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As cruise lines report second quarter earnings, the full economic effects of a no sail environment are getting clearer — and uglier.

And yet, people are still booking cruises, something that Norwegian Cruise Line CEO Frank Del Rio is both surprised and encouraged by.

“If you had told me that we were going to be facing these set of circumstances, and your question is, ‘Frank, would you be taking any bookings?’ I would have laughed at you. I’ll say, ‘Of course, not, who would book? It’s crazy,'” Del Rio said in response to a question on the company’s second quarter earnings call on Thursday. “But people are booking. People are confident that we’re going to come back. People do want to cruise. They miss it. It’s a heck of a vacation experience, a heck of a vacation value. And so this is temporary. The question is how temporary is temporary.”

The company reported that while booking volumes remain below historical levels since Covid-19 emerged, “the Company’s overall cumulative booked position and pricing for 2021 are within historical ranges including bookings made with future cruise credits.” This translates to $1.2 billion in advance ticket sails at the end of the second quarter, with $0.8 billion of that coming from future cruise credits which consumers received in lieu of refunds for cancelled cruises. Notably, more than half (60 percent) of consumers had opted for cash refunds for cancelled cruises as of August 3, rather than these credits.

The top line numbers are bleak. The company’s revenue fell 99 percent in the second quarter ending June 30, to $16.9 million — down from $1.7 billion in 2019. The net income reported was a loss of $715.2 million, compared to $240.2 million in the year prior. Earnings per share went from $1.11 to a loss of $2.99 year on year.

Like every other major cruise line in North America, Norwegian did not see any vessels sail in the second quarter. But it has, however, been raising quite a bit of capital by necessity. In July the company raised $1.5 billion to bolster liquidity “which we believe positions us to withstand a scenario of prolonged voyage suspensions,” CEO Frank Del Rio said. It also reported a monthly cash burn rate of approximately $160 million during the suspension.

The scenario of prolonged suspension is, of course, already well underway. Since its last earnings call, the cruise company has extended its restart date three times, most recently earlier this week to October 31, in conjunction with other cruise line members of the Cruise Lines International Association. Assuming it reaches that date without setting sail, that will mean 6 plus months with no ships at sea.

The reality is that it doesn’t appear anyone — not the authorities, not the cruise lines themselves — have much of an idea of how temporary this will be. The CDC extended its No Sail order in mid-June, only to have the cruise lines themselves push the date further out once again. A cautious restart last weekend for two smaller lines — one sailing in the Arctic and other in the Pacific — ended with headlines about Covid cases onboard, a huge blow to an industry trying to convince regulators and consumers it can be safe.

Del Rio acknowledged as much on the call, saying “look, there’s no way to spin the initial reemergence of COVID onboard vessels. But it’s like I said in my prepared remarks, it’s an opportunity to learn come. This virus teaches us something every day.”

The cruise lines are ramping up their efforts to figure out how to sail safely. Norwegian has partnered with Royal Caribbean to create a Healthy Sail Panel of experts. Of that effort, Del Rio said “while we compete fiercely on everything … we do not compete on health and safety issues. At the end of the day, the entire industry has one goal in common. And that is to create an environment that mitigates the risk of Covid-19.”

Del Rio acknowledged the “tough environment” in his parting remark — and that getting back to sailing has as much to do with the trajectory of the virus as with things that are under control of the cruise lines.

“We have a good liquidity runway to see this through and are hopeful that things will begin to improve, both on the prevalence of the COVID case and our ability to put together a comprehensive and robust set of protocols that gets us back in service quick.”

Photo Credit: Norwegian Cruise Line Norwegian Cruise Line