Good morning, and welcome to the Norwegian Cruise Line Holdings Second Quarter 2021 Earnings Conference Call. My name is Roshea, and I will be your operator. . As a reminder to all participants, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Andrea DeMarco, Senior Vice President of Investor Relations, Corporate Communications and ESG. Ms. DeMarco, please proceed.

Thank you, Roshea, and good morning, everyone. Thank you for joining us for our second quarter 2021 earnings call. I'm joined today by Frank Del Rio, President and Chief Executive Officer of Norwegian Cruise Line Holdings; and Mark Kempa, Executive Vice President and Chief Financial Officer. We would also like to welcome a special guest joining us today, Dr. Scott Gottlieb, Former Commissioner of the U.S. Food and Drug Administration, Chairman of our company's SailSAFE Global Health and Wellness Council and author of the soon-to-be-released book, Uncontrolled Spreads. Frank will begin the call with opening commentary, after which Mark will follow to discuss our financial results before handing the call back to Frank for closing remarks. We will then open the call for your questions. As a reminder, this conference call is being simultaneously webcast on the company's Investor Relations website at www.nchlltd.com/investors. We will also make reference to a slide presentation during this call, which may also be found on our Investor Relations website. Both the conference call and presentation will be available for replay for 30 days following today's call. Before we begin, I'd like to cover just a few items. Our press release with second quarter 2021 results was issued this morning and is available on our Investor Relations website. This call includes forward-looking statements that involve risks and uncertainties that could cause our actual results to differ materially from such statements. These statements should be considered in conjunction with the cautionary statement contained in our earnings release. Our comments may also reference non-GAAP financial measures. A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release and presentation. And with that, I'd like to turn the call over to Frank Del Rio. Frank?

Thank you, Andrea, and good morning, everyone. As always, I hope that all of you joining us today as well as your loved ones remain healthy and safe. Before I go into my prepared remarks, and if you haven't already heard the good news, I would like to congratulate Andrea on her new appointment to Chief Sales and Marketing Officer of our luxury brand, Regent Seven Seas Cruises. After more than 30 earnings calls with our company, we will all miss her, but wish her the very best of luck in her new role. Jessica John, who many of you have already met, will assume the role of Vice President of Investor Relations, Corporate Communications and ESG beginning September 1. Congratulations, Andrea and Jessica. I am pleased to say that we are taking this morning's call from Seattle, Washington as we prepare for a very exciting day tomorrow, the relaunch of our first ship from the United States in over 16 months. And as Andrea mentioned, we also have a very special guest with us today, former FDA Commissioner, Dr. Scott Gottlieb. After over a year of working together remotely to reach this long-awaited milestone, it is truly a pleasure to finally meet Dr. Gottlieb and the other public health experts on our SailSAFE Global Health and Wellness Council in person and for the first time today as we kick off our grade crews come back. Today, we will focus our commentary on the progress we have made on our return to cruising, our comprehensive plan for the phased resumption of operations for our entire 28-ship fleet and the record-setting strength we continue to experience in consumer demand, which has translated into a record load and record pricing for calendar year 2022 and beyond. As you can see on Slide…

Thank you, Frank. It's a great pleasure to be here with you today and to witness the culmination of over a year's collaboration on enhancing Norwegian's health and safety protocols. All of the scientific and medical experts on our SailSAFE Council fully support and recommend a fully vaccinated and tested population to relaunch cruising as it's the most effective way to mitigate the introduction or spread of the virus onboard a cruise ship or anywhere else in society. Even with vaccines, however, the risk can't be fully mitigated. But this approach mitigates the risk to the greatest extent possible and significantly reduces the severity of any potential breakthrough cases. While the Delta variant is fueling the current rise in cases, if the U.K. is any guide, I believe we're perhaps further into this epidemic surge. And we'll hopefully be turning a corner in the next several weeks. In fact, some of the states hardest hit by the Delta surge in the south are already showing some indication that their epidemic waves could be starting to peak. In the meantime, the vaccines are highly effective even against the Delta variant. And Norwegian is taking the extra step of coupling vaccines with multiple additional layers of protection against COVID-19, including universal testing prior to boarding the ship. This goes well beyond what we're seeing in other travel and hospitality sectors. And with the controlled environment a cruise ship provides, it can offer one of the safest vacation options. I look forward to seeing our protocols in practice with you tomorrow on Norwegian Encore.

