Q4 2019 Earnings Call
Good morning, and welcome to the American Airlines Group fourth quarter 2019 earnings call. Today's conference call is being recorded at this time all lines Arnold listen only mode.
Following the presentation, we will conduct a question and answer session.
Well, it's a question during the session you will need to press star one on your telephone if you require any further assistance. Please press star zero.
And now I would like to turn the conference over to your moderator managing director of Investor Relations Mr. Dan framing.
Good morning, everybody and welcome to the American Airlines for 2019 earnings Conference call.
I'm, just wondering Doug Parker, our chairman and CEO , Robert Isom present, their current Chief Financial Officer also in Iran for question and answer session.
Senior exactly what do you mind, leaving because our chief information Officer, Steve Johnson, or if you corporate affairs.
We several winery VP of people communications.
Okay singer senior Vice President of running a revenue and Boston, Roger Our senior VP of network planning Alliance like we normally do that will start the call with an overview national is all right well then follow the commentary on the operational performance and other commercial initiatives tariff will then walk us through the details or other fourth quarter.
Additional information on our guidance for 2020, and then after we hear from those comments, we'll open the call for analyst questions. I'm Lastly questions from the medium to get in as many questions. It's possible. Please limit yourself to one question a follow.
We began we must stay for today's call does contain forward looking statements, including statements concerning future revenues and cost forecast capacity traffic load factor, we find some fuel prices these statements represent or predictions and expectations as a future events numerous risks and uncertainties could cause actual results to differ from those [laughter] information about.
These risks and uncertainties can be found in our earnings press release issued this morning, and our Form 10-Q from the third quarter September ending September Thirtyth.
In addition, we will be discussed in certain non-GAAP financial measures. This morning, such as pre tax profit and CASM, excluding unusual items a reconciliation of those numbers to the GAAP financial measures is included in the earnings release and that can be found in the Investor Relations section of our website a webcast of this call will also be archived on the web.
The information that we're giving you touched on this call is as of today and we undertake no obligation to update the information subsequently so thanks again for joining us at this point I'll turn the call over to our chairman and CEO and partner.
Good morning, everyone. Thanks for joining us today, we reported or fourth quarter and for your results for 29 team. Excluding net special items, our fourth quarter net earnings were $1.15 per diluted share that's up 19% your ear and our full year net earnings were $4.90 per diluted share that's up eight.
And on a year over year basis.
Well its solid year over year, Brumitt, especially given the tough environment. We experience. We know we can perform better and we will.
We look to 2020, we remain focused on three key areas will create real value for shareholders.
Producing excellent operating results.
Efficiently and profitably and generating significant free cash flow.
The past few months prove that works already paying.
He spoke in October we noted two key challenges that affect our third quarter earnings.
First we were on the heels of subpar operating reliability results as we work through labor contract negotiations.
Second our 2019 earnings were negatively impacted by the Boeing 737, Max being granted for one seven months, bringing a lot of uncertainty in frustration to our customers our team and our shareholders.
We committed that we would swiftly and aggressively address both of these near term issues.
We've made meaningful progress.
First as it relates to our operating reliability, we see enormous improvement, including the best quarterly operating performance in company history, and this past quarter.
I was going to talk more about this in a minute, but we're incredibly proud of achieving the great work, they're doing to take care of or customers and run agreed operation.
Second on the match last quarter, we discussed our clear position the financial cost of the Max grounding should be borne by Boeing shareholders not American.
We're pleased that recently reached confidential settlement with Boeing to compensate American for the financial damages, we incurred in 2019 due to the grounding in a Max.
Well, we can't disclose details let me agreement American shareholder should know that the agreement reflects our priority to ensure our shareholders are adequate adequately compensated with real value for the extended ground.
Of course, the settlement when it relates to date to damages, we incurred in 2019 and the Max So grounded. So we'll continue to only accountable for future financial damages to protect our company and our shareholders.
Turning now to our 2020 priorities.
First operational excellence Robert will talk more about this is my son and the ongoing initiatives. We had to continue to ensure excellent operating results in the future, but one thing I want to point to point out is the impact the operations already having on customer satisfaction.
Our goal is to become customers airline choice measure the and as a measure that we're looking to become the industry leader in customer likelihood to recommend scores or LTR.
Running reliable operation is a significant driver of that in our fourth quarter LTR results prove it.
And this past quarter, our LCR returned near record highs and improve year over year for the first time since the second quarter 2018.
That give us great momentum and encouragement for 2000 20 million.
Turning to officially profitable growth, we now expect to grow Americans network by approximately 4% to 5% in 2002 one.
However, annual growth rate estimates don't really tell the story of growth in American 2020.
Because our capacity growth will be lower than 4% to 5% until the Max returns will be greater than that as the aircraft Richards reserves.
But we're excited about that gross book before and after the return to service date, because it will be efficient and profitable growth will be in markets that are expected to produce at or above average unit revenues largely because the gates, we've been able to add two of our most profitable hubs Dallas Fort worth Charlotte.
We'll also be highly efficient growth.
As it will be funded by the return of some aircraft are included in our cost structure.
Operating reliability and an increase in the gauge where please.
Next in a particular interest on investors, we're very pleased to a research we will be generating significant free cash.
After six years of considerable capital investments in integration and fleet modernization, we're now seeing a significant decline in future capex needs and a return on those prior investments.
Derek will provide more information on this in a moment, we expect to your free cash flow to be $6 billion. We believe that free cash flow yield will be a key differentiator between American and our largest competitors going forward and we will keep investors apprised of our progress.
This free cash flow, we use naturally delever, our balance sheet and return capital to shareholders. We continue to estimate that our total adjusted debt declined by approximately $3 billion to $4 billion over the next two years and $8 billion to $10 billion over the next five.
So in summary, we made real progress in the fourth quarter and we'll apply that same tenacity. This morning's one our team's doing amazing job, providing reliable operation and take care of our customers. We have outstanding profitable growth opportunities ahead, and we are intent on producing real cash returns for our investors will then turn it over to Rob.
Thanks, Doug and good morning, everyone.
Thank you start by adding my thanks to the American team for doing a phenomenal job taking care of our customers during the busy holiday travel period.
We're pleased with the operation we ran in the fourth quarter and the momentum it gives us to further improve as we head into 2020.
During the critical holiday period, we achieved record results for combined mainline and regional Ontime departures on time arrivals and completion factor.
Fantastic way to end, our strongest operational quarter on record.
Throughout the spring and summer reliability and customer service suffered because of exceptionally high aircraft out of service.
