嘉年華遊輪 (CCL) 2021 Q1 法說會逐字稿

Good morning, everyone, and welcome to our business update conference call. I'm Arnold Donald, President and CEO of Carnival Corporation & plc. Today, I'm joined telephonically by our Chairman, Micky Arison; as well as David Bernstein, our Chief Financial Officer; and Beth Roberts, Senior Vice President, Investor Relations. Thank you all for joining us this morning.

Before I begin, please note that some of our remarks on this call will be forward-looking. Therefore, I must refer you to the cautionary statement in today's press release.

Of course, the thing on everyone's mind is when are we going to resume sailing here in the U.S. And while we're very disappointed with the April 2 additional guidance issued under the conditional sail order, all 30 of our ships in U.S. waters and that fall under the conditional sail order have achieved green status. And we are continuing to work with the CDC and the administration to find practical approaches to resuming cruising in a way that serves the best interest of public health.

Now it's been over a year since we paused our guest cruise operations, but we are on our way back, and we are coming back an even stronger company operationally. Throughout this pause, we have been positioning Carnival to return operations an even stronger company. We're emerging with an exciting roster of new ships across our brands to capitalize on pent-up demand. We are achieving significant cost efficiencies from the exit of less efficient ships, along with ongoing streamlining of shoreside operations relative to pre-COVID levels. And we've continued progress on our sustainability efforts with an emphasis on minimizing our carbon footprint.

We are excited that the majority of our 9 brands will resume sailing this summer, albeit on a limited basis. In fact, AIDA is already sailing from the Canary Islands, so overwhelmingly positive feedback from our German guests. For Southern Europe, following a voluntary pause, Costa will resume sailing with 2 ships beginning next month in May. For the U.K., P&O Cruises will have 2 ships, offering U.K. coastal cruising in June and August, including an inaugural sailing for the brand's new flagship, Iona. Cunard will have the first of its 3 ships sailing in July; and Princess is offering Summer Seacations out of the U.K. with 2 ships starting in July and August, respectively. And last but certainly not least, Seabourn, will offer ultra-luxury cruises and signature Seabourn Moments sailing from Greece this summer.

Again, as we have demonstrated, our portfolio of brands has clearly been an asset as we have announced resuming operations so far with 9 ships, representing 12% of our fleet. In addition, we are also opening our hotels and 2 operations in Alaska this summer. Our ownership of the vast majority of land-based infrastructure has been key to our leading presence in Alaskan cruising. Opening our hotels will also help support our long-time partners in Alaska who have been very strong advocates for our return to sailing.

We are focused on resuming operations as quickly as practical, while at the same time, demonstrating prudent stewardship of capital and doing so in a way that serves the best interest of public health. Our highest responsibility, and therefore, our top priority is always compliance, environmental protection and the health, safety and well-being of our guests, of the people and the communities we touch and serve, and of course, of our Carnival family, our team members shipboard and shoreside.

We continue to be very encouraged about recent vaccine distribution and the positive progress that signals. Vaccines are a game-changer. They are another important tool, along with advancements in treatment therapies, contact tracing technology and affordable rapid testing. And while we will have a limited number of sailings carrying to those who have already received vaccines, our decisions about vaccines and all of our health protocols continue to be informed by our global medical and science experts and the requirements of the places we operate and visit.

We continue to work on securing the ability to resume cruising from U.S. ports in a manner consistent with the expected return of other forms of travel, leisure and entertainment activities. At the same time, we are, of course, working toward resuming operations in other parts of the world, including Australia and Asia. In fact, 59 of our 90 ships are outside the U.S. conditional sail order.

Meanwhile, despite minimal advertising, we've seen an acceleration in booking trends globally, with a near doubling in booking volumes during first quarter '21 compared to the previous quarter. We've also experienced significant latent demand upon opening new sailings this summer. In fact, P&O opened to a single biggest booking day in 7 years on the announcement of coastal sailings for its 2 ships this summer and generated significant buzz with nearly 1 billion media mentions so far.

Likewise, Cunard's Summer at Sea luxury U.K. voyages drove their biggest booking day in the U.K. in over a decade, while Princess had its second biggest booking day in the U.K. ever. The strong industrial demand has affirmed our confidence and indicates the potential for further pricing strength.

Over the last 14 months, agility has been a key strength. 2021 will clearly be a transition year. We expect the environment to remain dynamic over the next 12 months as we roll out our fleet while continuing to adapt to an ever-changing situation.

As expected, we are staggering the introduction of ships for each of our brands and we'll ramp up the number of vessels and the occupancy levels over time as destinations reopen and we gain further experience with our enhanced protocols. And each brand is coming back operationally stronger than before. While it will be some time before we return to prior capacity levels after accelerating the exit of less efficient ships, we have an exciting roster of new ships, which will be rolling out across each brand.

