Q1 2021 American Airlines Group Inc Earnings Call

[music].

Good morning, and welcome to the American Airlines Group first quarter 2021 earnings Conference call.

Today's call is being recorded at this time all lines are in a listen only mode. Following the presentation. We will conduct a question and answer session to ask a question. During the session you will need to press star one on your telephone if you require and they further assistance. Please press star zero and.

And I would now like to turn the conference over to your moderator managing director of Investor Relations, Mr. Dan Cravens.

Thank you Crystal and good morning, everyone and welcome to the American Airlines Group first quarter 2021 earnings conference call joining us on the call. This morning, Doug.

And our chairman and CEO, Robert Isom, President and Derek Kerr Chief Financial Officer.

And also on the call for a question and answer session are several of our senior execs and Q&A, including Maya Leibman Steve.

And Steve Johnson, <unk>, Alison Taylor and Devin Matt.

Like we normally do Doug will start the call with an overview of our quarter and the actions we've taken during this pandemic and Robert will then follow with some remarks about our commercial and other strategic initiatives and.

After Robert remarks, Derek will 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.

Again, and as many questions as possible. Please limit yourself to one question and a follow up before we begin we must state that today's call does contain forward looking statements, including statements concerning future revenues and cost forecast capacity fleet plans and liquidity. These statements represent our predictions and expectations as to future events, but numerous risk.

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 issued this morning, and our form 10-Q for the quarter ended March 31 2021.

In addition, we will be discussing certain non-GAAP financial measures, which exclude the impact of unusual items.

Reconciliation of those numbers to the GAAP financials.

Included in the earnings release and that can be found on the Investor Relations section of our website.

A webcast of this call will also be archived on the website and 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 and subsequently so thanks again for joining us at this point I'd like to turn the call over to our chairman and CEO Doug Parker.

Thanks, Dan and good morning, everybody.

This morning, we reported a first quarter pre tax loss, excluding net special items of $3 $5 billion.

The loss was driven of course by the extreme drop in demand for air travel due to the global.

Our revenues and the quarter were down 62% the same period and 2019.

And the mix of this difficult environment. The American Airlines team produced remarkable results.

And more customers and any other U S airline and we did so reliably and safely.

It is the highest passenger unit revenue or any global U S carrier or having more available seats per sale.

We completed the largest financing and airline history at $10 billion transaction secured by the most valuable loyalty program and the world advantage frequent Flyer program.

And excluding that principle, we were cash positive and the month of March our first such month since the beginning of the pandemic.

These results and more were made possible by our incredible team.

Without their resilience creativity and compassion, we'd be facing a very different future.

Thanks to their hard work and determination and we're starting to see light at the end of this very long time and is very dark tunnel and.

And we're on a path and is well positioned as demand for air travel Richard.

And that path forward as guided by what we're calling our green flag.

And for our industry. This pandemic has been much like a yellow flag during and order rates, where everyone's slows down it takes a pit stop and go.

And their cars ready for when the range resumed at full speed.

And this period to improve and prepared so that when the green flag does drop which appears to be on the horizon American will be ready.

That plan is centered on four initiatives I'll take a minute to walk through those and a high level and then Robert and Derek will expand and what we've achieved to date and what we see on the horizon.

First we're doubling down and our commitment to operational excellence.

And we had a great operation and the first quarter carrying more than 24 million passengers on nearly 340000 planes.

During our busiest day of the quarter, we had more than 430000 customers flying on our aircraft.

The highest we've had since March 2020.

Our goal is to run the most reliable operation and American Airlines and American Airlines history, once everyone's back to a full schedule.

And the steps, we put in place, including more reliable and profitable scheduling.

New tools and technology to assist our team and customers during irregular operations and our clinic commitment.

And will ensure we achieve that goal.

Second we're taking this opportunity to reconnect with our customers and Robert will talk more about all we're doing it.

And as customers return to the skies, and we'll see and even better American Airlines.

And with the broadest and best Global Network has now been enhanced by new partnerships.

And one with innovative technologies and procedures to make travel more convenient per customers and ensures they feel safe and comfortable as they return to flight.

Third we are planning to build and the positive momentum we've established.

Passenger is test and her team and ways, we could have imagined and it's also brought us much closer.

And we work hand in hand, with our union leaders to ensure that team members and cared for and even as we experienced by far the most difficult financial circumstances, and our industry's history.

And we're committed to building and that progress and continue to work together to ensure our team feels cared for every day.

On that note, we are very happy to tell and 13000 team members and they could tear up their warn notices following the passage of the COVID-19 relief package that included and extension of the payroll support program.

We will continue to welcome team members back to the operation as we increase our schedule and.

In fact earlier this earlier this week, we announced we will begin hiring pilots later this year to prepare for 2022 and beyond.

Finally, and importantly, we are committed to passionately driving efficiencies across the organization Derek will elaborate on this but we're really proud of the aggressive and innovative ways. The team has worked to position us to be more efficient on the other side of this pandemic.

Efficiencies, we built the business over the past year will drive more than $1 3 billion.

Permanent non volume related savings in 2021 and beyond.

So before I turn it over to Robert I'll close with this we are a long way from where we need to be this crisis. It is far from over and we have to continue financing to give our customers shareholders and team the company they deserve.

There is no doubt the pace of the recovery is accelerating and thanks to our team and a thoughtful and proactive plan as the Green flag drops and American Airlines is ready.

Thanks, Doug and good morning, everyone. I also want to thank our entire team for everything they've done for our airlines throughout the pandemic. This phenomenal group continues to rise to the occasion and deliver for our customers every day and we're incredibly grateful.

Our first quarter revenue of $4 billion.

It was effectively flat and then the sequential basis versus the fourth quarter of 2020.

However, our demand and revenue trends trends accelerated significantly as the quarter progressed and January our total revenue was 34% of what it was in 2019 and by March It was 46% and 2019.

This trend was driven by strong leisure demand and the U S Mexico, the Caribbean and Latin America.

This momentum has continued as our seven day Rolling average of system Daily net bookings has reached 2019 levels This week and.

And this is in spite of our business and long haul international demand remaining weak.

With net bookings of roughly 20%.

And their level of their 2019 levels.

That said there are early signs of recovery from business small business demand, which was roughly 17% of our of our system revenue has been improving steadily and vaccination rates have increased and as markets reopen.

And increasing number of our largest corporate accounts are coming back to the office and indicating that there'll be traveling and the third quarter and confirming and person board meetings conferences and events this year.

Importantly, we're focused on turning improved bookings and load factors and leading unit revenue performance we.

We have continued to shape, our network and our customer experience as nimbly and thoughtfully as possible and we're seeing the results.

The first quarter of 2021 was the third consecutive quarter, and which our passenger unit revenue materially outperformed each of our network competitors.

Thanks, Turkey, our likelihood to recommend scores have improved for the last three quarters as well.

Based on our results in the first quarter, we're on track to have our best LTR year since the merger.

We have used the pandemic to reset our airlines that are consistently outperformance from our customers our team and investors.

The first sign of this is and our summer schedule and second quarter capacity plant.

Expect to fly approximately 80% of our 2019 system seat capacity and the second quarter and this increases to 90% this summer.

We will continue to devote a largest share of our assets to markets, where we can create unique value for our customers and therefore generate passenger unit revenue premium passenger unit revenue premium relative to our competition.

When compared to 2019, we expect to find 90% of our domestic seat capacity during the summer peak.

And 100% and DFW and Charlotte.

Our domestic network will constitute 85% of our system seat capacity and the summer peak.

We expect the operating 80% of our international seat capacity compared to 2019 and our peak.

Our organic network and the Americas creates more unique choices for customers and more profitability for the airlines.

As such and our summer peak, our Latin American network is expected to be the same size as it was in 2019.

Our short and long haul Latin American network will constitute approximately 12% of our system seat capacity and the summer peak.

By contrast, our operation has been much more challenged and the Atlantic and Pacific as those markets have yet to fully reopen.

And as a result, and our peak schedule she capacity and those parts of our network will only be 40% of what it was during the same period and 2019.

Our Atlantic and Pacific Networks will constitute just 3% of our system sheet capacity and the summer peak.

And we expect and bring these marks back slowly and only when demand conditions warrant. It is important to note. There is significant pent up demand for international travel and we're seeing it most and markets like Tel Aviv, and Athens, where market reopening our leading to steady increases in demand.

As board and continue to open throughout the world will be ready and we'll be ready because of the changes that we made to our fleet and network and the strength of our partnerships around the world over.

Overall.

We will deliver any increasing capacity and a more efficient and reliable fashion that we did in 2019.

We've accelerated the retirement over of over 150 older aircraft and our fleet, leaving American with by far the youngest fleet of our global U S. Competitors, we entered it and we intend to have all of our remaining aircraft active this summer and no longer sitting idle and tarmacs around the country a day.

Eric will share and a few minute will soon complete the harmonization of our Boeing 737, and Airbus <unk> hundred 21 fleet driving superior cost efficient efficiency, a simple operation and a better customer experience.

We have been unable to grow these markets organically due to infrastructure constraints. However, through our recently announced partnerships with Alaska and Jetblue. We can now offer customers the largest network and these two regions and bring a level of competition and choice that has long been lacking.

Of course to make these partnerships work and the experience must be seamless for our customers as.

And as we like to think and elite customer anywhere should be treated and an elite customer everywhere and we have several initiatives underway to make that a reality, including our announcement just yesterday to deliberate on the next phase of our partnership with Jetblue.

As we look towards the recovery reconnecting with our customers will be centered on being the easiest airlines and do business with our goal has always been to remove as many friction points as possible and and our first quarter. We took a number of steps to help simplify the travel experience for customers as they return to flight.

We've enhanced our travel planning tool to help customers make informed decisions and where they travel and what to expect when they get there and a new pre flight COVID-19 testing options expanded acceptance of fair apply and mobile health wallet with simplified and verified travel requirements.

Verify it and now accepted for all of our international flights and the U S to the U S and on price from the U S to 11 countries, our partners Air Lingus, British Airways, Iberia, and Japan Airlines now also accepted verify.

Building, a curb to gain content contactless strength will be and ongoing effort as we re imagine safe and convenient travel and the post Covid era.

And do you have got we've expanded our touch technology.

To allow customers to use biometric scanners to check their bags prior to departure and we'll utilize that same technology to allow customers to gain entrance to and Admirals Club lounge later this year.

And today and as we celebrate our day.

And our highlights and important strides we've made to run a more sustainable airlines.

The most important thing any airlines can do is retire older aircrafts and replace them with new and more.

More fuel efficient aircraft.

And we've done that and we're at American with $24 billion of investment over the past seven years and the retirement of more than 650 older aircrafts.

But we need to do more.

To reach our goal of net zero carbon emissions by 2050 and.

And we have our eye on sustainable.

Double aviation fuel sack is the most promising advancement available to us and in the near to midterm.

We've not taken delivery of staff for almost a year and the first and in the first quarter, we reached innovative offsetting agreements with two of our customers Deloitte and Kona now.

We appreciate that the by the administration and many and Congress I think.

Haven't engaged with our industry on climate issues and we're encouraged by the fact that we have common goals, especially when it comes to SaaS.

So in summary over the past year, we've created simplified and modernized our fleet rationalized our network made many changes to our business and operations to ensure customers have flexibility and peace of mind when they return to travel.

And we're encouraged by the trends and demand for air travel across all sectors and believe American is well positioned from the recovery and the months and years ahead and with that I'll turn it over to Derek.

Thanks, Robert and good morning, everyone before I begin my remarks, I too want to take the opportunity to thank our team their leadership and hard work truly embodies what American Airlines team members are known for.