Not the case today since September started the aircraft data service has steadily improved reaching best ever levels in December and through January today.
December 24, we had our lowest number of aircraft data service at the start for the day since the merger.
With more aircraft available to start today more flights to part of that arrived on time with your cancellation and fewer disruptions to our customers travel flight plant.
To add up to Doug's comments about the Max we had previously push to return to service date to early June .
Of course, as new information becomes available like earlier. This week, we'll reassess that timeline and to that end, we'll continue to work closely with yesterday following our pilots and our union on a return on returned to service preparation and flat new flight schedule.
As a reminder, by the end of 2020, we had planned to take delivery of an additional 26, Matt Max aircraft.
We understand from Boeing to 13 of those aircraft have been built and are in storage and we expect most of the remaining aircraft to be delivered by the end of 20 to one.
On the revenue Frank we reported record fourth quarter and full year revenue fourth quarter revenue was up 3.4% to $11.3 billion. This marks the 13th consecutive quarter of unit revenue growth.
For the year, our top line grew 2.8% $45.8 billion.
Derek will talk more about our revenue performance in his remarks.
Looking at our business today, the revenue environment rank remains strong and the economy continues to show no signs of slowing down importantly demand for Americans product remains robust as our traffic growth continues to outpace GDP growth.
Corporate demand remains strong and we're picking up share gaps within that segment. This is driven in part by our operational improvement during the quarter, but also by the great work of our global sales and distribution team to drive that business forward.
We saw 28% increase in transactions through NDC enabled channels during the fourth quarter. This growth is driven by adoption from NDC connected agencies in both domestic and international points of sale.
A key component of our goal of being easiest airline to do business with so we're excited to see MDC become available to wider set of customers.
Leisure revenue growth was also very strong in the fourth quarter as we delivered a record load factor we're off to an outstanding start in the new year.
In 2019, our advantage program enrolled the largest number of new members since the merger.
With the highest year over year growth occurring in the fourth quarter. We also ended the year with record numbers of co brand card members acquisitions card spend in flight redemptions.
More members than ever.
Our interacting with American through the enhanced digital experience and there have there in their advantage account and a 2019, our team delivered even more customer benefit by expanding by expanding dynamically price reduction opportunities across our network.
As Doug mentioned, our operational reliability improved in the fourth quarter and started are likely with likelihood to recommend scores in 2019, we took strides to improve the customer experience in several significant ways.
We completed the installation of industry, leading high speed Wi Fi across our mainline narrow body slightly more than 700 aircraft.
Giving customers the ability to stay connected from gate to gate.
We had to introduce the Athree 20, onea enhancing what was already the youngest fleet among us network carriers.
We expanded the footprint of our industry, leading premium lounge product with new flagship in animals club lounges, and DFW and renovated animals clubs in Boston in Pittsburgh.
We launched innovative partnerships with Apple blade and the James Beard Foundation and expanded our relationship with high proved customers experienced throughout their journey is with us.
And we introduced biometric boarding and passport scanning and our mobile app expediting the boarding process on international flights.
Of course, one of America's biggest competitive advantages is the strength of our network and our ability to grow in our most profitable hubs. We continue to be incredibly pleased with the results from that from the growth at DFW This past year.
The fourth quarter, we drew DFW capacity by 9%, resulting in it.
21%, increasing origins and destinations and importantly, this growth came in at a bunch system average passenger unit revenue.
We'll continue to see the benefits of this high margin growth at DFW for years to come as we continue to engage the airline.
A lot of our growth in 2020.
We'll have that will happen at DFW from the lapping of our expansion there last year and also in Charlotte, where we added four new gates in late 2019, we have plans to add three additional gates at Charlotte beginning in 2020, and we'll continue to ground 2021 with the opening of the new regional concourse Reagan national as well as the compounding effect.
Of our growth at DFW and Charlotte.
On the international side with full government approval of our joint business with class customers already benefiting from new routes and expanded Codeshare and improved frequent flyer benefits in October we announced new service between DFW inaugural Ocwen and Los Angeles, and Christchurch, starting this year.
All right Atlantic Joint business continues to produce to perform well and it brings significant benefits to customers in North America in Europe .
Last month, we announced a new British Airways operated service between Portland in London, Heathrow, which is one of eight new Trans Atlantic wrap starting this summer throughout the Atlantic joint business venture.
In addition, late last year, we announced plans to co located with British Airways at JFK, which will allow us to more efficiently and conveniently connect customers traveling across our networks.
We're also excited about starting our first ever service to Africa, and Poland in 2020.
And returning to Tel Aviv as well.
We launched a new reciprocal codeshare with Rowley armor rock late last year, which will support our new Philadelphia Casa Blanca service now and allow for easy connections further into Africa.
On January 31st we will stop code sharing with let Tom.
American remains the largest the leading carrier largest care between the us in Latin America, and the best partner for future relationships.
We feel very good about our position in this important region expect only did grow on our own and with partners in the coming years and as a result, we don't see any impact to revenue or profitability in 2020.
In summary, we made great progress in the fourth quarter, especially in regard to our operations, we have a solid foundation in place and the demand and revenue environment remains strong.
The challenges of last year product closer as a team have aligned us in purpose and we're excited to deliver to deliver and what we've built so far and continue to focus on our operating reliability, improving the customer experience and capitalizing on our valuable growth opportunities and with that ill turn it over to Derek.
Thanks, Robert and good morning, everyone. Despite the operational and fleet challenges we face throughout most of 2019, we're going to grow both pre tax margins and earnings per share for the third successive quarter and for the year before.
Our fourth quarter pre tax profit, excluding net special items of 679 million resulted in pre tax margin of 6% as compared to 5.4% in 2018.
The revenue environment continues to be positive with fourth quarter total revenue growth of 3.4%.
Passenger revenues grew by 3.9% the 10.3 billion a record for the fourth quarter on unit revenue growth of 0.9 points.
For the year total revenue grew 2.8% to 45.8 billion and was also the highest level of revenue in company history with total revenue per available seat mile up 1.7%.
Robert touched on our international operations, but as we look at our fourth quarter International revenue performance by entity, we continue to see the strength of our Latin American franchise, Latin America was our best performing entity during the fourth quarter, where the year over year unit revenue improvement of 10% driven by does.
Well digit unit revenue improvements in Brazil, and Mexico. We also had positive unit revenue growth in Argentina for the quarter, while Caribbean performance was flat.
In the fourth quarter Pacific unit revenue continued to show improvement up 1.3% year over year, which was aided by our China restructuring last year in our partnership with Japan Airlines, we saw strength in the Japan market in Brazil, China to positive unit revenue territory.
