Q4 2020 American Airlines Group Inc Earnings Call
[music].
Good morning, and welcome to the Lincoln Avalanche Group fourth quarter, two 'twenty earnings call. Today's conference call is being recorded at this time all lines are in a listen only mode. Following the presentation.
Conduct a question and answer session to ask a question during the session you will need to press star one on your telephone and if you require any further assistance. Please press star zero.
And now I would like to turn the conference moderator managing director of Investor Relations, Mr. Dan Cravens.
Thank you Victor and good morning, everyone.
Welcome to the American Airlines Group fourth quarter 2020 earnings Conference call.
Joining us on the call. This morning, we have Doug Parker, our chairman and CEO, Robert Isom, President and Derek Kerr, Our Chief Financial Officer also on the call for the Q&A session on our server several of our senior executives, including Maya Leibman.
Steve Johnson, Robert you Raj.
Alison Taylor and David came on.
Like we normally do Doug will start the call with an overview of our quarter and act on the actions. We've taken during this pandemic. Robert will then fall follow with some remarks about our commercial and other strategic initiatives.
After Robert remarks, Derek will follow up follow with the details on the quarter and our operating plans going forward. After Derek comments, we will open the call for analyst questions and lastly questions from the media before we begin we must state that today's call does contain forward looking statements, including statements concerning future revenues and cost forecast on capacity.
On fleet plans and liquidity these statements represent our predictions and expectations for future events, but numerous risks and uncertainties could cause actual results to differ from those projected information about some of these risks and uncertainties can be found in our earnings press release filed with an 8-K. This morning as well as our form 10-Q for the quarter ended September 30.
2020. In addition, we will be discussing certain non-GAAP financial measures. This morning.
Excluding the impact of unusual items, a reconciliation of those numbers to the GAAP results is included in the earnings press release on that can be found on the Investor Relations section of our website a webcast of this call will also be archived on the website. The information that we're giving you on the call is as of today's date and we undertake no obligation to update the information.
Its equivalent so thanks again for joining us on the pinch point I'll hand, the call over to our chairman and CEO, Doug Parker. Thank you Daniel and thanks, everybody for being with us.
So before I begin my prepared remarks, I went on at least eight.
We will not be commenting nor answering questions on the recent activity in our stock price.
As a rule, we don't speculate on the day to day movements on our share price.
That rule today, so, but we do have a lot from do you want to talk about so I'll get US started and then Robert and Derek once more we will take questions on that as we always do.
So 2000 22020 was obviously an incredibly difficult year, but we couldn't be prouder of what the.
Airlines team accomplished in the face of extraordinary challenge.
Our team kept the country and economy moving.
They did so safely with great care.
American Airlines flew more customers last year than any other any other airlines and our team did so well running a solid operation.
Assuring our aircraft and airport facilities were clean and safe for every customer.
The hearing it on on either with the extension of the payroll support program.
This positive outcome is the result of the company and Union leadership working on R&R bring PSP two over the finish line.
It's clear that great things come about when we raise our voices together for the greater good.
Of course also grateful to our elected officials, who recognize the airline industry plays a vital role in the recovery from depends on it.
We took a lot of on the best days here at American we use that term described moments like American truly unique why our team believes its the best airline in the world.
December 24th was that best day for me.
We welcome back all of our furloughed team members and reinstated their pay and benefits.
For a tremendous support teams working around the clock, we were able to deliver thousands of colleagues for their first paycheck in months.
It's easy to forget for a lot happened in 2020 on top of navigating the pandemic.
Yes, we took aggressive steps to permanently lower our cost and increase our liquidity and care for customers in ways, we've never seen before due to COVID-19.
But we also accomplished significant milestones like entering at the groundbreaking new partnerships and Richard and reaching a new joint collective bargain agreement covering our fleet maintenance call. It.
And just last month, we seamlessly returned the Boeing 737, Max commercial service.
We'll talk more about these accomplishments shortly.
We sit here today.
I can unequivocally state that despite every channel doorway I've never been prouder of a company in my entire career.
The American Airlines team and our industry is incredibly resilient and this past year has proven that.
As we turn our attention to the year ahead, 'twenty 'twenty, one will be a year of recovery.
Theres still a lot of unknowns of course, when or how quickly demand will return.
Make no mistake it will return.
Good news is there are vaccines.
It will take some time for them to be widely distributed progress is being made every day and that's encouraging.
We don't know exactly when we may return to prior levels of demand. What we do know is that we're prepared to withstand the ongoing crisis irrespective of how long the recovery.
We ended the year with over $14 billion of total available liquidity and more importantly, we've used this opportunity to make American much stronger.