This morning, we reported a first quarter GAAP net loss of $1 3 billion or a $1 797 per share. Excluding net special credits, we reported a net loss of $2 7 billion or $4 32 per share.

Robert talked about many of the commercial activities, we're working on and the trends, we're seeing and the demand environment. So I'll focus my remarks on the cost side of our P&L and our balance sheet as we look to the future.

Throughout the entire pandemic, we have remained focused on keeping our capacity aligned with demand while preserving the maximum amount of flexibility to respond as demand returns, we took aggressive actions to reduce our cost structure and we have reduced our first quarter total operating expense, excluding net special items by 26% versus 2020.

On a 39% reduction and total capacity non.

Non fuel operating expenses, excluding net special credits were up 6% sequentially from the fourth quarter as we gradually added back capacity.

We ended the first quarter was $17 3 billion and total available liquidity, including approximately $3 1 billion of PSP to funds. We received from the Treasury Department. During the quarter. We were recently notified that this amount will be increased by approximately $463 million to be received and the second quarter.

In addition, and we expect to receive $3 3 billion and PHP three funds by the end of the second quarter.

We saw positive trends and our daily cash burn rate throughout the quarter. Our average daily cash burn was approximately 27 million per day, which came in better than our guidance of 30 million per day. This happened. Despite the drop off and demand we saw in January and February and a significant increase in fuel prices.

And beginning of the quarter.

As a reminder, our definition of cash burn includes approximately 9 million per day of regular debt principal and cash severance payments.

For the month of March our estimated average daily cash burn rate was approximately 4 million per day, and excluding approximately 8 million per day of regular debt principal and cash severance payments made in March as Doug noted the company's cash burn rate turned positive for the month.

During the quarter, our treasury team did a phenomenal job of continuing to strengthen our liquidity through a series of capital market transactions, notably we completed our 10 billion and financing transaction that was backed by the advantage program at a blended rate of five 6% less than half from what we would've been able to do last summer.

And use those proceeds to repay and full of 550 million secured loan we had with the Treasury Department.

We also had $530 million of aircraft amortization payments, including the maturity of our 2011 to ask one double ATC, which together with mortgage maturities, resulting in 35 mainline aircraft and nine regional aircraft becoming unencumbered.

During the during the quarter. We also repaid in full our $2 8 billion of revolving credit facilities and this was a liquidity neutral transactions that reduced the companys outstanding debt by $2 8 billion importantly, we still retain the flexibility to either draw upon and these revolving commitments again as needed or leave them on drawn until October.

Over 2020 four.

During the quarter, we took delivery of seven Boeing 737, Max aircraft and we expect to take one more delivery later this year as a reminder, these aircrafts.

And we're built while the Max was grounded and we're efficiently financed through leasing transactions.

In addition, we recently exercised our remaining deferral rights on 18, Boeing 737, Max aircraft that were previously scheduled to be delivered in 2021 and 2022. These deliveries are now expected to occur in 2023 and 2024.

Lastly, we reached an agreement with Boeing related to our remaining 787 dash eight deliveries and.

Under the revised terms of the agreement.

We have elected to defer and convert $5 787 Dash eight aircraft two 787 dash nine aircraft. These deliveries are now expected to occur in 2020 three the remaining 14 deliveries of 787 dash eight aircrafts have been rescheduled to occur by the end of the first quarter of 2022 and all of these aircrafts.

And it will retain their existing financings.

In January the company made $241 million and contributions to its pension plans.

And March the new COVID-19 relief Bill included among other things funding relief for single employer pension plans.

These new funding rules reduced the company's remaining required cash contribution for 2020 120, while lowering our projected required contributions over the next five years by over $2 billion.

Under these new provisions for funding purposes. The combined plans are expected to be funded and excess of 90% for plan year 2021.

As Doug and Robert mentioned, we are starting to see signs of what appears to be a strong economic recovery. This fantastic news makes our $1 3 billion of efficiency measures, even more important as we prepare our business from a return to a more normal environment.

On the fleet side, we have talked a lot about our fleet simplification efforts and the elimination of smaller sub fleets, which resulted in the removal of more than 150 older and inefficient aircrafts.

Many of these aircraft retired aircraft and have already been sold and by May We will have completed disposal of all of our 730, 767, aircrafts and Embraer 190, aircrafts generating more than $300 million and proceeds.

Our fleet changes are expected to drive significant operational and cost savings in 2021 and beyond with only four mainline aircraft types remaining we will see improved aircraft utilization and operational efficiencies and the back half of 2021 through the increase engage and reduction and inactive aircrafts.

<unk> spares and maintenance allocations.

Additionally, our fleet harmonization project is picking up steam and we expect to have our entire 737 and fleet completed and the second quarter of this year.

These aircrafts and have 172 seats and come with larger overhead bins and NC power.

We expect to have the <unk> hundred 21 fleet completed by the end of this year.

Aside from a better customer experience. These projects will provide significant opportunities to improve revenue production and lower our unit costs now and well into the future.

So when demand returns to more normalized levels, we'll be able to fly efficiently fly 2019 levels of capacity with approximately 10% fewer aircraft.

In terms of our balance sheet, following our transactions and the first quarter, 32% of our outstanding debt is pre payable without penalty.

And through all the Covid related financings, we have completed to date, our average cost of debt is approximately four five per cent.

As we have said in the past, we will naturally reduce our debt from where we are today by $8 billion to $10 billion over the next five years through regularly scheduled debt amortization.

We know going forward that since we are now starting at a higher debt level on account of a pandemic related debt, we will need to delever, even more and the near term we plan to maintain higher liquidity levels until we are generating sustained positive cash flow.

Once this occurs when combined with our efficiency measures and a lower capex profile, we plan to use any excess cash flow to more strategically delever, our balance sheet by proactively retiring pre payable debt and concurrently increasing our unencumbered assets as per.

Part of our plan, we also anticipate resetting our target minimum liquidity level.

Overall, we expect second quarter total capacity to be down approximately 20% to 25% versus second quarter from 2019 with these capacity and demand assumptions, we expect to see a significant increase and our revenue versus the first quarter with our total revenue to be down approximate.

And the 40% versus the second quarter of 2019.

These inputs and lead to an estimated second quarter pretax margin, excluding net special items of between negative 27 and 30%.

We presently expect to and the second quarter with approximately $19 5 billion and total available liquidity, which includes the additional PSP too and PSP three funds I mentioned earlier.

That would be the highest liquidity position in company history, and our fifth consecutive quarter of increased liquidity. Despite the demand driven operating losses, we have incurred over that period.

Given these projected liquidity levels and the positive cash and demand trends, we are no longer looking to raise liquidity at American for the first time since the pandemic struck.

For the full year 2021, our debt principal payments will be $2 8 billion, excluding the prepayment of our revolving credit facility and the second quarter, we expect to pay down $595 million of aircraft and engine debt and addition to the 250 million PDP facility, we paid off earlier this month.

Our full year, Capex and still expected to remain minimal non aircraft capex will be $900 million and due to a negotiated settlement with Boeing attractive aircraft financing and are already modernized fleet, our net aircraft capex, including PDP will be an inflow of $1 billion.

And we will feel great about how much we have accomplished we recognize that we are still have a long way to go to get our business back to normal our team has done an amazing job of bolstering our liquidity conserving cash and driving efficiencies throughout the organization and we're very well positioned for the future and whats.

That I will open up the line for analyst questions.

Yeah.

Ladies and gentlemen, if you have a question and at this time, Please press star and the number one.

One on your Touchtone telephone.

That question has been answered.

I'll move yourself from the queue. Please press the pound key.

Okay.

Okay.

Your first question comes from the line of Joseph de Nardi with Stifel.

Yeah.

And Doug two questions for you on and on the loyalty program I wanted to ask a question I asked a few years ago at your Investor Day.

And then how valuable these the loyalty program has become and how lucrative and the business of selling miles and it's become do you need to reconsider what American Airlines is are you and airline or are you a marketing company.

And we're in Airlines Joe.

And as always well being.

Managed program was a big part of that which helps us to market the airlines order.

So Doug and.

In 2019, your loyalty program generated roughly the same amount of EBITDA as Marriott did.

My question is did you know that does that surprise you and.

And lastly, why don't you allocate 40 per cent of the time on these calls to the loyalty program since that's how much EBITDA and represents for you all and thank you.

Thanks, Joe.

I don't think it's possible to separate the EBITDA and the advantage program from the EBITDA and the airlines are inextricably linked and I don't know.

You can't have one without the other so.

Anyway.

That's that's that's what I believe so.

And so.

And therefore, we talk about running airlines, what we do every day and again the advantage program.

It does indeed.

And important part of that.

Our because we do have such a good job of running an airline and people want to have miles and our loyalty program and people want to have credit cards.

And that allow them to earn models and extend to earn miles and so they can buy more of our on our airlines and those are all good things and she can have one without the other and I don't.

Think it's right to try and separate one P&L from the other.

Yeah.

Yeah.

Your next question comes from the line of Mike Lindenberg with Deutsche Bank.

Yeah.

Good morning, everybody, I guess, maybe Robert or Doug.

Robert you talked about international lagging you talked about Trans Atlantic, calling up Trans Atlantic and.

And yet we are seeing headlines over the last week or so about the potential opening of at least the U S. U K corridor, maybe as soon and some of the May maybe June can you just give us an update on what youre hearing and and whether or not we're going to see.

And <unk>.

Unfettered access between the U S and U K. Thank you.

So worse.

Mike, We're certainly hopeful and we encourage.

Our government.

And engage with the U K, but look this is a matter of a bilateral matter and it's one that.

And have to be predicated on our confidence and and safety of <unk>.

Travel and so we're encouraged and we're certainly ready.

When the opportunity.

Allows it and we know and.

And I've said that Theres tremendous demand.

Both from a corporate and from a leisure perspective to take advantage, but we're gonna have to make sure that we're coordinated.

With all parties governments and government agencies to make sure that.

We're doing it and in an appropriate manner.

And then thanks Doug.

Robert and then just my second call just Doug Vasu.

Curt Blue American.

And any sort of quick wins and with respect to flow traffic between the two of you and JFK and Boston and then.

You know the story I mean, certainly a lot of criticism and and at.

And at least it seems and the press and and from other entities out there and yet it feels like the story that's not being told is.

And number of new service and I, just think about the pace at which this loss at lunch and then last day or two.

Number of markets that maybe didn't exist before that now or is this like a JFK Kelly JFK Boise and the number of city pairs and you're going from one to two or two to three or three to four for whatever reason that story doesn't seem to be out there because I sort of view that as being you know enhancing competition and not taking away from itself and any sort of update that.

And you can get on.

With respect to that alliance. Thank you.

Yeah, Hey, Mike. Thanks for the question, it's a great question and look.

It will be a start the story about that because you're absolutely right.

And AA and Jetblue together and the fastest growing airlines and the whole northeast corridor.

Just adding new services that <unk>.

Certainly and would've never thought possible, such as JFK daily, but arguably and which jetblue and the possible such as Boston, the Cincinnati and.

And there's a lot of things, but really the first part of your question. It's all been enabled and then it's really the customers are the true voice for this because if they like it they will fly on it and we've seen that so far so March was our first month and which we turned on the Codeshare. We only had about three weeks worth of bookings.

And and at least for Jetblue on Hey that was only about 25% to 30 markets that Jetblue has already become our largest global codeshare partner.

That's a little bit weird because so many of our international partners are flying by the 10% of their schedule, but what we do draw. Some encouragement from is that a codeshare scope is vastly smaller with jetblue and just about any of our major partners and as we look at these things we look at not just the total revenue production on us and how much of that revenue.

And he's really incremental that is coming and higher fares and what we what what and who isn't organically booking are coming and periods, where the flights were light and we're applying that finding that somewhere between 30 and 40 per cent of that is incremental and with similar rates and Alaska and it's that from Pant compares extremely favorably.