We're executing quickly on our new joint business with Quantus, We recently expanded codeshare selling to all Quantus and American flights between Australia, New Zealand and a continental U.S. encompassing 104, Quantus and 48 American flights per week during the peak season.
Atlantic revenue was up 4.6% on 8.7% more capacity and a decline in unit revenue of 3.7%. The decline in unit revenue is attributed to a foreign exchange headwind an important due to a potential labor disruption at one of our joint business partners underlying premium demand remain.
Strong and we made good progress with premium leisure customers growing this segment by 15% during the quarter.
Premium economy continues to do well as the product matures with average fares approximately 2.3 times the coach fair.
Domestic revenue grew 4.4% from strong load factors offset in part by weaker yields during the pre Thanksgiving travel period, which led to somewhat flat unit revenue production during the quarter.
Investors should read too much into the softness we saw in November and December closed out very strong and those trends have continued into January .
On the cargo front trade concerns and macro weakness outside the United States continue to weigh on both cargo volumes and yields.
When combined with year over year International schedule reductions, we made in the fourth quarter 2018 cargo revenues fell 18.3% to 216 million in the fourth quarter.
Total operating expenses in the fourth quarter were up 2.1% at 10.6 billion when fuel and special items are excluded our unit costs increase in the fourth quarter by 2% compared to 2018, due primarily to higher salaries and benefits maintenance and regional expenses.
Turning to the balance sheet, we ended the quarter with approximately 7.1 billion billion in total available liquidity and we noted in our January 10, investor update due to the uncertainty of the return in service of the Max and our commitment to our 7 billion dollar liquidity target rearranged an additional revolving line of credit to provide.
The company with increased borrowing capacity of up to 400 million. We don't have any president intention to borrow any amounts under this facility, which matures in September 2020, with an optional extension to December 2020.
During the fourth quarter, we paid dividends of 44 million and repurchased approximately 285 million of stock or 9.9 million shares we have begun to delever the balance sheet as our capex requirements have come down as a result, our year end adjusted debt position decreased by 1.5 billion year over year.
Before we turn to guidance I'd like to talk by the changes we made to the format of our investor update due to the material uncertainty around the grounding of the Max we are adjusting how we provide our forward looking guidance going forward, we will provide guidance on the current quarter and the full year only.
As we look at 2020 with the Max grounding in mind. We currently project our earnings will be negatively affected by substantially the same amount as our 2019 earnings were impacted while we expect Boeing to compensate us for these 2020 losses. This compensation is not included in our any of our forward guidance.
As Doug mentioned, we now expect that our 2020 capacity growth will be approximately 4% to 5% and that our CASM 2020, CASM growth, excluding fuel special items and new labor deals will be up approximately 1%.
However, because our annual metrics like capacity and unit cost are highly sensitive to our Max return assumptions, it's worth pointing out that these metrics will have a different your trajectory in the second half of 2020 than what we are guiding in the first quarter as such our CASM will be up 2% to 4% in the first quarter and when.
The Max returns later in the year, our capacity will be higher and our CASM expected to be down year over year.
Looking forward, despite the GMV, but geopolitical headlines we continue to see no signs of macro softness in our forward bookings, we expect first quarter domestic demand to remain robust and Latin to again be the best performing international entity.
With that backdrop, we forecast our first quarter year over year TRASM to be flat to up 2%. We also expect that are first quarter pre tax margin. Excluding net special items will be roughly flat on a year over year basis.
Based on the assumptions I referenced earlier, we believe our full year earnings per diluted share excluding net special items will be between $4 and $6 a share.
In 2019, we made contributions of more than 1.2 billion to our defined benefit pension plans or 436 million in excess of required contributions.
Prefunding a portion of our 2020 minimum required contribution.
Favorable asset performance of 23.5% coupled with significant company contributions helped offset an increase in the benefit obligation due to declining interest rates improving funded status by four percentage points for 2020, we intend to make total contribution of 193 million. We also expect.
A significant reduction in pension expense year over year by approximately 260 million.
Our total projected capital expenditures for 2020 as expected to be 3.3 billion comprised of 1.7 billion and non aircraft Capex and 1.6 billion an aircraft Capex with these capital numbers as Doug said, we currently forecast that we will generate 6 billion in free cash flow over the next two years.
Yes.
So with that I will turn it back over to the operator to begin our question and answer session.
As a reminder to ask a question you will hear press star one on your telephone to withdraw your question press the pound key and the interest of time, we ask that you. Please limit yourself to one question and one follow up please standby, while we compile the Q and a roster.
And our first question comes from Michael Linenberg with Deutsche Bank. Your line is now open.
Yes, Hey, two questions here and maybe this is Derek I realize you mentioned with the guidance that it doesn't.
Reflect any sort of benefits from from from Boeing, but I want to touch on that that 6 billion of free cash flow over the next two years because.
In the southwest press release, they did call out 400 million of supplier proceeds that they received in 2019 so.
You were talking about the forward guidance I want to be clear does your 2019 number include any sort of benefit cash benefit from Boeing and if not.
This is that potential upside to the 6 billion over the next two years anything you can sand that would be great. Thanks.
It's hard to talk about any of this because as a confidential settlement that thats out there today.
The impact in 20 and 21.
Where were in there from that from a settlement perspective.
But we can't really talk about.
Well, how we got the settlement and where we got it we got it overtime.
I'll turn things and data that's kind of where we are Mike is really really just because it's a deal with Boeing that we have and its confidential that we can't really outline where that that but it will the Boeing settlement for the $6 billion that we talked about is included in those numbers. So theres theres no no change that no upside to that number because the Boeing settled.
Unless we talk about a 2020 settlement. This out there that we have not talked about at all so I guess theres some upside if theres a Boeing settlement on 2020, but I think the 20 settlement. We already have is included in that $6 billion number.
Okay. That's that's actually very helpful. And then just my second question you haven't made recently any change to your two year vaccines E checks for vaccines have you I, just I haven't been able to check.
We have not.
Okay, great. Thank you.
Thanks.
Thank you and our next question comes from Catherine O'brien with Goldman Sachs. Your line is no.
Good morning, everyone. Thanks for the time.
So question on cost your burn expected fourth quarter cost performance is due to running a better operation you talked about some of the milestones you hit on aircraft that a service.
During the quarter. So how do you extrapolating better trends into 2020, CASM guide or did you building any question from an operational performance standpoint, any color would be helpful. Thanks.
We have we have an add seven guided 4% to 6%. So we have.
Soon a completion factor of 45%.