In fact, in conjunction with our return to service, nearly every brand will welcome a new ship by year-end. Now these exciting new ships are considerably more efficient, and they will drive even more enthusiasm, excitement and demand around our restart plans with both our brand loyalists and with new to cruise.

Beginning with our namesake brand, Carnival, introducing the new Mardi Gras, just in time to commemorate the upcoming 50-year anniversary of the original Mardi Gras. Now the new Mardi Gras promises not to disappoint the brand's reputation built on 50 years of fun. And even after 50 years, Carnival Cruise Line continues to innovate, this time with the first ever roller coaster at sea: BOLT. Mardi Gras also boasts restaurants from Emeril Lagasse, Guy Fieri and Shaquille O'Neal. The highly anticipated Mardi Gras was recently named best new cruise ship by USA TODAY for these exciting innovations, including its liquefied natural gas propulsion system, the first LNG cruise ship in North America, reflecting our ongoing commitment to improve our carbon footprint.

Also in North America, premium brand, Holland America, will introduce a new router dam, featuring its iconic music walk experience, including B.B. King's Blues Club, Rolling Stones' Rock Room and Lincoln Center Stage. Princess will introduce 2 new ships, both of which will feature MedallionClass as well for the very first time the entire Princess fleet. And Seabourn Venture will set a new standard in expedition cruising for ultra-luxury Seabourn with spectacular features, including 2 360-degree view, battery-powered submarines capable of taking guests to depths of 1,000 feet. Seabourn Venture will have a world-class expedition team of 26 staff who specialize in destination-specific geology, oceanography, marine biology, penguins and polar bears, among others. As exploring the underwater world of Antarctica at depths beyond 100 feet has only been done by a handful of people, Seabourn's guests will get to share in a true once-in-a-lifetime experience.

In the U.K., we welcome Iona, also powered by LNG with her inaugural sailing August 7. Our maiden voyage will indeed be special as she sails from England with coastal cruising to Scotland, including her namesake, the beautiful island of Iona. For Germany, we will introduce yet another environmentally-friendly LNG ship, AIDAcosma. For Southern Europe, Costa Toscana and Costa Firenze will replace the exit of several less efficient ships. Costa Toscana curated by Adam Tihany is Costa's second LNG ship and is a tribute to Tuscany. Costa Firenze's interior design is a celebration of the city of Florence. Costa Firenze has been recognized by RINA with Green Star 3 for excellence and environmental performance.

Of course, we will also achieve a structural benefit to unit costs as we deliver these new, larger, more efficient ships. In addition, we will further benefit from the 19 ships leaving the fleet, which are among our least efficient ships. In fact, 17 of the 19 ships have already left the fleet. The combination of all of that will generate a 4% reduction in ship level unit costs and a 3% reduction in unit fuel consumption going forward, enabling us to deliver more revenue to the bottom line. We also continue our efforts to rightsize our shoreside operations and find efficiencies across our existing fleet to reduce our costs further.

Importantly, during this pause, we have made continuous improvements in the environmental, social and governance areas. Now while we've made significant progress on many fronts, we continue to focus on the important issue of carbon intensity. For more than a decade, we've demonstrated our commitment to reducing our carbon footprint through the development of more efficient new ships through the disposal of older less efficient ships and through our ongoing investments and efficiency enhancements for the existing fleet, which have averaged $70 million annually, and through our results. Despite fleet-wide capacity growth of 25% from 2011 to 2019, our absolute carbon emissions peaked in 2011, and we delivered a more than 30% reduction in our carbon intensity since 2005.

We also lead the industry in the development of shore power. Over 40% of our fleet is capable of plugging in well in port, enabling power for more sustainable sources. To date, only 16 of the more than 700 ports we visit worldwide offer this shore power capability. But we are working with our port partners to increase availability as demonstrated by our recently announced plans with Mayor Cava and the Port of Miami.

And we lead the industry in development of and continue improvements in advanced air quality systems. Currently, 78 of our 90 ships have been fitted with these systems. As a result, these ships achieved lower sulfur emissions and the same or lower nitrous in particular matter as ships operating on marine gas oil, or MGO, while avoiding the carbon impact from the additional refining needed for MGO.

Through our research and development efforts, we have aggressively implemented new technologies, such as the aforementioned development of ships power by LNG, the most environmentally friendly fossil fuel. A clear demonstration of our level of commitment was shown when we made the decision to build these ships, even though at the time the decisions were made, the infrastructure for LNG was not yet in place. We then partnered with Shell to develop the supply chain to support LNG operations. We now have 11 LNG ships either currently in the fleet or under construction, representing nearly 20% of our overall fleet capacity.

The utilization of LNG is a positive step for the environment, but it is not the ultimate solution. Our goal is to eventually achieve net zero emissions. To get there over time, we are aggressively looking at other options like advanced lithium-ion battery technologies and fuel cell technologies.

