Royal Caribbean Cruises Ltd (RCL)

Interest coverage

		Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	4,129,000	4,098,052	3,733,102	3,400,880	2,916,493	2,222,055	1,251,430	245,833	-884,988	-1,823,312	-3,086,783	-3,810,699	-3,751,277	-3,527,516	-3,474,521	-3,725,396	-3,151,224	-2,027,632	-226,832	1,535,992
Interest expense (ttm)	US$ in thousands	1,591,000	1,671,000	1,408,620	1,466,132	1,401,519	1,487,129	1,498,696	1,445,890	1,364,162	1,216,319	1,294,793	1,296,898	1,291,753	1,281,075	1,109,763	1,023,841	844,238	665,905	508,594	401,009
Interest coverage		2.60	2.45	2.65	2.32	2.08	1.49	0.84	0.17	-0.65	-1.50	-2.38	-2.94	-2.90	-2.75	-3.13	-3.64	-3.73	-3.04	-0.45	3.83

December 31, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $4,129,000K ÷ $1,591,000K
= 2.60

The interest coverage ratio measures a company's ability to meet its interest payments on outstanding debt. A higher ratio indicates a stronger ability to cover interest costs.

For Royal Caribbean Cruises Ltd, the interest coverage ratio shows a declining trend from March 2020 to September 2022, with ratios consistently below 1, indicating that the company was not generating enough operating income to cover its interest expenses during this period. This suggests a higher risk for lenders and investors.

However, from March 2023 onwards, the interest coverage ratio starts to improve and becomes greater than 1, indicating that the company's operating income is now sufficient to cover its interest obligations. The ratio continues to increase gradually, reaching a level above 2 in December 2024, which demonstrates a significant improvement in the company's ability to service its debt.

Overall, Royal Caribbean Cruises Ltd's interest coverage ratio shows a challenging period of financial strain followed by a recovery and improvement in its ability to meet interest payments. Investors and analysts should continue to monitor the company's financial performance to ensure sustained improvement in its financial health.