On the recovery does occur we'll be prepared in even better position we were prior to the pandemic.
We will do so I didnt give our team our customers and our company.
On the team from we're.
We're proud of the progress we've made especially in 'twenty 'twenty. It's.
This crisis has brought the American team together strengthen the relationship between management and our unit in our Union partners in incredible ways.
The answer on the pandemic, we've been meeting with our unions every two weeks to discuss the company's response from the crisis.
For.
And we stood side by side as we work to advocate for PSP PSP too.
When we made the difficult decision to for over 19000 team members last fall, we prepare for that reality in a way that was cooperative and collaborative with our Union partners.
Our hope is to expand on what we've accomplished in the past year, knowing that together, we can be the best in the industry and advocating and caring for our team.
For our customers, we're doubling down on operational excellence.
Once we are back at full speed, we're positioned to run the best airline in American Airlines has ever run in terms of operating reliability.
We've reset our network to focus even more on our strongest and best performing hubs and migrated to a much simpler more modern fleet.
We've talked before about a fishing growth in Dallas Fort worth Charlotte and.
And that work is not done.
We continue to modernize our current facilities in Washington, Reagan and improve the connectivity of Chicago, O'hare Phoenix, Philadelphia and Miami.
And we're building on much stronger network than we had before COVID-19.
Additionally, the inherent strength of our hubs in 2020, we established new innovative partnerships with Alaska Jetblue Donald.
Make a stronger on the west coast and the northeast.
We're also on a lot on over the passenger to make American on much more efficacy and airlines.
We had a truly unique opportunity to shut down the largest airline in the world and rebuild around our strength there.
It's enabled us to bring forward on an accelerated a number of efficiencies in 2020.
It was originally planned for the longer term, we are passionately pursuing those efficiencies as we recover for 'twenty 'twenty one.
Derek will elaborate on this in his remarks, but two of the best examples are the permanent retirement of more than 150 aircrafts and five different aircraft types.
And a 30% reduction of our management stuff.
We believe the efficiencies rebuilding the business will drive more than $1 $3 billion of permanent non volume related non people related savings in 2021 and of course being on.
So in summary.
Could not be more proud of the work the American College team has accomplished over the past year were very well positioned and feel great about where American is gonna be as demand returns with that I'll turn it over to Robert.
Thanks, Doug and good morning, everyone I'd like to also thank the entire team for their tremendous efforts in navigating an exceptionally challenging year.
Putting our team members and customers was Paramount in 2020, and it continues to be a priority as we move into 'twenty and 'twenty one.
We continue to expand our pre flight COVID-19 testing to make travel easier, including things like testing for certain international destinations and at home testing for travel for all U S cities requiring negative tests.
In the fourth quarter, we began the rollout on the digital health passport verify so customers can easily confirmed testing and COVID-19 travel requirement and streamlined airport check on.
This tool is now available for travel to many international locations and for travel in the United States.
Starting today customers also will have the ability to use clarify.
For travel to the U S to the UK and Canada, and we will continue expanding our use of Derek why this year to open up new <unk> to open up international travel in key markets.
With cleanliness and safety top of mind last month, we were pleased to achieve star certification from the global Bio risk Advisory Council for our entire fleet of aircraft.
For our Admirals club lounges. This is a testament to the effective cleaning disinfection and infectious disease protocols, we put in place over the past year.
As customers returned on Sky, we've taken a number of steps to give them flexibility and confidence when they book with American we've eliminated change fees on both domestic and international itinerary and fees for my mileage reinstatement on cancelled what bookings domestics same day trial on standby standby travel and reservations booked.
IPhone.
We also made it easier for top tier customers to earn advantage elite steps Pas mileage exploration through June 32021 extended 2020 status into 2022 for all members.
Each of these efforts is predicated on our philosophy and American Airlines should be the easiest airlines to do business with and we will continue delivering on that commitment more people return to flying.
On fourth quarter revenues are for core revenue was down considerably versus 2019, 64% year over year.
But we saw improvements compared to the third quarter when revenue was down 73% year over year.
The momentum we saw heading into the fourth quarter was tempered by the surge in COVID-19 cases and had the increased travel restrictions in many parts of the country.
As we have done throughout the pandemic, we responded by making close and adjustments to our schedule, while maximizing the connectivity of our network.
It is a testament to our team that are for quarter passenger unit revenues were by far the best in the industry.
We will continue to be flexible and match, our future capacity with observe booking trends, while playing to the strength of our hubs in the parts of the country, where travel demand is greatest.
On a year over two year basis, we currently expect our first quarter system capacity capacity to be down 45%.
The recent CDC order to require a negative COVID-19 test for entry into the U S has had an impact on our international bookings.
