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Carnival Company & plc (NYSE: CCL) Q2 2022 earnings name dated Jun. 24, 2022
Company Individuals:
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
Josh Weinstein — Chief Operations Officer
David Bernstein — Chief Monetary Officer and Chief Accounting Officer
Analysts:
Steven Wieczynski — Stifel Monetary Corp. — Analyst
Robin Farley — UBS — Analyst
Jaime Katz — Morningstar, Inc. — Analyst
C. Patrick Scholes — Truist Tools Finance Corp. — Analyst
James Hardiman — Citigroup — Analyst
Daniel Politzer — Wells Fargo Securities — Analyst
Assia Georgieva — Infinity Analysis — Analyst
Presentation:
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
Good morning, and welcome to our Enterprise Replace Convention Name. I’m Arnold Donald, President and CEO of Carnival Company & plc. I’m joined in the present day telephonically by our Chairman, Micky Arison, who’s in Europe; and right here with me in Miami, David Bernstein, our Chief Monetary Officer; Beth Roberts, Senior Vice President, Investor Relations; and as a part of our beforehand introduced transition, our Chief Operations Officer, Josh Weinstein. Thanks all for becoming a member of us this morning.
Now earlier than I start, please observe that a few of our remarks on this name might be forward-looking. Due to this fact, I have to refer you to the cautionary assertion in in the present day’s press launch. That is my remaining enterprise replace as CEO. Whereas very disappointingly, our share value sadly displays the present market circumstances, I’m nonetheless very pleased with all that the staff has completed over the past 9 years. I’m particularly pleased with how nicely we’ve got collectively overcome what appeared like insurmountable obstacles at occasions these previous few years.
And I stay very enthusiastic about our future. With money from operations now turning constructive, we’ve got reached an inflection level and, in reality, turned the nook and are headed on a constructive trajectory. I’m not solely enthusiastic about, I’m additionally very assured in the way forward for our firm, and I’m wanting ahead to its steady success. I strongly imagine on this staff and we’re having fun with a clean transition. As Vice Chairman, far and away, my primary accountability might be to help Josh and his administration staff as they work to construct on the present momentum.
Josh is a confirmed govt. He’s nicely revered all through the corporate. He served in key management roles. He’s pushed robust enterprise outcomes throughout his tenure. And he performed an integral half in tuning the corporate by way of the worldwide pandemic. Josh’s thorough understanding of our trade, of our operations and our enterprise technique places him in a powerful place to guide the subsequent part of our firm’s journey. Together with his imaginative and prescient, depth and core values really aligned with those who characterize our firm, I can not consider anybody higher fitted to this position than Josh.
Now turning to our enterprise outcomes. It’s reinforcing to see the continued energy and demand for cruise. We’re aggressively, but thoughtfully, ramping as much as full operations, with over 90% of the fleet now in service. And on the similar time, we’re driving occupancy larger on these ships which have been crusing and we’re targeted on bettering pricing in comparison with pre-COVID ranges.
As we had indicated, for the 20 ships that restarted over the past quarter, occupancy has been deliberately constrained. That mentioned, occupancy elevated from 54% final quarter to 69% this quarter, whereas we additionally elevated obtainable capability by 25%. Now the mixture drove an over 60% sequential enchancment in passengers carried. In actual fact, we carried over 1.6 million friends this previous quarter. And partly within the month of June, we’re already approaching 80% occupancy and, once more, on even larger capability.
Now what makes that much more spectacular is we have been capable of obtain that in an surroundings of uncertainty, given ceaselessly altering protocols, together with those who have been way more restrictive than these in broader society and that have been way more restrictive than these discovered even in different parts of the journey and leisure sector. Whereas fortunately, vaccination and take a look at necessities are beginning to chill out given the development within the state of the virus, we proceed, nonetheless, to face constraints within the pool of potential friends resulting from ongoing necessities in numerous locations. But, we’ve got been capable of make very significant progress.
As you already know, the CDC just lately lifted the testing necessities for reentry into the U.S. for air journey which, going ahead, clearly removes among the friction from our North American manufacturers deployment in each Europe and resulting from Canadian embarkation Alaska. Often requiring an extended period flight, these itineraries are usually related to longer lead occasions. Consequently, we count on the actual profit to be realized in 2023 and past.
Importantly, buyer deposits elevated by $1.4 billion within the second quarter, topping $5 billion. Now we’ve got seen a continued improve in specific demand, and we count on to see that demand proceed to construct as protocols are additional relaxed and as society turns into more and more comfy managing the virus. Regarding the specter of world recession, whereas not recession-proof, our enterprise has confirmed to be recession-resilient repeatedly.
As we’ve got seen in prior cycles, even in downturns, employed individuals take holidays. And that’s much more true in in the present day’s surroundings the place individuals prioritize spending on experiences over spending on issues. Cruise stays an particularly interesting trip choice throughout downturns due to its compelling worth proposition relative to land-based alternate options. Additionally, there may be pent-up demand for journey globally which is a robust tailwind.
At present, we’re seeing success for close-to-home cruises, with many sailings attaining occupancy at or above 100%, the place friends understand far much less friction than with worldwide embarkations. In actual fact, our Carnival Cruise Line model, crusing its complete fleet, is predicted to achieve practically 110% occupancy throughout our third quarter. We additionally noticed an enchancment in new-to-cruise friends within the second quarter, and we’ve got begun to ramp up our promoting efforts selectively to assist help attracting first-time cruisers.
Regarding pricing. We stay targeted on bettering value by way of subsequent yr. We’re targeted on optimizing the occupancy whereas preserving long-term pricing. On this present surroundings of journey restrictions and well being protocols the place we’ve got coast unavailability, we use OPay channels and restricted promotions to capitalize on near-term demand. We’re constructing on our aggressive fleet optimization efforts. Given challenges in elements of Europe, we’ve got reallocated capability to capitalize on markets the place there may be stronger demand.
