During Wednesday's call with Wall Street analysts, Royal Caribbean revealed some pretty intriguing statistics about the break even point for its ships.
One analyst asked how many ships Royal Caribbean needs to have sailing to reach a "break even" point in terms of costs.
Royal Caribbean Cruises Ltd. Chief Financial Officer Jason Liberty answered by saying the company could break even with use of fewer, but newer cruise ships, in lieu of older ships.
"For our newer ships, you need about 30 percent load factors to kind of break even. And then they skew to about 50 percent load factor on onto our older ships."
With the cruise line's recent cost-cutting measures, their return to service does not need the entire fleet operating at full levels to break even. In fact, load factors do not need to be exceptionally high either.
Essentially, Royal Caribbean is eyeing a slow return to service that gets them back to a break even point in a relatively short period of time.
Selling off older ships?
Another question was raised about older ships and if there is a prolonged suspension of cruises, would Royal Caribbean consider selling off or even scrapping its older ships.
Once again, Mr. Liberty answered the question:
"I do think that you will see ships that are retired at a much higher pace than what we have seen in the past with really because there hasn't been that much on the scraping side. I think the combination of what's happening with COVID and then the IMO regulations, you'll see interest in some of the older vessels for possible sale."
"And so you're going to see a permanent shift in the way of new buildings for some time, which is going to weigh on capacity growth numbers for the foreseeable future. Because these, especially the new building side, it's not a shift and catch up. It's what's likely to be a very permanent shift."
