Just skimming through Royal Caribbean’s (NYSE: RCL) quarterly report:
The Company estimates its cash burn to be, on average, in the range of approximately $250 million to $290 million per month during a prolonged suspension of operations. This range includes all interest expenses, including the increases driven by the latest capital raises. It also includes ongoing ship operating expenses, administrative expenses, hedging costs, expected necessary capital expenditures (net of committed financings in the case of newbuilds) and excludes cash refunds of customer deposits, commissions, debt obligations and cash inflows from new and existing bookings.
$3.2 billion/year is an impressive burn rate, but when considering all the infrastructure it takes to maintain the vessels even when they’re not in use, it isn’t surprising.
As of June 30, 2020, the Company had $1.8 billion in customer deposits of which approximately $300 million correspond to fourth quarter 2020 sailings. Approximately 48% of the guests booked on cancelled sailings have requested cash refunds.
What is surprising here is customers would trust their currency in a company in an industry that has obvious material risks. The value of this capital is in the form of an unsecured on-demand loan paying 0% interest, which is an exceptionally good deal for RCL.
I did place an order to buy RCL stock in mid-May, but sadly the stock narrowly missed my buy limit before it set sail. You can see a chart of it and guess where that happened. Fortunately there were other fish in the ocean at the time.