In actual fact, we simply introduced an particularly inventive strategy that we predict holds nice promise-, the launch of Costa by Carnival. With Costa by Carnival, we carry the atmosphere and fantastic thing about Italy to Carnival Cruise Line friends. Costa Venezia, Costa Firenze, each newly launched and each spectacular, might be managed by Carnival Cruise Line, catering to Carnival’s visitor base starting within the spring of ’23 and 2024, respectively.
This new idea will supply a singular expertise for Carnival friends to decide on enjoyable, Italian model whereas capitalizing on Costa’s stunning Italian design components. Deployment for Venezia might be introduced shortly and can symbolize a brand new itinerary choice for Carnival friends. Individually, we additionally introduced the switch of Costa Luminosa to the Carnival model starting in November 2022 catering to Australian friends. Now with these adjustments, the Carnival model will replenish capability which have been faraway from latest ship exits and contribute to handle progress for the model.
These new and differentiated product choices allow us to capitalize on demand amongst Carnival Cruise Line friends and strengthen return on invested capital throughout our portfolio. As well as, we proceed to additional optimize our fleet and have introduced a elimination of a further smaller, much less environment friendly ship, bringing the overall to 23 ships to be faraway from the fleet since 2019. The accelerated elimination of those much less environment friendly ships, coupled with the supply of 9 bigger, extra environment friendly ships delivered since 2019 fosters larger revenues over time by way of a 7 proportion level improve within the mixture of premium priced balcony cabins and an excellent higher platform for onboard income alternatives in addition to producing a 6% discount in ship degree unit prices, excluding gasoline, moderating the results of inflation and enabling us to ship extra income to the underside line.
Upon returning to full operations, practically 1 / 4 of our capability will include newly delivered ships, expediting our return to profitability and bettering our return on invested capital. Furthermore, subsequent yr, our capability progress in comparison with 2019 is concentrated in manufacturers with our highest returns. Regarding latest gasoline costs, we proceed to aggressively handle our gasoline consumption. Upon reaching full fleet operations, we anticipate that we are going to obtain an extra 10% discount in unit gasoline consumption and 9% discount in carbon depth as in comparison with 2019.
With our proactive efforts to scale back gasoline consumption, we truly peaked our carbon footprint in 2011, and that’s regardless of an over 30% improve in capability anticipated by way of 2023. In actual fact, we’ve got reaffirmed and strengthened our carbon depth discount objectives for 2030 and are on an accelerated path to realize them by way of our fleet optimization efforts, investing in initiatives that drive power effectivity, designing energy-efficient itineraries and investing in port and vacation spot initiatives.
Through the quarter, Carnival Cruise Line broke floor on an thrilling new vacation spot undertaking, Carnival Grand Bahama Cruise port. This vacation spot is predicted to open in late 2024 and can supply friends a uniquely Bahamian expertise with many thrilling options and facilities. Now this personal visitor expertise vacation spot will be a part of Princess Cay, Half Moon Cay, Grand Turk, Mahogany Bay, Amber Cove and Cozumel, securing our robust foothold within the Caribbean. In actual fact, we profit from a complete of 9 owned or operated personal locations and port services, together with terminals in Santa Cruz de Tenerife and Barcelona.
Once more, I imagine we’ve got operationally reached an inflection level and we’re not off course with money from operations turning constructive this quarter. We’ve a powerful liquidity place of $7.5 billion and have already managed our debt maturity towers down by way of 2024. We’ve 91% of the fleet now working and at bettering occupancy ranges, which bodes nicely for future money era.
And whereas to this point, vacationers understand uncertainty and friction continues to be a headwind as protocols turn into much less restrictive and society continues to turn into more and more extra comfy managing the virus, we count on to see demand proceed to construct, as we’ve got already seen with the energy for Carnival Cruise Traces closer-to-home cruises. The engaging worth proposition relative to land-based alternate options, which is even higher in the present day, and the continued energy in onboard revenues ought to assist foster a great surroundings for pricing and will assist to speed up our momentum going ahead.
As soon as once more, I don’t have the phrases to adequately convey how personally rewarding and galvanizing the dedication, the dedication, the inventive ingenuity and the outstanding execution of our Carnival staff, shipboard and shoreside all over the world has been. And that, in fact, contains our Chairman, Micky Arison, and the remainder of our Board of Administrators. Within the face of continually altering boundaries and constraints, in an surroundings of steady and excessive uncertainty, our world staff of tens of hundreds efficiently tackled problem after problem after problem, honoring our dedication to our highest precedence of compliance, environmental safety and the well being, security and well-being of everybody whereas stewarding the shareholders’ belongings and positioning us for nice success over time. I merely can’t thank them sufficient and it’s really a privilege and an honor to work with them.
Thanks additionally to our valued friends. Their loyalty to our 9 world-leading manufacturers and the numerous letters and calls of help are so deeply appreciated. Thanks to our journey agent companions, who’re extra essential than ever and serving to to ship the nice story of our cruise. Thanks to our dwelling port and vacation spot communities who’ve stood by us all through these challenges, amongst different contributions offering vaccines and lobbying for workable protocols.
Thanks to our suppliers and different many stakeholders who stood by us and labored arduous to fulfill our wants whereas dealing with challenges of their very own. And naturally, thanks to our shareholders, our bondholders, the banks, the export credit score companies for continued confidence in us and for ongoing help. We’re certainly poised for a terrific future due to the efforts and contributions of so many.
With that, I want to take the chance to introduce Josh and provides him the prospect to say a number of phrases earlier than turning the decision again to David. Josh?
Josh Weinstein — Chief Operations Officer
Thanks, Arnold. And thanks once more to Micky and all the Board of Administrators for this nice alternative. I strongly imagine in our firm and our capacity to create happiness by delivering unforgettable and much-needed holidays for our friends. This want is much more essential within the present surroundings given the stresses of the previous two years and the worth that all of us place on shared experiences with family and friends.
