Norwegian Cruise Line will relaunch five ships at a time, estimates 5-6 months before fleet is back up
Norwegian Cruise Line expects its entire fleet will be able to resume full operations in five to six months.
The cruise brand shared the news in its earnings report for the first quarter of 2020, which ended on March 31.
Frank Del Rio, CEO of Norwegian Cruise Line Holdings Ltd., said that Norwegian is planning a phased relaunch. He expects it will take up to six months to resume fleetwide operations across Norwegian Cruise Line Holdings’ 28 ships, which are spread across its three brands: flagship Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises.
“Nothing will be more critical to resuming sustained and profitable long term operations than making cruising the safest option in (the) travel and leisure space and providing cruisers with peace of mind,” Del Rio said on Thursday’s earnings call.
Norwegian cruises suspended through end of June
All Norwegian Cruise Line cruises were suspended after the Centers for Disease Control and Prevention imposed a 100-day no-sail order following outbreaks on ships belonging to multiple cruise lines. Both passengers and crew were infected and some vessels wereturned away from ports in several nations.
Passengers on three Norwegian ships had symptoms or tested positive after their sailings, the CDC said.
The no-sail order – which was imposed April 15 – required cruise lines to cancel sailings through July 24.
Passengers who had made a reservation on one of Norwegian Cruise Line’s canceled sailings will receive a 125% or 150% future cruise credit, depending on the date of their trip. They can either use that credit through the end of 2022 or opt for a full refund, according to its website.
Cruisers who opt to rebook by Friday will receive an additional 20% discount on cruises scheduled between Oct. 1 and Dec. 31, 2022.
According to the earnings report, as of May 11, just over half of the customers whose voyages were canceled had requested refunds.
While Norwegian cruises are suspended through June 30, Del Rio said last week that he wasn’t ready to say when they will sail again even if the CDC’s no-sail order is allowed to expire.
What the phased relaunch may look like
Norwegian is hoping to usher in a new era of cruising by taking a multifaceted approach to setting back out to sea.
It will take time and require cooperation with government and health authorities – including the CDC. Del Rio said the first goal is to get the CDC to lift its no-sail order.
He wants to do “everything humanly possible within the bounds of what technology offers today” to be able to look his family members in the eyes and tell them that Norwegian’s cruise ships are safe to board.
He said ships won’t operate until that point, and when operations start to resume, it will be a gradual process that takes several months. “We expect sailings to restart with a handful of vessels.”
Del Rio, who plans to relaunch roughly five ships per month, said more sailings will be added until the operations are fully back to normal.
“There will be fits and starts and it will require the implementation of new protocols as we learn what works,” he added.
Operations and itineraries are also contingent on which ports are open to receiving cruise ships.
Consumer demand won’t drive the timeline, Del Rio said; rather, the focus will be on the company’s capability to resume operations.
And does he expect full occupancy? No.
“I think it will take time to ramp up loads,” he said. “We don’t know if government agencies will require us to sail at less than 100%, even if there was demand.”
Cruises are likely to look a bit different
Norwegian is consulting Scott Gottlieb, a former Food and Drug Administration commissioner, to develop its next level of health and safety standards before cruising resumes, according to the earnings report.
In an interview with USA TODAY last week, Del Rio detailed that cruise ship passengers may have to don masks, see fewer tables in the dining room and – fewer fellow guests aboard – when they eventually return to sea.
And will that old cruise-ship standard, the self-serve buffet, be back?
“Likely not,” Del Rio said.
Despite the extra precautions, Del Rio says guests will have a great time once they return.
“All the basic elements cruising will always be there: the great value, the multiple destinations, the great dining,” Del Rio said.
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Bookings continue for fall/winter and for 2021 onward
According to the earnings report, cruisers are still booking vacations with Norwegian, especially starting in the fourth quarter and through 2021.
The company is still taking reservations and deposits for future sailings scheduled in 2020, 2021 and 2022. Overall, the company’s booked pricing and position for 2021 is “within historical ranges,” the report said.
During the earnings call, Del Rio predicted there would be “pent-up demand” after the industry’s four-month shutdown.
Jaime Katz, senior equity analyst for Morningstar, wrote in an analyst note Thursday that “the majority of 2021 demand stems from new bookings, rather than canceled re-bookings,” which indicates that customers are are not scared of cruising.
They expect to bounce back
One day after Norwegian warned of a cash crunch that threatened its future, its parent company said last week that it had lined up $2.2 billion in new financing that will carry it through the shutdown. By the time Thursday’s earnings report was released, the company had boosted that figure to $2.4 billion.
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The infusion of capital will keep the company afloat for another year and a half. It will still be able to relaunch operations even if it doesn’t sail during that period, according to Del Rio.
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Cruise lines and bailouts
While major U.S.-based airlines were able to receive bailouts under the federal stimulus package, the largest cruise operators were shut out because they are registered in foreign countries – even if, like Norwegian, they have business offices in Miami. That has forced a scramble to line up investments to stay afloat.
Katz said that given that all “three majors” – Norwegian Cruise Line Holdings Ltd., Royal Caribbean International and Carnival Corp. – have launched “significant efforts to access liquidity” to finance operations for the next year, the cruise lines are all looking to position themselves to survive.
“There’s never been a full stop in cruising prior to this, so we think cruise companies have positioned themselves for a worst-case scenario,” she said.
Del Rio believes resuming service will be a different process for each cruise company. He’s glad though, that at this time, his fleet is smaller.
“We feel like we will be one of the success stories that will write the history books on COVID-19 and we’ll see where the chips fall for everyone else,” he said.
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Contributing: Chris Woodyard, David Oliver
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