in the power of positive example. And in Singapore, we have a good one on how we can safely resume cruising while giving our guests the fun fill experience they expect. We've been operating there since early December. And even before that, we've had successful operations, which continue now in Germany and Canary Islands, Greece and The Middle East.

These early returns to service not only provide vacations, but they provide an opportunity to demonstrate proof of concept as well. These early cruises provide valuable information about the best way to design and implement our health and safety protocols. They provide important learnings on how we can coordinate most effectively with governments, port authorities, travel partners, and others to protect our guests, crew, and the destinations we visit. These early cruises have also given us the opportunity to design new attractive itineraries where we can better control the experience. Now after eleven months of pandemic, I think we all know that COVID fatigue is real.

People are clamoring for the opportunity to have experience outside their house. Every day, we see signs that people want to get out and get away. And once we're able to reopen and restart more broadly, we'll be ready to respond with our best in class hardware, including our new buildings, Odyssey of the Seas, Celebrity Apex and Silver Moon, and our exclusive private destinations like Perfect Day At CocoCay. Before I hand off to Jason, I do want to brag on our team just a little bit. Again, the dedication, commitment and the integrity of our employees throughout this very difficult period has been exceptional, and their individual and combined contributions have been extraordinary.

I am impressed every day by what they do. I also want to give a shout out to our loyal and committed travel partners for their ongoing support and to our investors for their trust. So thank you all. And now I'd like to turn it back over to Jason. Jason?

Speaker 1

Great. Thank you, Richard. This morning, we reported an adjusted net loss of $1,100,000,000 for the 2020 and a $3,900,000,000 for the full year. Due to the suspension of our global operations, we were able to operate only 20% of the revenue cruises initially expected in our February 2020 guidance. This simple stat reflects the staggering impact that the pandemic brought to our company and the whole industry during 2020.

In the fourth quarter, we were able to reduce our quarterly cruise operating expenses by more than 80% from $1,500,000,000 in 2019 to $265,000,000 in 2020. We achieved this by expeditiously laying up our fleet and becoming extremely diligent, disciplined and agile in controlling our costs. Something similar can be said about our general CapEx, which we will reduce by approximately 55% between 2020 and 2021. I am incredibly grateful of the efforts from the entire corporation in managing through the toughest year in our history. From a financial standpoint, our top priority remains ensuring that we are in a strong liquidity position.

While reducing our cash burn was and still is critical, another crucial liquidity action is accessing capital prudently and opportunistically while also managing our liabilities and our banking partners with our banking partners and export credit agencies. Since we suspended our global cruise operations, we have raised about $9,300,000,000 capital and have secured agreements to defer almost $2,000,000,000 of ship related debt through the 2022. These later efforts are reducing our expected debt maturities for 2021 to approximately $400,000,000 These successful transactions and negotiations were possible due to the strength of our brands, the relevancy of our product and the great relationships that were built during decades of collaborative work with banks, shipyards and vendors. I also want to highlight that this superb outcome was a huge undertaking executed by our amazing finance, legal and accounting teams. Now regarding our current liquidity position, we closed twenty twenty fiscal year with $4,400,000,000 in available liquidity.

We remain focused on further improving this position while also managing our operating and capital expenditures to ensure that our family of brands are well positioned for the return to service. I will stress that as we return to service and stabilize our operations, our cash flow will be primarily driven our cash will be the primary driver to delever our balance sheet, return to investment grade and create great shareholder value. As it pertains to our cash spend for the fourth quarter or during the fourth quarter, we spent approximately $1,300,000,000 which includes the payment of approximately $300,000,000 of bond that matured in November and approximately $180,000,000 from collateral postings, commissions and financing fees. When excluding these, our average cash burn rate was on the lower end of our previously announced range, driven by the phenomenal diligence of our team and some timing. Furthermore, this morning, we reaffirmed that the cash burn will be on average in the range of approximately $250,000,000 to $290,000,000 per month during a prolonged suspension of operations.

Over the last year, we have executed several measures to structurally reduce our cost base, realign our capital allocation and improve our scale and margins. Besides reducing our G and A expenses and streamlining procurement efforts, we successfully divested three of our oldest ships and entered into a definitive agreement to sell our Azamara brand. Reshaping our fleet's efficiency and the corporation's cost structure will help accelerate our margins by improving our operating leverage as we return to service. I will highlight that when we return to service and start to rev up our sales, we expect that customer deposits and cash flows from operations will further improve position. At the same time, ramping up our business will also include start up costs that relate to crewing our ships, health and safety protocols and increased sales and marketing activities.