Moreover, we have also advanced our efforts on social responsibility and governance. For example, half of our operating companies are now led by women executives, reflecting our commitment to diversity and inclusion. Also upon resuming operations, an even greater portion of executive pay will be tied to health, environment, safety, security and sustainability performance.

Turning to our financial objectives. First and foremost is to maximize cash generation. While we have secured the liquidity to sustain us well into 2022 even with 0 revenue, our cash flow, once we return to full operations, will be the primary driver to return to investment-grade credit over time, creating greater shareholder value. Now we've lowered our capacity growth to roughly 2.5% compound annually through 2025. We structurally reduced costs. We're working to lower interest costs, and we are working aggressively to return our fleet to guest operations as quickly as practical and still serving the best interest of public health.

With the aggressive actions we've already taken managing the balance sheet and reducing capacity, we are well positioned to capitalize on pent-up demand and to emerge a leaner, more efficient company, reinforcing our industry-leading position.

Throughout these challenging times, we have received overwhelming support. So again, thank you to our valued guests. Thank you to our dedicated members of the Carnival family, shipboard and shoreside. Thank you to our travel agent partners, and thank you to our other many stakeholders for their ongoing support. And of course, especially, thank you to our investors for their continued confidence in us and in our future. We can't wait to welcome everyone back on board.

With that, I will turn the call over to David.

Thank you, Arnold. I'll start today with an update on booking trends. Then I'll provide our monthly average cash burn rate along with the summary of our first quarter cash flows. Next, for those of you who are modeling our net income and EPS, I will provide you with some key data and then finish up with some insights into our financial position.

Turning to booking trends. Our booking volumes have been very strong given the circumstances. Booking volumes for all future cruises during the first quarter 2021 were approximately 90% ahead of booking volumes during the fourth quarter 2020. Just as positive, our cumulative advanced book position for the full year 2022 is ahead of a very strong 2019, which was at the high end of the historical range.

I would like to point out that our booking volumes and book position are very encouraging given that they were achieved with minimal advertising and promotional activity. Pricing on our full year 2022 book position is higher than pricing on bookings at the same time for 2019 sailings if you normalize for bundled packages and exclude the dilutive impact of future cruise credits or more commonly known as FCCs. This is a great achievement given pricing on bookings for 2019 sailings is a tough comparison as that was a high watermark for historical yields. We normalized for bundled packages since over the past year or so. We have offered and our guests have chosen more and more bundled package options. In the end, we expect to see the benefit of these bundled packages in onboard and other revenue.

Even more encouraging is the overall improved pricing trends we have seen over the last few weeks as we have announced the restart of cruise operations in several of our brands. I just want to remind everyone that due to the pause in guest cruise operations, the company's booking trends are being compared to booking trends for 2019 sailings and not the prior year.

Now let's look at our monthly average cash burn rate. For the first quarter, our cash burn rate was $500 million, which was better than the previous expectation of $600 million, mainly due to the timing of capital expenditures. For the first half 2021, we now expect our monthly average rate to be approximately $550 million, which includes additional restart expenditures. I am happy to say that this monthly average rate includes more restart expenses as we have recently resumed or announced the resumption of guest cruise operations for 6 of our 9 brands while we continue to plan for the others. Despite the additional restart expenses, our monthly average rate for the first half of 2021 is expected to be lower than previously indicated as our teams have worked tirelessly to opportunistically find ways to reduce our cash burn rate.

Next, I'll provide a summary of our first quarter cash flows. We are currently in a solid liquidity position with $11.5 billion of cash and short-term investments on our balance sheet at the end of the first quarter. Even better, this is $2 billion more cash than we had on the balance sheet at the end of the fourth quarter.

During the first quarter, we added to our liquidity position by completing 2 very well-received capital market transactions with cumulative net proceeds of $4.4 billion. The senior unsecured note offering, which was upsized due to the strong demand, raised $3.4 billion, while our overnight equity offering raised $1 billion. This was partially offset by 2 things: first, our total cash burn for the quarter was $1.5 billion, simply our monthly average cash burn rate of $500 million per month times 3; and second, $900 million driven by principal debt payments.

I would like to point out that our total customer deposits were unchanged this quarter compared to the fourth quarter 2020 at $2.2 billion with cash inflows from new bookings offsetting cash refunds. This is a welcome point on the road to the full resumption of guest cruise operations.

For those of you who are modeling our net income and EPS, let me provide you with some key data points. Depreciation expense for 2021 is expected to be approximately $2.2 billion. Net interest expense for 2021 is projected to be approximately $1.7 billion prior to our refinancing efforts later this year to reduce that number. While our refinancing efforts will only have a partial year impact on 2021, they will certainly have a more pronounced full year impact on 2022.

Our dilutive weighted average shares outstanding for the second quarter 2021 and fiscal year 2022 is expected to be 1.132 billion. For fiscal year 2023 and beyond, it will be around 1.185 billion. The increase from 2022 to 2023 is driven by the conversion of our remaining convertible notes.