So many countries on hospitality providers are planning to make testing available to travelers the timing and scale on these efforts remained remain unclear.
Given this continued demand volatility, we will remain as flexible as possible and match capacity to demand.
Our ongoing engagement with leisure operators will pay dividends as we head towards a recovery I want to acknowledge our sales team on entire customer organization for their work. This team was recently named Airlines partner of the year by the American Society of travel devices and the best overall airlines for students in use by student universe, which are both important important.
Accolades during such a challenging year.
Current remains a bright spot for our business for cargo revenue in the fourth quarter was up 32% year over year, despite client significantly reduced schedule.
For 2020 American operated more than 5200 cargo only flights transporting 167 million pounds of critical goods and supplies around the world during the pandemic.
Cargo will continue to be an area of focus in 2021.
We remain optimistic about the recovery because other changes that we've made to our network, we will offer customers the largest and most compelling global Airlines network. Thanks to the actions taken in 2020.
We will have net of the full run rate benefit of our advocates of Dallas Fort worth and Charlotte are best performing hubs and we will.
Have a fantastic new facility in Reagan Nashville that will enable us to up gauge the heart by.
By the third quarter 2021, all of our DCA flights will have a first class product, but we will eliminate the 50 seat regional jet operations there.
Our fleet simplification continued up gauging and improved connectivity will also scale the cost of our other connecting hubs.
Proved net revenue generating capabilities as well.
Our new partnerships with Alaska Jetblue will also create the best and largest network for our customers on the west coast and in the northeast.
Customers will have access to a seamless network that allows us to focus our assets on what we do best and New York, We will remove the 50 seat regional jet update our service and offer a much more competitive network for customers.
As a result, we will launch new long haul international flights from New York. This summer, we start service to Tel Aviv in Athens.
Similarly, we are working with Alaska on the West Coast and this year when demand returns, we'll begin service from Seattle to London.
I and Bangalore.
We have also announced a new integrated frequent flyer offering and have signed new corporate contracts. This partnership is already creating value for customers drive to west coast, including our hub in Los Angeles.
Lastly, while we anticipate international demand will be slower to recover we will use our strength in Latin America, and our partnerships to create a leading international network of Latin American network as long debt uniquely value for our customers and its performance during the pandemic has been a standout.
Despite near term demand volatility, we expect expect Latin American to recover sooner than the rest of our international network and we will continue to offer customers the largest and most comprehensive network in the region.
We have rationalized many parts of our transatlantic and transpacific networks during the pandemic and integrating more deeply with our partners as an example for our partnership with Qatar Airways and been able to leverage do hot as a global connecting hub, which has opened up many new markets for our customers.
As demand recovers, we anticipate leveraging these partnerships to stock price and increased global and an increased global connectivity even more.
We believe the structural changes we made in 2020 will enable us to produce industry, leading leading revenues on lower expenses through a focused customer proposition broader network and a smaller fleet.
We will continue to adapt our business to customers' needs and we will keep working hard to make sure that they have peace of mind, when they travel and with that I'll turn it over to Derek.
Thanks, Robert and good morning, everyone before I begin my remarks, I would also like to thank our entire team for their tenacity and resilience throughout the pandemic. While 2020 was a certainly a financial difficult year for the airlines for collaboration teamwork and cheered grid our team demonstrated was impressive.
This morning, we reported a fourth quarter GAAP net loss of $2 8 billion or $3 81 per share excluding $32 million of net special non operating items, we reported a net loss of 2.21 billion or $3 80, <unk> 86 per share for the full year.
<unk> 20, we reported a GAAP net loss of $8 9 billion and excluding net special items, we reported a net loss of $9 5 billion.
Robert talked about what we're seeing with the revenues. So I'll focus my remarks on the cost side of the P&L through aggressive actions, we have reduced our fourth quarter total operating expense, including net special items by 37% versus 2019, we remained focused on aligning our cost with capacity while preserving them.
Maximum amount of flexibility to respond to customer demand.
We have accelerated several of our long term efficiency plans and as Doug mentioned, we are on track to permanently remove at least $1 3 billion from our cost structure in 2021 and beyond.
At the end of the fourth quarter, we had approximately $14 3 billion of total available liquidity.
Costs were flat from the third quarter for the fourth and we continue to see a positive trend in our daily cash burn rate, which improved from approximately 44 million per day in the third quarter to approximately $30 million per day in the fourth for the reduction was due to revenue improvements on higher capacity as a reminder on.
Our definition of cash burn includes 8 million per day of regular debt principal and cash severance payments.
During the quarter, our treasury team did a phenomenal job of continuing to strengthen our liquidity through a series of capital market transactions. We raised approximately $1 5 billion of incremental cash through to equity transactions to strengthen our balance sheet composition and.