Our our historical global Alliance and so that's perhaps as much as anything as an indication of exactly what you said the customers vote and that the customer really.

Likes the new services like the service expansion, that's there and as long as that's the case, it's going to be attractive for us financially and so we'll continue to grow and innovate and try things that would not have been possible without a partnership such as this.

Yeah.

Your next question comes from the line of doing things.

Evercore ISI.

Okay.

Hey, Thanks I appreciate it.

Can you just bridge us from the current international demand commentary of kind of 20% of normal and maybe that was a march comment and 20% of normal.

And then getting to 80% from a capacity perspective and this summer.

Yeah, Hey, this is I feel like and I can help with that from that.

A big part when we quote international we're quoting both our long haul business and our short haul international business up no.

The way, we get to 80% is that we're envisioning a long haul business, which will be cut.

And that peak summer schedule and July 40% of its 2019 side, but a short haul international business, which will be north of that something like <unk>.

20% larger than kind of one and.

And 2019 with our long haul Latin American network being something like 80% from 2019 right. So.

And maybe even some more.

Colorful way to say is that for us long haul and it's gonna be a very small part of our system. This summer our total long haul network Trans Atlantic.

And specific and long and all Latin America will roughly will be about 3% to 5% of the seat capacity and the airlines.

And the peak July schedule. So a lot of what you see is and our international numbers is a and more.

Past and building into the shortfall and network, which for US has proven to be the most resilient part of the whole system ever since the pandemic started.

No matter, what the headlines have been no matter how the market.

And we always tend to find bookings rebounded fastest students and greatest and those markets and do you see that and our RASM results reflect is that the biggest schedule and short haul international and.

Or do you see the greatest comparing to browse and shop there too.

Thanks, and then and then just a follow up for Derek on the on the net aircraft Capex inflow of 1 billion can.

Can you just tell us how much of that is sale leaseback proceeds and how much of that is sort of PDP refunds.

Yes, our net.

Net aircraft Capex is about 145, so direct sale leaseback of aircraft and is about two seven so we have about a 2.72 point checks of aircraft Capex and that's all financed by direct lease and sale leasebacks and then.

And that PDP is at about 850 million.

Sorry, just to just a small point of follow up there can you give us a sense for where aircraft rent might be kind of exiting this year.

Yeah.

Yeah.

Aircraft Radziwill exit and we had about 350 and the first quarter accident around 400 and afford and Corp.

Your next question comes from the line of Helane Becker with Cowen.

And thanks very much operator.

Hi, guys. Thanks for the time.

And I am.

I have two questions. One is you guys said that you flew more passengers than any other airlines and.

And I know your cargo revenue was fairly strong as well.

Looking at your revenue per.

Just your absolute revenue and not your unit revenue and it was lowers and that like Delta and I'm kind of wondering what you think accounts for the difference.

And then my follow up question is related to.

Yeah.

Oh you are you are you talking to the binding and administration.

I'll read opening borders.

And obviously safely reopening borders.

This summer.

And at least some summer international cash.

So I.

And I can just I can try to take a first look I can't I have no idea.

And I don't know.

The detail on Delta number and I can tell you. This that it's not passenger revenue and it's not cargo revenues.

So what is it.

Similar to <unk>.

Binary and final guidance.

So anyway.

We know exactly what it is and theirs.

Okay.

Have you been doing business, we don't have.

Okay.

Via the ministration absolutely.

And as Mike is asking about U S corridor, we're heavily involved and that's given.

Our relationship with them.

Large we are you cannot relationship with B of course.

And we're in regular contact the book.

And what we.

Support is a risk based data driven approach to restoring international travel.

And you know what we want.

We have seen is true.

<unk> departure.

Testing for international rental has been and placement early this year and CDC recently, he's the guidance from domestic travelport accident and persons following a lengthy and tell you that issue. So all of these factors and we're taking into consideration.

And as formal guidance from travel is being developed I think he and I know the administration understands that I know the interest and.

Importance of international travel and restructuring international travel to the economy.

And we all need to go look at this and our risk based way.

And wants to rush or certain.

And no one's pushing that out here, so anyway I think.

I think it's going to happen gradually and we're going to do it and why and it.

<unk> works with our with our government and works with other governments and ensure that.

It's done and the way it works.

No doubt, there's enormous pent up demand for it.

And.

And we see that as some other countries and relaxed their restrictions on things.

Like coordinate and so well keep working on every day.

Everyone is involved and working productively.

Sort of.

Certainly.

And I'll sort of pushback hotter size, we don't want to do this in a way that makes sense.

And L. A and the biggest difference on the revenue side of the refinery.

And so you know and stuff.

Yeah, that's very helpful Alright.

Alright. Thank you guys have a nice day.

Thanks, Mike.

Right.

Your next question comes from the line of Hunter Keay with Wolfe Research.

Hey, Thank you good morning, everybody.

Okay. So so business travel, it's always been obviously, a little bit more cyclical and volatile risky last year, but higher reward.

Leisure travel tends to sort of endure and recover better. So you knew that but as you drive out you know whatever $2 billion and coffee densify. Your aircraft is there a thought maybe that you don't want as much of that corporate share and the other side of this and then maybe obviously I know business travel and important to you I understand that but maybe maybe like an 80 20 leisure and business mix makes more sense.

And for American longer term, given your network footprint and the cost savings and the seat Densification and and all of a factor is just around the periphery does that makes sense.

Oh, no we don't think so hunter.

Again, we think.

And actually we're building a network that will serve business per linear network and.

We're excited about that so as business travel returns.

We're building the airlines to be there for them.

And be able to do and as well or better than anybody else.

Okay.

Thanks, Doug and then Derek can you help me think about the FW beeline and in 'twenty, two 'twenty threes, and we contemplate junior already and the pilots and some of the head count cuts on management, if we assume the capacity as you know ladder and maybe slightly above two.

2019 levels.

From a salary and perspective, yeah like and absolute SW.

<unk> yeah.

Not necessarily unit basis budgets and absolute salaries basis relative to where you were pre COVID-19 with June Genuity and.

And I'll, let others, Yeah I think.

We're going to have a significant amount of retirements as people went out so when we talk about CASM in 2022 from a cost perspective on all of the groups, we should be down year over year from that perspective, so as we go out throughout the year.

We're increasing just because.

From a from a salaries perspective, we have.

Brought everybody back so it will increase as we go through the second quarter, but then we should be pretty flat as we go into and the third and fourth quarter.

As we have already brought everybody back for the flying that is for the rest of the year.

So it should be we should be a pretty good shape as we go forward with that.

And we all have contracts that are up so that it depends on when those negotiations happen, but in a steady state basis will be pretty flat throughout the rest of the year from a second all the way through the fourth quarter.

Yeah.

Your next question comes from the line of Jamie Baker with J P. Morgan.

Hey, good morning, everybody.

First one for Robert.

Question, I frequently get and how quickly American can ramp up capacity and the event that and incremental market opens up and and more stable times and kind of felt like it was about three months between something happening.

Is that spike in fuel and.

<unk> flown capacity actually reflecting that change.

Where are we today for example, if the EU announced today.

Vaccinated passenger is a welcome and I'm not suggesting this is going to happen what months would we see that additional capacity.

So Jamie I can I can start and others can chime in first half just in terms of market openings.

I realize as well, we're dealing with booking curve much different.

Much different and domestic the domestic where so much of the bookings occur within 30 to.

And 60 days for some of these long haul markets, even even for business related travel the booking curve is much more extended so even if.

Markets were to reopen so much of.

The actual window for purchasing for the summer and actually passed us by so we're going to be smart about how we ramp can I ask and yes that we make sure that we can match, our full demand profile with with the aircraft and that actually matches pretty well with the kind of timing it that's required to get aircraft.

And position pilots and position.

And cities that have actually been mothballed.

And so many parts of the world back up and operating as well so for us to actually be able to serve these markets.

Dealing with time timelines that are and kind of the three to six months.

And so you want to add anything to that.

The only thing I'll say is it depends.

A very specific part of your question and looking and 45 days and <unk>.

We can go and how to how to market and sell it and and operate it in a way that we couldn't have done before the pandemic, but Robert and good point that doesn't mean that we should or that we would because so much of it is and especially as markets reopen and what's the best marginal use and the capacity that that's out there and.

And just to add the dose and quality that is that.

Even if it's so much of Europe opens up right now the reality is weird, let's call it 60% to 65% of the way through the historical booking curve for Europe and a lot.

What are the customers that would've gone there are already book trips and Hawaii, and Florida anyway, So the marginal value the capacity and maybe a lot less and what what might be leased and the American.

Excellent all good points. Thanks for that and then second question and this is related to the second quarter Guide.

Feels somewhat reminiscent of last summer and strategy and we talked back there and about the low marginal cost and capacity, given PSP and where fuel prices were and.

And why it made sense to fly more than your competitors.

This year feels like a more calculated decision.

Less of a sort of grow or die decision too.

I think somewhat paraphrase, what <unk> said in the past, but the question I'm getting from investors.

Whether this summer as planned is markedly different than when you're basic.

Basically tried something very similar last year any thoughts on that.

Yeah, I'll start and bus and Robert and China, Yes, it's dramatically different and that.

Well first off from last summer.

And what we saw was.

And what looked to be a real drop it.

And the pandemic rates and as we saw that restricted or thereabout when and when.

We got looks like and spike in demand from all fell.

And we adjusted Accordingly.

And so.

All of that was the right decision was based on net.

And nothing else.

And this case.

<unk>.

And depending on if the rates absolutely are falling and.

And as a result, you'll see not just us doing this.

Every other island so anyway.

Yeah.

I know exactly I wouldn't I wouldn't be sure exactly with what happened last July and that's why we saw rates falling and it shows that capacity when they spike pickup reported back now.

And now we're seeing vaccinations result, something which goes much more prominent should that not be the case, you'll see us pull back on again.

We can be very flexible and we will be I don't think that'll be the case nothing about this feels even close to that.

That's the distinction.

And I and Jamie I would just add one thing to that and building off of Robert's comment from the section does that.

And what you see out there and our schedule and it's actually really indicative of where the airlines going out 85% of our capacity. This summer will be deployed and and domestic almost 95% and it between domestic and short haul international and.

As you look at it from the last three required and then that will lead flow and relatively more capacity. We've also produced more and and nominal PRASM and that's certainly what any of our of our network competitors app, but critically when you look out there. This summer where the capacity is going is really important that what.

What we call the big four are Dallas, Fort worth Charlotte, and Phoenix, Miami, or roughly 65% to 70% of our system capacity and put a little more color on it and the first quarter, while our system produced PRASM that was maybe 16% 15, and 20% larger than and what our network competitors where Charles.

And that will be produced PRASM that were 30, and 35% larger with Phoenix and Miami.

Pretty close to the 15 to 20 per cent range is still.

A lot of what you see out there is actually Ah theres, some opportunism and they're about flying Saturday only transfer leisure heavy trips and things like that a lot of it is or as Robert said in his opening remarks orienting the capacity and this network the markets and we can produce outsized value to customers and therefore, our outsized.

<unk> to the airlines.

Yeah.

Your next question comes from the line of Dan Mckenzie with Seaport Global.

And a couple of questions a couple of questions here regarding the plan to prepay eight to 10 billion and debt through natural amortization does.

Does that include or exclude the plan to use surplus free cash flow the prepaid prepaid debt and the reason I'm asking is it just seems like American.

Pay down substantially more than 10 billion over the coming five years.

And if that's correct I'm, just wondering if you'd be willing to provide sort of a bigger picture and number of what that could ultimately look like.

Yes. It does not include anything extra that's just what we have and amortization going forward.