Thank you, Dr. Gottlieb, for your insights. I, again, want to thank you and the members of the SailSAFE Global Health and Wellness Council for all the hard work and expert guidance that you and the council have provided us. Now with our safety protocols in place and our voyage resumption plan in full swing, we'll shift a discussion to our booking trends, which you can see on Slide 7. In short, pent-up demand for cruise vacations, especially for 2022 sailings, are very strong as we have experienced record-breaking demand for future cruise vacations across all 3 of our brands. This outsized demand is even more impressive when considering that this strength is true despite significantly reduced levels of demand-generating marketing investments and the absence of a full complement of our all-important travel agent partners throughout the world. The unparalleled pent-up demand I speak of is demonstrated by our record book position and pricing. For full year 2022, load factor continues to be meaningfully ahead of 2019 record levels by a wide margin. And when you look at our booking curve at the same point in time versus 2 and 3 years ago, we are now booked 9 to 10 weeks ahead of those levels. Pricing is also higher than 2019's record level even when including the dilutive effect of future cruise credits. The strength we are experiencing is evident throughout 2022, but particularly strong sequentially as we move through the year and our fleet rollout is completed and becomes fully operational. In addition, approximately 75% of our booked position in 2022 is comprised of new cash bookings with the remainder comprised of future cruise credit bookings. So far, approximately 45% of our outstanding future cruise credits have been redeemed. The strong demand is also extending beyond 2022. Last month,…

Thank you, Frank. Our remarks today will focus on the continued execution of our COVID-19 financial action plan, our liquidity profile and our all-important phased voyage resumption plan. I am pleased with the significant progress we've made on our return to cruising. As Frank mentioned, we are here in Seattle ready to relaunch Norwegian Encore tomorrow. We have a comprehensive voyage resumption plan in place and are focused on the execution of this phased relaunch. We expect to have 8 ships, representing approximately 40% of our total capacity, operating by the end of the third quarter and 17 ships, representing approximately 75% of our capacity, by year-end. The last ship, Oceana's Nautica, will emerge better than new after an extensive dry dock and reinspiration and join the rest of the fleet on April 1, 2022. While we've reached several important milestones in our road to recovery, we recognize that the global health environment is still fluid. So we remain focused on maintaining our cost discipline and pulling all available levers to conserve cash and maximize financial flexibility as we execute our relaunch plan. As you can see on Slide 12, since the halt in global cruise operations in March of 2020, we worked quickly to implement our COVID-19 financial action plan. During the pause in operations, we successfully reduced operating expenses by nearly 60% and capital expenditures by over 75%. As we ready our ships to return to service, costs will increase as expected. But we will do so in a strategic and disciplined manner to balance our cash needs while maintaining a strong liquidity profile. Since the beginning of the second quarter, we've taken several additional proactive measures on our financial action plan. We continue to significantly reduce or defer near-term demand-generating marketing expenses and nonessential capital expenditures. In…

Thank you, Mark. Before we wrap up our prepared remarks, I'd like to provide an update on our global sustainability program, Sail & Sustain, shown on Slide 16. This summer, we reached several key milestones on our ESG journey starting with the publication of our first comprehensive ESG report, which included disclosures aligning with the Sustainability Accounting Standards Board or SASB index. This was a significant step forward in our efforts to enhance our transparency. And I encourage you all to take a look at the report, which is on our website if you haven't done so already. We also unveiled our redesigned Sail & Sustain program, which is structured around 5 pillars developed through cross-functional collaboration with key internal and external stakeholders. The pillars include reducing environmental impact, sailing safely, empowering people, strengthening our communities and operating with integrity and accountability. In addition, we have aligned to the United Nations Sustainable Development Goals and have identified 10 goals where we believe we can make the greatest contribution to achieve a more sustainable future for all. In conjunction with the report, we have also developed a new sustainability website, which we will use to continue to provide critical disclosure to all of our stakeholders. On the environmental front, we were pleased to announce our newly created long-term climate action strategy and our goal to reach carbon neutrality. This ambitious program is centered around 3 key action areas, including reducing carbon intensity; identifying and investing in technologies, including exploring alternative fuels; and implementing a carbon offset program. We continuously seek opportunities to reduce our overall footprint by minimizing fuel consumption. And in fact, our ongoing investments in systems and technologies have resulted in a reduction of fuel consumption per capacity day of approximately 17% from 2008 to 2019 for our entire…

Before we take our first question, we ask that you please refrain from asking any questions regarding pending litigation. We appreciate your understanding and cooperation in this regard as we will not be commenting any further. Roshea, please take the first question.