Because the environment is still very fluid, we are not able to provide further guidance or commentary on these figures. I will now provide an update on the booking environment and our capacity. While bookings remain below historical levels, we have been constantly impressed and humbled with the number of cruises booked throughout this extended out of service period. It's clear that a lot of people want to cruise, and we can't wait to welcome them back onboard our amazing brands and ships. Clearly, 2021 is not going to be a traditional year.

And to this end, we did not plan for a traditional wave season, and therefore, our sales and marketing activities still remain anemic and extremely strategic. Currently, we don't expect to broadly ramp up our marketing until more ships come back into operation. Despite the lack of marketing spend, we have seen a 30% increase in new bookings since the beginning of the year when compared to November and December. Our lift and shift and future cruise credit programs have been very successful in both preserving cash and driving demand for future periods. Having said this, I will highlight that from a cumulative standpoint, almost 75% of our booked business is new and not related to rebooking activities.

The cumulative book position for sailings in the second half of twenty twenty one is aligned with our expectations in terms of resumption of cruising with pricing higher than 2019, both including and excluding the dilutive impact of future cruise credits. It is probably too early in the booking window to talk too much about 2022, but behavior to date is quite similar to booking activities in previous years. Our booked position for the 2022 is within historical ranges at higher average prices. As I noted, we are not expecting a traditional wave season. However, we did see a similar increase in 2022 bookings over the past six weeks to increases seen in prior years.

We think that this is a very that this is very encouraging stat given our muted sales and marketing efforts. Regarding our deployment, we are not ready to announce any specifics surrounding the cadence with which we will be bringing our fleet back into service. Currently, we have canceled sailings on most of our ships through the April. Our brands operate in multiple markets around the globe, therefore the timing and pace of the ramp up in capacity will likely vary by region based on local conditions. We are already operating Quantum of the Seas in Singapore, and our second shift in the water could also be outside of The US.

We're also using the learnings from Singapore as well as from our Tuohy Cruises joint venture, who has had ships sailing in Europe and the Canary Islands since August and November, which is helping us in in in, inform on how the ships will return to service. Our customer deposit balance at the December 2020 was $1,800,000,000 This is relatively equal to the balances reported both at the September and at the June. We were able to maintain a similar customer deposit balance for six months despite the suspension of approximately 1,100 sailings because of the deposits collected on new bookings and the success of our future cruise certificates and lift and shift options. Just over half the guests who booked who who were booked on canceled sailings have requested a cash refund, with the other half either holding an FCC or lifting and shifting their booking to a future cruise. Also approximately half of our customer deposit balance is associated with FCCs.

And moreover, about 30% of the overall balance is nonrefundable. As it pertains to our expectations for 2021, I will note that the timing and trajectory of the recovery remains uncertain, and we are therefore unable to provide further guidance for the year. We do expect, however, to incur a net loss on both The U. S. GAAP and an adjusted basis for the first quarter and the full year of 2021.

The magnitude of the loss will depend on many factors, including the timing and extent of our return to service. I will close my remarks by saying that we are clearly focused on what we can control. But as the vacuum distribution continues to accelerate, travel restrictions and advisories begin to ease and customer confidence begins to grow. We feel very optimistic about the future. With that, I will ask our operator to open up the call for a question and answer session.

Shelby?

Speaker 0

We do ask that you limit yourself to one question and one follow-up. We'll pause for just a moment to compile the Q and A roster. Your first question is from Robin Farley of UBS.

Speaker 3

Great. Thank you for taking the question. I know it's very difficult to get any visibility on the timing of a restart. I wonder if you could tell us when you mentioned your fuel hedges, you talk about you're adjusting it for forecasted fuel consumption. I wonder if you could kind of tell us what you're roughly thinking about for your fuel consumption as a way to sort of help us think about what that would look like versus a normal year.

And then also specifically sort of related Alaska too, I'm wondering if your fuel consumption assumptions for that market too. Thank you.

Speaker 1

Well, thanks, Robin. And by the way, that's a very interesting angle in trying to get us to provide how many ships we expect to have up and running in on the water. So our our our on the fuel consumption side, just like everything else, it's it's very fluid, you know, and and it will be based off of the timing on when we go back into service. So I I don't have a specific number to guide you to, although it was a creative way to ask it. But, you know, we are, you know, we'll disclose that as we know what the deployment will look like specifically and and the shifts that will come up and running.

Okay.

Speaker 3

Alright. Maybe then just as a follow-up since I I don't get my my first one. Just a clarification, in the release when you talked about 2021 pricing, you said it's higher than 2019. And I just wanted to clarify, was that higher than 2019? It doesn't specifically say that.

Or did you just mean higher than 2019 overall? Because obviously, it has a little bit of a different meaning.

Speaker 1

Yes. We were specific around overall 2019, but it's a similar answer for the 2019.

Speaker 3

So in other words, second half twenty twenty one pricing is above second half twenty nineteen specifically both with and without future cruise credit?

