Royal Caribbean (NYSE:RCL) has decided to keep its cruise ships docked for roughly another month. The company voluntarily stopped any new sailings on March 13 with an original intention of resuming in late March.
That target date no longer makes sense, due to the continued efforts to slow the spread of the coronavirus. Because of that, the company has canceled all cruises through May 12. Due to already announced port closures, ships that sail out of Alaska, Canada, and New England won't resume until July 1.
What does this mean for the cruise line?
Royal Caribbean has offered customers on canceled cruises either a full refund or 125% of what they originally paid in future cruise credit. Customers have until Dec. 31, 2021 to use the issued credit.
For now, Royal Caribbean has drawn down its credit line and taken steps to slow capital spending. It's essentially in a position where little money is coming in (aside from some people booking future trips) and money continues to go out in the form of refunds. Offering the 125% credit is a way for the company to preserve cash even if it limits future profits.
Will customers cruise again?
While it may take some time, Royal Caribbean's customers will come back. The cruise line has a loyal base of customers who regularly cruise. That group will be the first to return -- likely at heavily discounted prices. After that, the general public will eventually return.
Setting any return date is a guess for the cruise line. May 13 seems like a reasonable guess, though further delays are certainly possible.