4% to 5% excuse me and we have built in a completion factor that we assume that we continue to run the operation that we add today.
So that is in play there.
From a CASM perspective for the full year.
The one big headwind that we have is in maintenance area and it's mostly an engine costs.
And some of that is driven by keeping some of the older aircraft around and doing engine halls on those aircraft.
Engine overhauls on those aircraft due to the fact that the uncertainty on the Max and some of the delays on the 321 aircraft. So we have extrapolated in the operation is going to be better and we have but we have one of the biggest headwinds is just the maintenance side of things from a cost perspective.
Doug I'll, just add to that again much like much like we said at the I guess im numbers for the year don't really don't really reflect our plan for the entire here.
Because again.
4% to 5% will be lower than that for the next in terms of higher than Andrew same holds true for CASM.
So that number and move up.
Turning to service days move but no. This.
Once the returned to service date is here of the CASM will be lower than that average number Derek.
And until it goes there will be somewhat higher than that.
Okay understood and then a question on the 6 billion of free cash flow expecting over the next years. So.
How much it adds from sale leaseback gross proceeds I know in 2020 that number is 1.5 billion bullets that figure for 2021. Thank you.
Right now it's zero for 2021.
Understood. Thank you.
1.5 is correct for 2020 zero for 2021.
Great appreciate that.
Thank you. Our next question comes from Jose, Colorado with Credit Suisse. Your line is no.
Hey, Thank you very much good morning.
Robert maybe a question for you I wanted to ask about the progress on your sub fleet optimization initiatives.
I believe you were hoping and take something like 50, or so different sub fleet combos down to 30 or so.
Can you just give us an update on that initiative I imagine the Max situation last year, maybe delayed the progress there and just how you're thinking about that for 2020.
Sure. So one of our big projects on the mainline side was to make that configurations on our 320 ones and our 737 fleets identical so because of.
Issues that we ran into last year.
First with the Max and aircraft out of service, we slowed that project down so to date, we plan on Reconfiguring.
Total 304 737.
And I believe that were it changes daily, but I believe that were 80 or so through that.
We've just started on the 320 ones that that 202.
Our so aircraft there so theres a lot more that is coming there the recall that.
Those configurations, not only did they standardize not only did they also add too.
The total seat count, but they also break brought great customer amenities, such as new lighting news new seats oversized beds.
Analyte Wi Fi and whatnot. So we're really excited about things and getting great feedback from from customers on that.
We still have in our plan to eliminate the you when nineties.
By the end of this summer the Super Eightys are gone the Sevensixty Sevens will be gone.
Next year.
And on the regional side.
I've done a great job in terms of both rationalizing.
Our fleets in terms of of different configurations, and also carry a partner carriers as well greatly simplifying things. So we're really excited about where weve already started there's still a lot of upside, though as we as we move forward, especially on the mainline side of things.
Thank you for that and then just a quick second question on your load factor initiatives. In 2019 generally we are you pretty satisfied with how the initiatives sort of played out and do you have any plans to make any adjustments that strategy in 2020. Thanks, so much for the time.
Okay. This has done not you were very very pleased with how we executed on our what we described is kind of the smartly go load factor because obviously our objective.
To maximize load factor, but to maximize revenue.
And we had over the course of 29 can achieve record load factors was the highest load factor the company has ever had its history.
And as we look at where we good because that's really the most important mark that we were able to find the right places in order to be it.
Correct.
As we look forward into 2020, we still think there is a little bit of opportunity as we look back at the fine tune what we did in 2019, so I think a bit more upside.
Thank you and our next question comes from Jamie Baker with JP Morgan. Your line is now open.
Hey, good morning, everybody up first one for Derek is similar question well actually identical.
So what I ask Kevin I did yesterday.
Talk about the evolution of the four to six dollar guide and the timing of when that forecast really did come together the degree to which it was influenced.
By some of the recent.
Political uncertainty all so clearly a foregone conclusion that you're going have to push the June reentry schedule should we anticipate updated annual metrics when that happens.
Jamie as Doug ill take a product.
You do more derrick or detail, but to your question what was it was its.
When do we come to that was.
Last night.
So I mean incorporate.
Incorporates everything we know at this point in time.
Anything we anticipate at this point not.
And you know are certainly.
Objective is not not too many other than to maybe be amending it up we would hope maybe at some point in time, it's everything we see right now everything we anticipate right now.
And to the extent that changes of course, we will update at that time, but everything we know now.
Isn't there.
And I don't anticipate issues come up on work very hard to offset those so we know that adjusted but it's all those things you mentioned.
Our.
If they are incorporated into effect.
And just just to drill down mill accruals for any.
No you mean contract assumptions that are in the guide.
I'm sorry go lives.
No no labor accruals or assumptions on your behalf as part of the guide just want to make sure.
Yes, I want to make sure I sense right.
Includes everything we anticipate this time, we know where we are in labor negotiations. We anticipate is included in that so okay.
Thanks.
Excellent and.
A follow up on labor, Doug I want to ask about the bench I was impressed to see the higher brine on bosses team.
I think there has been some surprise amongst investors that there havent been.
So I'd say, there's more gyrations in terms of the overall bench I want to ask the question in a way that you're comfortable asking or answering excuse me.
You can answer my question with the question if you want.
I guess I'll ask it this way you know woods, Brian a one off or would you say that you are actively looking to pick up new talent where needed throughout the organization.
Yes, we're always actively looking to pickup downtown threaten organization, we've been doing so for quite some time.
Yes.
That's that's one case there have been somewhat over the years and they've been some of the best additions to the team one of the really nice things actually from my perspective of the transformations happened.
American and in this industry. There are the time it was difficult to attract people.
Our that were already in the business.
Weve.
Who we are what we can do now I mean, my goodness just look at.
If you add you apparently havent.
Prominent enough and pointing out to you.
The kinds of we have been adding such as our general counsel.
Phenomenal.
Resume the division, we have we're particularly bad over the last two years from firms like.
Memory now I view Pepsico Omar.
JP Morgan.
Yes.
Starwood, Texas instruments that have all companies organization.
And made a huge difference and we'll continue to do so so we'll keep doing that.
And we do it throughout the organization those people are all throughout the organization, we feel fantastic about the team we have in place and structure, we have in place and the bench strength, we have in place.
We're really.
But we always are looking to improve.
As you know we're excited we're excited about higher you noted.
Our more to come.
As there always will be and really excited what we are pleased.
Excellent and strong answer thank you Doug take care. Thanks, Thanks James.
Thank you and our next question comes from Hunter, Ken with Wolfe Research. Your line is no.
