Carnival Corp. will shed 13 ships and defer five of the nine newbuilds it was scheduled to receive this year and next, as the company looks to emerge from the Covid crisis leaner and more efficient.
Carnival Corp. CEO Arnold Donald said during a second quarter earnings call with analysts that the 13 ships represent a nearly 9% reduction in current capacity. The reductions and new ship delays will mean that the nine-brand fleet does not return to its 2020 second quarter capacity levels until 2022, "at the earliest," Donald said, adding that the resulting fleet will be "inherently more efficient, with a roughly 10% larger average berth size and reduced average age."
Donald did not say which ships would be sold, only that "We have aggressively shed less efficient ships". P&O Cruises this week said the Oceana was being sold and Costa Cruises said in June that the Costa Victoria would exit the fleet.
"We will emerge a leaner, more efficient company to optimize cash generation, pay down debt and position us to return to investment grade credit over time providing strong returns to our shareholders," he said, adding that the ship delivery deferrals through 2021, Carnival Corp. would defer more than $3 billion of capital expense into fiscal 2022 and beyond.
The company now expects that only five of the nine ships it had scheduled for delivery in fiscal years 2020 and 2021 to be delivered prior to the end of 2021, but Donald said ship delivery delays could reach into 2022 and 2023: In total, Carnival Corp. is negotiating the delay in delivery of 16 ships by an average of five months.
Donald told analysts that there was no discussion around canceling any orders.
"The new ships are far more efficient," Donald said. "We'd regulate demand by disposing of less efficient ships rather than trying to avoid bringing on the new ships. The timing of that is important to us, but we'd like to have the new ships."
Carnival said in June that it had accelerated plans already in place to shed some of its 100-plus ships over the ensuing years. It confirmed today that it already sold one ship in June and said it has agreements for the disposal of five more ships and preliminary agreements for an additional three; all are expected to leave the fleet in the next 90 days. This is in addition to the sale of four ships that were announced prior to 2020, the company said.