Speaker 1

That's correct.

Speaker 3

Okay. Because that's an improvement I think since your last quarterly call. Okay, great. Will Yes, jump

Speaker 1

a little bit more. But I mean, we're very as we said before, I mean, we are there there is clear demand. And as we look at 2021 based off of the different scenarios we have in terms of resumption of service, you know, the the the volumes that we see, you know, on a demand standpoint are at least in our perspective impressive.

Speaker 3

Okay, great. And I'll hop back in line. I've got more questions but I will I'll get back in line. Thanks.

Speaker 1

All right. Thank you, Robin.

Speaker 0

Your next question is from Steve Wieczynski of Stifel.

Speaker 4

Hey, guys. Good morning. So Jason, guess first question would be around the first half twenty twenty two booking commentary. I'm not sure the right way to ask this question, but can you help us think about how much of your first half twenty twenty two inventory is currently open for sale? And I don't know if that is 100% or it's 50% or whatever that number is, but I'm trying really understand that pricing comparison relative to 2019.

I think there's some confusion out there with investors about what that looks like actually on a pure like for like basis, and hopefully that makes sense.

Speaker 1

Yeah. Well well, most of our deployment is open, for for the 2022. Now it is very early here in in the in the in the booking stage, and we're, you know, we're sitting here in the first quarter of of twenty twenty one. And and, historically, we don't really talk about 2022. But, you know, what we're seeing, continue on is is our customers there's a lot of pent up demand, for vacations.

Right? You know, they're saving more. They've they've they've bypassed many of their vacations. And so, you know, they're, you know, they're trying to eye out when when we're gonna return to service, and they're gonna be able to to go and enjoy the vacations that they that they had previously planned. And so I think when you look at the 2022, again, it's very, very early.

The pricing that we're seeing, relative to, you know, like for like for 9 you know, for 19, shows that our that our that our APDs are up with or without any application of future proof certificates.

Speaker 4

Okay. Understood. And then second question, I guess, would be around your liquidity position, which, again, right now still looks pretty solid on paper. But Jay, you made somewhat of a comment, at least I think you did, that says you're still looking at kind of or you're taking proactive steps. So just trying to understand what those steps could mean moving forward.

And kind of are you still evaluating any option possible out there over the near term?

Speaker 1

Yeah. Well, first off, we have a lot of options. So it's not just some options. We have a very full quiver of options,

Speaker 5

both in

Speaker 1

the capital market and even noncapital market activities. Whether, you know, we still have a lot we can access as as it relates to our debt baskets, Obviously, we can, you know, access equity and and and other instruments. But, yeah, we are and we have been extremely methodical, about our capital raises. Some of it's based off of the operating landscape. Some of it is being opportunistic and seeing how we how we can, you know, continue to focus on the balance sheet.

But, you know, we will, you know, just continue to evaluate the situation. And and based off of that, we'll, you know, we'll look to continue to be in a strong liquidity position so that as we return out of this our business can accelerate.

Speaker 4

Okay, got you. Thanks guys. Appreciate

Speaker 5

it. Thanks Steve.

Speaker 0

Your next question is from James Hardiman of Wedbush.

Speaker 6

Hi, good morning. So two questions for me. Think you guys talked about in some of the prepared remarks just how much time was spent by the healthy sales panel trying to figure out how to sail in in sort of a pre vaccine world. Obviously, that's no longer the world in in which we live in. So I'm I'm just trying to figure out how the the cruise experience is what it's gonna look like in 2021 and maybe beyond.

So I guess for starters, the the whole notion of a vaccine requirement onboard some ships onboard all ships, maybe speak to that and and and maybe the CDC's willingness to to let some ships sail earlier, if, you know, you have a critical mass of people that have already been vaccinated?

Speaker 2

I'll try to answer that. You're you're right. The, the LVSL panels work and all of those discussions were pre vaccine and vaccine really does change it. We're really in an interim period where the vaccines are still relatively new. They're coming out amazingly quickly, but it still is going to take months, to get huge numbers of people vaccinated.

And so we and the CDC and governments around the world are looking at how that would change it. And we don't have answers yet. I think one of the things everybody's looking to see is just how effective the vaccines are. And people actually want to see that happening. And one of the nice things we have is we can look at the example of Israel where the vaccination level is one of the highest in the world.

And therefore, they're able to make some very significant statistical correlations. And one of the things that you've seen coming out of there, for example, is that the number of people who, get the disease who have been vaccinated is the efficacy is as high or higher than the than the, trials that were done. And this is now on larger numbers of people, so that makes it even more reliable. But more significantly, they were also saying the ability to prevent the disease from being serious in people is even better than that. So these are, in the history of vaccines in the world, these are really exciting kinds of levels that give us all a lot of hope.

