Dividends and Carnival post losses $4.4 billion in second quarter

One of the biggest cruise ship operators Carnival based in Miami, Florida reported a $4.4 billion in quarterly losses because of COVID as reported by Reuters.

Carnival said it had $7.6 billion in the bank, but it was spending or burning $650 million a month. Consider $650 million x 10 is $6.5 billion, if there is no virus or ships do not sail then Carnival is not looking good. The cruise company said it was waiting for regulatory approval for the redemption of some of its lines in the hope that customers will come back later this year.

The problem for Carnival is many of its customers are over 60, which are the people who should be social distancing and not necessarily safe of the ship because of the HVAC systems and the way air is normally circulated.

Carnival has sold 6 of its ships as it scales back. In terms of of its credit line it has drawn down $3 billion and issued $6.6 billion in debt and equity. Carnival has debt that is maturing within a year and is hoping its creditors waive some of the conditions over wise what was a high rating bonds will breach some of the conditions of the bonds.

The company normally receives bookings 6 to 1 year in advance and customers have canceled, refund or rebook thousands of tickets. Carnival customers are loyal and about half want refunds and half decided to rebook.

In the second quarter, Carnival reported a net loss of $2.4 billion or $3.30 a share.

Linking to dividend paying stocks, with the COVID it depends on how you see the future. If you see a future with a cure in the near future, then people will be cruising, consider half rebooked their tickets. Having gone on a cruise, if the weather is calm it is a wonderful way to enjoy the sea and other countries. If you see the cure coming in 2021, then Carnival will not survive but go into Chapter 11 reorganization to come out as something else. Is the glass half full or half empty?

There are more questions than answers, till the next time – to raising questions.

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