We're not ready to two.

Say, but I agree with your premise that.

Liquidity is sitting at $19 $5 billion and at the end of the at the end of the quarter, we're going to go through the process of figuring out where we need our liquidity and the short term and where we need it and the long term and it's not it doesn't need to be at $19 $5 billion, but as we said until.

And we see you know sustainable cash per day.

Production.

And our hold the cash where we're at and keep our cash levels are higher than we need. We will then use that to go do that so as I said, we have a lot of pre payable debt. So once we're ready we were.

We'll go down that process and be able to delever more than the $8 billion to $10 billion, but I just wanted to make sure that that eight to 10 billion number everybody, though it's going to happen.

It has to happen as we go forward and pay off the debt that's due aircraft debt.

Unsecured it's things that are going to come due over the next few years, but you are right Dan.

It can be a bigger number it's just we want to wait till we get through everything and we're comfortable to move forward.

Understood Okay. Thanks Vasu.

<unk> is 10% smaller so call it 10% less flying.

I'm wondering if you can provide some insight on the overhang to margin say in 2019 with that portion of the fleet and the reason I'm asking. This question is just you know based on what American has done and the cost side based on what Youre doing on the revenue side. It just seems like normalized earnings and this next cycle and we're gonna be higher than they were and.

The last cycle and I'm just wondering if you guys would agree with that or what what do we need to keep in mind.

Well, yeah, and some others can Kevin Kevin Kevin.

Speak to what our earnings profile might look like but but you are on to something that we have made this airline materially more efficient and do the pandemic here.

Yeah.

This summer will be almost 150 airplanes down but in the schedule will only be about 80% and 85 airplanes down and so all of that Delta is efficiency and inefficient airplanes and that went away.

And superior gauge economics superior and utilization wherever we have it and so if you want and the back half of 2019, we could fly rough.

Roughly that same airlines with materially fewer jet and.

And the network from the oriented and a lot more to places, where we could produce outsize RASM and and so.

And then it's very much the conscious design and that's the whole point that the earlier remarks about the green flag planted to deliver and airline that can outperform and the future and.

And we think we've done that but the proof will be when we did.

Your next question comes from the line of sight with Raymond James.

Hey, good morning, everybody and.

And I Wonder if you could talk about how youre thinking about the cadence of capacity and you can.

And a move away from the summer and kind of a I know, there's a lot of uncertainty but right.

Right now a lot of the demand being driven by leisure, but should we expect the same in this level of capacity or better as you move into the fourth quarter.

Savi I'll just look we're going to be incredibly flexible as we go forward and I mean, we've given a lot of detail as to what we intend to file this summer if things progress as we hope with vaccination is increasing and then hopefully international markets opening up and based on what we're hearing from our.

Customers and coming back to work back into the office and setting meetings and events.

We're optimistic but it really is dependent on the.

The continued man and the continued containment of Covid and people get back to business.

So I've got all our standard.

And.

And with Jamie's question, and we just have enormous flexibility in this regard.

A schedule. We have built is designed for the current amount of true for current leisure based travel that's why we haven't got a triple Sevens flying and the United States and I'm paid to do that that's not going to be happened and a year from now.

And as international markets open up that's one of those or redeployed and.

Good day.

We're going to we're going to wait for the demand and come back before we deploy aircraft there, but right now and the team's doing a really nice job of.

And deploying airplanes worth and existing demand.

Great.

And then if I may just follow up on your response to Hunter's question, just how much of kind of the <unk> costs are related to kind of getting capacity back online versus and actually the Cooper.

And being produced in the quarter and just wanted.

And that kind of and how much is in the number today that might wind down as you as you come out and increase capacity.

There's really not I mean, we don't have a lot of cost built into the second quarter or to get the capacity back up most of the aircrafts have been ready to go we will have higher cost per tire costs in the and the second quarter really due to volume driven costs. So our maintenance cost will be up because our power by the hour.

Costs will be up and things like that but there is no.

You know built in cost to retrain and there's no big built and cost to get the fleet back up because of the fleet is ready to go.

Team has done an incredible job of maintaining those aircraft over the last year and having them ready. We then we did the mothball any aircraft, we didnt put them in the desert, we don't have to bring them back and spend a lot of money on engine costs and anything like that so so theres not theres not a lot.

I'd say and the second quarter and to.

And to build the airlines back up other than volume.

Yeah.

Your next question comes from the line of David Vernon with Bernstein.

Hey, good morning, guys Robert.

Maybe could you help us understand the cadence and sort of leisure fares and what I'm trying to get at is is where we are today and sort of <unk> on a.

And sort of like for like neutral basis, the prefer is versus.

And kind of a pre crisis level and then how the fare environment is changing as they move into the summer months and obviously, we're adding a bunch of passenger bunch of demand coming in and I'm, just trying to get a sense for how the revenue management systems are working in terms of.

Setting fares and would be expecting to see and sort of thank you. Thank you.

Oh, Hey box you can help me with the real specifics I just I'll just say this though to kick it off which as you know.

Being able to leverage.

Leverage yields is dependent on having based bookings and from that perspective as I said in my remarks, Fortunately, we're seeing not only bookings, but real load factors that actually allow for some.

Some.

Some optimism about where where pricing is going about true yeah, that's right David.

We have seen.

And the inflection point with yield which has brought many of the things that we must draw and in terms of encouragement.

Uh huh.

And to put some context to it when we came into the first quarter of this year.

Our our selling spares, where roughly half of what they were a year ago and then it's fair and half of last year's price you can gain access to the American Airlines system as we go out into the summer, there's something like 90% of where they were a year ago and indeed in our leisure markets and by leisure.

It'd be really specific care, we count that as short haul international and also all the obvious domestic market Bagus Orlando, Florida things like that.

And our seat capacity, there and it's up about 25%, but there are yields are about 95 day, 100% bookings from 95 to 100 per cent of what we were taking a year ago and so.

And that for us as much as anything is really key because we.

And a place Nokia if you'll notice the commentary we're not spending a lot of time talking about bookings because and our system.

Engineering and bookings is not the issue anymore and so much and it is about getting yields back and getting and RASM back, especially in our domestic system.

And because we are.

Historically, and our network and the way we're shaping it into summer domestic RASM is key to our success and.

And given what's happening with traffic and yield is is super important. So we are doing all we can go and and yield.

Yield up wherever we see it.

Doug just to clarify were you referring to <unk> 95 per cent of up 2020 levels of 2019 levels 2019 levels sorry.

And all my from my comments actually playing out and I apologize.

Yeah that that would satisfy the frightening.

Just as that and maybe if I'll, let Derek and you might have.

And before managing the airlines are a little bit lower level of leverage.

How do you think about talking to your board about the financial liability risk when you've got all these unencumbered assets I think one of the things that.

You know maybe surprised a lot of us is that there there were a lot of assets you can tap into for debt and credit.

How do you think about managing and measuring that are or maybe mitigating that from the market going forward. So that we maybe have some visibility into additional liquidity that you could tap outside of like the traditional kind of debt to EBITDA metric just given the fungibility of the assets that are and the and the network, particularly like if you buy down more Eric.

Kraft and cash.

Yeah.

Number one we're not looking for more liquidity. So that's that's the good news now is.

Come in every day that not have to go look for liquidity.

But we will keep everybody up to data and the unencumbered assets and as we look forward.

And if we have excess cash we're going to we're going to manage it properly and to figure out what is the best thing to pay down.

As we move forward. So we are going to have conversations with the board on liability management that we're going to discuss and what are we going to do over the next.

Year or two years.

And if we have.

Excess cash what do we pay off and what's the best things to unencumber as we move forward in today's environment are unencumbered assets of $3 7 billion. They grow every time, we pay off aircraft and <unk>. We have the first lien capacity of about $7 billion. So we have the ability to do more but the good news.

As you know, we're not looking to do more right now.

As we go and go forward. So I think the key is as we move forward. What is the what is the liquidity levels, we need to be at what are the ratios.

Our ratios, we want to be as we move forward and how do we best do that over the time period.

And with any excess cash that we have above the amount that we need and so we'll be having those discussions over the next year and every board meeting and will and won't be discussing that with our board for a period of time as we move forward through.

Through this recovery.

Your next question comes from the line of Myles Walton with UBS.

Thank you and just one.

And to clarify the law.

And we're looking to raise liquidity or would you also be comfortable saying that you have no interest at this point and accelerating the deleverage with additional equity and.

And then maybe if you can just give us a bit of color on the walk from 17, 3% to 19 five and.

And P. S. P contribution in there and I said that.

It's as simple as a sort of a 1 billion dollar underlying cash burn off staying with PSP.

Hum.

I'll take the first one and I think I can do the second one all standard.

So.

And so anyway.

On the first point, yes, when we say, we're not looking to regimen and answered and I look and the rest from answering and that includes equity and and as Derek said we.

But we know that.

We have just true.

And our normal amortization schedule $8 billion to $10 billion of debt going down and over the next five years and.

And as was noted by Dan Mckenzie and we will go ahead and the ability to do a good bit more than that so long and <unk>.

And the recovery continues and the path and it appears to wind up with more cash coming in and so that's how we would choose to de lever over time.

And then and again I'll I'll try it real quick because I've already talked about Derek.

Pete.

Yeah.

And what Youre asking.

And the BSP payments from your book and our cash.

You actually see that it's net.

And not up as much as the PSP and the reason for that is seasonality of.

And first off the seasonality of our sales.

Sales and not as strong and the second quarter and as the Earth.

And we also ended debt payments are larger and the second and the first but even if you did if you.

Excluding debt payments.

We are still cash positive and the second quarter, excluding net payments on that point kind of spread and interest. It says instruments. There. So that's where it is and seasonality all users to get on my little soap box and that's this is.

And why by the way.

We there are there are GAAP principles.

And you know it's.

Because cash flow seasonality.

And so.

We're gonna be Havent, there was a real reason at some point when we were talking about cash per cash burn cash flow because.

The market had real interest and where people's cash levels were and how much cash and they were burning well well past that and.

And if we keep talking about cash burn and computing people, because there's a huge seasonality and cash and airlines.

There's huge seasonality and debt payments.

And what all of us.

Making large profits, we'd still have quarters, where we had declines in cash.

So that's why and that's why do you go back to GAAP principles include things like crude oils, and smoothing and matching principals.

And whether you can keep yourself actually know what's going to airlines.

So anyway, that's my little Soapbox I'm glad we're going to stop talking about cash burn.

And I was talking about earnings.

But that's the way that's the reason for thanks for asking.

Your next question comes from the line of Stephen Trent with Citi.

Good morning, everybody and thanks very much for taking my question.

Most were answered, but I was just curious what you guys are seeing.

If you could give a little more color I think you mentioned that youre going to.

Higher some pilots later this year.

Any color with respect to.

What this could mean from a head count perspective.

And as American planning to apply any ESG type filters on the hiring as some of your competitors have telegraphed.

And they wanted to diversify their their basis.

So yeah look.

It's great news that we're looking at.

Our hiring pilots later that later this year and it's due to a number of factors most notably that we've had significant retirement over the past few years. So this is going to put us and positioned to fly and be flexible wherever we need to be from bringing and pilots and we're incredibly excited.

And about the work that we've been doing both and that the mainline airline and with within our regional airlines as well.

And also have been.

Marching down the path to ensure that those that are coming into our regional <unk>.

Airlines are wholly owned and also our mainline really represent the face of the country, most notably ensuring that we have more women and people of color are that are taking the ranks of fish.

And the pilot ranks and so youll see.

That we haven't got program that now has over 305th.

And 50 people and it that's.

Just going to grow and the future and as we look forward, we anticipate getting a substantial number of our total pilots brought in through that program. So very excited about where we're headed and that program and that program yes.