I think it's worth noting that we also incurred almost $200 million of noncash expenses during the first quarter 2021 for things like lease asset amortization and share-based compensation. It appears these items were not fully captured in consensus estimates given the focus on cash burn.

Finally, I will finish up with some insights into our financial position. Since the pause in our guest cruise operations a little over a year ago, we raised $23.6 billion through a series of transactions. These transactions included equity offerings raising over $4 billion. These equity offerings, along with retiring $1.5 billion of our convertible notes through the issuance of common stock, considerably strengthened our balance sheet. From a financial position perspective, the last year was about obtaining sufficient liquidity to get through the pause in guest cruise operations. However, with $11.5 billion of cash and short-term investments on our balance sheet at the end of the first quarter, we believe we have enough liquidity to get us back to full guest cruise operations.

As we look forward, given the improvement in the debt capital markets where interest rates for companies like ours are less than half of what they were last year, we will be pursuing refinancing opportunities to reduce our interest expense and extend our maturities.

And now I'll turn the call back over to Arnold.

Thank you, David. Operator, please open the call to questions.

(Operator Instructions) Our first question comes from Steve Wieczynski with Stifel.

So it seems like yesterday, we got some additional comments from the CDC, which -- who knows if they're true or they're not, but it seems like they could be at the point where they might be open to allowing cruising from North American ports by mid-summer, which is encouraging. And I guess the question is going to be -- before those comments came out, we've seen some of your competitors start to announce Caribbean itineraries that embark -- they were embarking from so-called foreign ports. And you guys really didn't do anything like that for your Carnival or your Princess, kind of core North American brands. And I guess is that something that you would still explore at this point? Or do you just kind of sit back and wait at this point to see what the CDC officially kind of comes out for before you make that type of decision? And hopefully, that all makes sense.

Yes, Steve. I think, first of all, just a couple of things. Princess has announced some sailings from the U.K., some limited sailings from the U.K. But you're correct, we haven't announced sailings just for Princess or Carnival. We have announced for Seabourn sailings out of Greece as an example.

So look, the bottom line is this: we are in dialogue with CDC and with the administration. We stand with everybody and trying to make certain that we all contain this virus. And public health is paramount here. So we -- we're in all that. But as released on April 2, that is not necessarily a workable or practical solution. And so we're in dialogue to try to come up with that. So we want to share the optimism that we can be sailing in July. And I think by working together, we can all make that happen.

In terms of whether we would consider sailing or home porting out of the Caribbean, Carnival is really America's original cruise liners, America's line. We sail more people than anybody else from America and more kids and all that. And part of it is the drive to market capabilities, access for people. So they have 14 home ports here in the U.S. Nobody else has anything like that for Carnival. We prefer to get the people who are working in the ports, all the people who depend on the cruise industry for their livelihood, obviously, we prefer -- and I'm sure the other companies were too, we prefer to have those jobs and all that stuff be here. But if we're unable to sail, then obviously we will consider home porting elsewhere. I hope I answered your question, Steve.

Yes, you did. And then second question is probably going to be for David. But I mean -- so pre-pandemic, you guys were always kind of targeting a double-digit ROIC. And I guess if we assume cruising goes back to a so-called normal at some point over the next, call it, couple of years, is there any color you could give us around what that ROIC could look like now given the much lower cost structure, but obviously, you have higher interest costs as well. So any color about what that ROIC could look like down the road? David, that would be very helpful.

Sure, Steve. So just to point out, yes, we do have higher interest expense. But clearly, the return on invested capital is on all of the capital. So the interest expense doesn't impact the ROIC calculation, but we are still targeting an ROIC in the double digits. And as we've said many times before, once we get to the double digits, we're not going to stop there. This is a business that we believe has the capability going beyond that and getting an ROIC in the low teens, so -- low to mid-teens. So we are moving forward and have a lot of optimism and positive attitude towards our business.

Our next question comes from Robin Farley with UBS.

Great. On the comments last night from the CDC, and I was interested that you didn't mention the potential to have those brands operating from U.S. ports. And I guess it sounds like the April 2 specifications might be burdensome. I guess my question is, if you're reaching agreements with ports and local health care authorities in those places, isn't it possible that if you sort of probability wait the outcome of all of the scenarios that you need to take into account according to the specifications and the health care you have to provide in the land base, if you probability weight that outcome with a fully vaccinated ship, can't that get you to a number that's low enough, right? In other words, a fully vaccinated ship, the probability, I would think, would be so tiny that you would need to incur those costs. Isn't it workable in kind of a probability-weighted scenario?

Robin, there's a lot in your question. I think the conversation around negotiating with ports and local authorities, depending on the specificity and the criteria involved in all that, we do that [specifically]. For example, we've sailed overseas -- the industry has sailed, I think, almost 400,000 guests so far overseas. And to do that, we have to have arrangements with all those places and destinations we go. And so that unto itself, depending again on the criteria established and the paperwork involved that may not be so burdensome because we need to have an understanding.