Now we’re uniquely positioned to ship on this by way of our 9 main cruise manufacturers, every with a deal with assembly their particular friends’ wants and desires. We plan on renewing our efforts to make sure every model obtain readability of positioning and successfully reaches their audience. This, alongside offering cruise experiences that actually resonate with their distinct visitor base, will assist every model optimize its yield and progress aspirations to drive income.
We additionally count on to capitalize on our revitalized fleet, our continued portfolio optimization efforts and our unparalleled vacation spot footprint, significantly within the Caribbean and Alaska. As well as, we’ve got an thrilling sustainability highway map that underlies all of our efforts. What additionally provides me super confidence is our decided and resilient staff all over the world. They’ve confirmed time and time once more for the final 2.5 years that they will completely obtain something and so they do it whereas staying true to Carnival Company’s collective values and constructive tradition. All of it will assist us speed up revenues and returns, drive sturdy earnings progress and enhance the steadiness sheet.
As you mentioned, Arnold, we’re clearly at an inflection level and have a shiny future forward. I’m wanting ahead to placing the views I’ve gained right here in my 20 years in a number of roles to work for the advantage of our shareholders and our many different stakeholders.
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
Thanks, Josh. We’re wanting ahead to your management. David?
David Bernstein — Chief Monetary Officer and Chief Accounting Officer
Thanks, Arnold. I’ll begin in the present day with a evaluate of visitor cruise operations, together with a abstract of our second quarter money circulate. Subsequent, I’ll contact on our 2024 necessary auditor rotation. Then I’ll present an replace on reserving traits and end up with adjusted EBITDA expectations and our present monetary place. Turning to visitor cruise operations. Through the second quarter 2022, we restarted 20 extra ships, leading to 74% of our complete fleet capability in visitor cruise operations for the entire of the second quarter. This was a considerable improve from 60% in the course of the first quarter 2022.
As of in the present day, 91% of our fleet capability is in visitor cruise operations. We have been happy to see that the second quarter 2022 income elevated by practically 50% in comparison with first quarter 2022, reflecting continued sequential enchancment. For the second quarter, occupancy was 69% throughout the ships in service, a major improve from the 54% within the first quarter. We have been inspired by the very close-in demand we skilled in the course of the second quarter for the second quarter, leading to practically double the close-in occupancy features in second quarter 2022 versus second quarter 2019, a pattern we had anticipated.
Income per passenger day for the second quarter 2022 decreased barely from a powerful 2019. As Arnold indicated, we’re targeted on optimizing occupancy whereas preserving long-term pricing. Nonetheless, let’s not overlook the influence because of the future cruise credit score, or FCC as they’re extra generally known as, which value us a few proportion factors in second quarter 2022 versus second quarter 2019. Excluding the influence of FCC’s income per passenger cruise day, the second quarter would have been larger than a powerful 2019.
As soon as once more, our onboard and different income per diems have been up considerably within the second quarter 2022 versus second quarter 2019, partially because of the bundled packages in addition to onboard credit utilized by friends from cruises canceled in the course of the previous. We’ve just lately expanded our bundled bundle providing given their recognition. The brand new bundled choices require us to make adjustments to the accounting allocation. In consequence, within the third quarter, you will notice extra of the income left in ticket, until allotted to onboard, impacting the onboard and different income per PCD comparisons for the third quarter as in comparison with the second quarter.
Simply one more reason so as to add to the listing of explanation why one of the best ways to evaluate our efficiency is by reference to our complete cruise income metrics. On the associated fee aspect, our adjusted cruise value with out gasoline per Obtainable Decrease Berth Day, or ALBD as it’s extra generally known as, for the second quarter 2022 was up 23% versus second quarter 2019. The rise in adjusted cruise value with out gasoline per ALBD is pushed by primarily 5 issues: First, the price of a portion of the fleet being in pause standing. Second, restart-related bills for 20 ships. Third, 24 ships being in dry dock in the course of the quarter, which resulted in over double the variety of dry-dock days in the course of the second quarter versus the second quarter 2019. Fourth, the price of sustaining enhanced well being and security protocols. And eventually, inflation.
Do not forget that as a result of a portion of the fleet was in pause standing in the course of the second quarter and the upper variety of dry-dock days, we unfold prices over much less ALBDs. The primary half of 2022 had an unusually massive variety of ships in dry dock as a part of our resumption of cruising ramp-up, optimizing our dry-dock schedule whereas the ships aren’t in service and guaranteeing that the ships have been nice and work nice once they welcome their first guess again on board. Nonetheless, the second half 2022 dry-dock schedule appears extra regular by historic requirements. We anticipate that many of those prices and bills driving adjusted cruise prices with out gasoline per ALBD larger will finish throughout 2022 and won’t reoccur in 2023.
Because of the entire above, we count on to see a major enchancment in adjusted cruise prices, excluding gasoline per ALBD, from the primary half of 2022 to the second half of 2022, with a mid-teens improve anticipated for the complete yr 2022 in comparison with 2019. Subsequent, I’ll present a abstract of our second quarter money circulate. We ended the second quarter 2022 with $7.5 billion in liquidity versus $7.2 billion on the finish of the primary quarter. The change in liquidity in the course of the quarter was pushed primarily by 6 issues: First, detrimental adjusted EBITDA of roughly $900 million resulting from our ongoing redemption of visitor cruise operations, an enchancment from the primary quarter.
Second, our funding of $500 million in capital expenditures. Third, $200 million of debt principal funds. And fourth, $400 million of curiosity expense in the course of the quarter. All of which was greater than offset by a $1.4 billion improve in buyer deposits in the course of the quarter, together with the $1 billion principal quantity of senior unsecured notes we issued final month. Now I’ll contact on our 2024 necessary auditor rotation. I wished to take a second to elucidate our scenario as it is extremely completely different from most publicly listed firms exterior the U.Ok. and the EU. Carnival plc, our U.Ok. publicly listed firm, which is a part of our dualistic firm construction, is topic to U.Ok. legislation which requires necessary auditor rotation.