And we still have $118 million left on our previously announced at the market equity authorization I would like to take this opportunity to specifically thank our recently retired treasurer Tom Weird.
It has been an invaluable member of our team for more than 20 years. His expertise will be missed but I am confident our new treasurer Mega Montana and her and her team will pick up right, where Tom left off.
During the quarter, we took delivery of 10 Max seven.
737, Max aircrafts, and we expect to take another seven this quarter. These aircraft were built while the Max was grounded and we're efficiently financed through sale leaseback transactions also as a reminder, we reached an agreement with Boeing to secure deferral right on eight of our 2021, Max deliveries and all 10 of our Max delivery.
Reason 'twenty 'twenty two we have deferred five of these aircraft to date and as I mentioned last quarter to avoid exercising additional deferral rights, we would need to see substantial improvement in the demand environment.
As Doug discussed in his opening remarks, as we look ahead to a recovery in 2021, we are passionately pursuing the initiatives we have put in place to make the airlines more efficient when we are back to a normalized demand and capacity environment.
Like all airlines are plant or planning begins with our fleet as.
As we've mentioned on previous earnings calls, we have worked hard to rebuild their fleet into one that is simpler and much more efficient to operate while offering our customers, a consistent and improved product and experience as.
As part of that process, we have retired more than 150 older non core aircrafts, including five total fleet types lowering our average fleet age to 11 two years, the lowest of the U S net network carriers.
Not surprisingly the aircraft that we exited where the lease cost efficient aircrafts on our fleet with only four mainline aircraft types remaining we will see improved aircraft utilization and operational efficiencies in the back half of 2021 for the increase in gauge reduction in inactive aircrafts, including spares.
Ours and maintenance allocations.
Additionally, we have further accelerated our seat harmonization project and now expect the entire project to be complete by the end of 2021.
When this work is done we will have a more consistent product with more premium seats larger overhead bins in in seat power.
These projects will provide significant opportunities for not only improved revenue production, but also lower our unit costs now and well into the future.
As a result, when demand conditions improve we could eventually reach 2019 levels of capacity for the approximately 10% fewer aircraft.
We will also have a more efficient workforce on the other side of the pandemic, we reduced our management side by a third resulting in an estimated $500 on a permanent cost reductions for reference that would drive more than entire pretax margin point on our total revenue base for 2019.
Beyond that we have implemented 700 billion in additional labor efficiencies that have been incorporated into our plans going forward. These include but not limited to optimize staffing plans.
And the utilization of technology to be more efficient across our operations for many of our work groups. These initiatives will allow us to achieve the best productivity levels that we have seen in years.
Many of these projects would have come to fruition over time, but due to the extraordinary circumstances in 2020, we took the opportunity to accelerate and implement these efficiencies as part of our future Foundation.
As we looked at the first quarter there continues to be a tremendous amount of uncertainty with bookings stubbornly high COVID-19 cases, and more stringent travel restrictions continue to constrained demand in.
And as a result, we expect the first quarter demand environment to be very much like the for it.
As Robert noted, we expect capacity to be down 45%.
We also expect total revenue to be down approximately 60% to 65% versus the first quarter of 2019 similar to our fourth quarter results.
When this flat revenue performance combined with known cost pressures from higher fuel restoring pay to our furloughed workers and volume driven expenses, we expect our first quarter pre tax earnings excluding special items to be lower than the fourth quarter.
We presently expect to end the quarter with approximately $15 billion in total available liquidity. This results in an average of first quarter average daily cash burn rate of approximately 30 million per day flat with the fourth quarter.
The first quarter also includes approximately 9 million per day of debt principal in cash severance payments, which includes a $360 million WPC amortization <unk>.
<unk> the maturity of our 2011 dash one W. P C, which unencumbered 30 aircrafts on.
Also included on a daily cash burn for the quarter is at $240 million contribution to our pension and $225 million on non aircraft Capex.
In terms of our balance sheet, we feel good about the flexibility and efficiency, we have approximately 40% of our outstanding debt is pre payable without penalty and we still do not have any large non aircraft debt maturities until our $750 million unsecured bond matures in June 2022, after all the Covid related.
<unk> financings, we completed in 2020, our average cost of debt is just over 4%.
Yeah.
For guidance for the full year of 2021, our debt payments will be $2 9 billion and our pension payment is $695 million for.
Full year, Capex will be $900 million of non aircraft capex and due to a negotiated settlement with Boeing discussed earlier and attractive aircraft financing, our net aircraft capex, including PD PS will be an inflow of $1 2 billion.
As we have previously stated when demand recovers, we expect to use all excess cash to further delever our balance sheet.
