Could Royal Caribbean sell more ships? It's not off the table

Royal Caribbean Group might not be done selling ships.

The parent company of the world's largest cruise line, Royal Caribbean, as well as Celebrity Cruises and Silversea, is taking an "opportunistic" approach to ship sales as it navigates the unprecedented shutdown of most of its operations worldwide, one of the company's top executives said this week.

The company already has reduced the capacity of its 26-ship Royal Caribbean fleet by selling two older ships in December, and just last month it sold its entire three-ship Azamara brand to a private equity company, Sycamore Partners.

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"This opportunity came our way here with Sycamore [that] gives Azamara an opportunity to grow, and I think ... it'll do quite well under ... this other venture," Royal Caribbean Group CFO Jason Liberty noted this week during a conference call with Wall Street analysts. "Moving into other ship sales and so forth, we remain opportunistic."

Liberty suggested that Royal Caribbean was looking hard at how the company should be positioned when it comes to ship numbers and types when the year-long shutdown to most cruising worldwide finally ends.

"We have really tried to be opportunistic and strategic and look at ... how do we want to prioritize, whether it's how we're investing or how we're supporting on our resource base."

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Royal Caribbean Group has had to raise billions of dollars to stay afloat over the past year as most of its ships remained idle. It's losing hundreds of millions of dollars per month. But Liberty suggested that the ship sales the company has done weren't so much about raising cash as about setting up the company's brands for success in a post-coronavirus world.

"I think we need to remember that, pre-pandemic, all of these ships generated quite a bit of cash flow and so ... for us, typically, the tests on [whether to sell a ship] is a little bit less about the cash that we would receive," he said. "It's more strategic on whether we think this ship, whether in its current state or through some moderate investment, is something that fits our brands."

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With the sale of two ships in December, Royal Caribbean Group's Royal Caribbean brand now has 24 ships. Its Celebrity brand has 12 ships. The Silversea brand has nine vessels.

That's 45 ships in all at wholly-owned Royal Caribbean brands, down from 50 just a few months ago.

Royal Caribbean Group also owns a 50% stake in two German lines, TUI Cruises and Hapag-Lloyd Cruises, that together own 13 more vessels.

Liberty didn't say which ships the company might be willing to sell in the coming months if the right offer came around. But typically cruise lines only sell their oldest, least-efficient vessels.

The oldest vessels in the fleets of the Royal Caribbean brands include the four Vision Class ships at Royal Caribbean (unveiled between 1996 and 1998) and Silversea's Silver Wind, Silver Cloud and Silver Explorer (all built between 1989 and 1995).

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The two Royal Caribbean ships the company sold in December -- Empress of the Seas and Majesty of the Seas -- were built in 1990 and 1992. The three Azamara ships the company sold date to 2000 and 2001.

Liberty noted that the Azamara ships were less efficient when it comes to costs on a per passenger basis than the average vessel in the Royal Caribbean fleet due to their small size. The three ships hold just 700 passengers each.

The sale was "[good] on the cost standpoint because, you know, [Azamara's] ships were smaller [and] for spreading of costs were not as efficient," Liberty told the Wall Street analysts on the call.

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