Frank Del Rio
President and Chief Executive Officer at Norwegian Cruise Line
Thank you, Jessica and good morning everyone and thank you for joining us today. Over the past several quarters, we have reached many pivotal milestones as we continue to steady march of our post-pandemic recovery. On our last call, we had just welcomed the last ship in our fleet back to service, becoming the first major cruise operator to be fully operational. This quarter, we are pleased to report that we have reached another key milestone with operating cash flow turning positive for the second quarter.
While our focus is on profitable future when I take a moment to reflect on the tremendous progress we have made since launching our Great Cruise comeback just over a year ago, I can't help to be immensely proud of the entire team in the region for rising to the occasion time and again and delivering impressive results. Working right alongside us has been the travel agent community who more than anyone can appreciate the challenges that we as an industry have overcome and more importantly, can also see the tremendous opportunities that lie ahead. We thank them for their unyielding support throughout this journey.
We have been disciplined and methodical in our ramp up and have maintained a clear and consistent mindset, focused on our core market strategy of market to fill and emphasizing value over price by continuing to expand and refine our bundling strategy. Our guiding principle has been a focus on the long-term profitability of the company, particularly for 2023 and beyond by protecting our long-term brand equity and building on our industry-leading pricing. This means making intentional tactical sacrifice in the short term in favor of long-term sustainable results. With this details at the forefront of our business plan, we also continue to be opportunistic exploring all options to accelerate our recovery.
As I served [Phonetic] with a current landscape. I see several tailwinds and catalysts for our company, which are outlined on Slide 4. First, since we last spoke, we have seen further improvement in the public health and regulatory environment, which has allowed us to relax COVID-related protocol and align us more to the rest of the hospitality industry.
Last month, the CDC discontinued its voluntary COVID-19 program for cruise ship. This was a strong signal of confidence by the CDC that the industry's COVID- 19 mitigation and management plans are robust and effective. This very positive development has paved the way for us to begin removing barriers for our guests. We're permitted by local regulations bringing us not quite an equal footing with land based vacation and leisure alternatives but significantly closer.
Just yesterday, we announced a number of changes to our own health and safety protocols which are effective September 3rd, and as always are subject to local regulations. We will no longer have the mandatory vaccination requirement at any of our ships and have we lacked testing protocols regardless of sailing length. To put it simply, vaccinated individuals including those embarking an NCLH ship from U.S. ports will no longer have any pre-cruise related protocols and those who are unvaccinated or choose not to provide proof of vaccination will be required to test negative within 72 hours prior to embarkation.
In addition, all guest 11 years old and younger will be exempt from vaccination and testing requirements of any kind. There remain a few jurisdictions with stricter requirements, including Canada, Greece and Bermuda where we will continue to comply with local mandate. These modifications to protocols are meaningful and give us additional flexibility to reach a wider cruising population, reduce friction and travel-related hospitals for our guests and bringing greater variety to our itineraries.
In fact, yesterday's announcement was an instinct catalyst resulting in one of our top 3 best-looking days of the year. Our top priority remains the health, safety and well-being of our guests, crew and communities we visit and this commitment to is unwavering even as we are evolving our SailSAFE protocols to adapt to the changing public health environment.
Across the globe, we continue to see the easing of travel restrictions and reopening of ports to cruise bringing us closer to a normal operating environment. Once they gave an example of this easing is the lifting in June of the onerous one day testing requirement to enter the U.S. While the decision was too late to have the meaningful impact on ships sailing in the second and to a lesser degree third quarters of this year, the change resulted in an immediate and sustained boost in booking volumes for future periods in the weeks following the announcement.
Second, and despite recession and economic slowdown fears abounding in the broad marketplace, we continue to see a strong up margin consumer with booking trends continuing to show steady improvement week over week, which I will touch on in more detail later in the call.
But at a high level, we evaluate the extent and willingness of consumers to spend on cruise travel, we typically monitor 2 key indicators.
First is, the booking window, which provide a peek into the consumer psyche about the future given that Cruise is a long lead time and relatively high-ticket purchase. To be clear, we have not seen any cracks emerge in the dynamics of the booking window and it remains both within historical range in our own expectations. Second is our onboard revenue generation, which is a real-time now indicator of how our guests are feeling about their financial situation right now and while on board our ship.
Onboard revenue generation has continued to be impressive, even as we continue to ramp up occupancy carrying more guests across all ships in cabin classes. In the second quarter, onboard revenue per passenger Cruise day was approximately 30% higher and during the comparable 2019 period. We continue to focus on enhancing our market leading bundled offerings and increasing quality touch points with our guests, starting from the time of booking to capture even more revenue pre-cruise allowing guests to arrive onboard with an ever fresher wallet, which ultimately result in higher overall spend.
In fact, our pre-cruise revenue on a per passenger date basis for the second quarter '22 is up over 50% versus 2019 level. At a high level, guests who make pre-cruise purchases tend to spend approximately double that of guests who do not pre-book onboard activities. And while the broader economy has experienced a pullback in consumer spending for physical goods, we continue to see strong propensity for spending on travel and experiences, particularly from the affluent consumer. Hotel average daily rates and airline fares remain at or near record levels with occupancies reaching pandemic peaks.
Consumers want vacation even during economic downturns, and we believe Cruises are much better positioned than land-based alternatives to capture the strong demand given our unmatched value proposition. While consumer appetite for experiences both wealth of the entire cruise industry, we believe our company in particular is best positioned to outperform in this environment.