Keep in mind when all this started, people were concerned about ICU units being overwhelmed and so on. And fortunately, that hasn't happened with the advent of vaccines, with the advancement in treatments, with more rapid testing, more readily available testing. With all of that, it appears well on a trend and a trajectory where that is no longer at a big risk. Having said that, of course, we want to be having a prearranged agreement with what are we going to do if there's a case on board. Because if it's in the community, there's a chance of it being onboard.

The specific solutions you're referring to in terms of everybody's vaccinated and so on and so forth, we'll have to see how that evolves. We continue to be informed by global medical and science experts. Of course, we're going to be in compliance with whatever the protocols are regulated wherever we go. Of course, we're going to do that.

But as you know, today, everybody doesn't have access to vaccines. Children are not yet really eligible for vaccines. Hopefully, that'll change over time. hopefully, the availability of the vaccine so everyone will have access will also change over time. And we would encourage everyone to be vaccinated. We would. Today, we can't buy vaccines to do anything. So we just have to let this play out. And keep in mind, we are currently sailing without any major incident, without anybody being vaccinated and a number with protocols in place. And so you're hoping that the combination will result in -- the combination of vaccinations and other protocols will result in a situation where the public health interest is being served, and we don't have to go through a very burdensome and almost unworkable situation.

The key thing is mitigating risk. We can't be -- prefer not to be -- hopefully won't be asked to stand up to a 0 risk standard because, frankly, no where else in society is that being considered. We just like to be treated similar to the rest of travel and entertainment and tourism sector. And so if we do that, we'll be fine.

An interesting point is today, you can fly out of the U.S. Today, you can fly out of U.S., take a cruise and fly back into the U.S., whether you're vaccinated or not. And today, if you're vaccinated, you can't take a cruise ship from the U.S. And so we've got a little work to do here, but we stand with the CDC. We stand with the administration and working together to come up with practical solutions that protect the public health but allow 0.5 million-plus people in the U.S. that are dependent on the cruise industry for jobs to be able to get back to work and give people the vacation experience of their choice. Thank you.

Great. Just one quick follow-up. Just thinking about the opportunity to put additional ships into service this summer. And given the booking stats, you mentioned, those record booking levels and all the pent-up demand that we're seeing, how far -- in advance, how close in could you add additional July departures? In other words, does that happen -- have to happen by the end of April to sort of reasonably add other ships in July? Just thinking about that timing.

Thank you. Our biggest constraint right now, of course, is being able to ramp up with crew. And so it will take us minimum 60 up to 90 days to be able to get a crew on board, trained up with new protocols, et cetera, to be able to execute a sailing. So you can backtrack from that in terms of when we'd be able to go with an announcement. And so that's the biggest challenge we have is ramping. But we do have the opportunity from a demand standpoint, assuming we have the crew available and ready to go and trained up that we can do closer in announcements on itineraries and sailings because the demand is there.

Our next question comes from James Hardiman with Wedbush Securities.

So a lot of discussion about vaccines and how that may or may not help the regulatory landscape. I'm curious about the consumer landscape. Obviously, you've got certain customers that would see a vaccine requirement as a reassuring step, creating a bubble on the sea, so to speak. And then you've got another contingent that would see that as somewhat taking away their freedoms. Talk a little bit about -- I'm sure you surveyed your own customer base and how you think about -- how big those different contingencies are and how you serve both.

Well, I would say, first of all, we would encourage everyone to get a vaccine if available is -- today, that combined with other basic simple measures you can take is your best defense, I guess, of getting COVID and certainly your best defense against having any serious effects if you do get COVID. And so we would encourage everyone to get a vaccine.

Having said that, of course, people have the individual personal liberties, et cetera, to my knowledge, and we're involved in the World Travel and Tourism Council, we're involved in U.S. travel group, et cetera. To my knowledge, there is no country -- major country today that is mandating vaccines for travel. And so the option is vaccines or testing or whatever. And so that's my understanding today.

There, as you can see, as we go about the society of today, whether it's restaurants or entertainment venues, some of the sports teams are opening up where they're taking guests in, there's not a mandate for vaccinations. Then some places in the world is not even legal to mandate vaccinations or anything. So there's a lot of complication in all of that.

Having said that, as I said before, we'll be informed by the global experts, the medical experts to scientists. And of course, we will follow whatever the protocols are that -- are regulated and in place wherever we go. We will have to follow those. And you're right, there are a lot of people who don't feel -- even they are willing to take the vaccine, they don't want to be mandated to take it, and people do have that personal freedom, perception and orientation.

So we want to encourage people to take the vaccine. And then what our ultimate policies will be, we'll have that evolve and see. In the U.K., we have some -- we've announced some of the sailings in the U.K. We just announced one in Seabourn where it's available to people who have vaccinations, but we do not have a company or brand policies right now around vaccinations. And we're going to allow that to play out in line of with what makes the most sense. Does that answer your question?

