Cruise ship operator Carnival (NYSE:CCL) reported its earnings hit an iceberg in the second quarter, as the coronavirus pandemic caused it to swing to a much worse than expected loss for the period.
Even the company adjusted for $2 billion in impairment charges, the loss was almost double what Wall Street was forecasting. Carnival says the longer the cruise delays continue, the worse the impact will be.
That sinking feeling
Cruise ship operators have been landlocked for almost the entirety of the quarter, as major COVID-19 outbreaks on their ships led governments to impose "no-sail" orders. While many hoped to begin sailing again in July or August, Norwegian Cruise Lines (NASDAQ:NCLH) just announced it was extending its pause in sailing out even further until September, following Carnival's Princess Cruises' announcement that it was extending its cruise suspension as far out as October in some countries.
Carnival's net losses exploded to $4.4 billion, or $6.07 per share, in the quarter, compared to profits of $437 million, or $0.65 per share, last year. Adjusting for the impairment related to the pandemic, losses were $2.4 billion, or $3.03 per share, versus analyst expectations of $1.52 per share in losses.
The cruise operator said it was accelerating its "capacity optimization" strategy, and would sell within 90 days six ships it had intended to sell over the next several years. It says it has preliminary agreements in hand.
Under the "future cruise credit" (FCC) program Carnival implemented, about half the guests who booked cruises have requested cash refunds through May 31, but the company is "seeing growing demand from new bookings for 2021." Two-thirds of new bookings are new customers; the remainder is customers applying their FCCs.