Earlier. This month, we received the first installment of approximately $3 1 billion of P. S. P. Two funds from the Treasury Department and negotiated an extension on the final draw date on the cares Act loan facility from March 26 through May 28, 2021. This extension gives us more time to decide our liquidity needs.
For the year based on the pace for the recovery as well as to evaluate alternatives to drawing the cares act or.
Our industry still has a long path to.
Two recovery ahead, but the actions we have taken an American to conserve cash bolster liquidity and drive permanent efficiencies across the business give us confidence that we are well positioned for the year ahead and the long term.
And with that I'll open it up to questions from the analysts.
Yeah.
Right.
As a reminder, ladies and gentlemen to ask a question you will need to press star one on your telephone.
And so withdraw your question okay.
Okay.
In the interest of time, please limit yourself to one question one follow up please.
Please stand by.
Hey, Ross.
Okay.
And our first question will come from the line of David Vernon from Bernstein, you may begin.
Hey, good morning, guys I'm wondering if you could help us frame what the cost actions you guys have taken and the efficiencies that you guys can pull for through this crisis.
How that how we should be thinking about EBITDA margins.
You know perspective from my 23 years, maybe 24 level.
You think about the $1 3 billion of non operating cost take out plus the efficiencies of the fleet. If we get the revenue levels that we saw on 2019, where should we be thinking the EBITDA margins will shake out at that point.
Hey, David It's Doug.
Really hard of course to protect what 'twenty 'twenty three margins are going to pay for it without knowing for American.
I think for breast cancer.
On one 3 billion.
He describes.
Right on sustainable.
No.
What what other ways.
If we if we werent starting 2019 right now.
With this fleet with this line of an organization mismanagement.
Our management team our earnings in 2019, it would've been $1 $3 billion that Doug.
Taken care of all that and other things that happened to be bad debt.
We've got a contract on with our.
So, but you know.
For those adjustments, but it's real.
Hum.
The fundamental difference on the island right now so you can use that to make your own 2023 protections.
Yeah, I know I realize it's difficult and nobody knows what the mandates I guess.
Our conversations with investors it feels like people are framing.
Your your earnings power off of for 2019 base when it sounds like with the fleet changes, you're making on with the cost reduction actions taken net that's that's too low on the starting point and I guess I'm just trying to.
Understand if that is the right way to think about it or if.
If you think that the only for the businesses is gonna be materially higher or were higher than it was again, assuming the revenue environment stays.
Right I guess, what I'm getting like suddenly yep.
Yes, David.
And I appreciate the question on it.
It's really hard to figure out the margin because it's so dependent on on revenues, but to answer your question to the extent that people are modeling 2023, with whatever revenue assumptions and they want to do.
If you if you weren't would you if you didn't know that American Airlines is gonna be $1.3 billion more efficient relative to your model.
If you're already suspected that until they have an adjustment to bank debt.
That's where we are.
Those are real differences as a way for this company's non structure versus where it was in 2019.
Alright, thank you.
Thanks, Doug.
Our next question on comes from the line of Savi Smith from William.
And James you may begin.
Hey, good morning, everyone, just if I might on on.
The cost side of things.
It provide any color on like 121.
What you're expecting on the Opex side, including you know what might be temporary because of PSD too and just a follow up on on Doug Your comment on the restaurants to David I think you're basically saying the.
2019 at 2019 capacity, you should see $1 3 billion lesson kind of non non feel opex out of the system is that is that fair way to look at it.
Yes.
Yeah, and savvy to the answer I mean, the one number that we do know is the number added back to salaries is about $300 million.
Which is the amount of money.
That we will have higher salaries due to P. S P two coming back.
On the other as volume I think fuel price is definitely up.
Fuel price and we and we gave you a 45% capacity. So I think if you cant calculate where the price of fuel is now in that capacity increase that fuel should be up right around $300 million, where the curve is today.
And then we have a little bit higher regional expenses, because we're growing the regional a little bit by about $100 million. So those are the key for three key things.
The rest is just depending on volume of growth debt, we have over the fourth quarter.
But that's helpful. All right. Thank you.
Thanks Ali.
Thank you.
Our next question on personal line of Mike Lindenberg from Deutsche Bank.
You may begin.
Yeah, Hey on Q here, I guess, Robert and Doug Robert you sort of alluded to the fact that the new testing requirements that went into effect I guess earlier. This week. It was obviously, having some impact on.
Bookings two from Latin America, Caribbean et cetera.
What's your thoughts on I know that the administration. This week floated the possibility of domestic testing and I just logistically I just I can't get my arms around that and I'm not even sure. If the airports would be you know would be able to facilitate it maybe it's an at home type product and it sounds like maybe you are gearing up for that given what youre doing sort of behind that.