Hey, Hey, Doug everybody.
Doug did have an off the question, but the way you were talking about shareholders sort of feeling the impact of the Max delays. During your prepared remarks that kind of just dawned on me wouldn't wouldn't one would sell for that might be cutting a special dividend of about $5 per share to your shareholders using borrowing money to make up for how much your stock price has gone down since them axles grounded is that something you.
Consider.
Jamie.
So that we think about.
Im sorry.
Every time.
I just wondered if I go to put them is built every to earn higher.
I do at each one of you so anyway Hunter.
Yes.
This we view the settlement as we do.
All cash.
Proceeds and cash flow generated by the company.
It goes.
Order.
First to invest in the business make sure we're doing that next to make sure we're paying down.
Any debt either that is.
It is expensive, which we don't have any of that whereas it comes due and we don't need to add more to do that.
And then having and then having done those things, especially in the company made sure we're paying down debt as prudent.
And then make sure we have sufficient amount on hands to ensure that we.
As we do it extremely large cash balances out to be prepared to be.
Ready for any sort of a black swan event that might happen.
Rich.
Finally, the liquidity events, you know all that and then having done all that speaks index as.
We do look to return to shareholders, we've been aggressive about that in the past will be the future believe.
With where the stock is when we believe the stock is undervalued, we hit the best way to return to shareholders as repurchasing shares of those who are who are not as Ics.
Not as of.
Don't have as much of a strong view about the future as others might we think thats the best way to reinsurance shareholders not through dividends. So that's how we'll treat these proceeds as well okay that fair. Thanks and then.
As it looks the head count over the last few years Im curious Derrick how attrition rates have impacted that relative to you. What your baseline plan was at the time of the merger, obviously labor rates have gone up and both to don't have mandatory retirement age as are probably hanging out a little bit longer to make up for loss pensions and things like that so.
How its attrition impacted head count is that something is that an area that's been a little bit worse than expected relative to your baseline sort of merger cost outlook and is there anything that can be done about that going forward. Thanks.
I would I wouldn't say, it's any were different than what's expected I mean from you know attrition rates have definitely gone down because of the.
Salaries within the industry. So you know at certain areas, where there were high attrition, it's gone down a fair amount.
But we're managing that just means we're not hire as many people in those areas.
And then we have so I'm not concerned about where we're at I think we're we're efficient we're going to become more efficient overtime there might be some opportunities that we will go after over the next few years.
But as we as we go forward I think I think we look at that all the time and by the attrition really hasn't impacted it thats really lowered hiring and lowered where we needed to be from a iron standpoint.
Okay. Thank you.
Thank you and our next question comes from Twain Pfennigwerth.
Evercore ISI your line is now open.
Hey, good morning, Thank you.
Just just revisiting the fourth quarter little bit and apologize. If this is overly simplistic, but you grew below 3%.
You had the benefit of Dallas hub grows.
Competitors had fleet limitations, which which limited their ability to grow and in fleeted inflated their non fuel costs.
You were in a seasonally stronger period and yet revenue came in softer versus your initial guide and so.
Yes, again, maybe overly simplistic, but if you can't find price on 3% growth.
How are investor supposed to get comfortable that you can find it on five plus to offset inflationary pressures on the business longer term.
And more importantly, how are you going to evaluate if that aspirationally growth rate is working as we proceed maybe in the back half of this year.
Okay. This is Ed witnesses.
This is Don Casey that talking so you just look at kind of what our guide was our guide was.
I have TRASM.
One point in the fourth quarter, we ended up half a point.
Two tenths of that was.
Good morning, Sams and important because with better completion factors for that.
Three tense and when you do look at the numbers that we have you have to remember this is the kind of the last quarter, we have a headwind related to a frequent flyer recognitions, but nine tenths of a point.
So when you kind of back and look at our numbers, we actually did I think pretty low relative.
Got to everybody else.
More importantly, as we look forward into the second order and particularly in the domestic market.
We actually see the domestic market looking pretty robust as we had for going forward. So in every form of month right now our yields which were a bit soft in the fourth quarter because of performance in November all at positive right. So we're pretty optimistic about forward outlook and again as you think about the fourth quarter.
Really the only thing that was off track for US was November we did better in December and we expect to be better knocked over than we expected, but November it with the extra week.
Trough that last week before Thanksgiving Ross was very aggressively but beyond that everything really performed really at or above expectations and again. The forward look in terms of four deals as positive.
So once you want to growth, yes, Hey, Duane this is vastly too I, just add something dons comments too and that the manner in which we've taken out the Max and the path and the way we're taking it out first quarter in second quarter is.
As different right.
Until this point in time, certainly on fourth quarter and third quarter before that we were taking the Max out sometimes 60 or 75 days before the flights flu.
So what we are effectively doing is we'd already filled up capacity and we had fewer seats available for higher yielding a last minute bookings and so you can see it certainly stands to reason you see in the industry data that.
There's been a huge transfer of share from carriers that operate the Max to carriers that don't operate an action, we saw that and fourth quarter.
Despite that as as we look forward, we haven't actually we've taken it out further further advanced and so that that enables us to go and revenue manage the airline.
I'm more predictable capacity base, but also in fourth quarter.
Despite the very obvious frustrations, we have one with the Mac on one thing that is encouraging as we think about bringing the Max back.
As we took the Max out we sought to preserve the connecting power about three biggest.
Chicago, DFW and Charlotte and so even though we saw net traffic loss across our system.
Those three hubs, we actually both saw traffic gain and most critically we saw share gains on the highest value LNG isn't the domestic system. This is encouraging to us of course, because when the Max comes back the marginal cost of bringing that airplane back is as minuscule on deeper carrying it right now, but we believe the marginal RASM will.
Well be.
Certainly uniquely high for us because so much of what the Max will do is provide more seats on those higher value I Wendy's that are at the highest percentile of our domestic yield curves.
Just as Don again, just that one more plant is like a where the Max capacity impact as its really domestic that's where we actually have impact.
Domestic on them in 1.2% in the fourth quarter, we expect that a lot more domestic has the far away the highest nominal PRASM. So it hasn't disproportionate impact on us.
In terms of first party revenue.
Thanks for that detail and just just for a quick follow up Derek the lower pension expense ratable across the quarters and would you be willing to disclose the actual pension expense in 20 versus 19, thanks for taking the questions.
But it is ratable throughout the quarters.
And the 260 number is the number that is going to be the expense this year.
Thank you.
Okay.
Thank you and our next question comes from Darryl Genovesi with vertical research. Your line is now open.