Due to this fact, PricewaterhouseCoopers, or PwC as they’re extra generally known as, should be modified as Carnival plc’s auditor for the fiscal 2024 audit on the newest. Due to this fact, we carried out a aggressive RFP course of for the unbiased audit of Carnival plc in addition to the consolidated entity, Carnival Company & plc. Because of the just lately accomplished RFP course of, yesterday, our Board of Administrators appointed Deloitte as the corporate’s unbiased auditor for fiscal 2024. We accomplished the RFP course of within the first half of 2022 to make sure an orderly transition of non-audit providers for the rest of 2022 and to make sure independence by Deloitte in 2023, as required below U.Ok. legislation.
Earlier than I proceed, I want to add that the Board of Administrators and administration of Carnival Company & plc want to thank PricewaterhouseCoopers for its continued service as the corporate’s unbiased auditor. Now let’s take a look at reserving journey. The upper March weekly reserving volumes we talked about on our final enterprise replace continued all through the quarter. This resulted in reserving volumes for all future sailings in the course of the second quarter 2022 being practically double the reserving volumes in the course of the first quarter 2022. Second quarter 2022 reserving volumes for all future sailings have been one of the best quarterly reserving volumes we’ve got seen for the reason that starting of the pandemic, though they have been nonetheless under the 2019 degree.
I’m joyful to report that reserving volumes for the reason that starting of April for the second half of 2022 sailings have been larger than 2019 degree. All of this displays the beforehand anticipated prolonged wave season. And as I mentioned earlier than, we have been very inspired by the close-in demand we skilled in the course of the second quarter for the second quarter, leading to practically double the closing occupancy acquire in second quarter 2022 versus second quarter 2019, a pattern we had anticipated. Whereas the cumulative ebook place for the second half of 2022 is under the historic vary, we imagine we’re nicely located with our present second half 2022 ebook place given present reserving quantity, coupled with closer-in reserving patterns.
We proceed to count on that occupancy will construct all through 2022 and return to historic ranges in 2023. Pricing on our cumulative ebook place for the second half of 2022 was decrease, with or with out FCC, normalized for bundled packages as in comparison with 2019 crusing. For the complete yr 2023, our cumulative superior ebook place continues to be on the larger finish of the historic vary and at larger costs, with or with out FCC, normalize for bundled packages as in comparison with 2019 sailings. It is a nice achievement given pricing on bookings for 2019 sailings is a tricky comparability as that was a excessive watermark for historic yield.
Through the second quarter 2022, we as soon as once more elevated our promoting expense in comparison with the primary quarter 2022 in anticipation of our full fleet being in visitor cruise operations and our 8% capability improve for 2023 versus 2019. Second quarter 2022 was the primary time for the reason that pandemic that promoting expense was above 2019 degree.
I’ll end up with our adjusted EBITDA expectations and our present monetary place. Everyone knows that reserving traits are a number one indicator of the well being of our enterprise. With improved latest reserving traits main the best way, driving buyer deposits larger, constructive adjusted EBITDA is clearly inside our sights. Adjusted EBITDA over the primary half of 2022 was impacted by restart-related spending and dry-dock bills as 34 ships, practically 40% of our fleet, have been in dry dock in the course of the first half of fiscal 2022.
For the third quarter, with over 90% of our capability again in visitor cruise operations and occupancy percentages constructing, we count on ship degree money contribution to develop. In consequence, we count on adjusted EBITDA to be constructive for the third quarter 2022 which, after all the things we’ve been by way of, might be one thing price celebrating. With EBITDA turning constructive, extra liquidity than final quarter, debt maturity towers which have been nicely managed by way of 2024, we’ve got already refinanced a portion of our 2023 maturities and we are going to do the remaining over time.
And now I’ll flip the decision again over to Arnold.
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
Thanks, David. Operator, please open the decision to questions.
Questions and Solutions:
Operator
Thanks [Operator Instructions]. Our first query comes from the road of Steven Wieczynski with Stifel. Please go forward.
Steven Wieczynski — Stifel Monetary Corp. — Analyst
Yeah, hey guys. Good morning. Arnold, congratulations, and it was a terrific run. So thanks to your service. So first query can be across the reserving patterns, which clearly listed below are persevering with to strengthen. Nonetheless, I suppose, buyers are going to, at this level, primarily based on the place your inventory is, they’re going to look previous reserving — present reserving patterns and so they’re going to deal with what may come subsequent given an unsure macro backdrop.
And I suppose my query is, how would you guys assault a slowdown in bookings or load components? Previously, you’d have usually minimize costs to be able to hold load components excessive. However this time round, when you do see bookings gradual, do you assume you guys and your friends will have the ability to keep extra disciplined on the pricing aspect of issues, so the restoration wouldn’t be as steep on the opposite aspect?
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
A few fast feedback. To start with, I wouldn’t touch upon what the others would do. You’ll be able to discuss to them immediately. For us, we’ve got, as we’ve been hit with completely different variants and invasion of Ukraine and different issues and bringing extra capability on board, we’ve needed to think about all of that. And at this cut-off date, largely we’ve got performed all the things in thoughts of attempting to maintain our pricing robust going ahead as a result of we predict that’s the best transfer proper now.
The constructive factor right here is that there’s pent-up demand. And so even when there was a world recession, the fact is we’re, as I mentioned in my feedback, recession-resilient traditionally. And this time, if there was a recession, there’s super pent-up demand, which up to now wasn’t essentially the case as a result of it’s been a few years the place individuals haven’t been capable of journey the best way they wished to. So a mix of issues. One is we’re naturally considerably recession-resilient. We’ve added tailwind of pent-up demand. And sure, we’re targeted on doing what we are able to to finally drive the money we’d like however, on the similar time, do in a way the place we are able to preserve pricing energy. David might have a remark.