Yes. Very helpful. It does. And then I guess second question here, and you get this question all the time, but I figure it's worth asking every few months. Walk us through sort of your latest thoughts on the timetables around mobilizing the fleet, how quickly you could get to sort of cash flow breakeven, how quickly do you think it would -- how long do you think it would take to get the full fleet up and running. And then as I think about occupancy, Norwegian talked about a 60% occupancy level to start. Do you think that's a reasonable number? Or is there another number that you're thinking of?

Okay. And one other comment in fairness to people on the vaccines, too, I just have to make is that, as I said, and I'll repeat it. But everybody doesn't have access to vaccines today. Hopefully, that will change and hopefully, it will change very quickly. But today, everyone doesn't have access. And so that's a whole another factor to put in, and children today are not approved to take vaccinations. And so there's testing going on and sciences at work. And in coming months, that could change as well. But today, children obviously are not approved for vaccines. And so those are additional vaccine commentary.

Now back to your current question. Initially, take our U.K. sailings and some of the other sailings, initially, so we can have opportunity to practice the protocols and make sure everything is going as planned. We're starting with less than 50% occupancy, but that will ramp up pretty quickly as we make certain that the execution is in place and going well. And so that's where we are in terms of the initial sailings. Again, for other companies, whatever theirs are, it's probably just a similar thought process. So people want to make sure that the protocols are in place and are working right, and we all get good practice with our crew in managing all of that. And then it would ramp up as we get better at it. So that's the first comment.

In terms of how quickly it gets to breakout there, David make some comments on the financial perspective. But what we've been saying is 30 -- depending on the brand and the ship size and a whole bunch of other things, 30% to 50% is -- of occupancy is better than breakeven financing for us for a given ship. In terms of the overall fleet, we are going to come back staggered no matter what. We will be bringing in a few ships in a brand at a time. Hopefully, if we were approved to go and the destinations were all up and running, and we can have all the various itineraries and all that, ideally, we'd like to be able to have the fleet fully going by the end of this year, early next year. And that's our aspiration and what we're working hard with all (inaudible) around the world to accomplish.

And then the last comment I just want to emphasize for us, the U.S. is very important to us, at the same time as the rest of the world. And that's one of the benefit they have, all the brands we have. And so as I said in my opening remarks, we have [9] ships that are involved in other jurisdictions and other regulatory environments that we have to work with. So today, those a little bit ahead of where we are in the U.S. But hopefully, we'll all get to a level playing field and be able to bring the fleet back over time. I hope I answered your question, but I'll let David make a comment if you want to add anything on the breakeven conversation.

Yes. Let me just address the breakeven. It'd be very difficult at this point in time because to determine exactly where we breakeven, there are so many variables. I mean you're talking about pricing. The cruise ticket, there's the price of fuel, there's currency. So what I've been doing is referring people back to our 2019 actual. And when we looked at 2019, and I've said this before, if we had the top 25% -- top 25 ships in our fleet operating, we would -- and yes, they would be -- I'm just talking about full operations with full occupancy. Those 25 ships would generate enough cash flow to cover the pause cost for the other 60 ships in our -- 65 ships in our fleet as well as cover the full $2.4 billion of SG&A that we had in 2019.

And by the way, with Arnold's comments, coming back and being more efficient, hopefully, we can do better than what we did in 2019 in terms of SG&A. But hopefully, that helps you build your own model because there are just too many variables at this point for me to be specific on the guidance of when we'd be cash flow breakeven.

Our next question comes from Patrick Scholes with Truist.

A couple of questions for you. Yesterday, the CDC came out in a -- it was in a Bloomberg article, and I quote, "Hopefully, by mid-summer with -- hopefully, by mid-summer, there'll be restricted revenue sailings." I'm curious, I'm sure you thought about this. By them saying restricted revenue, do you interpret that to mean test cruises or would that be limited occupancy on paying cruises?

Thank you for the question, Patrick. I think I'd rather the CDC respond to what they were thinking when they said that. Again, we want to work with them and the administration to ensure that ultimately, it would be really revenue cruises at this point in time. And we look forward to working with them to come up with a practical approach that would make that happen and still serve the interest of public health.

Understood. And then in that regard, do you have a date in your mind? And I don't want to -- I don't expect you to tell what that date might be. But do you have a date in your mind that you'd just say, hey, it's x date and we're just not really moving forward here, sailing out of the United States that you would possibly go ahead and just pull the U.S. ships and sail them out of other countries at that point, sort of a deadline date in your mind?

No, I wouldn't say there's a date per se. Obviously, practically speaking, as a company, we'll have to make prudent decisions for you, for our investors. And so we'll do what we think we need to do to get people an opportunity to sail and to give an opportunity for people to work and earn a living and so on and so forth.