And is by and large are designed to bring in and again people of color and females.

E mails into.

<unk> ranks.

Okay.

Females and people.

And what color.

That's very helpful. I appreciate the color. Thank you.

Sure.

This completes our analyst portion of the Q&A, we will now and move to media questions. If you have a question at this time, Please press star and the number one on your Touchtone telephone. If your question has been answered and you wish to remove yourself from the queue. Please press the pound key.

Yeah.

Your first question comes from the line of Allison.

Wall Street Journal.

Yeah.

And.

Yeah I was wondering if you could talk a little bit about the latest issue with the seven and 37, Max and you know whether that creates any challenges for you all and kind of rebuilding confidence and the plane that's something else that's come off after all the setting that happens.

And the latest problem.

Sorry, Allianz, it's Robert.

I am.

Really pleased with with Boeing and the industry, we coalesce around safety and so with the Max and with with any aircraft. This is critically important that we take the right steps when there is any potential concerns and and the case of.

The <unk> hundred 37, Max and these at least for US. These 18 aircraft that we have a pretty good idea of exactly what the issue is and the remedies that needs to be.

Attended two so the work that we're doing is with Boeing.

Boeing and the FAA, we're waiting on a service bulletins and to be developed air worthiness directives to be dropped and then getting the work done and those aircraft back up for the year. We hope that that is just in a matter of weeks and not longer in terms of the impact on our schedule and.

Look we've been flying the Max now for.

Four months are back and incredibly successfully passenger reaction has been.

Really that are there.

Like the product they like the aircraft and as we take a look going forward, even with 18 aircraft out of service right. Now there is virtually no impact to our schedule and we've been able to use other aircrafts to fund the needs for the airlines. So overall I think we've we've we've as an industry with.

Boeing and and certainly with the FAA, we've made all the right moves and I have great confidence that this aircraft is going to be and the skies and the safest and most reliable for years to come.

Thanks, and have you seen any increase and book away you know on the masses that are still flying like are there is there any sign that customers have any elevated concerns.

Not at all.

Thank you.

Yeah.

Your next question.

Your next question comes from the line of Leslie Joseph with CNBC.

Awesome.

You mentioned net bookings were ticking up and of course.

And it looks like that and much stronger summer than last year. What are your projections for after a summer vacation season starts to wane and you expect a lot of that leisure demand and said yes.

Go away.

And do you think theres going to be enough business to replace it.

Hey, Robert Lee This is Bob Thanks for the question look and it remains to be seen.

And then it gets always difficult.

Our cash to prognosticate that far out and those things are recovering that difficulty remain so and so it remains to be seen as and as Robert and Doug mentioned earlier that for us the real lever is that capacity and if things change we can change with it and over the last year, we have any number of tools and techniques to go and make the airlines.

And pretty nimble and responding to it so.

First things first is is to manage the summer and then Paul is it.

Gets closer.

Okay and then the bookings that you have so far are you seeing a big drop off after August and July is there any one.

And it was slowdown.

We are seeing pretty consistent bookings growth throughout areas and indeed.

And where where bookings are falling and is a conscious decision on the part of the airlines. So that we don't do things like for example, sellout Thanksgiving week too soon.

And we see continued strong bookings as we go out there, we just want to make sure they're coming in and.

My parents and casino and sustainable.

Your next question comes from the line of Mary swing and staying with Bloomberg News.

Hunter.

How are you.

Great.

And I ask first real quick if I can go back to Allison's question on the Max I wanted to see if you have any information you can comment on and it does the frustration level and the fact that you haven't yet gotten them a service bulletin on net repair, which you know originally the talk was the sales repairs would be fairly simple and straightforward.

But now it's been weeks and you don't have anything yet from Boeing.

No not at all.

Yeah and paint job.

And and they do it well and we work really well with them.

And as Robert said, we don't call and that's around safety and that's part of the process.

And I believe I believe about frustrated.

Okay. Thank you Andy if I can also ask.

And I think you could talk a little bit about the wide body domestically and what you're flying where domestically.

Yeah, and maybe I can talk a little bit about it and but really the bigger story on the widebody and just how I'm trying to have that dynamic the airline has gotten and and managing capacity around the system, which is great and easy to do and the world of scheduling and it's a lot harder to actually deliver it for our customers and do so and reliably.

And on a weighted life and some due to the pandemic and the international demand and this call and sometimes even as as opposed to 45 or 60 days from departure, we've been taking out international flights, but as we've seen strong bookings say Miami or what have you we've been been been putting those wide bodies in there.

So a big part of it is very dynamic and it changes a lot and.

What we're most encouraged about is wherever we've seen them and deal we've been able to deliver it on short notice and and earlier comment and a way our customers like our customer satisfaction scores and indeed never been higher the only real message beyond that and the way the wide bodies go this summer and they are.

And it disproportionately and we call hub to hub markets those are markets like Miami, and DSW and also our big Sunbelt markets, especially and and Miami and so we're now and a place where Miami and New York is all on wide bodies, Miami and Los Angeles on wide bodies, and Miami, Boston largely on wide bodies too.

So we don't anticipate very many material changes versus what you see and the schedule, but if.

And if things change and international.

A real lever for us the marginal capacity of that is probably better spent that domestic right now than what it is and most of the long haul.

Great. Thank you very much.

Okay.

Your next question comes from the line of David Koenig with the associated press.

Thank you good morning folks.

And I guess this as per Vasu I wanted to follow up on what you were saying to David Vernon.

First the 90%.

Approached this summer and then 90 per cent of 2019 levels is that due in part to more business travelers or was it pretty much just that you can get higher fares from from leisure travelers and then to follow up on that and is that pretty much means your parents across your system domestic and short haul international.

Hi, and thanks for the question and I and looking to be clear is that 90% of the book yields were taking right now there could be any number of factors that impact what they actually come in at once.

And the summer is all set and done.

But yes, it is primarily driven by.

Bye bye and leisure demand growth.

We are seeing signs of business growth.

But it is it's kind of hard from the small base and it's still a pretty small part of our system totaled so most of the yield growth. We're seeing is from the leisure travel segment and frankly, a lot of what Neil growth It's Derek.

And where.

We're seeing a lot of cases, where especially on peak holidays and things like that where frankly the demand for seats is granted and supply and seats.

And so that's what produces higher yield.

And that's pretty much system wide.

No. It's not in our system is is really uneven and it's much more heavily concentrated demand.

Our domestic leisure and short haul international markets.

Okay. Thanks.

Your next question comes from the line of Dawn Gilbertson with USA today.

Hey, Doug.

Hey, good morning.

And I wanted to ask a question for you is off to a state Department earlier. This week a range deal you know travel alerts to their highest levels from.

For most countries I'm wondering if you have seen or expect to see any impact on bookings and if not why not.

Hey, John I didn't hear it for me I'll start and I and others can add but and look and remains to be seen in the last one.

Whatever its been and 48 hours.

And the 96 hours and since it's happened.

It's been too early to tell what what's going on.

And what its impact to bookings might be and.

Indeed, there is one we have ample tools to be able to adjust the airlines.

Should it come to pass.

And that always has and the last thing I'll add to it.

And for US from my earlier comments and the way we've configured the airlines this summer and it's very much to make it resilient and it just these kinds of changes where 85% of our capacity is and the domestic system.

And in large part and defense.

We realize that the recovery is not just gonna be choppy from a demand perspective, the choppy from a market opening perspective, as well and so by building. The plan like that is something that we can deliver on a break even and our customers and create a lot more.

Resilient and since it has a the world recovers.

Thank you.

Your next question comes from the line of Tayo.

Arnold with Dallas morning News.

Okay.

Guys.

I appreciate it.

Yeah, I know you have some plans and you announced the plans to start hiring some pilots you guys have any.

Will there be any need going into the year for for other employee groups flight attendants are ground workers or gate agents.

Yeah.

The the answer that and.

Yes, and you'll see that throughout our network and it's especially from a.

Passenger service team member and those folks that.

Work on the fleet side of things, we're going to have needs throughout the network, but it's really just.

Just based on location needs.

More than anything else and.

Too soon to say anything about where we stand with our flight attendants and but I can tell you that anticipate that there'll be a need there as well.

And this is kind of weird.

And so many of our questions.

So opportunity to take leaves.

But what were doing rather than hiring Dupont and tenants, bringing product back from leave earlier and earlier.

And then we would have extended so having having them come back off of bleach scrutiny would've otherwise once we get to Doug will lead to higher but we're not there yet.

Thanks.

Yeah.

Your next.

Question comes from the line of Edward Russell with <unk>.

Alright. Thank you for taking my question Robert could you tell me a bit more about how many aircrafts American needs to reactivate supply all of its fleet. This summer and what types are still needed to be reactivated.

No and work where we.

Have aircrafts that are ready to be ready to go of course, we have to work as Derek mentioned in his comments.

And we're accelerating our reconfiguration program, our harmonization progress on day 737, and <unk> hundred 21. So we'll have some some aircrafts that are caught up and that but the way to look at our fleet is that they're all out there and and maybe not utilized as much as that they will be but we feel great about the work that our maintenance team.

And that's done day to keep everything ready to fly when and when necessary.

So just a follow up you you don't have any aircrafts temporarily stored anymore. At this point is that the way to characterize it.

Correct Yep Yep Okay.

Yeah.

And at this time I would now like to turn the conference back to Doug Parker for closing remarks.

And that's it.

Thanks, everybody for your interest and hearing from other questions. Please let us know.

Appreciate your time.

Yeah.

Ladies and gentlemen, this concludes today's conference. Thank you for participating.

Have a wonderful day you may all disconnect.

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Good morning, and welcome to the American Airlines Group first quarter 2021 earnings Conference call.

Today's call is being recorded at this time all lines are in a listen only mode. Following the presentation. We will conduct a question and answer session to ask 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 I would now like to turn the conference over to your moderator managing director of Investor Relations, Mr. Dan Cravens.

Thanks, Chris and good morning, everyone and welcome to the American Airlines Group first quarter 2021 earnings conference call joining us on the call. This morning, we have Doug Parker, Chairman and CEO, Robert Isom, President and Derek Kerr, our Chief Financial Officer.

And also on the call for a question and answer session are several of our senior executives, including Maya Leibman.

Steve Johnson.

<unk>, Alison Taylor and Devin Matt.

Like we normally do Doug will turn the call with an overview of our quarter and the actions we've taken during this pandemic.

Robert will then follow with some remarks about our commercial and other strategic initiatives. After Robert to March Eric will follow with details on the quarter and our operating plans going forward. After Derek comments, we'll open the call for analyst questions and lastly questions from the media.

And again and as many questions as possible. Please limit yourself to one question and a follow up before we begin we must.

As stated on today's call does contain forward looking statements, including statements concerning future revenues and costs.

Our cash capacity fleet plans and liquidity. These statements represent our predictions and expectations of 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 and our earnings press release issued this morning, and our form 10-Q for the quarter ended March 31 and 2021.

And Additionally, we will be discussing certain non-GAAP financial measures this morning, which exclude the impact of unusual and I.

A reconciliation of those numbers to the GAAP financials.

Included in the earnings release and that can be found on the Investor Relations section of our website.

A webcast of this call will also be aircraft on the website and the information that we're giving you on the call and as of today's date and we undertake no obligation to update the information and subsequently so thanks again for joining us at this point I'd like to turn the call over to our chairman and CEO Doug Parker.

Thanks, Dan and good morning, everybody.

This morning, we reported a first quarter pretax loss, excluding net special items of $3 5 billion.

The loss was driven of course by the extreme drop in demand for air travel during the global Panda.

Our revenue for the quarter were down 62% from the same period and 2019.