David Bernstein — Chief Monetary Officer and Chief Accounting Officer
Sure. Only one factor I’d add to that. Bear in mind, Steve, not each recession is similar. And we’re at present in a really robust labor market. And on condition that, if individuals have jobs and so they really feel comfy of their jobs, they’re more likely to want a trip. And bear in mind, holidays are now not a luxurious, they’re a necessity in in the present day’s world. So I believe we are going to do very nicely. As Arnold mentioned, we’re recession-resilient and we’ll do very nicely in a recessionary surroundings.
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
After which there’s — we’ll see if a recession comes proper now. Financial savings are actually excessive. As David identified, employment charges are actually low. And so there’s financial energy in the meanwhile. We’ll see what occurs.
Steven Wieczynski — Stifel Monetary Corp. — Analyst
Okay. Obtained you. After which second query, I suppose, most likely for you, David, across the latest debt elevate. And we acquired a number of questions from buyers about why you guys would exit and lift debt north of 10% and possibly what drove you. Or possibly there was an underlying cause as to why you needed to elevate debt at these ranges. And I suppose from right here, the query goes to be, what’s the alternative transferring ahead to refinance? Or possibly there may be sufficient likelihood to refinance given the place charges are at this level?
David Bernstein — Chief Monetary Officer and Chief Accounting Officer
Yeah. So when you — as I mentioned on the final convention name, we have been trying to, over time, refinance the $3 billion of 2023 maturities, and we have been targeted on that. And we took a glance and we imagine that we’re in a rising rate of interest surroundings. And so we did exit and we raised $1 billion at 10.5%. It was a problem available in the market, no person may have predicted what would occur within the total market. However what’s attention-grabbing is regardless of the market backdrop, we have been capable of elevate $1 billion inside the value discuss that we wished on that day and we felt superb about that.
We’re trying to do $2 billion to refinance the remaining portion, as I mentioned in my notes, over time. However we’re simply averaging in. In the event you take a look at it in the present day, rates of interest are larger than they have been a month or so in the past after we truly did our bond providing. So I’d say that we have been in a great place. We be ok with what we did. And we’ll look to refinance the opposite $2 billion over the following months forward. And we’re simply averaging in. Bear in mind, regardless of, I’ll say, including 10.5%, when you take a look at our portfolio of debt, our common rate of interest in the present day is 4.5%. So we’ve performed a terrific job managing the entire portfolio. And this is only one minor piece within the portfolio.
Steven Wieczynski — Stifel Monetary Corp. — Analyst
Okay, nice. Thanks guys. Actually admire it. Better of luck Arnold.
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
Thanks Steve.
Operator
Subsequent query from the road of Robin Farley, UBS. Please go forward.
Robin Farley — UBS — Analyst
Nice. Thanks. Arnold, greatest needs, since that is the final earnings name you’ll be becoming a member of it for. Good luck with all the things.
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
Thanks Robin.
Robin Farley — UBS — Analyst
I had a query on occupancy. I believe buyers type of battle with how a lot of the decrease occupancy is kind of short-term, just like the Omicron cancellations in Q1 and new ships going into service at decrease ranges. And the way a lot — in different phrases, to attempt to type of see the trail demand there, I ponder when you may give us a little bit little bit of coloration on kind of the sequential construct in occupancy by way of Q2, I do know you usually wouldn’t give that degree of element and/or possibly one thing together with your visibility on Q3, which I believe usually you’d be 80% to 90% booked by now. And simply type of are you seeing, for ticket value relative to ’19 and occupancy, with that degree of visibility, I don’t know when you can remark a little bit extra particularly.
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
Yeah, you guess, Robin. I’ll have David share some particulars. However the overarching remark can be that we’ve got actual energy in occupancy. And we had some deliberately constrained occupancy as we introduced ships on again on-line due to protocols in other places and so forth. We additionally had some remoted conditions the place we’re transferring crew round briefly as we have been staffing up with crew and constrained capability for these causes as nicely.
However total, our occupancy — however our occupancy charges, as we shared, have actually improved over time right here. And as we talked about, the Carnival model is 110% occupancy within the third quarter. So we’ve got extra capability crusing and occupancy is rising properly. And because the world continues to chill out and turn into comfy managing the virus and restrictions are relaxed, we see issues transferring extra into the course of the Carnival model the place issues are extra normalized although they nonetheless have some restrictions proper now. David?
David Bernstein — Chief Monetary Officer and Chief Accounting Officer
Sure. So in the course of the second quarter, I imply, the variance between the months, it went from 67% to 71%, which is why we wound up total with that 69% occupancy for the quarter. So — and as Arnold mentioned, we’re approaching 80% for the month of June. And with reserving traits good, we proceed to construct. So — however consider, that as I had indicated, we began 20 ships within the second quarter. And naturally, there are a variety of cruises, we’re early on, we constrain occupancy to make sure we follow and the friends have a good time. And so we construct on these ships, and you’ll see the advantage of that after we acquired to June. So we really feel superb concerning the total pattern. It’s constructive. Shifting in the best course. And we do count on to see an bettering pattern within the third quarter and into 2023.
Robin Farley — UBS — Analyst
Okay, nice. Thanks. And possibly simply as a follow-up query on the expense commentary. You place — you talked about a number of kind of buckets about pause standing, ship restart prices, dry dock, all of these as being a part of that 23% improve. And I do know you talked about that may enhance considerably by year-end. I ponder when you may quantify a little bit little bit of how a lot of that improve was simply inflation in well being and security. In different phrases, the opposite components all being considerably short-term, the pause standing, the restart value, the dry dock, how a lot of these kind of 23 factors are — go away robotically simply by having your — the fleet again in service? Simply so we are able to take into consideration type of the place you can get to by the top of the yr by way of expense per passenger per se.