Good morning, everyone.
Doug I guess given that this is sort of a new you're right I just wanted to ask you a bigger bigger bigger picture question and then.
I don't mean to be combative, but since 2014, the first year. Following the merger your pre tax income has declined by about 30% of a little over billion dollars I know the Max creates some hardship, but united and southwest horrible operators have grown a pre tax over that period.
Neither one of those carriers has a significantly larger operational footprint than you and neither has a single hub that's bigger than either of your two largest at DFW in Charlotte as they currently exist. So I guess the question with all respect and without reference to the Max or the need for more capacity. What do you think the one to two things are that you.
Don wrong since the merger.
And what are the one or two things that you think you need to do differently in 2022 show investors that you can reverse the downward earnings trend.
Yes, let me let me.
Let me answer it this way by.
First by noting.
One.
We we agree we know of course that well.
Let's start with us as the margin gap.
We were we fully recognized we are relative Mirage immersions relative to our two large competitors.
That that that gap.
Gone from being positive to American to negative American.
It was positive again I felt was positive more positively.
And we're concerned about that and certainly intent on reversing the trend.
For the to explain most of what you described.
You know from 24 part of our large.
Hi, good margin relative margin performance was the fact that you know as we took two airlines want Us Airways, which had lower labor costs and the big three and then American which has lower labor costs those that those two airlines.
As I went through a bankruptcy.
Large part of that margin advantage was on sustainable we certainly.
I think we're quite clear about that at the time that we were going to need to overtime as we signed new contracts, yes, our teams wages and benefits in line with those and Thats happened. So thats certainly a part of it but it's not but but having said that that's not all those are going on so let me just say this way.
As we sit here today, having just close these years up.
That gap I mean on what well line you look out I know that generally people look at pre tax we get someone heard on that of course, but affected Uganda invested in $20 billion of new aircraft for the last five years those airlines haven't done yet so.
That's that's that's about a point of so a way to a way to adjust for that is to look but anyway. The trends are much. Thanks, I'm trying to kind of trying to blame it on that.
But I think a better way to look at it EBITDAR margin and get the story is exactly the same you look at EBITDAR margins.
For the year just added.
We're going to we come out a little less than two points behind a united for the year in about six points Delta.
So.
I look at though as we think that doesn't seem right. We should theres no reason that American airlines margins.
What are lower than United's there may be a structural reason at this point in time.
We would be lower than delta and United is.
That structural reason being that they have so much of their capacity flying in and out of.
I'm really really profitable hub.
But we're not we're not trying to say that structural reason that can't be close it but it will it may not be able to be closing the really near term as we end up growing Dallas charlot overtime.
Our network I think that can be close but.
I suspect you are talking more near term so in the near term here's what I think.
We have one more of these contracts to do that's in.
Thats going to one more time to actually get our labor costs in line, we have one more joint collective bargaining. If you get done a that'll comp that will that will happen in 2020, once we do that.
You will then.
At a point, where our labor costs in general across the border largely in line with there's you won't see that continued kind of pressure.
So as we went to 2020, we have that headwind, but what I believe is because of all the things we have going on that will close that gap. The 2020 margin again, let's let's set the Max aside for whatever that does to this years earnings.
We will then be compensated for.
But.
Just looking at it.
Adjusted for the Max I think our margins this year will be.
Despite that headwind.
In line or hopefully, maybe a little better than those two carriers year over year proven I'm, saying.
So what we may not be able to start closing in 2020, because we have to get that last on.
Last contract there were then there and having done that we will then have labor costs that are now.
Largely the same as our competitors the extent.
Labour costs go up that any of our airlines will go but all the airlines.
Sure this summer so.
And as that happens.
Well I know is you we expect that margin capture be close.
How much how fast hard to say conservatively I think we should easily be able to get a point here.
So again, let's let's for 2020 assume that.
We're not able to get that point, but we stay where we are in the gap and then a couple more years were at or near United.
And then.
And over three years ahead of United.
Or by a cornerstone close mek and taking that to happen Africans, though.
That's that I believe is what you will see for most from all the initiatives that we've been looking out over time, there working now.
And now despite all despite what's going on.
Once we've had we did indeed.
Margin expansion area, we had.
This quarter, our fourth quarter margin improvement for the first time in two years was.
[laughter] Didnt.
Was the improvement was better than United for the first time into owning a big deal about that.
Because it's not that much but it's not that much improved and it's one quarter and it's the last quarterly year, So no who knows.
But what it but thats a fact.
The first time in two years that we've seen our margin.
GAAP versus United start to narrow, albeit a small right.
We hope that's beginning of a trend.
We think that should be like I say once we get this last contract in place going forward.
So thats, where thats where were headed that happens by the way.
Without you asked me what are we need to do about that I I believe we've been.
I believe we explained but again, if you want Moreno Robert Don can do it again, it's largely revenue.
And its revenue initiatives.
He is like.
Getting our.
Oh the entire fleets.
Harmonized.
Things like getting our ability to sell up.
This is same position than or some of our competitors are things that we know we can and will do and that will allow our revenues to increase that are rate.
Our revenues.
Is that a rate or province or increase right.
Good.
They don't have the opportunity to do so that's why I know so long answer, but it really weren't question.
You get a launch.
And that's what I believe.
That margin gap is not something we believe is.
Accessible not something we believe we will be sustained and one that you should continue to owner features as far as we move forward.
Great. Thank you very much with oriented.
Sure.
Thank you and our next question comes from Joseph Denardi with Stifel. Your line is no.
Yes, Thanks, Doug I, just want to highlight that I mean, you do refer to kind of the competitive disadvantage that you face in some cases, you guys have an enormous competitive advantage over United in particular related to the credit card program that I think Nancy.
Consider but my question is when you look out over the next couple of years in the 6 billion and free cash flow how much of that do you expect to return to shareholders versus going to pay down debt or the pension like what's the actual number that that use that you see being free to return.
Yes, Brian should I was wondering.
On your comments nothing that I sense that we have disadvantages.
Nothing we're saying any reason that we think we shouldnt have margins.
I didn't I agree with your credit.
One of the reasons, which position and what I said, what we may have a structural disadvantage on network front versus dealt a two day. So anyway, that's what I'm trying to say.
As to your question on how much of that free cash flow gets to investors.
Well refer back to my comments.
Which were as follows.
You said that we expected over the next two years free cash flow $6 billion. We also said that we expected to reduce our total adjusted debt by three to four Blake.
Again, so that's there's there's a couple of million dollars there that again all else equal.
Would be excess over the.
$7 billion.
What.