But we really need to see it in practice, and it's really hard to say, wow, we're not yet at a point where enough people have been vaccinated that you could say, okay, you know, everybody on board will have been vaccinated, that sort of thing. But it is something we think that the vaccine is, of course, the ultimate weapon. And, the fact that it is coming out and beginning to come out so quickly and that the pace of that is growing, will be a basis for a new set of approaches. But we haven't neither we nor the governments around the world nor the Healthy Sale Panel has yet, been able to define exactly what that will look like.

Speaker 6

Got it. That's helpful. And then my second question is maybe for Jason. I'm trying to wrap my head around sort of the new revenue and margin profile of your post pandemic fleet. Obviously, you've gotten rid of quite a few ships.

And so I I don't know the best way to frame it, whether it be to to talk about what what the yields and or margins were on the ships that you got rid of, or just looking back to sort of pre pandemic margin levels of, call it, 19%, 20% and sort of order of magnitude what those could look like once we're back to normal, but with significantly newer and presumably more profitable fleet.

Speaker 1

Yeah. Well, and I do appreciate the challenge, James, because we obviously, it's still early for us to kind of talk about what margins will look like as we come out. You know, The sale of Azamara, we've sold some of our older tonnage. The net of that is will be it's a very slight good guy on a yield standpoint. It will be a good guy on the cost standpoint because, you know, the the, you know, their ships were smaller.

So spreading the spreading of costs were were, not as efficient. But, you know, as an organization, we have and we continue to, you know, take, you know, take advantage of this opportunity to, you know, analyze our costs and and find ways to be more efficient. So as we come out of this, we we have the ability to add on to those margins. It's too it's still too early to talk specifically about, you know, how much that will be, but, you know, we're, you know, we're trying as I I kinda described it. You know, our our goal is to kinda be in our in our our wedding weight as as we come out of this and and and then accelerate as we as we move back into service.

Got it.

Speaker 6

And just just to clarify, you called out a couple good guys. There aren't any bad guys we should be thinking about in in terms of the margin in a in a post pandemic world. Correct?

Speaker 1

Yeah. I I mean, I I don't I don't think there's necessarily bad guys. Obviously, we will have return to service costs here as we ramp ourselves up, which could just make it look a little lumpy in in the beginning. I also think it's important to note that, you know, besides for the ships that we have sold or the or the brand that we have sold, we also have, you know, incredible new tonnage that is coming in into the our our fleet. And so as we know, those ships are the inventory mix is better.

They're much more cost efficient on a fuel perspective, and they deliver higher margins. And so all the ships in which Richard had noted that are coming in here in the next couple of years plus what we have on order will also help us expand our margins further.

Speaker 6

It. Thanks, Jason. Thanks, Richard.

Speaker 7

Your

Speaker 0

next question is from Brandt Montour of JPMorgan.

Speaker 7

Good morning everyone. Thanks for taking my questions. I wanted to talk about OZMAR quickly hoping you could give us some comments around the process there if it was competitive and how long you've been working on it? And then shifting gears to maybe additional ship sales, what are the different factors you're assessing for potential future ship divestitures and sort of what are the flexibilities you have around that in your existing credit agreements?

Speaker 1

Yes, sure. So on the Azimara sale, really kind of through this whole process, we have really tried to be opportunistic and strategic and look at as we are today and as we will come out of this, how do we wanna prioritize, you know, where you know, whether it's how we're investing or how we're supporting on our resource base. This opportunity came our way here with Sycamore. It gives Azimar an opportunity, to grow. And and and and I think that, you know, it's it's a it's a great brand that we think, you know, we'll we'll do quite well under meet this other other this other venture.

I think moving into, you know, other ship sales and so forth, you know, we remain opportunistic. You know, I think we need to remember that pre pandemic, all of these ships, you know, generated quite a bit of cash flow. And and so it, you know, needs to you know, for us, typically, the the test on on a ship is a little bit less it's it's a little bit less about, you

Speaker 5

know, the

Speaker 1

cash that we would receive. It's more strategic on whether we think this ship with whether it's in its current state or through some moderate investment, is something that fits our brands, or could fit another brand within our within our our our our organization or even with our JVs. And that's kind of how we look at it and I think we'll remain opportunistic.

Speaker 7

Okay. Thanks for that, Jason. And then if I could just sit one more in here. For this summer in Europe where, I assume you don't need CDC certification to sail, but presumably a decent portion of your guests are coming from The U. S.

And would to fly over. I guess maybe just as things stand today for the summer sailing in the med, could you just reframe maybe the range of scenarios that play out there?

