Norwegian Cruise Lines Set to Cruise to Profitability in 2022

Cruise ship Marina

Norwegian Cruise Line Holdings’ Cruise ship Marina. Credit: Pjotr Mahhonin/CC BY-SA 3.0

After reporting third-quarter earnings, Norwegian Cruise Line Holdings Ltd. (NCLH.N) recently forecasted its return to profitability in the second half of 2022. With the U.S. travel and tourism industry attempting to return back from the impact of the COVID-19 pandemic, this is welcome news for cruise operators.

Cruise lines recorded billion-dollar losses in 2020, with many ships anchored offshore without passengers. However, with pent-up demand for leisure travel and the entry of COVID-19 vaccines, cruise lines can see a turnaround with patrons intending to travel again.

In the backdrop of the pandemic, the cruise line took on large amounts of debt, which they’re now trying to pay down. The cruise operator’s long-term debt touched to over $11.8 billion at the end of September, whereas it was around $6.8 billion at the end of 2019. Plus, the total debt is around $12.4 billion, and it has $1.9 billion in cash and equivalents in the bank.

Moreover, Norwegian also highlighted that to help provide it with extra liquidity; it had entered into a $1 billion commitment that runs through August 2022. In the meantime, it has to still tap into the money and does not intend to do so; if it does draw down on the funds, they will convert into an unsecured note maturing in April 2024. Against this backdrop, a return to profitability is important to Norwegian.

President and CEO Frank Del Rio stated that during the third quarter. However, there were consumer concerns centred around the Delta variant, which spelt a slowdown in bookings; net booking volumes swelled over the past six weeks. He added that they continue to see steady future demand for cruising, especially for the second half of 2022 and beyond. He added that it would be a time when their entire fleet is expected to be back in operation at normalized occupancy levels.

Norwegian has three brands, Norwegian, Regent Seven Seas, and Oceania, with 11 ships across them, and all back in the water, representing about 40% of its capacity. By the end of the year, it expects to touch 75% of capacity, with the entire fleet hitting the sea by April 2022. However, consumer demand returned over the last six weeks of the period, which works well for the second half of the year.

Norwegian Cruise also expects monthly average cash burn for the fourth quarter to touch $350 million. In comparison to the third quarter, the numbers will be up from about $275 million. Furthermore, Royal Caribbean Group (RCL.N) also recently forecasted a return to profitability in 2022.

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