. Your first question from the line of Steve Wieczynski with Stifel.

Yes. So you clearly now have a nice road map as to when the full fleet will be back in service. And I guess the question is, if you stay on that path that you're on right now, let's say you get your target 60% of your capacity back in service by the end of the year, Mark, I think I heard you correctly that by 1Q, you would be in that kind of breakeven standpoint. I want to make sure I heard that right. And then maybe what goes into -- what are some of the assumptions that you're making to kind of get to that level?

Steve, thank you for the question. So you're absolutely correct. Based on our -- first, let's talk about our voyage resumption plan. As you know, we've been very disciplined. We've been very methodical, and we've said we are not interested in being the first to the race to launch our vessels. We think we have a very measured and disciplined plan with approximately 75% to 80% of our fleet in operation by year-end. And as a result of that, when we look at our cash flow, both the inflows and just the regular operating contribution from each of our vessels, yes, we expect to be cash flow positive sometime over the course of the first quarter of 2022. And that's only -- to put that in perspective, that's 5 to 6 months away. So we're very pleased with the booking trends that we've seen. Obviously, as we restart and our ships enter service, that starts to generate that cash flywheel that we've been talking about. So we're very pleased. We don't think -- with anything, there's always a little bit of risk out there. But based on our measured plan, we think we have a solid game plan of returning to cash flow-positive operations.

Okay. And then, Frank, I want to ask about all the changes that we've seen. It's been going on with the operators over the last week or so. I mean, we've seen changes in terms of your peers around mask mandates, the requirement to get tested preboarded -- or get tested before you board. Just want to understand what do you think this does? Or what is this going to do to the psychology of the -- a cruise passenger right now? Meaning, do you think some of these folks are going to say, forget it. Let's book at a later date? Or how do you think this is affecting your customer right now?

Steve, look, it's not what we're seeing in our booking trends. As I mentioned in my prepared remarks, we were ahead approximately 10 weeks when compared to where we were in 2018 at this time for '19, a record year. And as you know, we at Norwegian Cruise Line Holdings came out very, very early, as early as late March. And we said we're not going to cruise until it's safe to do so. And as a precursor, everybody has to be vaccinated, crew and passengers. And we haven't moved from that. We think that's a competitive advantage, quite frankly. During a pandemic, people who are willing to travel want to travel safely. And the Norwegian Cruise Line platform allows you to do that. Dr. Gottlieb spoke about it. It becomes just about the safest place on Earth, to be on a Norwegian Cruise Line ship. And I'm glad to see my peers in the industry following suit because now they have begun to introduce at least some of the measures that we have announced early on. So to me, it is a competitive advantage. We continue -- we will continue to do the right thing. And that is to protect the health and safety of our guests and the communities we visit in every possible way we can.

Your next question the line of Stephen Grambling with Goldman Sachs.

How should we be thinking about the customer deposit inflow over the course of the restart? And as you mentioned, the restart costs moving up a little bit in the coming quarters. Should that be front-end loaded? Or should we be expecting a similar amount each quarter till fully up and running?

Steve, it's Mark. So look, when we look at our customer deposits, as we said in our prepared remarks, our customer deposits increased 50% versus the prior quarter, roughly $300 million on a gross basis. So obviously, as we continue to relaunch and restart and we get closer to the voyages operating, we expect that to accelerate. So we're very, very pleased with that. When we look at our relaunch cost, look, everything -- all the costs that we're incurring, they're normal, they're expected. You look at how many ships we're restarting over the course of the next 5 to 6 months. There's nothing out of the ordinary. Most of -- there is going to be some onetime front-end loaded costs. Again, you're relocating whether it's 1,000 or 1,500 crew per vessel from across the globe. So you have some onetime initial cost. But that will settle. That will balance as typical. But most importantly, as our vessels start to sail and as we've said publicly, we are -- most of our vessels are starting at either 60 and then ramping -- 60% load factor and then slowly ramping up to 80 and then hopefully to over -- back to our normal load factors in a short time. Those vessels which are operating are cash flow positive out of the gate. And that's very, very important. And we've seen that with our first 2 initial voyages that have just been completed by Norwegian Jade. And we expect that to be the case for the coming voyages as well for the rest of the fleet.