Again, consistent with our past behavior in our views about our obligation to our shareholders.
If I was modeling that that would be return to shareholders.
Okay and then.
If the Max reduced to 2019 pre tax by 550 million. The mechanics was another few hundred million.
Can you just help us understand how much of an impact that's expected to be in 2020, if things are getting better in the operations getting better and there is theres revenue momentum then why shouldn't the baseline for 2020, B 2019 results plus the Max and the mechanics impacts.
I guess, how much of those factors are reduce how much are those reducing the first quarter 20 guidance by can you just maybe help us understand that thank you sure yes.
Look the Max is still an issue 20 joint so and.
We say, we expect you back.
Obviously, you know we have our June .
But.
We're going to need to reassess that so.
Sometime late summer early fall, let's assume that's going to be out about the same number of months in 2020 as it wasn't 2090, so the Max effect on financials.
There's there's no positive impacts.
No the in those numbers I do want to make this take this time going to make this point.
Whatever that amount as we will be compensated.
That Boeing has been clear about that they've shown that there and we'll do that it is unfortunate that the accounting for that doesn't match the period in which in which the pain happens.
But it's real value inspired accrues to our shareholders.
And we are committed to ensuring that we perceive that value.
For you on your behalf on our behalf.
So that again those those I would just.
Ask I'm all of you as you look to those kind of large impacts of the.
Following impact to understand.
Those are that's an accounting issue.
In large part at least again for financial purposes, a huge obviously issue for our customers and our team, but other than that as it relates to the financials that amount.
Our shareholders will be compensated for it just won't be in you just will be accounted for in the current period.
0.1, I'm. So that's my answers the promises Max that leaves you with the other piece, which is the operating issues. We had this year certainly there's upside to that.
We are.
As I mentioned, we have some we have some.
Another headwind which is.
Actually the the contract which caused the current negotiations which related to that.
Issue will result in.
What we really want to get happen mid cabin, which is really contract for food service maintenance to you that well that will lead to an increase in our costs. So on a year over year basically because things you know certainly.
Don't have a huge.
Positive and they certainly not positive impact offsetting one versus the other.
But having said all that I go back to where what we said which is knowing everything we know at this point.
We gave you an estimate.
We.
Good.
We had we believe is that as our best estimate where we are at this point incorporating all.
Thanks, Doug.
Yes.
Thank you and our next question comes from Dan Mckenzie with Buckingham Research. Your line is now open.
Alright, Thanks, Yeah, Hey, thanks for the time you guys.
With respect to the 7 billion dollar liquidity target, what's the debt profile that you'd like to see before you draw that down so theres three to 4 billion less debt in two years, what liquidity target might a company that.
Yes, it's a good question, Dan, although we answer specifically, which raise a good point Hum that number is based upon.
We work with.
<unk>.
There is science.
End of the day, it's you know its theres, some art as well, but the science is going and working with some.
Some outside.
Some bankers and running all sorts.
Monte Carlo simulation worst case make sure under the sort of.
Difficult situation.
No we have more than enough to handle that.
Those those simulations run with with less that will result in lower cash balance required.
Not doing it yet when they do well continue to look at it.
It's a fair quite but anyway, you raise a good point I look forward to the day that that's a question we're getting from all of our shareholders, which is why are you holding so much of the cash right now we believe is prudent.
But I.
I certainly expect as we produce the kind of cash, but we suggested in using to pay down debt.
There will come a time in the future.
That number.
Well come down somewhat.
Understood Okay.
Don or thanks realized.
Sure.
Next question here down or Basi, I think you've been really clear that the growth has focused where your strong.
But as you look at where your strong you look at where your week, how do you get more critical mass in the markets, where your weeks I guess the question is clearly an expanded coach here domestically be solution and then kind of separate to that question I'm. Just wondering just given the Atlantic RASM headwind I, just sort of you could just as a housecleaning question just sort of comment on.
When you think that that might reverse.
I hate Dan. This is vastly let me, let me start and end dot dot and others can can pick up.
Actually let me take the second question first and then I'll do the first one.
And so there's certainly a a foreign exchange impact on our end fourth quarter transatlantic RASM, but one other things and we've talked about this spring for a long time, certainly I have is that.
As we go and shrink the number of some fleets returning 767 to 787, so in the old days of both AMR and US Airways, we could go into the winters when demand was lower and simply idle wide bodies are fly them in the domestic system or things like that the ownership of those things was very different.
So one of the things as we've been doing increasingly is going in and.
Extending a fourth quarter flying on our wide bodies and and no resins are down we've been really pleased with the marginal earnings from it right of course, we the the cost of operating a 787 flying Chicago to Barcelona, and the winter is maybe a you know at its very very small it's.
Actively just the incremental cost of of the fuel burn on the thing, but what we're seeing on it our marginal RASM that are in the 70, 580% range of or otherwise buying and trans Atlantic.
And so that's been a I really positive development for us indeed.
Overtime not that long ago.
The airline Didnt make money flying on Trans Atlantic in the winter and now we make money Trans Atlantic All 12 months of the year and we see opportunities to go and do more and so though we see that this near term RASM challenges it backed up by something which is a really promising sign for future earnings and future network development.
And then hit here earlier point about places were relatively strong a relatively weaker.
It remains to be seen.
The then were critical point is that in the places where we're strong in certain certainly and markets like in the Midwest, The southeast, Florida things like that.
The southwest we every chance we have had to grow it we've been seeing the marginal earnings off of that growth has been really attracted indeed, it though it is it scared.
Any number of other things going on we see opportunities to be able to grow earnings primarily by being able to do that organically in the near term.
This is Don just past just about the Atlantic just the way our type business and we satellite revenues and we didn't end up three point headwind.
On the Atlantic between cannot related to kind of pharma to back that out.
Our performance.
Right in line with.
Delta and United Tank crossing the same thing.
Which is a pretty stable.
Business demand and demand for premium products.
Missions pricing at this point in the coach again.
Okay. Thanks for the time.
Sure.
Thank you, ladies and gentlemen, we will now take questions from the media as a reminder to ask a question you will need a press star one on your telephone to withdraw your question press the pound key and then the interest of time, we ask that you. Please limit yourself to one question and one follow up please standby, while the compile the Q and a roster.
Okay.
And our first question comes from Allison Cider with will Wall Street Journal Your line is no.
Hi, I also mice.
I was wondering if you could share if theres any sort of thinking that you have right now.
So there's a lot of uncertainty, but you know any contingency plans for a much longer term grounding you know if this were announcing the past mid year.
End of year even longer.