And the mix of this difficult environment. The American Airlines team produced remarkable results and we.

And we flew more customers and any other U S airline and we did so reliably and safely.

And produced the highest passenger unit revenue of any global U S carrier or having more available seats percent.

<unk> completed the largest financing and airline history at $10 billion transaction secured by the most valuable loyalty program and the world.

Vantage frequent flyer program.

And excluding that principle, we were cash positive and the month of March our first such months at the beginning of the pandemic.

These results and what were made possible by our incredible team.

Without their resilience creativity and compassion, we would be facing a very different future.

Thanks to their hard work and determination and we're starting to see light at the end of this very long time, and it's very dark Tom and.

And we're on a path that has as well positioned as demand for air travel Richard.

And that path forward and guided by what we're calling her greens pipeline.

For our industry. This pandemic has been much like a yellow flag during and auto race, where everyone's slows down and stop.

And it gets their cars ready for when the race resumed at full speed.

Using this period to improve and prepared so that when the green flag and does drop which appears to be on the horizon.

And we'll be ready.

That plan is centered on four initiatives I'll take a minute to walk through those and a high level and then Robert and Derek will expand and what we've achieved what we see on the horizon.

First we're doubling down and our commitment to operational excellence.

Great operation and the first quarter carrying more than 24 million passengers on nearly $340000.

During our busiest day of the quarter, we had more than 430000 customers flying on our ore. That's the highest we've had since March 2020.

Our goal is to run the most reliable operation and American Airlines, and American Airlines history, once and everyone's back to a full schedule.

And the steps, we put in place, including more reliable and profitable scheduling.

New tools and technology to assist our team and customers during irregular operations and our claim commitment will ensure we achieve that goal.

Second we're taking this opportunity to reconnect with our customers and Robert will talk more about all we're doing it.

And as customers return to the skies and will see and even better and American Airlines.

The broadest and best Global network has now been enhanced by new partnerships.

And one with innovative technologies and procedures and make travel more convenient for our customers and ensure they feel safe and comfortable as they return to flight.

Third we are planning to bill and the positive momentum, we've established and Archie.

Last year's test and our team and ways, we could have imagined and it has also brought us much closer and.

We worked hand in hand, with our union leaders to ensure that team members cared for EBIT as we experienced by far and the most difficult financial circumstances, and our industry's history.

We're committed to building and that progress and continue to work together to ensure our team feels cared for every day.

On that note, we are very happy to tell and 13000 team members and they can tear up their warn notices following the passage of the COVID-19 relief package that included and extension of the payroll support program.

We will continue to welcome team members back to the operation as we increase and reschedule and.

In fact earlier this earlier this week, we announced we will begin hiring pilots later this year to prepare for 2022 and beyond.

Finally, and importantly, we are committed to passionately driving efficiencies across the organization Derek can elaborate on this and we're really proud of the aggressive and innovative ways. The team has worked to position us to be more efficient on the other sizes and Doug.

And the efficiencies we built into the business over the past year will drive more than $1 3 billion.

Permanent non volume related savings in 2021 and beyond.

So before I turn it over to Robert I'll close with this we are a long way from where we need to be described and as far from over and we have to continue to give our customers shareholders and team the company laser.

There is no doubt the pace of the recovery is accelerating and thanks to our team and a thoughtful and proactive plan as the Green flag drops and American Airlines is ready.

Thanks, Doug and good morning, everyone and.

I also want to thank our entire team for everything they've done from airlines throughout the pandemic. This phenomenal growth continues to rise to the occasion and deliver for our customers every day and we're incredibly great.

Our first quarter revenue of $4 billion.

It was effectively flat on a sequential basis versus the fourth quarter of 2020.

However, our demand and revenue trends trends accelerated significantly as the quarter progressed and January our total revenue was 34% and what it was in 2019 and by March It was 46% and 2019.

This trend was driven by strong leisure demand and the U S Mexico, the Caribbean and Latin America.

This momentum has continued and our seven day Rolling average of system Daily net bookings has reached 2019 levels This week and.

And this is in spite of our business and long haul international demand remained weak.

And with net bookings of roughly 20% and their wealth.

All of their 2019 levels.

That said there are early signs of recovery from business small business demand, which was roughly 17% of our of our system revenue has been improving steadily and vaccination rates have increased and as markets reopen.

And increasing number of our largest corporate accounts are coming back to the office and indicating and that there'll be traveling and the third quarter and confirming and personally important meetings conferences and invest for this year.

Importantly, we're focused on turning improved bookings and load factors and Doug leading unit revenue performance we.

We have continued to shape, our network and our customer experience as nimbly and thoughtfully as possible and we're seeing the results.

The first quarter of 2021 was the third consecutive quarter, and which our passenger unit revenue materially outperformed each of our network competitors.

Thanks to our team our likelihood to recommend scores have improved for the last three quarters as well.

Based on our results and the first quarter, we're on track and have our best LTR year since the merger.

We have used the pandemic to reset our airlines that have consistently outperformed from our customers our team and investors.

The first sign of this is and our summer schedule and second quarter capacity plan.

We expect to fly approximately 80% of our 2019 system seat capacity and the second quarter and this increases to 90% this summer.

We will continue to devote a largest share of our <expletive>ets to markets, where we can create unique value for our customers and therefore generate p<expletive>enger unit revenue premium p<expletive>enger unit revenue premium relative to our competition.

When compared to 2019, we expect to find 90% from our domestic seat capacity during the summer peak.

And 100% and DFW and Charlotte.

Our domestic network will constitute 85% of our systems key capacity and the summer peak.

We expect the operating 80% of our international fee capacity compared to 2019 and our peak.

Our organic network and the Americas creates more unique choices for customers and more profitability for the airlines.

As such and our summer peak, our Latin American network is expected to be the same size as it was in 2019.

Our short and long haul Latin American network will constitute approximately 12% of our system seat capacity and the summer peak.

By contrast.

Our operation has been much more challenged and the Atlantic and Pacific as those markets have yet to fully reopen and.

And as a result, and our peak schedule and seat capacity in those parts of our network will only be 40% of what it was during the same period and 2019.

And our Atlantic and Pacific Networks will constitute just 3% of our system seat capacity and the summer peak.

And we expect to bring these marks back slowly and only when demand conditions warrant and it's important to note. There is significant pent up demand for international travel and we're seeing it most and markets like Tel Aviv, and Athens, where market reopening our leading to steady increases in demand.

As far and continue to open throughout the world will be ready and we'll be ready because of the changes that we made to our fleet and network and the strength of our partnerships around the world.

Overall, we will deliver any increase in capacity and a more efficient and reliable fashion that we did in 2019.

We've accelerated the retirement over and over 150 older aircraft and our fleet, leaving American with by far the youngest fleet of our global U S competitors weighted.

And we intend to have all of our remaining aircrafts active this summer and no longer sitting idle and tarmacs around the country and.

Eric will share and a few minutes, we will soon complete the harmonization of our Boeing 737, and Airbus <unk> hundred 21 fleet driving superior cost efficient efficiency, a simple operation and a better customer experience.

Just as we use the p<expletive>enger to adapt our fleet network. We have also developed partnerships to offer our customers a seamless network and markets, where we have structurally underperformed.

This has been most true on the West coast and.

And the northeast.

We have been unable to grow and these markets organically due to infrastructure constraints. However, through our recently announced partnerships with Alaska and Jetblue. We can now offer customers the largest network and these two regions and bring a level of competition and choice that has long been lacking.

Of course to make these partnerships work the experience must be seamless for our customers as.

And as we'd like to say and elite customer anywhere should be treated at and elite customer everywhere and we have several initiatives underway to make that a reality, including our announcement just yesterday and delivered on the next phase of our partnership with Jetblue.

As we look towards the recovery reconnecting with our customers will be centered on being the easiest airlines and do business, where our goal has always been to remove as many first and points as possible and and our first quarter. We took a number of steps to help simplify and travel experience for customers as they return to flight.

We've enhanced our travel planning tool to help customers make informed decisions and where they travel and what to expect when they get there and a new pre flight COVID-19 testing options expand and acceptance to verify and mobile health wallet that simplifies and verified travel requirements and <unk>.

And why is now accepted for all of our international flights and the U S to the U S and on price from the US to 11 countries our partners Air Lingus, British Airways, Iberia, and Japan Airlines now also accept verify.

Building, a curb to gain content contactless journey will be and ongoing effort as we re imagine safe and convenient travel and post Covid era.

And DFW, we've expanded our touch technology.

And to allow customers to use biometric scanners to check their banks prior to departure and we'll utilize that same technology to allow customers to gain entrance to and Admirals Club lounge later this year.

And today as we celebrate our day.

Highlights and important strides we've made to run a more sustainable airlines.

The most important thing any airlines can do is retire older aircrafts and replace them with new and more.

More fuel efficient aircraft.

And we've done that and at American with $24 billion of investment over the past seven years and the retirement of more than 650 older aircraft.

But we need to do more.

To reach our goal of net zero carbon emissions by 2050 and.

Our eyes are.

And on sustainable aviation fuel SaaS as the most promising advancement available to us and in the near to mid term.

We've been taking delivery of SaaS for almost a year and the first and in the first quarter, we reached innovative offsetting agreements with two of our customers Deloitte and Kona now.

We appreciate that the buy and administration and many and Congress.

<unk> engaged with our industry on climate issues and we're encouraged by the fact that we have common goals, especially when it comes to SaaS.

So in summary over the past year, we've greatly simplified and modernized our fleet rationalized our network made many changes to our business and operations to ensure customers have flexibility and peace of mind when they return to travel.

And encouraged by the trends and demand for air travel across all sectors and believe American is well positioned from the recovery and the months and years ahead and with that I'll turn it over to Derek Alright, Thanks, Robert and good morning, everyone. Before I begin my remarks, I too want to take the opportunity to thank our team their leadership and hard work truly embodies what American.

And airlines team members are known for.

This morning, we reported a first quarter GAAP net loss of $1 3 billion or a $1 $7 97 per share. Excluding net special credits, we reported a net loss of $2 7 billion or $4 32 per share.

Robert talked about many of the commercial activities, we're working on and the trends, we're seeing and the demand environment. So I'll focus my remarks on the cost side of our P&L and our balance sheet as we look to the future.

Throughout the entire pandemic, we have remained focused on keeping our capacity aligned with demand while preserving the maximum amount of flexibility to respond as demand returns.

We took aggressive actions to reduce our cost structure and we have reduced our first quarter total operating expense, excluding net special items by 26% versus 2020 on a 39% reduction and total capacity non.

Non fuel operating expenses, excluding net special credits were up 6% sequentially from the fourth quarter as we gradually added bag capacity.

We ended the first quarter was $17 3 billion and total available liquidity, including approximately $3 1 billion and PSP to funds. We received from the Treasury Department. During the quarter. We were recently notified that this amount will be increased by approximately $463 million to be received and the second quarter.

And Additionally, we expect to receive $3 3 billion and PHP three funds by the end of the second quarter.

We saw positive trends and our daily cash burn rate throughout the quarter. Our average daily cash burn was approximately $27 million per day, which came in better than our guidance of $30 million per day. This happened. Despite the drop off and demand we saw in January and February and a significant increase in fuel prices.

Beginning of the quarter as.

As a reminder, our definition of cash burn includes approximately 9 million per day of regular debt principal and cash severance payments.

For the month of March our estimated average daily cash burn rate was approximately 4 million per day, and excluding approximately 8 million per day of regular debt principal and cash severance payments made in March as Doug noted the company's cash burn rate turned positive for the month.

During the quarter, our treasury team did a phenomenal job of continuing to strengthen our liquidity through a series of capital market transactions, notably we completed our 10 billion and financing transaction that was backed by the advantage program at a blended rate of five 6% less than half of what we would have been able to do last summer.