Our 3 brands, focused on providing upscale experiences relative to their respective industry categories and therefore skewed towards the higher end consumer, which while not immune have proven more resilient than other cohorts in previous downturns, and all indications are that the intend to travel for this demographic has not abated.
The last and arguably most exciting catalysts, I want to touch on is our attractive pipeline of new builds outlined on Slide 5, which will greatly enhance our already world-class fleet and drive significant contributions to the top and bottom line. I just came back from literally last week where we took delivery of Norwegian Prima, the first of 6 next generation Norwegian Cruise Line ships, bringing our total fleet to 29 vessels with approximately 62,000 births.
We are excited to celebrate our christening ceremony later this month in Reykjavik Iceland and I encourage all of you to experience our first fan as she is truly incredible. In fact our shipbuilding partners Fincantieri have said Prima is the finest, most demanding and most complex vessels they have ever build. The Prima Class marks an evolution for Norwegian Cruise Line at every aspect of the design and guest experience has been elevated.
Last week, we also celebrated the float out of Norwegian Viva, the second vessel in this groundbreaking new class, which is expected to debut in summer of 2023 as seen on Slide 6. The Prima Class will further differentiate Norwegian Cruise Lines compared to our Cruise peers and reinforce the positioning of our brands as the leaders in providing upscale experiences in each of the major Cruise category.
In addition to the new Norwegian vessels, we are also gearing up for the delivery of Oceania Vista in spring of '23 and Regent Seven Seas Grandeur later that year. These new additions will further add to our dominance in the flourishing upper premium and luxury segments.
I often get asked whether we are confident that we can profitably absorb the capacity growth we are expecting for the next few years and the answer is a resounding, yes. Given our relatively small base of only 29 ships, we still have many unserved and underserved markets around the world. We are continually innovating and enhancing our product offerings through our new builds and refurbishment upgrades to our existing fleet and making enhancements to our bundled offering to provide even more value and attract even more high paying guests to our brands.
I can't emphasize this enough, so I will show you once again on Slide 7 how we've proven our ability over the years to absorb capacity and deliver outsized revenue, adjusted EBITDA and operating cash flow contributions relative to our capacity growth and we fully expect to continue this trend.
Turning now to our booking demand and pricing trends summarized on slide 8. We continue to see sequential improvement as we remain disciplined and focused on laying the foundation for a record 2023 and beyond. In the second quarter, our load factor was approximately 65% in line with our expectations and a significant improvement versus the prior quarter of 48%. We expect load factors to increase in the low 80% range in the third quarter with July already coming in at 85%. This steady sequential ramp is expected to continue until we reach historical 100% plus levels beginning for the second quarter of 2023.
In terms of pricing, as you can see on slide 9, our net per diem growth in the first half of 2022 over the first half of 2019 pricing was significant at 18%. These results are consistent with our strategy of holding firm on our go-to-market strategy outlined on slide 10 of market to fill versus discount to fill and maintaining pricing integrity by emphasizing high value over low price. We absolutely believe this is the optimal path to continually deliver high quality and sustainable profitability once we return to like fully normalized environment post pandemic.
As expected our second half 2022 booked position remains below and extraordinary strong 2019, driven primarily by the lasting impacts of Omicron and the Russia-Ukraine conflict. That said, pricing for the second half of 2022 continues to be higher when compared to 2019 even when taking into consideration the dilutive effect of future cruise credits and the impact of premium priced Baltic itineraries from the Ukraine conflict which is primarily concentrated in the third quarter.
As we move beyond this transition year and focus on 2023, our full year book position is in line with 2019's record performance and our booking pace in recent weeks has reached the level needed to consistently sail full. Pricing is also significantly higher for 2023, and while we typically would not provide this level of detail, our performance in this area is so extraordinary that I just had to share it with you this one-time.
I think for 2023, it's currently running in excess of 20%, 20% above 2019's record pricing and is higher by double digits across all 3 brands and while pricing will naturally tends to level off as we continue to build our book for 2023, it is nevertheless a testament that our steadfast strategy of focusing on long-term price increases over short term load factors is indeed working as intended.
Another one time Proofpoint that I will provide is ticket sales already on the books for 2023 sailings. When compared to the same time in 2018 for 2019 sailings and taking into account capacity growth of approximately 20%, 2023 sales are of whopping 40% high. In addition, the quality and stickiness of our ticket sales for 2023 sailings is also expected to improve as a significantly higher proportion of bookings, 4 times the level seen in 2019 include air travel booked through our own air programs, which in the past has proven to be indeed stickier.
Another positive indicator demonstrating strong consumer demand is our advanced ticket sales build as you can see on Slide 11. Our advanced ticket sales balance stood at $2.5 billion as of the end of the second quarter, up over $300 million versus the prior quarter despite approximately $1 billion of revenue recognized. This represents an all-time record high ATS balance for the company.
On a gross basis, advance ticket sales build increased by over 40% to $1.5 billion in the quarter, the highest level in 3 years. In addition, approximately $1.5 billion of the total ATS balance at quarter end is associated with bookings that are already within the final payment window and therefore, subject to cancellation penalties.
The bottom line is that our entire team is more energized now than ever before. We are striving to reach our goal of record net yields and record adjusted EBITDA in 2023 welcoming 8 additional ships to our fleet through 2027 after Prima this year and leveraging all opportunities to maximize value for our stakeholders. This will not be an easy feat, especially as we continue to navigate an uncertain macroeconomic but an increasingly encouraging public health and regulatory environment.
We are prepared for all scenarios and I'm confident that we are taking the right steps today to set us up for future success. I'll back with closing comments a little later, but for now, I'll turn the call over to Mark for his commentary on our financial position. Mark?