That's super helpful. Maybe one more if I can sneak it in, which is kind of the topic du jour, but have you seen any impact, and you kind of talked about this a little bit from the Delta variant on bookings pricing more recently? And how would you think about the impact of risk if further requirements are imposed on even 100% vaccine sailing such as otherwise?

Steve, it's Frank. Look, we have seen a modest decrease in our net new booking activity during the month of July when the Delta variant has surfaced. It is sequential. So it's more pronounced in -- for -- in year 2021 sailings, which for us is not that significant. I'm not focused on 2021. It's a transitional year. The focus is to get the ships operating again. As Mark mentioned, very successful launch of Norwegian Jade. It went off without a hitch. We do have muscle memory. We do remember how to operate cruise vessels. The customers had a great time. Onboard revenue was through the roof. And so we are encouraged that we're off to the races. The -- it's good that we have such a pad, so to speak, on our forward bookings to be 10 weeks ahead of our best prior year ever. It's certainly a wonderful cushion and insurance policy to have. In discussing the likely course of the Delta variant with Dr. Gottlieb, we think this is a transitory, temporary phenomenon. It's going to run through the course of the population very, very quickly. We don't think it will have lasting effects. But again, having a 10-week advance, so to speak, is certainly wonderful to have.

Your next question on the line of Brandt Montour with JPMorgan.

Congratulations on the official relaunching. And Mark, maybe you alluded to this in your prior comment. But I want to I want to understand, Frank, how you're thinking about occupancies. While COVID is still sort of among us and you're 100% vaccinated, can you get to a full ship under that scenario without masks? Is that safe? And is that in your plans? And has that changed at all in the last few weeks because of Delta?

Yes. As Mark mentioned, we're starting every vessel in the 60% to 70% range of load factor. That's not anyone's requirement. It's not a CDC mandate. It's something we think is a responsible way to start operations, train our crew, get our feet wet, so to speak. If all goes well, after 30 days, we'll increase that to 80% load. And after 60 days, we will resume trying to fill the vessel as in prepandemic levels. And yes, in a fully vaccinated environment, the way that we are conducting it, where we test everyone at the pier, where we have the protocols in place, the new air filtration systems that we have spent tens of millions of dollars to upgrade throughout the fleet, we believe that we can safely operate vessels at full capacity. We will see. It will be staggered. We will learn along the way. But yes, we believe that, that can be achieved. And by the way, and so does our sail and safety council, which they again, believe that our protocols are second to none, not just in the cruise industry, but in any kind of public environment.

Yes. And Brandt, I want to just add to that, that when we look at all the measures we are taking, and you look at that vis-à-vis any other hospitality driven type venue in the world, what we're providing our customers is one of the most safest experiences that we can based on today's science and technology. So that, again, we believe that, that's an advantage for all 3 of our brands.

Yes. And this is Scott. We feel confident that given the measures that we've taken, creating a 100% vaccinated population onboard the vessel, testing people before they enter into that environment, you can substantially reduce the risk and create a safer environment. And relative to other kinds of options people may have to engage in leisure and vacation, this becomes a much safer environment, a much more predictable environment. And we have measures on the ship, not only measures to control the risk of introduction of the virus on to the ship. We're taking significant measures to control the risk that if you do have an introduction, you're going to have secondary spread onboard the ship. And then if you do have a case that emerges on the ship, it's -- we've tried to do our best to make it a safe environment to seek treatment, including getting some of the advanced therapeutics onboard the ships, having ICU-level care available, having procedures in place on how to offboard passengers who may become ill during the cruise. So at every step, we've tried to take every reasonable measure to create the safest possible environment for someone to engage in leisure activity.