James can you just talk about that and why.
Whether or not that would even be feasible.
Hey, Mike It's Doug.
Yeah.
We certainly haven't been.
And for them, but that's sort of English evidence.
We what we know is what Robert said about the international testing, we're getting that to work as Robert said, it's had an impact on demand certainly on short haul international flying.
We're supportive of that on.
Anyway.
That's domestic testing as reasons you stated.
It seems.
Right.
Something that would both be difficult and that.
I would have is testing.
Americans on airplanes that we all know are safe.
To be on it so we'll obviously work with the administration on what basis.
Expense to our best to make.
Make sure in the World doing everything we can to make sure other people.
Our safe and also that we get through this pandemic as quickly as possible for us all of our best interests, but also let them know what kind of impact that would have on on travel, but again to be the bigger point is we haven't.
Or what do you say had been floated don't get reported to us.
And so we haven't heard anything directly from <unk>.
Regulators or others about that possibility okay, great very good and then just a quick wanted to Derek you gave us. The gross you gave us the pension contribution for the year. I think you said 695 million how does that compare to the what you anticipate expensing on the P&L. Thanks, Thanks for taking my questions.
So the expensing on the P&L is actually a credit.
I think it's.
Let me get you back on that number make sure we've got it right not a problem. Thanks, everyone. Thank.
Thank you Monica.
Yeah.
Our next question comes from the line of Catherine O'brien from Goldman Sachs You may begin.
Hey, good morning, everyone. Thanks for the time Oh My first one is on on.
1.3 on the cost side I.
I guess could you just walk us through what some of the larger buckets are there. It sounds like you know we have a case.
And management team our thesis on men's and costs as you said a percentage of that I know you gave the 500 million for.
On the management headcount reduction and then can you talk a little.
A bit in your prepared remarks.
Think about.
What proportion of that event.
We're pulling forward.
He laid out versus maintenance.
Hopefully from some new opportunities that came from you know turning over additional films without Covid.
Yeah, I would say I mean, the two big buckets as I talked about or the 500 and management and then the 700 and other labor and that goes through all of group. So you know it goes I'd say.
You get the summary, it through every group pilots flight attendants maintenance fleet service. So so as we as we looked at every group.
We look and see how can we be as efficient as we can in each one of these.
As we brought some people back so there is no that the biggest item definitely as management.
On the $500 million on the 700 goes and other things.
We have a bunch of other items that are in that.
Facilities.
Consolidations fuel efficiencies benefits a lot of other items that we would have gone through to make sure that we're as efficient as possible. We do have other savings that are out there that due to volume will be down, but we'll have to see if those are permanent overtime and whether they come back so on.
I would say.
We did take advantage of debt to do some of this earlier all of it was on our plans over the next probably three years.
But we brought all of that forward and you know as we went through the process of unfortunately, having to furlough people.
And as we bring people back how do we how do we be as efficient as possible and that's what we've done.
And on a dynamic manning at the airports single agent boarding at airports all of that stuff.
On accelerated through this process and will be put in place as we as we grow back.
Got it understood and actually maybe one more for you Derek.
Can you walk us through that.
For the calculus on determining how much cash do you want to get on your balance sheet for the coming months just given the uncertainty you know is there a new minimum.
The total demand gets back to a certain point.
Just kind of factor in your expectations on cash burn to help decide on on potential incremental reserves or is it really just more opportunistic either you definitely need to pay down debt in the future or keeping a pulse on the market opportunities for your most expensive debt.
Yeah.
Yeah, I think yeah, I think I mean, we don't we don't have any.
<unk> requirements other than on 750 in 2022, and then we do have some payments some term loans and stuff that come out from 2023, So right now the <unk>.
Got it ourselves at the end of this quarter, we will be at $15 billion.
<unk> amount above the $7 billion, we had in the past. So I think the liquidity is there, but we have to keep our pulse on it we have to keep watching it.
Where the recovery is but.
But we are gonna be opportunistic our biggest.
We talked about the government loan, which we have $75 billion.
Hence the frequent.
Frequent flyer program for that government loan, which we would have to pull by May 28.
The determination of what do we do there is one of our one of the biggest things we're gonna do on the next few months, but we're happy with them liquidity level, where we're at we were on a really strong position. We don't have a lot of capex coming forward in the next two years at all.
As I talked about our actual net capex is positive this year, which will bring in cash flow for us. So.
Our biggest our biggest thing to look at right now.
The government loan how do we refinance debt.
Actually we haven't pulled it yet so how do we what do we do for using that collateral and how much liquidity do we raise in that transaction, but we're really comfortable where were at and.
