Royal Caribbean Cruises Ltd (RCL)

Interest coverage

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Earnings before interest and tax (EBIT)	US$ in thousands	3,105,000	-763,976	-3,870,330	-4,601,560	2,082,700
Interest expense	US$ in thousands	1,402,000	1,364,000	1,291,750	844,238	408,513
Interest coverage		2.21	-0.56	-3.00	-5.45	5.10

December 31, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $3,105,000K ÷ $1,402,000K
= 2.21

The interest coverage ratio for Royal Caribbean Group indicates the company's ability to meet its interest obligations on its outstanding debt. A ratio below 1 suggests that the company is not generating enough operating income to cover its interest expenses, which may raise concerns about its financial health. In the case of Royal Caribbean Group, the interest coverage ratio has shown significant fluctuations over the past five years.

In 2019, the interest coverage ratio was at a comfortable 6.06, indicating that the company's operating income was more than sufficient to cover its interest expenses. However, this ratio dropped sharply in the following years, reaching negative values in 2020 and 2021. A negative interest coverage ratio suggests that the company's operating income was insufficient to cover its interest expenses, which can raise serious solvency issues.

The interest coverage ratio improved in 2022 and 2023, indicating that the company's ability to cover its interest expenses has strengthened. However, it is important to note that the ratio in both years was still below 1, indicating that the company's earnings were barely enough to cover its interest payments.

Overall, the fluctuating nature of Royal Caribbean Group's interest coverage ratio over the past five years suggests a degree of financial instability and indicates the importance of closely monitoring the company's ability to generate sufficient operating income to meet its interest obligations.