What kinds of things when you do differently does that feel like it's a possibility something you're kind of gaming out already.
No actually we aren't at this point.
Yeah.
We are.
Running or airline on today.
Without the Max in service and if we're going to be out longer than we anticipated. We can you do same thing.
We're not going how our strategy dictated by this airplane comes or doesn't come we know it will fly again someday.
When it does we'll be ready in the meantime weren't keep focusing on.
Running great operation make sure that we're where we where we are growing or growing where we.
You profitable.
And making sure we're generating free cash flow.
When it when it wouldn't be FX.
Five aircraft is ready to fly will be ready, we will <unk> will be ready to get our parts trading of aircraft back up we're looking forward to that but.
Until that time, we'll keep doing exactly what we're doing it.
Don't have any plans beyond trying to figure out what happens.
After that or before that.
Got it thanks.
Simulator training requirement to sort of.
Create a lot of new delays or slow down the returned to service process when it eventually comes.
Got it wrong that we're working really closely with with the Epay and trying to make sure that theres.
All the information is built into into our planning from well we know right now.
We no that there's going to be simulator and 77 Mac simulator training required.
We are sketching out a number of different scenarios and then all of those we've made sure that American is sufficiently staffed with resources simulators and also training resources to make sure that we can get the aircraft backup as soon as possible once the F.A. once our pilots and Boeing.
Since the aircrafts ready to go.
Thanks.
Thanks.
Thank you and our next question comes from Dawn Gilbertson USA today your line is.
Hi.
Good morning.
My question has to do with the Corona virus that are kind of on three fronts on I know, it's early but are you baking any booking impact at all.
Have you contemplated any travel waivers for the region and lastly, and maybe this one is Robert what measures is American taking to protect passengers and Chris. Thank you.
Thanks, John So.
First off we haven't it's too soon to see any impact our network isn't that extensive in Asia, but we're on top of that we're working with CBP.
The CDC and public health officials as well as our medical resources here.
To make sure that we're we're following.
All best practices, we're doing that with an intent to make sure that we take care of our customers and team members. We've seen a virus is in the past that we've had to to make accommodations for into to be prepared for we're doing all those same things right now and were going up we're going to watch.
Mixture that we've taken aggressive action, if theres a need to.
Thank you and your next question comes from Leslie Joseph with CNBC. Your line is now open.
Hi, good morning, everybody.
Hello.
The grounding affected your hiring plans for this year in going forward and when do you expect to be fully over the issues with the Max considering or thinking of that fillings forecast for mid year a at the ground lifting holds thanks.
So so we know that we were confident the Max will come back and.
We plan for the future and as we take a look out into that future and where we will be later in 2020, assuming the aircraft comes back in late summer early fall or even out into 2021.
We are planning and making sure that we're ready to accommodate those aircraft. The planning cycle for pilots is a lengthy one and so we actually have to start hiring 12 months were more in advance not only to handle growth, but also to handle the hundreds of pilots that are now retiring out of American we feel really.
Hey, good about that pilot pipeline, we're gonna mix. It's it's our pilots are best asset and we do a great job in going out and hiring recruiting the best of the best making sure that there are always trained and ready to go.
So we're planning well in advance we have sufficient number of pilots and right now we're not making any changes to the to that plan.
Thanks, and then the other question about the whole Nexus when do you expect to have your 76 of selling giving you any guidance on that and when when do you expect this whole thing to resolve this Boeing forecast for the ground thing is lifted in the middle of a year and you have the clean by let's say like late summer early fall.
So.
Right now we can tell you said that we know that we have a 24 owned aircraft.
And that once the on grounding is lifted we're ready to go with those as I mentioned, there's a number of aircraft that I'm off also been produced we're hopeful that those would be some of the first that could be released but then in terms of future production. We don't know and so we'll continue to work very closely with.
With with Boeing or once the aircraft is on grounded and we're hopeful to get a delivery.
And back to the levels of flying that.
We had intended originally okay. Thanks, and then so no reduction in hiring pilots or cabin crews because of the Max issues.
No I. Thank you.
Thank you and our next question comes from David Slotnick with business inside your line is now open.
Hi, how are you thanks for taking my question.
I know that you have results that were part of the labor efficiency, we're experiencing last spring.
And into the summer.
I just wondered if you had any update on contract negotiations with mechanics and pilots unions.
They continue the national media or it is overseas those negotiations.
Recently can to restart it again after the year.
New.
That's that's update.
We have oh parties have agreed.
Interviews request not to discuss those negotiations other than that and that's that's a productive busbars grumble about to them.
Got your things and.
Quickly I know you were talking about the partnership in countries with contracts earlier have you seen any impact because of the fires or is it really them too soon for that.
Got you want to talk about.
Yeah, Yeah. So we have we have started we've expanded the codeshare with.
On us so right now I think it's still early stages.
In terms of performance, obviously with bill look against really market.
Seen over the last restarted the three weeks ago bit of those softening terms the U.S. demand, but overall I think we're very happy with private Mi management.
Okay. Thanks.
Thank you and our next question comes from Edward Russell.
Your line is now.
Hi, Thank you for taking my question.
Just wanted to ask you about the fleet plans with the continued Max grounding I see your years continue with that you wouldn't on your retirement and I don't see any other modifications the fleet plan to address back but the boxes back that's got until at least summer.
American considering holding on to the one ninetys or any other measures to make sure that so you can continue to grow due to the Max.
Right right now does the one ninetys are scheduled to go out at.
End of the summer that's that's the game plan. That's the way we built the airline we will make adjustments based on what we hear from from Boeing and the actual timelines as they become more from a but right now we anticipate that the Max coming back up late summer.
Early fall and we're preparing our airline.
To that end.
Okay and is also correct. Since then the retrofits the 320 ones in the 737.
Going to move forward. This in the news this year on schedule I know, that's going to last year due to the Max.
Yes, so from the original schedule will probably probably a year behind but as we then I think take a look into it to the year. We will have a we restarted the 737 line. We have 321, a prototype but done as well and we will have a critical mass I don't know the exact number that we'll have done by.
Next summer, but a 100 150, all the seventh rates will be done by April 21 that all the 320 ones will be done by May of 22, and we're going to keep the line go and that the entire time, we're not going to pull the line because of the delay in them access this year, we're going to keep it moving.
Great. Thank you very much.
Thank you ladies and gentlemen, this concludes our question and answer session.
Oh now, let's turn the call back over to Chairman and Chief Executive Officer Parker for any closing remarks.
Thank you very much we appreciate your interest here any questions on please let us now.
Wager [noise].
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
Or.