But we don't have an arbitrary date. I would say it's sooner rather than later that we might have to announce some additional home porting outside the U.S. We're trying to hold back on that, but it could be sooner rather than later on that. But I continue to be very much focused on working with the CDC and the administration to come up with a solution that works for American workers and American public, and I think we can. I think if we all just continue to work together, we'll figure that out -- where we have figured it out, and I think we can figure it out here, too. I'm sorry. Go ahead.

Our next question comes from Brandt Montour with JPMorgan.

Sorry, one more on vaccines and CDC. And understand that you don't want to alienate any of your U.S. loyal guests. The other Norwegians' 100% vaccination plans looking to ramp up load factors much more quickly than what we would expect. You could probably -- or anyone could probably realize under the conditional sailing order that I realize that's a work in progress.

My question is, if that strategy for Norwegian is able to move forward, is there a world in which you could envision moving to something like a hybrid approach where some ships require vaccination and then you can ramp up loads really quickly and then others are more -- available to people that didn't want to have a vaccine? Is that something that's on the table for you?

I think, again, that's one of probably 1,000 different scenarios. In my comments, I mentioned agility and constantly changing dynamics and ability to adapt. And so certainly, that's one of a 1,000 different possibilities. Hopefully, we can come up with something that wouldn't require those kinds of dynamics. And more than cost would be optimistic, we all can working together. But I guess there could be scenarios like that. I'm hopeful that we'll have something much more straightforward that will accommodate [the world as it is], and we'll let the appropriate authorities (inaudible) information we have.

Okay. And then I'm surprised we haven't talked about the pricing commentary yet because it was really positive. Arnold, you mentioned further pricing -- looking for further pricing strength. And then, David, you mentioned in the last few weeks pricing trends were positive. I guess the question is -- and you haven't even started marketing yet, so we would assume it would -- potentially that would be another catalyst. But is there any concern or one concern we would have is that if people aren't booking non-balcony cabins or inner cabins right now, is there any benefit from some cabin mix in those numbers?

I'll just make a comment first, David, to speak to the specifics. Generally, as you understand, I'm sure, what you have is a basic kind of supply-demand right now. I mean we have very limited sailings available and a lot of pent-up demand. And so therefore, there's an opportunity to give people a great value. The vacation experience they want still at a much better value than equivalent land-based experience. So still a great value. And so we're seeing that reflected, though, in the general pricing strength. But David, you can go ahead and answer the specific question.

So keep in mind, the pricing comments that we made, the pricing was up, we were looking at the full year 2022 booking trends. And essentially -- substantially, all our fleet is open for the full year 2022 without the -- so what we see, we looked at it by quarter. We looked at it by brand. We looked at it by category mix. And we see the same general positive pricing trend regardless of how you look at it. So we felt very good about the overall book position. As well as the last couple of weeks, as I had said in my prepared remarks, booking volumes and pricing was very encouraging in the last couple of weeks. And by the way, it wasn't just on the voyages that we opened up for this summer, looking at 2022 as well. Everybody wants to go away. And I will tell you, the next best thing to actually going away is planning a vacation. And that's what a lot of people seem to be doing right now.

Our next question comes from Jaime Katz with Morningstar.

I'm actually curious to understand a little bit better what the mechanics behind the revenue management processes right now, particularly whether you guys are filling the ships to that 50% mark, leaving some incremental ability closer in, if you can fill more, or whether you're booking above and beyond that for maybe later this year where there may have to be some adjustment or some of those reservations may have to be walked back, if that makes sense.

Yes. Well, first, I'll make a few comments and then, David, add whatever you would like. When you think about revenue management, you think about the booking information we're sharing a lot of booking as well out into '22 and some is even in the '23, where we fully expect to have full occupancy and full fleet sailing and so on and so forth by that point in time, and where there's confidence obviously amongst those who want to cruise that is likely they'll be able to at that point in time. So that's a lot of what's driving what you're hearing much more so than the near end shorter-term stuff, which is more limited occupancy. But David, go ahead.

Yes. The -- I think, Arnold, I think you said it well. The -- first of all, on the revenue management side, Micky and Arnold and I have met with every single revenue management team recently, and we've been talking to them about what they're doing and how they're doing it and sharing best practices to make sure that everybody is thinking very clearly about what is optimal under the circumstances. Because as you would imagine, the models that we have, while they're helpful, they're not the answer in this environment. And we have to layer in our own thought process on top of that. So the people are actively thinking this through very carefully.

The limitations on occupancy that you're describing are more of a short-term thing that we are focused on for the voyages we've announced this summer in both the U.K., for P&O Cruises, Cunard and Princess as well as what we're seeing with Costa and AIDA and, of course, Seabourn in Greece as well. So we are focused, and we will limit the occupancy as appropriate the way Arnold had described and, of course, try to take advantage of the positive cabin mix in terms of pricing when we do that. And so it's a shorter-term issue.