That's all great color. And then my second question is just on that metric you gave, Frank, on the onboard spend on the first ship out and up 50%. That's obviously a really impressive statistic. Is that apples-to-apples, I guess, with what you would have seen from that ship in 2019, I guess, on a per person basis, since it's going to be have a little bit less load, right, on that ship? But I guess, can you also talk about the mix on the ship of where you're seeing that consumer spend really sort of take off?

Yes, Brandt, I'll take that one. So certainly, when we look at that and we look at the measure of onboard spend, while we look at it in totality on the vessel, more importantly, we're looking at a -- on a per person per day basis. So that's the measure of what the customer is willing to spend. And yes, it is on an apples-to-apples basis of a similar voyage, similar itinerary from 2019's record levels. And when you look at the mix of passengers, I think that voyage was predominantly probably the majority U.S.-based and then followed by a European-based. And you look -- when you look at the spending trends of it, it was your normal areas. Shore ex was very intense, food and beverage and then casino. So it's great to see that we're seeing the trends that we're used to. Customers are willing to spend. While it's early, it is certainly very, very encouraging.

Our next question line of Vince Ciepiel with Cleveland Research.

Great. It sounds like deposits are building nicely, and there's an expectation to move cash flow positive at some point, maybe in the first quarter, even of 2022. Number of things going in the right direction. Can you help us think about the path and timing for deleveraging of the business?

Yes. Vince, it's Mark. We are intensely focused on that. As you can recall, in 2019, we were on a path to our stated leverage of 2.5 to 2.75. We've obviously had to lever up the balance sheet as a result of this. But as we look forward, our goals right now are we want to get below 5. And then obviously, we'll look to get into the 4s. It's a bit premature to decide or to really telegraph when we're going to get to those levels. As we've said before, if 2022 continues on the path that we're seeing today, it could be a very nice year in terms of EBITDA and subsequent cash flow generation. So that's certainly going to assist and help us with that delevering story. So we are focused on it. We have not lost sight of that because we know that's important. But right now, we're focused on relaunching and providing the best experience that we can to our customers. And if we can do that, that's going to subsequently turn into significant cash flow generation. And I will reiterate, we've said and we expect in our conservative relaunch plan, we expect to be cash flow positive over the course of the first quarter of 2022. So when you think about that from a restart within a 6-month period to be cash flow positive, we feel that's pretty tremendous. And we're pretty proud of that. So we look forward over the next few months of restarting our fleet. And again, that the cash flow that, that spins off.

And another question. You look at the hotel industry, leisure nights, 15%, 20% ahead of '19 levels right now. Pricing in that industry is 5% ahead of 2019. When you think about the path for yield into '22 and '23, you've already kind of had a glimpse into once people get a path and the ability to go that unleashing of pent-up demand, what it can mean for pricing and other aspects of leisure. So curious, as you look out over the next couple of years, is just a little bit ahead of '19 the right way to think about it? Or could pricing be even better than that in years ahead for cruise?

I think it's better than that. It's -- if you -- I hesitate to give you any specific numbers, but when you strip out the dilutive effects of the future cruise credits, the like-for-like pricing, the pricing to the public, so to speak, is up significantly, up multiples of what our typical year-over-year growth is in yields. And so the pent-up demand is real, and we're taking advantage of it. We do have these future cruise certificates to deal with, which will end in 2022, that these FCCs will not be dilutive at all in 2023. The FCCs have to be used by the end of 2022 or else we're going to refund the customer or whatever they paid in. And also, remember, as I mentioned, I believe it's Slide 11, look at our future growth. We have 20% more capacity coming online through the end of '23. Look at our historic ability to absorb that growth and how we turn the capacity growth into gross revenue growth, outsized EBITDA growth and outsized net cash growth. So we're very much looking forward to taking delivery of these vessels over the next few years. Four of them come online in '22 and '23. They're going to be accretive. They're going to be higher than the corporate average. So we believe that, that's a wonderful setup. As Mark mentioned before the pandemic hit, NCLH was hitting on all cylinders. We were delevering to investment grade. We're going to start paying a dividend. The biggest problem we used to sit around the boardroom was, what are we going to do with all this cash? And well, we're going to start generating cash again, and that cash is first going to go to pay down debt that we took on to survive the pandemic, and then we're going to look to do what companies do: buy back stock if it's opportunistically to do so, perhaps expand the business. We're bullish on this business. We know how to operate a cruise in this top line cruise company. We haven't forgotten how to do that over the pandemic. And we're seeing the pent-up demand from customers that allow us to do what -- exactly what we do best. So we're very much bullish on the future.