And use those proceeds to repay and full of $550 million secured loan we have with the Treasury Department.

We also had $530 million of aircraft amortization payments, including the maturity of our 2011 to ask one double ATC, which together with mortgage maturities, resulting in 35 mainline aircraft and nine regional aircraft becoming unencumbered.

During the during the quarter. We also repaid in full our $2 8 billion of revolving credit facilities and this was a liquidity neutral transactions that reduced the company's outstanding debt by $2 8 billion and importantly, we still retain the flexibility to either draw upon and these revolving commitments again as needed or leave them on drawn until October.

Over 2024.

During the quarter, we took delivery of seven Boeing 737, Max aircraft and we expect to take one more delivery later this year as a reminder, these aircrafts.

And we're built while the Max was grounded and we're efficiently financed through leasing transactions.

In addition, we recently exercised our remaining deferral rates on 18, Boeing 737, and Max aircraft that were previously scheduled to be delivered in 2021 and 2022. These deliveries are now expected to occur in 2023 and 2024.

Lastly, we reached an agreement with Boeing related to our remaining 787 dash eight deliveries and.

Under the revised terms of the agreement.

We have elected to defer and convert five 787 dash eight aircraft to 787 Dash nine aircraft. These deliveries are now expected to occur in 2023. The remaining 14 deliveries of 787 dash eight aircrafts have been rescheduled to occur by the end of the first quarter of 2022 and all of these aircrafts.

And it will retain their existing financings.

In January the company made $241 million and contributions to its pension plans and March the new COVID-19 relief Bill included among other things funding relief for single employer pension plans.

These new funding rules reduced the company's remaining required cash contribution for 2020 120, while lowering our projected required contributions over the next five years by over $2 billion.

Under these new provisions for funding purposes. The combined plans are expected to be funded and excess of 90% for plan year 2021.

As Doug and Robert mentioned, we are starting to see signs of what appears to be a strong economic recovery. This fantastic news makes our $1 3 billion of efficiency measures, even more important as we prepare our business from a return to a more normal environment.

On the fleet side, we have talked a lot about our fleet simplification efforts and the elimination of smaller sub fleets, which resulted in the removal of more than 150 older and inefficient aircrafts.

Many of these aircraft and retired aircraft have already been sold and by May We will have completed disposal of all of our 730 767 aircraft and Embraer 190, aircrafts generating more than $300 million and proceeds.

Our fleet changes are expected to drive significant operational and cost savings in 2021 and beyond with only four mainline aircraft types remaining we will see improved aircraft utilization and operational efficiencies and the back half of 2021 through the increase engage and reduction and enact of aircrafts.

<unk> spares and maintenance allocations.

Additionally, our fleet harmonization project is picking up steam and we expect to have our entire 737 completed and the second quarter of this year.

These aircrafts and of 172 seats and come with larger overhead bins and NC power.

We expect to have the <unk> hundred 21 fleet completed by the end of this year.

Aside from a better customer experience. These projects will provide significant opportunities to improve revenue production and lower our unit costs now and well into the future.

So when demand returns to more normalized levels, we'll be able to fly efficiently fly 2019 levels of capacity with approximately 10% fewer aircraft.

In terms of our balance sheet, following our transactions and the first quarter, 32% of our outstanding debt is pre payable without penalty.

After all the Covid related financings, we have completed to date, our average cost of debt is approximately four 5%.

As we have said in the past, we will naturally reduce our debt from where we are today by $8 billion to $10 billion over the next five years through regularly scheduled debt amortization.

And we know going forward that since we are now starting at a higher debt level on account of the pandemic related debt, we will need to delever, even more and the near term we plan to maintain higher liquidity levels until we are generating sustained positive cash flow.

Once this occurs when combined with our efficiency measures and a lower capex profile, we plan to use any excess cash flow to more strategically delever, our balance sheet by proactively retiring pre payable debt and concurrently increasing our unencumbered <expletive>ets as.

And as part of our plan, we also anticipate resetting our target minimum liquidity level.

Overall, we expect second quarter total capacity to be down approximately 20% to 25% versus second quarter from 2019 with these capacity and demand <expletive>umptions, we expect to see a significant increase and our revenue versus the first quarter with our total revenue to be down and <unk>.

Ultimately, 40% versus the second quarter of 2019 these.

And these inputs lead to an estimated second quarter pretax margin, excluding net special items of between negative 27% and 30%.

And we presently expect to and the second quarter with approximately $19 5 billion and total available liquidity, which includes the additional ESP too and PSP three funds I mentioned earlier that.

That would be the highest liquidity position in company history, and our fifth consecutive quarter of increased liquidity. Despite the demand driven operating losses, we have incurred over that period.

Given these projected liquidity levels and the positive cash and demand trends, we're no longer looking to raise liquidity and America for the first time since the pandemic struck.

For the full year 2021, our debt principal payments will be $2 8 billion, excluding the prepayment of our revolving credit facilities and the second quarter, we expect to pay down $595 million of aircraft and engine debt and addition to the 250 million Pvp facility, we paid off earlier this month.

Our full year, Capex and still expected to remain minimal non aircraft capex will be $900 million and due to a negotiated settlement with Boeing attractive aircraft financing and are already modernized fleet, our net aircraft capex, including PDP will be an inflow of $1 billion.

While we feel great about how much we have accomplished we recognize that we are still have a long way to go to get our business back to normal our team has done an amazing job of bolstering our liquidity conserving cash and driving efficiencies throughout the organization and we're very well positioned for the future and.

And with that I'll open up the line for analyst questions.

Ladies and gentlemen, if you have a question at this time, Please press star and the number one on your Touchtone telephone.

Hi, My question has been answered and you will still move yourself from the queue. Please press the pound key.

Your first question comes from the line of Joseph de Nardi with Stifel.

And Doug to two questions for you on the loyalty program I wanted to ask a question I asked a few years ago at your Investor Day.

And then how valuable the loyalty program has become and how lucrative and the business of selling miles has become do you need to reconsider what American Airlines is are you and airline or are you a marketing company.

And airline Joe.

And it always will.

And managed program was a big part of that which helps us to market and airlines.

So Doug and in 2019 your loyalty program generated roughly the same amount of EBITDA as Marriott did.

The question is did you know that does that surprise you and lastly, why don't you allocate 40% of the time on these calls to the loyalty program since that's how much EBITDA and represents for you all and thank you.

Thanks, Joe.

I don't think its possible separate.

EBITDA and the advantage program from the EBITDA and the airlines there.

They are inextricably linked.

And you can't have one without the other so.

Anyway.

That's what I believe so.

And then.

So.

And therefore, we talk about running the airline was and what we do every day and.

Again the range of program.

It does indeed.

And important part of that.

Our because we do have such a good job of running an airline and people want to have miles and our loyalty program and people want to have credit cards.

And that allow them to earn models as they spend to earn miles and so they can buy more of our on our airlines and those are all good things.

And she can have one without the other.

I don't think it's right to try and separate one P&L from here.

Okay.

Your next question comes from the line of Mike Lindenberg with Deutsche Bank.

Good morning, everybody I guess, maybe.

And maybe Robert or Doug Robert you talked about international lagging you talked about Trans Atlantic calling at Trans Atlantic.

And yet we.

We are seeing headlines over the last week or so about the potential opening of at least the U S. U K corridor, maybe as soon and some of that May maybe June can you just give us an update on what youre hearing and and whether or not we're going to see.

And then maybe.

Unfettered access between the U S and U K. Thank you.

So we're.

Mike, We're certainly hopeful and we.

And encourage.

Our government.

And engaged with the U K, but look this is a matter of a bilateral matter and its one that <unk>.

<unk> have to be predicated on comp.

Confidence and safety of travel and so we're encouraged and we're certainly ready.

And when the opportunity.

How's it and we know as I said that there is tremendous demand.

And both from a corporate and from a leisure perspective to take advantage, but we're going to have to make sure that we're coordinated with all parties governments and government agencies to make sure that.

We're doing it and in an appropriate manner.

And then.

Robert and then just my second call just Doug <unk>.

Curt Blue American I mean, I know, it's early and any sort of quick wins and with respect to flow traffic between the two of you and JFK and Boston and then.

You know the story I mean, certainly a lot of criticism.

And it seems and the press and from other entities out there and yet it feels like the story that's not being told is this correct.

Number of new service and I, just think about the phase that was just launched and last day or two you know the number of markets that maybe didn't exist before that now and it's like a JFK Kelly JFK Boise and the number of city pairs.

And from one to two or two to three or three to four for whatever reason that story doesn't seem to be out there.

Sorry to hear that as being.

Enhancing competition and not take.

And away from itself and any sort of update that you can get on with.

With respect to that alliance. Thank you.

Yeah, Hey, Mike. Thanks for the question, it's a great question and look.

It will bring and start the story about that because you're absolutely right.

Derek AA and Jetblue, together and the fastest growing airlines and the <unk>.

And all northeast corridor.

Just adding new services that.

And it would have never thought possible such as JFK daily, but arguably and which are the jetblue and the thought possible such as Boston Cincinnati and.

And there is a lot of things, but really the first part of your question. It's all been enabled and then is it really the customers are the true voice of this because they like it they will fly on it and we've seen that so far so March was our first month and which we turned on the code share. We only had about three weeks worth of bookings.

And then and at least for Jetblue on AA that was only about 25% to 30 market that Jetblue has already become our largest global codeshare partner.

That's a little bit weird, because so many of our international partners declined 5% to 10% of their schedule, but what we do draw some encouragement from is that.

Codeshare scope is vastly smaller with Jetblue and just about any of our major partners and as we look at these things we look at not just the total revenue production on us and how much of that revenue is really incremental and that is coming in higher fares and what we what AA is organically booking are coming and periods, where the flights were light and we're fine.

And the findings and somewhere between 30% and 40% of that is incremental and with similar rates and Alaska and is that from past compares extremely favorably.

Our our historical global alliances so that for us as much as anything as an indication of exactly what you said the customers vote and the customer really.

And likes the new services like the service expansion and Thats, there and and <unk>.

Along with that is the case is going to be attractive for us financially and to and will continue to grow and innovate and try things that would not have been possible without our partnerships such as this.

Your next question comes from the line of Dwang fittings.

And with Evercore ISI.

Hey, Thanks I appreciate it.

Can you just bridge us from the current international demand commentary of kind of 20% of normal and maybe that was a march comment 20% of normal.

And then getting to 80% from a capacity perspective this summer.

Yeah, Hey, this is actually like and I can help with that.

Yeah.

A big part when we quote international we're quoting both our long haul business and our short haul international business.

Yes.

And the way we get to 80% is that we're envisioning a long haul business, which will be kind of our peak summer schedule in July and 40% of its 2019 size, but a short haul international business, which will be north of that something like 20% larger than kind of what it was one and 2019 with our long haul Latin American net.

We're being something like 80% and as our 2019 right. So.

And maybe even some more.

Colorful way to say is that for us long haul and it's going to be a very small part of our system. This summer our total long haul network transatlantic transpacific and long haul Latin America will roughly will be about 3% to 5% of the seat capacity of the airlines.

The peak July schedule. So a lot of what you see is and our international numbers.

And more capacity going into the short haul network, which for US has proven to be the most resilient part of our whole system ever since the pandemic started.

No matter, what the headlines have been no matter, how the market with.

We have always been defined.

Bookings rebounding faster and sooner and greatest and that.

And as market and you see that and our RASM results were buying that.

And the biggest schedule and short haul international and producing the greatest comparative RASM up there too.

Thanks, and then just a follow up for Derek on the on the net aircraft Capex inflow of $1 billion.

Can you just tell us how much of that is sale leaseback proceeds and how much of that is sort of PDP refunds.