Speaker 8

Brent, it's Michael. Yes, I mean, technically, our operations in Europe are not subject to the CDC jurisdiction, but I think it's fair to say there's an, you know, awful lot of Americans who do fly out to Europe to join our European products, particularly for loyal and celebrity. So, nevertheless, we'll be guided by the protocols either through the healthy sale panel or as they come from the European Union or The UK. So we know that the operations in some of the European countries, particularly Germany, Italy, have been ongoing for the past couple of months and the Canary Isles. And those protocols that have governed operations have basically been based on the healthy cell panel or clear member policies and then overlaid with specific instructions by the National Health Authority.

I think what we're going to see is very similar to what we're going to see in The United States, which is as we continue to see, infections decline and vaccines increase, then we're gonna move to, protocols that probably are some kind of hybrid between vaccines and testing. We are fortunate in a way that we're coming through the winter season, so it's incredibly low in terms of volume and revenue during the winter, but we're entering into the spring. And for the Royal Caribbean Group, we have multiple ships that are currently deployed into European operations. So it's going to be subject to the guidance from the European Union or The UK authorities and we we imagine that they'll be very similar to the guidelines that we'll get from the CDC. Does that does that help, or do you need more more color on that?

If

Speaker 7

you wanted to provide more no. That that that's very helpful. I appreciate it.

Speaker 8

Okay.

Speaker 1

Thank you.

Speaker 0

Your next question is from Jamie Katz of Morningstar.

Speaker 9

Hi good morning. Thanks for taking my questions. I guess I'd be curious to hear what changes maybe have been made to Quantum that we can implement domestically that might surface when the start sale begins. And then additionally, is there something that you guys are doing differently, maybe just sort of geographically different, that leads you to believe that May 1 is a better start sale date than June 1, which Norwegian has put out there?

Speaker 8

Hi, Jamie. It's Michael. As Richard commented, in his opening comments, we're really pleased with the performance of Quantum in Singapore. It's been, an incredible learning experience for our company, and it's been a remarkable example of great collaboration between, you know, a cruise company and the health ministry and the government of Singapore. So we've been operating now for close to three months.

We've carried probably around 35,000 Singaporeans on ocean cruises. The customer satisfaction ironically is higher with our protocols than it was before our protocols, which is quite funny in a way. And our revenue has exceeded our expectations both from a ticket and an onboard revenue perspective. So the overall performance of our products has been really quite strong. It's subject to a series of protocols that, as you as you question, are probably very similar to a framework that we may be operating with in the future out of The US or Europe.

But it's a changing landscape. So what we've started with in Singapore in terms of protocols are already being reviewed and there's in the coming weeks, we expect some of those protocols to be changed. For example, load factor constraint in the beginning of our Singapore operations was capped at 50%. We're now in discussions about increasing that cap to 65% in the coming weeks, and some of the testing regime has changed. So one of the things that's come from Quantum, well, two things.

One is that operationally, we've really begun to understand how we can work together with the health ministry to safely operate a large cruise ship during the COVID times. And we've also gained from our investment in technology. So there are there are two technologies that have come from Quantum that really are game changing. One is the e mustering, which completely transforms the whole process of, lifeboat mustering, and it's all done digitally through through your iPhone or, in an app. And the second is we've really developed technology for contact tracing using a combination of technologies.

One of them is a tracelet, which basically each guest wears and can tell exactly how long and, they've been in contact with everybody else who's wearing a tracelet. And then we have, artificial intelligence connected into basically CTV cameras that use, facial and body recognition to then double check and verify contact tracing in the event that somebody did have COVID onboard the ship. We've been fortunate that that hasn't happened, but that technology development is really, we think, groundbreaking and very sophisticated. And in our conversations that we had, the week before last with the CDC, they specifically asked us to share, that technology and and what what we've been doing in Singapore with them, which we've subsequently done. There's a lot of lessons being learned, and I think I think ultimately, it it will create a foundation for how we'll operate.

But but, again, the landscape's changing quite significantly as well with the with the vaccines and the infection rate. Thank you, Jamie. Great.

Speaker 7

Thank you.

Speaker 0

Your next question is from Steven Grambling of Goldman Sachs.

Speaker 7

Hi. Thanks. Perhaps I missed this

Speaker 10

in the intro, as you've seen an improvement in the mix of new bookings, could you comment on what the demographics of the new bookings look like versus history as you've been marketing less? In other words, are you seeing any change or bifurcation demand trends between older versus younger, new to cruise versus returning or by region?

Speaker 8

Steven, let me comment and I think Jason will jump in as well. One of the things that we've seen really after we came out of the holidays early in January is a proportional increase in the number of guests booking who were 65, and that has continued to increase. So as the weeks have passed, our belief, we don't know if this is a fact, but our belief is that 65 are getting vaccinated, then they're obviously becoming more comfortable with booking. We're seeing that very much in our bookings from about January forward. So I think that's that's something that we think is a major positive.