David Bernstein — Chief Monetary Officer and Chief Accounting Officer
Yeah. I believe one of the best ways so that you can — you are able to do your individual quantification and it’s fairly simple. If you consider, we have been kind of 24% up per ALBD for the primary half. And all it’s important to do is when you’re mid-teens for the complete yr, you possibly can again into the place we have been for the second half, taking out the pause standing, the restart, the dry docks. As a result of I did say that the dry docks within the again half of the yr have been going to be kind of extra regular like by way of the variety of dry-dock days. So when you again into the quantity, you’ll have the ability to see the place we’re for the again half of the yr, which is a greater reflection total than the primary half. Now there’s nonetheless noise in that as a result of provide chain disruption and different issues. And we’re working actually arduous to handle that down. And we are going to do this. So — however that’s most likely one of the best ways to again into it.
Robin Farley — UBS — Analyst
And I do know that that straightforward common would get you to type of a mid-single digit for the second half. However I suppose I used to be questioning by type of the top of the yr, actually excited about 2023, that’s how I used to be in search of kind of what items would possibly go to.
David Bernstein — Chief Monetary Officer and Chief Accounting Officer
I perceive. And I’m not ready to present value steering for 2023 at this level. However I used to be simply attempting to present you some directional. You’ll be able to see what the again half is, and we’ll handle by way of all of these gadgets successfully over the subsequent six months. And like I all the time say, we hope to do higher. However at this level, it could be untimely for me to present you value steering.
Robin Farley — UBS — Analyst
Okay. Understood. Thanks very a lot. Thanks.
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
Thanks Robin.
Operator
Our subsequent query comes from the road of Jaime Katz with Morningstar. Please go forward.
Jaime Katz — Morningstar, Inc. — Analyst
Hello. Good morning. Thanks for taking my query. I’d be excited about listening to the way you guys are seeing variations between home and worldwide shoppers, significantly due to this transition of Costa ship, possibly being this rebranding with Carnival and whether or not or not that’s signaling something?
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
Yeah, I believe simply usually, clearly, Europe in some ways is extra challenged from client demand standpoint because it pertains to journey to an extent than North America. And what you’re seeing within the transfer with Costa by Carnival and the switch of the Luminosa in Australia to Carnival is a part of a rightsizing of Costa for what we see as a European surroundings which has difficult not solely by COVID and macroeconomic circumstances, considerably triggered by invasion of Ukraine, but in addition the invasion of Ukraine. And so all of these issues are impacting the European market sector.
So we’re reallocating to manufacturers which have stronger demand, which can be in a stronger place. That’s one of many stunning issues, our belongings are cellular. So — however total, we nonetheless see robust demand in Europe. And there are parts of Europe, the U.Ok. particularly. Additionally we see some persevering with energy in parts of Germany and what have you ever. And so we see a great market in Europe, a powerful market in North America. And we’re simply reallocating throughout the manufacturers to optimize our portfolio and maximize the money era and place us for the long run.
David Bernstein — Chief Monetary Officer and Chief Accounting Officer
If I can construct on that a little bit bit. I did wish to level out, so we talked about our bookings within the second quarter practically doubling the — what they have been within the first quarter. So the NAA manufacturers have been a little bit bit over double than the EA manufacturers, which incorporates Costa, we’re a little bit bit lower than double ebook, I imply all the things is not off course. There’s good, stable, robust demand in all of the manufacturers. However the NAA manufacturers are doing, from a reserving pattern perspective, a little bit bit higher than the EA manufacturers.
I’d additionally prefer to level out, add to Arnold’s feedback, about Costa by Carnival. As a result of consider, an enormous chunk of Costa’s capability in 2019 was in China. And so with that market in the intervening time closed, we fairly than take all of that capability and put it in Europe, we created a brand new market in direction of the Carnival friends which we predict will broaden the market right here in North America and we’ll be in a a lot better place total. So we really feel superb about all of our manufacturers and the course and we’re managing it appropriately as you can see, what Arnold talked concerning the strikes of the ships.
Jaime Katz — Morningstar, Inc. — Analyst
Okay. After which David, I don’t assume it was explicitly famous, however up to now, I believe you guys had pointed to 2023 EBITDA above 2019 ranges. And do you continue to really feel just like the enterprise is monitoring in the best course to realize that?
David Bernstein — Chief Monetary Officer and Chief Accounting Officer
So I mentioned that fairly numerous occasions. I believe we’re — what I’ve all the time mentioned is we’ve got the potential for EBITDA to be higher in 2023 than 2019. That one huge wildcard, in fact, is the value of gasoline which has risen fairly a bit in the previous couple of months. So simply hold that in thoughts. However there may be, with the occupancy bettering over time, there actually is that potential.
Jaime Katz — Morningstar, Inc. — Analyst
Thanks.
Operator
Our subsequent query comes from the road of Patrick Scholes with Truist. Please go forward.
C. Patrick Scholes — Truist Tools Finance Corp. — Analyst
Hello. Good morning everybody. Arnold, greatest needs as nicely.
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
Thanks Patrick.
C. Patrick Scholes — Truist Tools Finance Corp. — Analyst
Thanks. Properly, first query is, are you able to remark in your potential willingness to promote manufacturers to — a number of manufacturers to assist shore up the steadiness sheet?
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
Properly, we’re more than happy with our portfolio of manufacturers. Having mentioned that, our job is all the time to maintain an open thoughts and do what’s greatest for the shareholders. And so we’d completely, once more, consider any and all choices. However we’re solely going to do what is sensible for the shareholders given our projections of alternative given the portfolio we’ve got.
