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Royal Caribbean's Liberty of the Seas ship on May 19 in Miami Beach, Fla.

Cliff Hawkins/Getty Images

Royal Caribbean
Group CEO Richard Fain continues to see a gradual return to business, at least initially, whenever that does occur.

Several companies have begun to operate cruises in Asia and Europe with scaled-down passenger occupancy, including several affiliated with Royal Caribbean. In an interview with Barron’s Monday, Fain said he was encouraged to see those cruises begin and that “we’ll learn from that.”

Fain, the company’s CEO since the late-1980s, spoke to Barron’s after the company released its second-quarter earnings.

The company reported a loss of $7.83 a share on a generally accepted accounting principles basis, compared with plus $2.25 in the corresponding quarter a year earlier. The stock closed Monday at $57.31, up 10% on the day as investors cheered positive comments about Royal Caribbean’s 2021 bookings, especially in the second half of the year.

Meanwhile, all of Royal Caribbean’s (ticker: RCL) cruises were canceled during the second quarter owing to the global pandemic, which shut down the industry in mid-March.

Royal, the second largest of the big three U.S. cruise operators, doesn’t plan to relaunch most of its cruises until Oct. 31, though that will depend on what the Centers for Disease Control and Prevention decides.

The CDC, which oversees U.S. ports, has a no-sail order in place until Sept. 30. Royal Caribbean has teamed up with rival
Norwegian Cruise Line Holdings
(NCLH) to vet and beef up health and safety protocols. That panel is expected to have some recommendations later this month.

“It’s not only a question of protocols that we put in place,” Fain said. “It’s relevant to how prevalent [Covid] is in society. If there is a high level of prevalence, no protocols are adequate. But with more reasonable prevalence, you can bring the risk way down.”

Fain declined to discuss many specifics of what the new protocols will look like.

“We will see differences but I think it will all be part of the evolutionary state of cruising,” he said. “Just as flying is different now after 9/11, cruising will be different after Covid-19. But it will still be cruising.”

One difference will be the so-called “muster drills,” in which customers typically gathered in groups aboard a cruise ship shortly after boarding to learn from crew members about emergency procedures. But nowadays, much of this can be handled on an app and inside a customer’s cabin, Fain said.

Fain said he was encouraged by booking activity. CFO Jason Liberty told analysts Monday that the first quarter of 2021 was softer but that bookings were much stronger in second half of next year.

The company is seeing more interest from customers who have already taken cruises, Fain said. “That’s not too surprising.”

As of June 30, the company’s liquidity totaled about $4.4 billion, but there has been speculation that Royal Caribbean will raise additional capital, possibly before the end of the year.

“If there’s an opportunity to add to our liquidity, I suspect that’s something we would look at carefully,” he said.

Royal Caribbean’s stock is down about 45% year to date.

Write to Lawrence C. Strauss at lawrence.strauss@barrons.com

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Topics #Asia #Getty Images #Jason Liberty #lawrence.strauss@barrons.com #Richard Fain #safety protocols