And obviously, as the vaccine spread down into the population by age, we'll we'll see that probably, accelerate. And that's also true of Silversea, which I think even before the holidays started to see an uplift in bookings coming in based upon age demographics. So that's, we see that as a positive. Obviously, as this continues, you know, we expect to see more bookings coming in by by every age category.

Speaker 1

Just a just a few other things that I would I would just add to it. We've we've also you know, over the past year, we have seen a disproportional amount of our loyalty guests as well as, of experienced cruisers, as part of as part of the mix, of of bookings. What we have seen more recently, though it's not back to where it was pre COVID, there has been an increase, in first to cruise, coming back in into the space. The the other point that that I would just add is, and some of this, I think, is because people are being vaccinated and to Michael's point of 65. But as the distribution or shots in the arm of of our of our, the vaccines are are being rolled out, we're we're seeing that there's a pretty strong relationship to booking volumes, and and and vaccines.

And so that is that is, I think, something to point out that, one, there obviously, there are there are people 65 and older who are getting the vaccine, who are now becoming confident to travel. On the other side of it, it's also building confidence that we're getting, you know, closer to the other side of this, and people are beginning to, you know, to, you know, to realize that that that that travel should be here sooner rather than later. And so I I just wanna make that point as well as as there seems to be a tight relationship to that.

Speaker 8

Just Stephen, just to add one more comment that surprises on our Quantum bookings is that we saw an exceptionally high number of new to cruise booking with Quantum, which surprised us, but that's a real positive.

Speaker 10

That's great to hear. As a follow-up on the balance sheet, Jason, how are you thinking about the appropriate net debt to EBITDA level near term and long term as we think about a recovery path?

Speaker 1

Yeah. Well, the near term will really be based off of when we're able to return to service. So it's tough to kind of peg exactly the coordinates within a certain period of time. We are extremely focused from the board down on getting back to pre COVID levels as soon as possible. So on a balance sheet basis, means for us to be 3.5 times debt to EBITDA or better.

And obviously most of that is going to if not all of that is going to come from the generation of cash from operations. We continue to look at that path as we get back into service here to try to get the balance sheet back in a healthy shape.

Speaker 10

Got it. Thanks. I'll jump

Speaker 5

back in the queue.

Speaker 8

Great. Thanks, Steven.

Speaker 0

Your next question is from Ben Chaikin of Credit Suisse.

Speaker 5

Hey. How's it going? Hi, Ben. I guess on the booking side, did I catch did you guys say that January and February or implied that January and February were up 30% versus November, December. So a sequential comment there, I guess, if that's correct.

And then were November and December sorry. Go ahead. You said that's correct?

Speaker 1

That that is correct, Ben. And and, of course, November and December were tough months because of of, you know, just an incredible rise in cases in society.

Speaker 5

Gotcha. Okay. And then I guess then you saw the tailwind from normalization plus the 65 plus comment you were kind of alluding to, in the previous question?

Speaker 1

Well, I think it's normalization, is is is or or or really, you're seeing a a a decrease, in in cases, and you're seeing a a you know, the the the rolling out of vaccines. But I I I do I I wanted to bifurcate the point again on on, the relationship, you know, to the vaccines because it's not just, obviously, people 65 and over who've gotten the vaccines who are now focused on their travel, but I think it's also a stimulus of, of of confidence in the consumer that they'll be able to travel soon again. So, yeah, we're also it's not just an increase in 65. We're seeing an increase in all the other demographics as well.

Speaker 5

Got you. That makes sense. That's super helpful. And then as it pertains to the CDC, think if I'm not mistaken, think the next step is to potentially get some technical instructions back. Curious if have any view on timing there?

And then if not, maybe alternatively, some of the key questions you're hoping to clear up or get answered there.

Speaker 8

Yes. Hi, Ben. Yes, we've been in regular communication with the CDC both at the with the maritime units and at the executive level. And we're literally expecting the technical specifications any day soon. So they it's an intergovernmental process between several agencies within the government that are reviewing the technical specifications.

But they've assured us that as soon as, as soon as all of these things come together, they wanna get us back into, operations. So we're just literally waiting. I think I think, again, to to our previous comments, I think our level of optimism is increasing as we see the infection rate decline so dramatically in The US and the number of vaccines increasing. And and, so we're we're waiting, and, you know, hopefully, we'll get them soon, and we can we can start our trial sailings. And I I think you may know that when we asked for volunteers for our trial sailings, we received over 250,000 volunteers.

So there's plenty of people interested in cruising.

Speaker 5

Gotcha, that's great. I appreciate it. Thank you.

Speaker 8

You're welcome. Thanks Ben.

Speaker 0

Your next question is from Asia Georgieva of Infinity Research.