C. Patrick Scholes — Truist Tools Finance Corp. — Analyst
Okay. Honest sufficient. After which my second query is a little bit of a clarification on among the textual content within the earnings launch the place you famous that cumulative superior bookings for the second half of ’22 at the moment are under the historic vary, which means — clearly it was lowered from the earlier the place you mentioned it was at decrease finish. Particularly, you famous right here, this place is per its anticipated bettering occupancy ranges for the second half of ’22. Are you able to clarify a little bit bit extra what that final phrase means? I’m not fairly understanding what you imply by per anticipated bettering occupancy ranges.
David Bernstein — Chief Monetary Officer and Chief Accounting Officer
Yeah. So what we have been attempting to — sure, what we’re simply attempting to say there may be, like Arnold indicated, that within the month of June, in his ready remarks, he mentioned occupancy was approaching 80%. And so what we have been attempting to say is even though we have been under the historic vary, we do count on, due to the closer-in nature of the reserving patterns, to see occupancy within the again half of 2022 to be larger than the 69% within the second quarter. And that’s all we have been actually attempting to point to individuals with that assertion.
C. Patrick Scholes — Truist Tools Finance Corp. — Analyst
Okay. Thanks for the clarification.
David Bernstein — Chief Monetary Officer and Chief Accounting Officer
Positive.
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
Thanks Patrick.
Operator
Subsequent query from the road of James Hardiman with Citi. Please go forward.
James Hardiman — Citigroup — Analyst
Hey, good morning. Thanks for taking my questions. And Arnold, I wished to reiterate congratulations and good luck with what’s subsequent. Wished to hone in a little bit bit on among the pricing commentary, significantly the income per passenger cruise day. I believe you mentioned that quantity was down a little bit bit. There was some — a little bit little bit of an FCC headwind there. However I believe that very same quantity was up north of seven% within the final quarter.
Clearly, there’s this rising concern that the trade goes to wish to push value a little bit bit to fill these ships. Possibly converse to that concept. As we proceed to refill the ships within the third quarter and past, ought to we count on that pricing quantity to go down, down additional? After which clearly, we’re going to get again to a few of that FCC influence. However kind of excluding that piece, how ought to we take into consideration income per passenger cruise day as we proceed to lift occupancy?
David Bernstein — Chief Monetary Officer and Chief Accounting Officer
So — okay. I believe, total, Arnold in his notes talked about the truth that we have been targeted on maximizing occupancy whereas preserving value in the long run. And so we’re very eager on that. We did improve promoting expense within the second quarter for that function to create extra demand. We’re seeing extra first timers. We had talked about the truth that we noticed a major enchancment in first timers. So what we’re attempting to do right here is we’re constructing in direction of historic occupancy ranges in 2023 with higher pricing. As we indicated, the pricing for 2023 is up.
However with the shorter reserving window and using OPay channels and using restricted promotions, we’re driving occupancy within the brief time period to be able to optimize the EBITDA and the money circulate from operations of the enterprise. So whereas I’m not ready to present you steering on the third and fourth quarter gross income per PCD, which, by the best way, when you simply take into consideration the third quarter, one of many issues to recollect is we hope to have a number of children on board within the third quarter.
And people thirds and fourths may also usually, they add to the income, they add to the underside line. However they may also on a per PCD foundation be decrease than the decrease berths, each for the ticket and the onboard. The youngsters don’t usually spend as a lot on board both. However we’re joyful to have all of them on board. So there are components in there that it’s important to think about as you consider the pattern per PCD from third to fourth quarter and past.
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
And with the rise in occupancy that we skilled within the second quarter, even with additionally the capability improve we had within the second quarter, whenever you normalize the FCCs, our pricing didn’t decline.
James Hardiman — Citigroup — Analyst
That’s actually useful coloration. And possibly you already answered this to a point, but when I kind of zoom out right here for a minute. Traditionally, the trade has largely used this value to fill paradigm. And I believe with a few of these metrics, the priority is that we’ll return to that. We have been — pre-pandemic, we have been — it appeared like in a greater place, pondering extra about long-term pricing alternative. Possibly converse to if there’s been any change in your philosophy pre pandemic to now simply given the significance of filling up these ships and attending to constructive free money circulate.
David Bernstein — Chief Monetary Officer and Chief Accounting Officer
So one of many issues that it’s important to take into consideration in all of that is, over time, we’re already seeing it, however we — the protocol friction is lowering. Only recently, they dropped — the U.S. dropped the testing necessities for individuals to get again into the U.S. from worldwide locations. And we’re seeing — we’re beginning to see the flexibility for us to scale back our protocols and cut back the friction. And I believe that may carry again individuals from the sidelines and can create extra demand which can permit us to get higher occupancy at a greater value. So directionally, with extra first timers approaching board and the lowered protocols, we really feel superb concerning the future over the subsequent few quarters in 2023.
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
And consider, as you monitor all of this, that there are combine points in right here, too. Simply portfolio combine and total model positioning in addition to particular itinerary — itineraries obtainable and what have you ever. So the typical value is, there’s a number of noise in that. And the general — the message we’re sending and what we’re experiencing is an encouragement of a powerful market coming again, pent-up demand and us rigorously managing that, thoughtfully managing it, as we create the money and on the similar time place the enterprise nicely for the longer term.
James Hardiman — Citigroup — Analyst
That’s actually useful coloration. Thanks each.
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
Thanks.
Operator
Subsequent query from the road of Dan Politzer, Wells Fargo. Please go forward.
Daniel Politzer — Wells Fargo Securities — Analyst
Hey, good morning everybody. And Arnold, better of luck. And Josh, congratulations on the brand new place. So I had a query on buyer deposits and the way we should always take into consideration this for the remainder of the yr. Clearly, it was very robust within the second quarter. I imply, there’s usually a decline sequentially. So simply as we take into consideration money circulate for the remainder of the yr and the way buyer deposits circulate by way of, is it protected to say that the third quarter ought to — just isn’t going to be money circulate constructive or — simply on condition that there’s that sequential decline? Or given the extent that you just guys proceed to get better by way of your bookings and operations, the third quarter may proceed to be money circulate constructive?
