Frank Del Rio, CEO, Norwegian Cruise Line
Scott Mlyn | CNBC
Pfizer‘s encouraging vaccine news Monday gave some consumers enough comfort to book cruises, Norwegian Cruise Line CEO Frank Del Rio said Tuesday.
Data from Pfizer’s late-stage vaccine trial news sent the U.S. stock markets soaring Monday, along with Norwegian and its peers, Carnival Corp. and Royal Caribbean, which all surged by almost 30%.
Del Rio told analysts on the company’s third-quarter earnings call Tuesday that the vaccine news drove higher-than-usual bookings on Monday. Norwegian’s shares were trading down by more than 5% on Tuesday after reporting mixed earnings results and continued uncertainty about when sailing might resume.
“Bookings, the last 24 hours, yesterday, were pretty good, better than the previous four or five Mondays. And that, I think, is attributable to the vaccine news,” he said. “We did not have any particular promotion or did any outsized marketing.”
Del Rio touted the Pfizer news as “a significant milestone” and also noted that the Food and Drug Administration authorized Eli Lilly’s antibody treatment on Monday evening. Both of these developments, executives said, along with advances in Covid-19 testing will help cruise travel resume.
While most industries have suffered from the pandemic, the cruise industry is among the hardest hit. The industry was brought to a standstill in mid-March when the Centers for Disease Control and Prevention issued a no-sail order after coronavirus outbreaks occurred on several ships. The CDC previously said “that cruise ship travel exacerbates the global spread of Covid-19” in justifying the order.
Last month, the CDC lifted the no-sail order and replaced it with a “Conditional Sailing Order,” which lays out a phased approach to help cruise companies resume operations in U.S. waters.
With the replacement of the no-sail order and the advances in Covid-19 vaccines, testing and therapeutics, Del Rio said “the excitement level hasn’t been this high in a long, long time.”
The company is in talks with the CDC about how to interpret the conditional sailing order, Del Rio said, and Norwegian hopes to launch some “trial sailings” with the agency in January. Such test cruises would work to review the health protocols that Norwegian and its industry peers put in place to see if they effectively limit the spread of the virus and protect passengers.
Norwegian partnered with rival Royal Caribbean back in July to hire a handful of top epidemiologists and former U.S. health officials to craft a public health proposal for the CDC that would let them resume sailing. On the board is Dr. Michael Osterholm, director of the Center of Infectious Disease Research and Policy at the University of Minnesota, who was appointed this week to President-elect Joe Biden‘s Covid task force.
Norwegian CFO Mark Kempa said the company has set aside $300 million for investments in health and safety. Del Rio added that the $300 million will likely be spread out over “the next few quarters.”
Del Rio said he hopes the company’s full fleet can resume operations in six to nine months, though he added that’s just a “best answer today” and there are many uncertainties.
Kempa said the company continues to improve its liquidity and conserve cash. The company currently has $2.3 billion in liquidity, including the money set aside for health and safety investments. However, Kempa cautioned that monthly cash burn is expected to rise going forward as the company begins to mobilize its fleet and staff in preparations for a gradual return to service.
Kempa said the company has adequate liquidity to continue to operate, noting that it expects a “cash flywheel” upon resumption of cruising. Back in May, the company issued a going concern warning to investors, saying there was “substantial doubt” about its ability to continue. But the company quickly raised more than $2 billion in fresh debt, shoring up its financials for “well over” a year.
“Going forward, we do not expect a straight line recovery,” he said. “So we will take a thoughtful and disciplined approach to reintroducing costs as we resume voyages in order to conserve cash, while at the same time balancing the need to drive new cash bookings.”