Speaker 11

Good morning. Thank you for taking my question. And just to follow-up on Ben's question, now with the change of guard at the CDC should we expect a more streamlined process including vaccinations in the job in terms of cases where both you and all of us have more visibility in terms of how the process will evolve, technical orders, etcetera?

Speaker 8

Hi, Asia. Yeah. I think, you know, I think, our communication and dialogue with the CDC is is is productive. You know, they're dealing with an incredibly challenging situation and environment. When we have our discussions, it's a relatively open process.

And, as Dave explained to us on many occasions, this really is about what's happening with the virus. And, you know, and they've they've assured us on several occasions that when these indicators really start to move in a very positive way, then they'll start working with us to get us back into operation. That's exactly what we're seeing now. So I must admit, every single day I go on the COVID USA chart on Google and see how the trend line is, and it's just plummeting. So my sense is is that we're getting closer and closer to to to good news.

Speaker 11

Michael, has the CDC offered any sort of a threshold in terms of infection rates to where they would be willing to loosen restrictions and provide more of a timeframe, if you will, a schedule?

Speaker 2

Well, you know, I think they, like us, are looking at these statistics. And, you know, it's not just the absolute numbers. There are the unknowns, how quickly the vaccine continues to roll out, how the variants will affect the numbers going forward. So, I think it's premature for them or for us to try and speculate on, what threshold the number has to be because it's so many variables. I think every day we learn a little bit more, and, I think we're more encouraged to see the really dramatic drop that we've been experiencing and the really nice rollout, particularly in The United States and The UK, in the vaccine.

But I think it's still too early for them or us to try and pinpoint this is the threshold that allows us to move forward.

Speaker 11

Thank you, Richard. That makes a lot of sense. And thank you, Michael, well.

Speaker 7

Thanks, Oskar. Your

Speaker 0

next question is from Patrick Scholes of Truist Security.

Speaker 12

Hey, good morning everyone. You've sold a number of ships and brands so far. Thoughts on additional sales going forward?

Speaker 1

Patrick. I mean, remain opportunistic in considering things. As I commented earlier that for us, it's it it needs to it's not about selling ships to get cash. It it's about whether or not, when we look at the investment in the ship or where the ship fits within the fleet, whether or not it's it fits strategically within the brand or could fit in one of our other brands. So we continue to evaluate opportunities that come our way, but we don't have any specific plans or a specific goal in mind here.

Speaker 12

Okay. Thank you. And then just a quick follow-up, Jason. Housekeeping, what was the year end share count?

Speaker 1

Let me see if I have it. I don't have that right in front of me. Make sure I might we can we can get it we can we can get right back to you right after

Speaker 12

Okay. That would

Speaker 7

be great. Yes.

Speaker 1

You got it.

Speaker 0

Your next question is from Paul Bolding of Macquarie Capital.

Speaker 13

Great. Thanks so much for taking my question. So just a couple on the capacity front. Have you summarized the aggregate cut to supply in what you've announced the three ships cut and the Azimara fleet? And then as a follow-up, given the Quantum modifications and the insights you've gleaned from that, has anything changed in your view on lead time around once you're ready to get the fleet back in the water, what that lead time might be if you have to make modifications, etcetera?

Thanks so much.

Speaker 1

All right. Well, let me take the first one and then I'll pass it to Michael in terms of talking about our lead time for ramp up the service. But, you know, if you if you consider Azamara and you consider, the Majesty and Empress, which are the two ships that we sold, that's about a 5% impact on our capacity. Just try to get those numbers.

Speaker 2

Thanks.

Speaker 8

Next Hi. On the sorry, let me just follow-up on the second part of that question with regards to bringing our our ships back into operation with regards to our learned lessons from Quantum. We we've been I mean, as you can imagine, we've been working on return to service for many, many months and we have multiple teams who've been working on all of the logistics and operations of this. And of course, all of the lessons that we've been learning from Quantum have been applied to the whole corporation in terms of planning and logistics. So I think there's a lot of variables and a lot of dynamics in returning a fleet to operation, but we've obviously been doing it for many, many decades in terms of bringing new ships to life.

And we put a lot of energy now behind, ensuring that we understand how and what we need to do to bring our ships back. One comment I'd like to make, which I think is kind of interesting and it's related to bringing our ships back, and that is our crew members. We recently sent a survey to, our entire crew database of around 70,000 employees. And we had 32,000 responses within twelve hours. And subsequently within a couple of days, we've had 98% of all of our crew respond.

And we asked them a couple of questions. We asked them, are they are they planning on returning to work with us? And the the unanimous response was yes. We can't wait to come back. We spoke to them about vaccines and the probability that they will be required to be vaccinated to work on the ships and what do they think about that.