David Bernstein — Chief Monetary Officer and Chief Accounting Officer
In order that’s a terrific query and we’ve been attempting to reply that. I’ll let you know that within the final — for the reason that finish of Might, buyer deposits have continued to extend. They’re up a number of hundred million {dollars}. In order that at the very least directionally within the final — what has it been, 3.5 weeks, that’s the place we’re at. Usually, in the course of the third quarter, there’s a discount as a result of we attain the seasonal excessive peak on the finish of Might. However there are offsetting components this yr that we’d count on to see. With extra ships coming again on-line and better occupancies, that ought to mitigate any regular seasonalization. Whether or not it fully mitigates it or not, it’s very arduous for me to foretell at this level. However there are some mitigating components to the traditional seasonalization of buyer deposits.
Daniel Politzer — Wells Fargo Securities — Analyst
Yeah. Another fast one, if I may simply squeeze it in. On simply the newer cruise product, a number of your fleet has been refreshed. To what extent have you ever been capable of seize that pricing? Usually, the newer product will get a premium value however that is type of a bizarre surroundings. Have you ever been capable of seize that? And if that’s the case, any type of metrics or a solution to quantify that?
David Bernstein — Chief Monetary Officer and Chief Accounting Officer
Yeah. It’s very arduous to inform. I imply we take a look at so many issues, however.
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
There’s so many variables proper now.
David Bernstein — Chief Monetary Officer and Chief Accounting Officer
So many variables proper now, it’s simply very, very troublesome to inform in a comparability going again to 2019. So we take a look at the overall, we handle it appropriately. I’ll let you know, these new ships are performing very nicely, excessive ranges of occupancy, producing vital money flows. And as we transfer ahead, I think that we will proceed to generate a premium there. Arnold indicated practically 1 / 4 of our fleet might be new in 2023 or newly delivered.
The typical age of our fleet, imagine it or not, I believe I mentioned this earlier than possibly on one of many earlier calls, however from 2019 to 2023, regardless of the passage of 4 years, the typical age of our fleet went down one yr. In order that we’ve acquired a number of new capability which ought to assist very nicely each on the income aspect and on the associated fee aspect from an effectivity perspective and higher gasoline consumption. So we’re very excited concerning the future and delivering memorable trip experiences to most likely 14 million individuals in 2023 as we go for historic occupancy ranges.
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
Operator, we’ll take extra query. Let’s make it a great one for Josh. Go forward.
Operator
Our subsequent query comes from the road of Assia Georgieva, Infinity Analysis. Please go forward.
Assia Georgieva — Infinity Analysis — Analyst
Good morning. Arnold, you’ll be missed. However Josh, very joyful that you just obtained this nice place accountability and triple promotion. So I do have a great query for you, hopefully. With the Costa by Carnival idea, that’s clearly one thing that will be a long-term fixture. We’re not simply transferring ships round for the subsequent two or three years. Do you imagine that that is one thing that could possibly be expanded?
And does the Costa gasoline play any position by way of what ships would possibly truly proceed to hitch the brand new idea? LNG deliveries have been considerably troublesome, I suppose, in Europe. We had points with Costa in South America final winter season. So how do you see the event of the idea? And what are the important thing parameters that will truly play into it?
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
I’m going to have Josh touch upon the general model positioning and stuff as we go ahead. However actual rapidly on the LNG gasoline query. LNG, as you already know, is the cleanest burning fossil gasoline. It provides us a 20% discount in carbon emissions, and so forth. However the shifts are twin, to allow them to additionally burn MGO. And in order that, unto itself, wouldn’t influence the way forward for the Costa model. We’ll burn LNG each time it is sensible to take action, which we predict would be the majority of the lifetime of the ships. However there are occasions the place we’ll clearly choose to burn MGO. However by way of the Costa by Carnival positioning, it’s a brand new idea, and I’ll let Josh share his ideas on it. Go forward, Josh.
Josh Weinstein — Chief Operations Officer
Only one factor to make clear. Clearly, the 2 ships that we’re speaking about which can be going below this Costa by Carnival umbrella aren’t LNG ships. In order that clearly didn’t enter into our mindset in any respect. So simply to reiterate Arnold’s level. And with respect to the positioning, I believe it is a nice instance of leveraging the dimensions of this company. As a result of what we may have performed is taken these ships, new stunning ships, solely below the Costa identify and attempt to introduce them into the North American market on a standalone foundation.
However that is truly the chance to leverage all the things that Carnival does so nicely right here in the USA and Canada for its visitor base. So by marrying that together with Costa’s stunning tonnage and onboard experiences, we’ve got the flexibility to marry that up and make a greatest go of making one thing actually particular. So the brief reply is, we completely count on this to achieve success and we don’t take a look at this as one thing brief time period. However ideally, will probably be one thing that works and we are able to construct upon.
Assia Georgieva — Infinity Analysis — Analyst
Okay. So at present, no additional plans. Clearly, you’ve made plans for 2023 and 2024. In order that’s loads of time and capability coming within the two ships. So at this level, it’s too early to debate whether or not this may turn into kind of a mini model by itself.
Josh Weinstein — Chief Operations Officer
Yeah. I believe let’s attempt it out with two ships, after which we’ll see how we do. However that’s it for now.
Arnold W. Donald — President, Chief Government Officer and Chief Local weather Officer
So, thanks, everybody. Go forward. Go forward. I’m sorry. Okay. Thanks, everybody. Actually admire it. And looking out ahead to listening to those as we go ahead and listening to the nice information coming from Josh and our staff. So thanks all very a lot, and have a terrific day.
Operator
[Operator Closing Remarks]
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