And we don't have a lot of commitments going forward from an aircraft standpoint, or a capex standpoint or debt standpoint in the next two years.
Understood. Thanks.
Thank you. Our next question will come from the line of Hunter Keay for them.
Wolfe Research you may begin.
Hey, good morning, everybody.
Hey, a couple for you Derek probably what's the latest on the 77 delivery.
Schedule for this year and just can you just give us a rundown on what you're planning for aircraft deliveries this year and next and how many of them you already have financing.
For yeah, Yeah. So we have right now we haven't changed the delivery schedule on 788, yet we have 19 deliveries coming this year all fully financed.
And as of right now they are coming but.
We are talking with our partners on on those aircraft.
The Max we have eight more coming seven will come this quarter, all fully financed and we had 16 deals coming on.
All of those fully finance or our actual net aircraft capex. When we just talk about Capex. It's a it's actually a positive so those aircrafts coming in will be positive cash flow.
Next year, we have 26.
Airbus a three for 320 ones coming in.
No financing, we have backstop financing I know, there's been no permanent financing yet so we're working on 2022.
We won't take any aircraft that don't have financing.
Going forward. So we're fully finance on all 2021 with with really good debt financing and we still have on looking at 2022 right now.
And we will look as we look at the Airbus planes next year and the 708.
To look at.
Those aircrafts.
As we talked for manufacturers.
That's super helpful. Thanks, Derek and then just.
Two two sort of quick cleanup ones.
Triste expense.
Can you help me out with that this year index would be great. Even 'twenty three if you want to take a stab at it and then.
What is your blackout period end.
Uh huh.
I'll get you the number two blackout period ends.
Today or tomorrow okay.
And I will get back to you on net interest expense numbers okay.
Okay, Great all right.
Thank you. Our next question will come from the line of Dan Mckenzie from Seaport Global.
Net.
Oh, Hey, Thanks, Good morning, guys question on corporate demand.
The broad view is that it's permanently impaired and I'm. Just wondering if you can elaborate on the latest conversations with your corporate travel managers, what that path to recovery might look like.
I'm pretty sure there's no airlines planning for 50% permanent decline in the spin.
And I'm thinking Americans got some share shift here, but I just wonder if you could just help us connect the dots on that on this part of the recovery story.
Yeah, Hey, Dan <unk> I'll start into that.
The reality is as corporate travel demand.
Down at 5% to 10% on what is historical levels were and though.
We are very optimistic that on return as vaccines are distributed on the timing the speed the rate of that is unclear at that.
But also as important as that is the thing that really never forget and I mentioned this a lot on do it again here.
Is the power of the network business right that for US is the primary value. We create is when we create more origin or destination markets for customers that creates more value for them on that result from them, they're paying us more for that product and indeed, what we see right now.
Is that 50% of the revenue that we're drawing from origin and destination markets, where I'm really American Airlines has the best network or in some cases, the only travel option and indeed the yields in those markets are 50% higher than in markets, where our product is the most commoditized and a ton of different carriers can provide the OLED.
So that's a huge degree of leverage.
Business because of course, there is a basically a billing prices that we can move our capacity around.
And so in a world where corporate travel is slow to come back and we should expect that it is.
What we've really tried to do is make the airlines as limber as possible. So that we can go in on create as much connectivity, where there is travel demand and that sort of in some cases that we are taking leisure were taking it in some cases, where we're on origin or destination network is uniquely advantaged versus other airlines and the.
Yields that we see in those telling these are materially higher than that on.
What we can generate even from what business travel is there and really Commoditized zone.
Thanks, Dan, we're staying really close to call for.
Travel managers and their management team to get them all the information they need to feel comfortable to get their traveling back on the road and how you can see that most of their time doing that on building competency travel three mentioned.
The indication we also take three months of <unk> and the other large association to provide great communication to these travel managers a little early to say.
I actually saw some other surveys coming out from J E. T. I think it indicates the back end of 'twenty one start on corporate travel. Thank you.
Oh, yeah. Thanks for the perspective, you know I guess just following up on that I'm wondering if you can elaborate a little bit more on on travel passport initiatives. What countries are you focusing on initially for for adoption and you know I appreciate that it's early.
But is there a read on you know what it's going to take for these you know for countries to get a little more comfortable with is this idea you know maybe COVID-19 metrics are.
They wanted to see.
Luckily with our credit partners, we don't do this alone so lucky with tourism body.
<unk> partners, but you did say Nate and up very COVID-19 spot market price.
And hopefully you have out there I hope on that it provides for all the documentations you're ready to travel.