98% of the crew were completely in favor of that. And we also learned that that that that over 4,000 of our crew have already been vaccinated at home. So that's another important element of return to service is the crew, and, I think we are very encouraged by the results of the survey. And it literally was last late last week. So just wanted to give you that extra nugget of information.

Speaker 5

Thank you.

Speaker 8

Thanks so much.

Speaker 0

Your next question is from Vince Seidl of Cleveland Research.

Speaker 14

Great. Thanks for taking my question. Curious on your thoughts longer term about occupancy. Do you think you'll get back to pre COVID levels? Have you seen anything in the bookings data about consumers' appetite for interior cabins, anything related to maybe spacing of crew that you have to consider going forward?

And with all those considerations, has that maybe changed or informed the way that you're building your new ships and the layout there?

Speaker 8

It's a great question. One thing we saw on Quantum was that outside rooms sold very quickly. And, of course, we we put premiums on those rooms. And so you can see that people were were considering that or thoughtful of that. We know that in the beginning, when we do start up, depending upon the environment, that there will be, you know, protocols in place with regards potentially with birthing of crew, etcetera.

So that that, you know, may present some challenges, but we don't see it as permanent. We see it as transitional. And so I think in the beginning, we may see more focus on outside inventory than inside, but there's no really significant dynamic that's in front of us right now. And and we do definitely see it as transitional. And and in terms of the question of returning to our pre COVID load factors, you know, we we obviously don't know, but I think our expectation is once we go through the transitional phase that we will be returning to our pre COVID load factors.

Speaker 14

That's helpful. And then unrelated follow-up for Jason related to debt. Did you mention the debt capacity remaining? Maybe

Speaker 5

I missed that.

Speaker 14

I think as of August, you said $3,000,000,000 and I think you've utilized 1,300,000,000.0 since then. And then I believe that the old debt maturity schedule called for about $1,300,000,000 of paydown in 2021. And I think the most recent number is 400,000,000.0 So if you could is that correct? And could you talk about kind of what changed?

Speaker 1

Yes, sure. So as it relates to our debt basket, our current availability is $2,000,000,000 under those indentures. Vince, are right. We did talk about that our liquidity our maturities for 2021 is $400,000,000 As noted late last week, we did secure debt holidays from our export credit agencies for the vast majority of of of what was available, and we should have the balance of that closed out here hopefully in the next couple of weeks. And and based off of those two things, we will have our maturities for 2021 will be about $400,000,000

Speaker 7

Thank you.

Speaker 0

Your final question is a follow-up from Robin Farley of UBS.

Speaker 3

Oh, great. Thank you for letting me hop in with a last question. Just two things. One is you mentioned that the next Royal ship to be back in service would likely be outside The U. S.

And I'm just wondering is that sort of more likely to be maybe Australia? I'm just thinking about kind of where your sourcing comes from the market, where you can sort of fully source a ship as opposed to Europe. Just kind of thinking if that's more likely to be Australia. And then the other question, and this is very minor, but I was just curious with the sale of the Emerson Majesty. Those were ships that my understanding I thought those were the only Royal Caribbean ships that fit into the port in Havana in Cuba.

And I know that's like way out on your radar screen, but are there other ships that could potentially return to that market if that were to reopen? Thanks.

Speaker 8

So Robin, great question on Cuba deployment. And of course, when Jason called us and said, I think we've got a buyer for these two ships, it it was the very first question we all went and double checked, and and we're okay. So we do have a ship that, ships that will fit into into, Cuba if that should come back. So we we're okay there. With regards to ships starting in Australia or China, or Europe or elsewhere, for example, we literally are in discussions globally around the world with different governments and looking at where they are with COVID and vaccines, etcetera, etcetera.

So I think the point is is that it it there's a lot of opportunity that's starting to open up globally in terms of what's occurring with COVID. And so we've we we are in discussions around the world. One of the products that we opened this is not a product that's that, you know, would be the next product for Royal Caribbean to open up, but we we opened, Grandeur of the Seas Home Corning in Barbados, sailing out of Barbados in November '21 on a mix of seven and fourteen night cruises into the Southern Caribbean and, really focused into the North American, American, Canadian, and The UK market. And it it has exceeded our expectations quite significantly. I mean, we literally sold 25% of our load factor within within a couple of weeks.

So back to Jason's point, there's a lot of demand we think is building up globally for for vacations and and cruise and for Royal Caribbean. So, you know, we're quite kinda optimistic about where this is heading.

Speaker 7

Great.

Speaker 3

Thank you very

Speaker 7

much Okay. For the

Speaker 1

Thank you, Robert. Okay. Thank you, everybody, and Shelby for your assistance with the call today, and we thank all of you for your participation and interest in the company. Corolla will be available for any follow ups you might have, including the share count, which which she'll pass along. And I wish you all a very great day.

Speaker 0

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now