Carnival Corporation has announced that it will again accelerate its ship retirement program amid the coronavirus pandemic, increasing the number of ships its selling off from 13 to 18.
Eight of those ships have already left the fleet, which numbered 101 ships before the pandemic. The additional ships take the total fleet lay off to 12% of pre-pandemic capacity.
“We continue to take aggressive action to emerge a leaner more efficient company. We are accelerating the exit of 18 less efficient ships from our fleet. This will generate a 12% reduction in capacity and a structurally lower cost base, while retaining the most cash generative assets in our portfolio,” said Arnold Donald, CEO, Carnival Corporation.
The plans were announced as part of Carnival’s third-quarter earnings report, which revealed a US $2.9-billion loss.
Carnival Corporation said that the ships it is retiring from the fleet will be older, less efficient vessels, freeing up capacity for new ships it has on order.
The removal of less efficient ships will also make the company better prepared for a future in which margins will be tighter as the company recovers from the impact of the pandemic.
“In total, the 18 ships represent approximately 12 percent of pre-pause capacity and only three percent of operating income in 2019,” Carnival said, in its SEC filing.
“The sale of less efficient ships will result in future operating expense efficiencies of approximately two percent per available lower berth day (ALBD) and a reduction in fuel consumption of approximately one percent per ALBD,” Carnival added.
Based on the actions taken to date and the scheduled newbuild deliveries through 2022, Carnival Corporation will have a roughly 13 percent larger average berth size and an average age of 12 years in 2022 versus 13 years, in each case as compared to 2019.
The most recent ship exits include the Rotterdam and Amsterdam, which have been sold to Fred. Olsen Cruise Lines from Holland America Line, as well as Carnival Inspiration and Carnival Fantasy, which are currently being scrapped in Turkey.
“With two thirds of our guests repeat cruisers each year, we believe the reduction in capacity leaves us well positioned to take advantage of the proven resiliency of, and the pent up demand for cruise travel – as evidenced by our being at the higher end of historical booking curves for the second half of 2021,” Donald said.
“We will emerge with a more efficient fleet, with a stretched out newbuild orderbook and having paused new ship orders, leaving us with no deliveries in 2024 and only one delivery in 2025, allowing us to pay down debt and create increasing value for our shareholders,” he added.