You've got a cheeky you can go on and actually as an example debt on Tuesday, with Apple on preference coming back from cash to Sydney way, everyone check on it successfully and had been negative check so it'd be nice to facilitate this through communication with our customers and being very proactive without notification.
On the customers directly and working on the ground.
Every station led by I think for.
They've done a great job of making sure that other graphically ready to help our customers.
I see thank you I appreciate it.
Thanks Al.
Our next question will come from the line of Jamie Baker from Jpmorgan may begin.
Hey, good morning, everybody very thorough call most of my questions have been answered, but Derek you disclosed are you able to achieve.
2019 capacity on 10% fewer aircraft would you be able to express the capacity base that would be required to get you back to 2019 ex fuel CASM.
I apologize if I missed that in your prepared remarks.
Capacity base, meaning number of aircrafts.
Okay.
And at the end of 2019 as even the correct base to be using that's just sort of become the.
The industry standard at the moment, how much capacity do you have to operating to get back to.
All we're trying to do is I mean, obviously, we're not back to those levels, yet and we don't know when we're gonna be back for those levels. All we're trying to do is it a quaint to the fact that if we did get back for 2019 levels, we could do it with a significant amount on fewer aircraft.
Because we got we don't have to add a bunch of aircraft to get to those levels.
Our spares are down.
Our maintenance allocations are down the Max's come back which were down in 2019.
We have a significant amount of utilization increase it and gauge increase in our in our fleet. So that we would not have in order for us to get to 2019 levels. The point is that we would not need anywhere near as many aircraft to get to those levels because of those things, we don't know whether that whether that's the right point.
It's a level that we know and that we were at back at that point in time.
Hopefully some some day in the future will be ahead of those levels or would you have a corresponding ex fuel CASM number that would then.
Wait till the 2019 capacity.
No no not ask okay, well, we don't have that right now.
And second you know I came into the call Mark and I also curious on you know what the net proceeds of PSP, we're gonna be a net and I think.
You answered this in response to Sami's question. So is the 300 million in incremental labor. The only thing we'd net out or were there any other additional operating costs.
That's what you would net out okay.
Okay, Alright, thank you very much take care.
Thanks, Jeremy Thanks, Doug.
Our next question will come from the line of.
Helane Becker from Cowen you may begin.
Oh, thanks, very much operator, hi, everybody. Thanks for the time Doug.
You know you've been very close to Washington, and you've done a lot to go.
P S T N play.
There have been any disc.
Gotcha, and then maybe if it's.
It's too early in the new administration about changes.
Going forward once we get post.
Pandemic.
Capital controls or anything else.
That would ensure the industry remain solvent.
On the event or some other places.
No.
I don't think I'm not I'm not.
Certainly having to ask for that so that nothing like that claim.
Okay.
That's very helpful and then Doug.
With that that was my main question and then the other thing is when you look at the fleet with him I think he said eliminating five types in down to where you are now.
And having a loving and a half years, how does that compare from an ESG.
Perspective.
What will your.
What is your carbon goals were to be by.
By 2015, what would be like.
Where would you be on say 2030 or 2035. Thank you.
Yeah I'll try.
It goes do you already have in place.
We require things like this improvement so you're right.
Helpful.
Two.
Younger fleet is hopefully environment.
In terms of.
American I've done.
A lot in that regard already already has the youngest now it gets slightly younger even though even though years go on through this so we're proud of that but that's that's a big part of our of our commitment to get to carbon neutrality is continuing to.
Uh huh.
Modern fleet.
Doug what these retirement.
Okay. That's very helpful. Thank you that's current.
Yeah.
Our next question comes from line of Justin.
Nardi from Stifel you may begin.
Thanks, Good morning.
Maybe a question for Doug or Derek following up on on hires do you feel comfortable from a legal standpoint, selling stock into this market and how quickly can you increase your I guess your authorization.
Yeah, Joe it's kind of all the stuff that's coming on.
What again.
Comments, we still have $118 million left.
Left on our previously announced at the market equity authorization.
Got it.
If we choose to do anything more than that.
Day to inform our investors, but right now that's what we have to tell you.
It was $118 million on the.
ATM equity authorization.
Whether or not we choose to do that or.
Well doing it we can't talk about.
Okay, and then can you just quantify maybe what what gauge it looks like on the other side of this relative to pre Covid and then if you could just walk through the for geographic entities and speak to maybe the structural impact to capacity based on the fleet actions.
If that makes sense. Thank you.
Yeah.
We indeed, we will be getting a material amount of uptake as you've probably figure from from derek's comments by the time, we get to December we have the ability to produce 2019 level of capacity on about 110 fewer airplanes Doug.
And that'll be a gauge increase for about 4%.
Yeah.
Got it thank you.
Yeah.