Norwegian Cruise Line Holdings puts delta surge in the rearview mirror

Norwegian Cruise Line Holdings (NCLH) said that bookings have improved after a slowdown caused by the delta variant surge in Covid cases, and that it expects to be profitable during the second half of 2022. 

The patterns echo those reported by Royal Caribbean Group during its Q3 business update.

“Despite headwinds in the third quarter related to the delta variant, we continue to experience strong future demand for cruising with positive booking and pricing trends, particularly for the back half of 2022 and throughout 2023,” said NCLH CEO Frank Del Rio during a call with analysts. “We believe we are nearing an inflection point with the worst of the pandemic now appearing to be behind us.”

NCLH expects to be cash-flow positive in the first quarter of 2022 and, based on the current trajectory, to be profitable for the second half of 2022. The cumulative booked position for the second half of 2022 is meaningfully higher than 2019 and at higher prices, NCLH said. 

The company said that about 40% of its capacity was operating by the end of September. Its fleet was cash-flow positive during the quarter, and occupancy was at 57.4%, reflecting self-imposed limits. NCLH said that approximately 75% of capacity is expected to be operating by year’s end with the full fleet back in service by April 1. 

Del Rio said that the 11 ships back in service have seen high guest satisfaction scores and “remarkably strong onboard revenue generation.”

“In fact, onboard revenue has exceeded our baseline expectations by over 20% with broad base strength across all ships, regions and revenue streams,” he said. 

Del Rio said that while such figures may not be permanent or future-indicative given factors such as pent-up demand, “it is nonetheless an encouraging and positive signal of the healthy consumer demand we are experiencing.” 

NCLH said the delta-induced bookings slowdown was heavily weighted to sailings in the fourth quarter of 2021 and early 2022, and that bookings improve sequentially through 2022. 

Net bookings have materially improved over the past six weeks with particular strength for bookings related to sailings in the second half of 2022 and into 2023, the company said, with its overall cumulative booked position for full year 2022 in line with 2019’s record levels at higher pricing, even when including the dilutive impact of future cruise credits (FCCs).

Company reports $801 million net loss

NCLH lost $801.4 million during the quarter, compared to a $638.7 million loss in the same quarter a year earlier, despite revenue of $153.1 million greatly exceeding $6.5 million in Q3 2020.

The company said cruise operating expenses increased 131.3%, primarily related to crew costs, salaries, food and other travel costs as ships prepared to return to service. Fuel costs also increased as well as NCLH’s interest expenses due to added debt at higher interest rates. 

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