Royal Caribbean Cruises Ltd (RCL)

Interest coverage

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	4,117,000	3,016,000	-803,470	-4,002,200	-4,951,150
Interest expense	US$ in thousands	1,590,000	1,402,000	1,364,160	1,291,750	844,238
Interest coverage		2.59	2.15	-0.59	-3.10	-5.86

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $4,117,000K ÷ $1,590,000K
= 2.59

The interest coverage ratio of Royal Caribbean Cruises Ltd has shown a worrisome trend over the period from December 31, 2020, to December 31, 2024. The ratio was negative in the initial years, indicating that the company's operating income was insufficient to cover its interest expenses. This suggests a high financial risk and potential difficulties in meeting its interest obligations.

However, there has been a slight improvement in the interest coverage ratio in the later years, reaching 2.15 in December 31, 2023, and further improved to 2.59 by December 31, 2024. This shows that the company's ability to cover its interest expenses with operating income has improved, albeit from a very low base.

Despite the recent improvement, the negative trend in the earlier years and the relatively low coverage ratios in the later years suggest that Royal Caribbean Cruises Ltd may still be operating with a considerable level of financial leverage and should continue to monitor and manage its debt levels carefully to ensure sustainability and financial stability.