Next question the line of Robin Farley with UBS.

Great. Two questions. One is if you could remind us, I know you've laid out your restart, but what percent of your ships in '21 or in the next 6 months are Florida-based for this year? And then also an expense question on -- you mentioned carbon credits. Can you sort of help us quantify what the cost of that might be your spend on carbon credits?

Robin, so when we look over the next 6 months, I believe we have roughly 6 vessels that would be operating out of Florida, with the first one being Norwegian Gem on -- out of Miami on August 15. And then I think the rest come online in late -- mid- to late December. I think the second part of your question was related to the carbon credits. We're very excited about this. This is something we're serious about. We've really taken a hard stance on our ESG efforts over the last year or 2. And we're committed to this. So we spent a few million dollars on purchasing these carbon credits. I think that, together with our other investments that we continue to make with the fleet, whether it's exhaust gas cleaning technology, waste heat recovery, we're looking at all viable investments where we can to reduce our carbon footprint. So -- and just back to the first part, when you look at the Florida-based vessels, I believe it's about 35% to 36% of our fleet sailing out of Florida over the next 6 months.

Okay, great. And the carbon credit has not run through the P&L yet, right? That's -- I guess you've purchased it. It's on the balance sheet somewhere, and then that expense will run through when you're operating?

Yes. That will get expensed as we consume the fuel that it's related to in a pro rata fashion over the course of the next 2 to 3 years. But again, I want to highlight that it's not a significant amount. It's a few million dollars. So it's -- you're not even going to see it when you look at our financial statements.

Our next question comes from the line of Jaime Katz with Morningstar.

My questions are actually on the composition of cruisers looking forward, and given your disproportionate exposure to U.S. cruisers, what that looks like for some of the European itineraries in September and October? In addition to that, I think you guys had commented that 1/3 of the bookings for the Regent Seven Seas World Cruise was new to brand. So is there anything noteworthy that you saw in those new passengers that's different from maybe what you've seen in past passengers?

Yes. Typically, for a cruise on the Norwegian brand that operates in Europe, roughly half the customers are from the U.S., and half the customers are from the rest of the world. On the first 2 Norwegian Jade cruises to the Greek Isles out of Athens, we have seen that number jump in the neighborhood of 80%. So many Americans have not been able to go overseas for such a long period of time that the pent-up demand that we're seeing for cruising overall is higher indexed by Americans wanting these long-haul travel plans to places like Greece. So we don't think that's sustainable in the long term, perhaps in the short to medium term as this pent-up demand is sort of burned off. But it's good to see that we have the marketing strength and the sales platforms throughout the world to be able to fill our ships. And whether it's Americans want to come over or Europeans, we're seeing strong demand across the board.

And then as far as some of the debt service on the balance sheet, are you guys taking steps to maybe refi some of the operating debt that you raised early in the cycle, in the COVID cycle? Or is that something that's maybe on pause for now with a bigger focus on just restarting the fleet?

Well, we're focused on all of the above. While our immediate focus, obviously, is on restarting the operations, we have not lost sight of our balance sheet and balance sheet management opportunities. So it's something we've been looking at, we continue to look at. And there is some opportunities in some of our higher-priced notes, I believe, in our 12.25 and 10.25 notes, where we have the ability to possibly have some clawback opportunities around that. So we're looking at it. We want to get our -- the most important thing for us right now is getting the vessels operating. But once we get a few vessels in the water and we have more visibility around that, I think that's what you're going to see over the course in the future is us looking at all those opportunities and exercising on some of those balance sheet management opportunities that we have.

And your next question on the line of James Hardiman with Wedbush.

A couple of questions for me. Maybe a clarification here. So when I digest what you've said about your fleet ramp and the occupancy ramp, it kind of feels like second quarter of next year could be a pretty normal quarter. Obviously, your fleet will be back to 100%, but it seems like the expectation is that occupancy will be, at least on all but one ship, 100% plus. So is that sort of what you're targeting in terms of sort of the first normal quarter? That seems like, Frank, you made a point earlier that you weren't so much interested in the starting line, but more so the finish line. Seems like that's maybe a little bit ahead of some of your peers.