But when we look out to 2022 at this point in time, the percentage that's on the books is much lower. And therefore, as a result of that, the capacity limitations are in a factor. And hopefully, by then, when the full fleet is operating, we're operating at a much higher level of occupancy as well. The vaccine rollout continues around the world, and hopefully, we get to a better place.

Okay. And then I think you had said demand quarter-over-quarter was up 90%. Is there a way to think about what the sort of organic part of that is and what part of that is attributable to itineraries that were open for 2021?

Well -- so let me tell you some of the things I looked at to better understand the demand and what flowed through. So I looked at the first quarter bookings just for 2022 because all of those sailings were already open. And for 2022, the bookings in the first quarter were higher than the bookings for 2019, which we all know was a very robust year. And then when I looked at the March bookings for 2022, they -- I said they accelerated because just for 2022 in March, we saw a significant increase in bookings versus what we had seen in 2019.

And so this was, to my point, when you do an apples-to-apples comparison just for 2019 -- for 2022 versus 2019, you're seeing some very positive booking momentum. As I said before, people are looking forward to getting away. There's all that pent-up demand, and they're planning the vacations.

Our next question comes from David Hargreaves with Stifel.

Great job on controlling cash burn. With respect to the refinancing efforts that you talked about, I'm just wondering if there are any specific elements of the debt stack that you may be targeting and whether we should be thinking in terms of equity clawbacks. And then I have a follow-up.

David?

Yes. So -- yes. So in general, I mean, you can look at all of the debt that we did early last year in the April, June and July and August time frame, which was, as Arnold has said, very expensive. And those are the things that we're focused on in terms of refinancing. And we've been very specific that we're looking clearly at refinancing to lower interest rates, and we're not necessarily -- we'll be patient in terms of reducing our debt load and using the extra cash until we have clear line of sight that our fleet is going to be fully back in operation and we feel comfortable. So I'm expecting to focus on refinancing the early expensive debt.

Okay. And...

I'm sorry. Finish your question, then we'll take one more, and that will be it. Go ahead.

So with respect to the vessels that you've taken on and expect to take on, could you talk about secured borrowing capacity, if there have been changes to that and if you expect a need for any further covenant amendments?

So the vessels that we're taking on, with each vessel, we have a committed export credit that's associated with those ships. So as we take delivery of the vessels going forward, we'll use those export credits, and they are unsecured financing. And the export credit agencies have been very supportive. We continue to work with them. And so we feel very comfortable with that financing, and it's committed in place. And our bank groups that are associated with that, too, have been very supportive.

As far as covenant amendments, we have worked with all our bank groups, and we got multiyear covenant amendments for our agreements, and we feel good about that. We have -- if you look at the 10-Q, you'll see that with the export credit agencies, I guess, they gave us covenant waivers through either August or November of 2022. They said they were very busy with other customers, and we're now working with them to complete that holiday, too, as well as get the same covenant amendments that we got from our bank group.

We have a question from Sharon Zackfia with William Blair.

I had a question about -- thanks for the detail on the efficiencies you've been able to generate on the ships. But I'm wondering at the corporate level, if we look at that kind of $2.4 billion from pre-pandemic annually, what do you think structurally you've taken out of that number? And then on marketing, which is obviously a big chunk of that $2.4 billion, have you rethought kind of what the right level of marketing spend might be going forward?

Yes. Real quick, we're not going to give any kind of guidance in the cost at that level. But in terms of our historical behavior of becoming more efficient, and certainly with this pause, we've had the opportunity, which you normally don't have, to really take a really hard look at everything because we are so reduced in terms of staff at this point in time. And then look at all of our processes, et cetera, and have time to introduce additional technologies that make us more efficient and what have you. So we do see substantial contributions in terms of cost improvement across the board on the shoreside.

With regards to the marketing, that's evolving on its own anyway in terms of what the most powerful delivery mechanism is for positioning and attracting and getting bookings and so on is just naturally evolving as society becomes increasingly digital and social media-based, et cetera. And our most powerful marketing tool has always been word of mouth because the product itself, the experience itself is so great. That's always been the most powerful marketing, too.

Right now, we have pent-up demand. On top of that, all the repeat cruisers have gone almost a full year now without being able to cruise and have a huge pent-up demand there. We have a base of almost -- a database of almost 40 million previous cruise scores that we can access directly and so on. So we'll see how all those dynamics change, whether the absolute spend will be different or it will be reallocated, that's all being worked at. But the short answer is we're going to come out leaner, and we're going to come out having more impact per dollar spent. There's no question about it.

David, I don't know if you want to add any additional color from...

No. I think that's perfect.

Okay. Well, look, I want to thank everyone for being on. Obviously, we feel, as I said, will come out operationally stronger, and we're excited that we're starting to sail again. And we're looking forward to working things through here in the U.S. It's a very important market, obviously, for us, extremely important. And we're looking forward to giving people the opportunity to have a great experience as they do in the rest of the travel and tourism sector. So thank you so much, everyone. Appreciate it.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.