Yes, our net our net aircraft Capex is about 145, so direct sale leaseback of aircraft and is about two seven so we had about a 2.72 points.

And of aircraft Capex and Thats, all financed by direct lease and sale leasebacks and then about PDP is at about 850 value.

Sorry, just a small point of follow up there can you give us a sense for where aircraft rent might be kind of exiting this year.

Yes.

Okay.

Aircraft rent and exited we had about a 350 and the first quarter accident around 400, and the Florida Court.

Your next question comes from the line of Helane Becker with Cowen.

Thanks, very much operator.

Hi, guys. Thanks for the time.

And I have two questions. One is you guys said that you flew more p<expletive>engers than any other airlines.

And I know your cargo revenue was fairly strong as well.

And looking at your revenue.

Here too the absolute revenue not your unit revenue and it was lower than that like Doug.

Alta and I'm kind of wondering what you think accounts for the difference.

And then my follow up question is related to.

Uh huh.

Okay.

Are you are you talking to the <unk> administration.

Re opening borders.

Obviously states like that.

<unk> opening borders.

Summer.

And again at least.

Summer International cash.

Yes, I can just I can try to take first of all cash.

No.

Don't know.

And the detail on Delta's number I can tell you. This that it is not p<expletive>enger revenue and thats not cargo revenues.

So what is it.

Okay.

And my own refinery.

Refinery and final yes.

And anyway.

We know exactly what it is and there is.

Okay.

And do a business we don't have.

Okay.

And the vital ministration absolutely.

And as Mike had asked about.

U S corridor, we're heavily involved in that day.

And our relationship driven.

Large we are to the UK and our relationship would be and of course.

And we're in regular contact.

What we saw.

And support as a risk based data driven approach to restoring international travel.

What we've seen is.

Pre departure and.

Testing from international rental has been in place and early this year CDC recently, he's the guidance from domestic Travelport vaccinated persons volume linked these tiger that issue. So all these factors and we're taking into consideration and.

Formal guidance for trial would be and developed I think I know the administration and I know they understand and.

Importance of international travel and restore international travel to the economy.

And we all need to go look at this and our risk based way.

And once to rush or certain.

And no and pushing that out here so anyway I.

And I think.

And it's going to happen gradually and we're going to do it and weighted.

<unk> works with our with our government and works with other government insured.

And.

And why it works.

No doubt there is enormous pent up demand for it.

And.

We see that and some other countries and relaxed their restrictions on things.

Quarterly.

And we'll keep working on.

Everyone is involved and working productively.

And I'll sort of.

They are certainly income.

And I'll sort of pushback hotter size, we haven't wanted to us and the way that makes sense.

And Helane the biggest difference on the revenue side of the refinery.

Just to show you an answer.

Very helpful Alright.

Alright. Thank you guys have a nice day.

Thanks Glenn.

Okay.

Your next question comes from the line of Hunter Keay with Wolfe Research.

Hey, Thank you good morning, everybody.

Okay. So so business travel has always been obviously, a little bit more cyclical and it'll risky last year the higher reward.

Leisure travel tends to sort of endure and recover better. So you knew that but as you drive out whatever $2 billion and costs identify your aircraft is there a thought maybe that you don't want as much of that core per share on the other side of this and that maybe obviously I know this is Charles important to you I understand that but maybe maybe like an 80 20 leisure and business mix makes more sense.

And for American longer term, given your network footprint and the cost savings and the seat Densification and and all of the factors just around the periphery does that makes sense.

No we don't think so hunter.

Again, we think actually were going on and network that will serve business per day or network.

We're excited about that so as business travel returns work.

We're building the airlines to be there for them.

And the data as well or better than anybody else.

Okay.

Thanks, Doug and then Derek can you help me think about the FWD line and in 'twenty two 'twenty three as we contemplate junior already and the pilots and some of the head count cuts on management, if we <expletive>ume the capacity as you know at or maybe slightly above.

2019 levels.

From a salary perspective, yes, absolutely.

<unk>.

Not necessarily unit basis, just an absolute salaries basis relative to where you were pre COVID-19 with June June already and.

And I'll, let others.

We're going to have a significant amount of retirements as people went out so when we talk about CASM in 2022 from a cost perspective on all of the groups, we should be down year over year from that perspective, so as we go throughout the year.

We're increasing just because.

From a from a salaries perspective, we have.

Brought everybody back so it will increase as we go through and second quarter, but then we should be pretty flat as we go and the third and fourth quarter.

As we have already brought everybody back for the flying that is for the rest of the year.

So it should we should be a pretty good shape as we go forward with that.

And we all have contracts that are up so it depends on when those negotiations happen, but in a steady state basis will be pretty flat throughout the rest of the year from a second all the way through the fourth quarter.

Yes.

Your next question comes from the line of Jamie Baker with J P. Morgan.

Hey, good morning, everybody.

First one for Robert.

Question I frequently get is how quickly American can ramp up capacity and the event.

That and incremental market opens up and and more stable times I kind of felt like it was about three months between something happening.

It is a spike in fuel and Sloan capacity actually reflecting that change where are we today for example, if the EU announced today the <unk>.

Vaccinated p<expletive>engers are welcome and I'm not suggesting this is going to happen what months would we see that additional capacity.

So Jack and I can start and others can chime in first half just in terms of market openings.

Yes, I realize as well, we're dealing with booking curve much different.

Much different and domestic the domestic where so much of the bookings occur within 30 to 60 days for some of these long haul markets even for business related travel the booking curve is much more extended so even F.

Markets were to reopen so much of the.

The actual window for purchasing for the summer is actually p<expletive>ed us by so we're going to be smart about how we ramp capacity up so that we make sure that we can match, our full demand profile with with the aircrafts and that actually matches pretty well with the kind of timing.

And that's required to get aircraft and position pilots and position.

And.

Cities that have actually been mothballed.

And so many parts of the world back up and operating as well so for us to actually be able to serve these markets.

Dealing with time timelines that are and kind of the three to six months.

And lastly, you want to add anything to that.

The only thing I'll say is it.

Very specific part of your question and looking and 45 days. We can go ahead, and how to market and sell it and operating in a way that we couldnt have done before the pandemic, but Robert Barry and good point that doesn't mean that we should or that we won this and so much of it and especially as markets reopen and what is the best marginal use.

And the capacity that that's out there and.

And Doug.

And the dose and quality that is that.

Even if it's so much of Europe opens up right now the reality is were let's call it 60% to 65% on away from a historical booking curve for Europe, and a lot of the customers that would've gone there are already book trips and Hawaii, and Florida and anyway. So the marginal value that capacity may be a lot less and what might be the leased and the American system.

Excellent all good points. Thanks for that and then second question and this is related to the second quarter Guide.

It feels somewhat reminiscent of last summer's strategy and we talked back then about the low marginal cost capacity, given PSP and where fuel prices were in.

And why it made sense to fly more than your competitors right. This year, you will plug and more calculated decision.

Less of a sort of grow or die decision.

I think somewhat paraphrase, what <unk> said in the past, but the question I'm getting from investors as well.

Whether this summer as planned is markedly different than when you.

Basically tried something very similar last year any thoughts on that.

Yeah, I'll start and bus Robert and China, Yes, it's dramatically different and.

Well first off last summer.

And what we saw was.

And what.

Book to be a real drop it.

And.

And then rates and as we saw that Richard.

And we got the second spike.

And from fell off and we adjusted Accordingly.

So.

And all of that was the right decision was based on that.

And this case, we have vaccines.

Absolutely.

And then as a result, youll see it and I'll just ask doing this.

Every other airlines so anyway.

Okay.

I don't know exactly I wouldn't be sure exactly with what happened last July and Thats why.

And why we saw rates falling and <unk>.

And capacity when they spike back up reported back.

Now, we're seeing vaccinations result, something which goes much more prominent should that not be the case.

And iconic.

We can be very flexible and we will be.

I don't think that would be the case, nothing Robert steels, even close to that.

Pessimistic.

And Jamie I would just add one thing to that and building on Robert's comments and the section.

And what are you what you see out the internet schedule and is actually really indicative of where the airlines.

85% of our capacity this summer will be deployed and and domestic almost 95% of net between domestic and short haul international and.

As you look at it from the last three required and then that will lead flow and relatively more capacity. We've also produced more and.

Non of PRASM, and that's certainly what any of our of our network competitors App, but critically when you look out there the summer where the capacity is going is really important.

What we call the big four Dallas.

Dallas Fort worth Charlotte and Phoenix Miami.

Roughly 65% to 70% of our system capacity and a pull.

And a little more color on it and the first quarter, while our our system produced PRASM that was maybe 16% 15, and 20% larger than what our network competitors were Charlotte and DFW produce PRASM that were 30 and 35% larger.

With Phoenix and Miami.

Pretty close to that 15% to 20% range is.

Lot of what you see out there is actually.

Theres, some opportunism and Theyre about flying Saturday only transfer leisure heavy trips and things like that a lot of it is or as Robert said in his opening remarks orienting the capacity of this network to markets, where we can produce outsized value to customers and therefore, our outsized RASM for the airlines.

Okay.

Your next question comes from the line of Dan Mckenzie with Seaport Global.

And a couple of questions a couple of questions here regarding the plan to prepay $8 billion to $10 billion and get through natural amortization.

Does that include or exclude the plan to use surplus free cash flow the prepaid prepaid debt and.

And the reason I'm asking is it just seems like American.

Pay down substantially more than 10 billion over the coming five years.

And if that's correct I'm, just wondering if you'd be willing to provide sort of a bigger picture and number of what that could ultimately look like.

Yes. It does not include anything extra that says what we have and amortization going forward.

We're not ready to.

Say, but I agree with your premise that our liquidity is sitting at $19 5 billion and at the end of the at the end of the quarter, we're going to go through the process.

Figure it out where we need our liquidity and the short term and where we need it and the long term and it's not it doesn't need to be at $19 $5 billion, but as we said until we see you know.

Sustainable cash.

Production.

Going to hold the cash where we're at and keep our cash levels higher than we need. We will then use that to go do that so as I said, we have a lot of pre payable debt. So once we're ready we.

We'll go down that process and be able to de lever more than the $8 billion to $10 billion, but I just wanted to make sure that that $8 billion to $10 billion number everybody, though it's going to happen.

It has to happen as we go forward and pay off the debt that's due aircraft debt.

Unsecured things that are going to come due over the next few years, but you are right Dan.

It can be a bigger number it's just we want to wait till we get through everything and we're comfortable to move forward.

Understood Okay. Thanks, Bob.

To a fleet that is 10% smaller so call it 10% less flying.

I'm wondering if you can provide some insight on the overhang to margin say in 2019 with.

With that portion of the fleet and the reason I'm asking this question is just.

Based on what American has done and the cost side based on what Youre doing on the revenue side. It just seems like normalized earnings and this next cycle and are going to be higher than they were and the last cycle and I'm. Just wondering if you guys would agree with that.

Or what what do we need to keep in mind.

And yes, some others can and Kevin can speak to what our earnings profile might look like.

But you are and it's something that we have made this airline materially more efficient through the pandemic here.

And this summer will be almost 150 airplanes down but in the schedule will only.

About 80% and 85 airplanes down to all of that Delta is efficiency and efficient airplane that that went away.

And superior gauge economics superior and utilization wherever we have it. So if you went and back half 2019, we could fly roughly that same airline with materially fewer jet.

And the net work from the oriented a lot more to places, where we could produce outsize RASM and and so that and it's very much the conscious design and the whole point that the earlier remarks about the green flag planted to deliver an airline that can outperform and the future and we think.

And we've done that with the proof will be when we did.

Your next question comes from the line of southern sites with Raymond James.