James, it's Mark. So look, I think when you look at 2022 and you look at second quarter, third quarter, we are seeing very strong bookings for those periods. But let me just go back in the time line here. Something we just said about Norwegian Jade's first 2 voyages. Even at reduced capacity, we are seeing significant strength and significant spend on those vessels. So while our vessels are coming online over the course of the next 2 to 3 quarters, Q1, I think, is going to essentially look pretty normal as well, so to speak. Again, we do have, I think, believe it's 9 or 10 vessels that are coming on in Q1. So certainly, by the second quarter, we had to anticipate that all of our vessels or the vast majority should be back at their normal load factor levels. And if we're lucky, maybe some time sooner than that. But it's not that we don't care about '21. We've taken the stand that we want to do this right. We want to create confidence in our customers and our shareholders and our employees. And we want to make sure we're learning from all the cruises that we're launching. So we look -- we're excited about 2022 and beyond. And -- but right now, we're focused on '21, getting all the fleet back in the water. So looking good, but we've just got to go forward in getting the ships wet again.

Got it. That's really encouraging. And then trying to do a little bit of math here. Obviously, there are a lot of moving parts. But if I think about $2.75 billion of cash, about $9 billion in net debt as we stand here today. You've said another $285 million a month of cash burn in the third quarter. Presumably, that comes down in the fourth quarter. I'm just trying to figure out, once we get to that inflection point of cash flow positive what the balance sheet looks like? Is it in the ballpark to think that maybe another $1 billion of net debt before you hit that inflection point?

Look, I think you said it right, James. If you look at the math today, we have roughly $2.8 billion. We're going to burn roughly $900 million in 3Q. But I will highlight that -- and I clearly stated that, that does not include the customer inflows that we expect from advanced ticket sales. And as we said in our comments, we did see significant growth in the second quarter. And we expect that to ramp up, obviously, in the third and fourth quarter and first quarter. So when you do the math and you look at where our cash is today and the fact that we've stated that we expect to be cash flow positive over the course of the first quarter in 2022, you can kind of triangulate where our cash balance is going to be and the subsequent generation of cash. So we're comfortable where our liquidity is today. We believe we have a strong foundation. We've taken significant measures to get where we are today. So as long as we can reasonably execute on our resumption -- on our voyage resumption plan, we feel that we're in a very, very strong position as we sit here today.

And your final question comes from the line of Patrick Scholes with Truist.

In light of the severe labor shortage situation we're seeing domestically in the United States and also problems with the supply chain for -- as it relates to basic ingredients for food, I'm wondering with your far more international company, what's the labor situation like for you folks and also the supply chain for food and beverage?

Patrick, look, we're not immune to it. I think the benefit we have as a company is a lot of our -- the vast majority of our labor force, which is ship-based, comes from overseas. And quite frankly, our employees, our crew are excited and ecstatic to come back to work. We do have collective bargaining agreements in place for most of those employees. And you have to remember that those employees, unlike other areas of the world have not, for the vast majority, received government assistance. So they are excited. They want to come back to work. When we see employees on the vessel, they just break down in tears of joy because they have the opportunity to work again. So we don't anticipate any issues around the labor sector or the labor portion of our operating model. In terms of good old fashioned food, consumables, things of that nature, yes, we're not immune to it. We are seeing some inflationary pressure. We have started to see some of it stabilize. And we think there's -- of course, there's probably going to be some laggards in the supply chain that end up being slightly costlier. But on the -- just as equally, there's a lot of areas where we've been able to take advantage and reprice over the last 18 months and renegotiate contracts. So we're seeing some benefit from that. So we're laser-focused on the cost side. We're not immune to it, but we're focused on it. And we think we have a good opportunity in 2022 to take advantage of some of the renegotiations we've seen. So we're looking forward to it.

Okay. Well, thanks, everyone, for joining us this morning. We're -- you can see by our tone of our voice we're excited to be here in Seattle to kick off the Encore's maiden season here in -- for the Alaska season and start our cruising comeback from the U.S. Thanks very much. We'll see you next quarter. Bye-bye.

This concludes today's conference call. You may now disconnect.