Q4 2021 American Airlines Group Inc Earnings Call

Yes.

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 listen only mode.

Following the presentation, we will conduct a question and answer session.

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

Thank you Lance and good morning, everyone and welcome to the American Airlines Group fourth quarter 2021 earnings conference call on the call. This morning, we have Doug Parker, Chairman and CEO , Robert Isom, President and incoming CEO and Derek <unk>, Our Chief Financial Officer also on the call for Q&A session are several of our senior exact.

Including Maya Leibman, Steve Johnson, <unk>, David Cmos Nate.

Kevin Matt.

We normally do Doug will start the call with an overview of our quarter and we'll update the actions we've taken during the pandemic.

I'll then follow up with some remarks about our operations and initiatives for 2022 after Robert remarks, Eric will follow with the details on the quarter and provide guidance for the for the year. After Derek's comments, we'll open the call for analyst questions and lastly questions from the media to get in as many questions as possible. Please limit yourself to one question and a follow.

Sure.

We begin today, we must state that today's call does contain forward looking statements, including statements concerning future revenues and costs forecast of capacity and fleet plans. These statements represent our predictions and expectations as to future events, but numerous risks and uncertainties could cause actual results to differ from those projected information about some of these rich.

And uncertainties can be found in our earnings press release that was issued this morning as.

As well as our Form 10-Q for the quarter ended September 32021, and.

In addition, we will be discussing certain non-GAAP financial measures. This morning, which exclude the impact of unusual items. A reconciliation of those numbers to the GAAP measures is included in the earnings release and that can be found in the Investor Relations section of our website.

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

Thank you, Dan and good morning, everybody and thanks for being on the call.

We have a lot to cover today.

I'll start with the Big news.

Last quarter's call at least for me, which is that Robert Isom, that's going to be the next CEO of American Airlines that changes effective on March 31.

Im going to remain chairman of Americans Board, but importantly, I have I will have no executives here.

Robert we fully in charge.

As chairman for as long as Robert and the board find out about it.

This is terrific news.

It's going to be the ninth CEO in the nearly 100 year history of American Airlines.

Which we believe is the best job in all of aviation.

And we are excited for Robert and Premier.

I'll now Robert someone I've worked alongside for several decades is an extraordinary team builder.

Understands the complexities of operating in an airline like American Eagle.

Lots of people working and he brings a fresh perspective to the future.

It's been accomplished great things and I'm looking forward to watching that happen along with all of you.

Now what this transaction does mean is this.

There's going to be my last earnings call with you all which is kind of a big deal for me.

Speaking rule on every quarterly earnings call since I became CFO of America West Airlines in June of $19 95.

So by my calculations. This makes this is my 107th consecutive quarterly call.

So.

I'm trying to speak as much from this one does it have on the first 106.

Especially as it relates to the company's go forward plan, rather I'm going to let those who are leading American into the future talk about that future.

Before I turn on the stage the idea of a couple of quick. Thank yous first just to you all.

The sell side analysts and reporters who cover our business you all have very important jobs are in this crazy industry that we all love and you do it extremely well.

I have great respect for what you do and the challenges you face.

And I've done my best throughout my career to treat you with respect he deserved.

It can be accessed in the candor you need to do or Jonathan.

And you've all been extremely fair to me, which I really appreciate it so thank you very much.

Thank you to all of you on the line.

It also goes to some of the great people.

All of our analysts like call Carol's canvas Browning Sam budget.

One of the reporters like Terry Maxon, Susan carrying Scott Mccarthy. Thank.

Thank you all.

Second thanks to the American Airlines team.

I can't begin to do adequately on this call.

Can do to somewhat.

Oh, you all about the phenomenal job they did in 2021.

In a year when growing back to me a huge increase in demand was the most important and challenging objective for all airlines in.

The American team grew back faster and further than anyone else.

We served about 25% more customers than any other airline in 2020.

Just phenomenon in our industry. The last time any U S airline was that much larger than the next best next highest competitor with more than 10 years ago and that was done by merging two existing youre not.

Through organic growth.

This growth in 2021 lead us to higher 16000, new team members last year, we expect to hire another 18000 in 2022.

To manage that growth, while taking great care of our customers.

We posted the best operating performance in our company's history in 2021 with the highest on time performance and completion factor we've ever had.

We were the second highest of the four largest airlines in all of those metrics. Despite the fact, we grew back so much further and faster than <unk>.

We're particularly proud of how we ended the year certainly relative to our competitors our team had a far more customers than any other airline over the holidays. We did say was much less disruption than our primary competitors American.

American was the top performing airline.

All airlines in December in each of the key operating metrics.

And.

As our teams performed as well our customers have taken up our full year 2021 likelihood to recommend scores were the highest in American history.

That's an incredible testament to our people not only show up every day to operate the world's largest airline, but they do so in a way that welcome back our customers with open arms.

And all of this translated to our shareholders shareholders as well and a year of very difficult stock performance from the industry American stock increased 19% far more than any other U S airline.

So I wanted to summarize all of this to convey my gratitude to the incredible American Airlines team.

Want to thank each of them on behalf of our customers, our shareholders and everyone who counts on them every day.

It's this performance that gives us great confidence and momentum as we head into 'twenty, two 2022 and beyond so with that thank you all again.

I'll now turn it over to our soon to be CEO , Robert Isom, just talk about what lies ahead.

Thanks, Doug and good morning, everyone I want to start by thanking the entire American Airlines team for their efforts in the fourth quarter and throughout the entire pandemic.

And I'd like to reiterate how honored I am to be taking on the role of CEO .

I Express my appreciation for Doug's partnership and friendship over the years as you all know that leaves behind an incredible legacy having opened many doors for our airline and our industry I look forward to continuing to work closely with him over the coming months to ensure a seamless transition.

I'm taking on this role at a very important time for America over the past few years, our airline and our industry have gone through a period of transformative change and American has made good use of that time, especially in regard to renewing our fleet facilities and network and making the company as efficient as possible.

For fleet, we have dramatically simplified.

Now operate just for fleet types.

That gives us operating flexibility reliability and efficiency.

American's fleet remains the youngest in the U S network carriers. Our aircraft are equipped with industry, leading Wi Fi new interiors and we've added seats to our 737 <unk> hundred 21 fleet, bringing us more in line with the rest of the industry for.

For facilities.

We have expanded the number of gates, we operate that our largest hubs in Dallas Fort worth and Charlotte and we have inaugurated a wonderful new regional concourse at Reagan National which is historically, our most profitable hub.

We've also invested more than $200 million in languages over the past five years with new animals club lounges opening at Reagan National and Laguardia.

New and upgraded airport spaces are underway in New York, Chicago, and Los Angeles as well.

We've also updated maintenance training and corporate spaces throughout the system to ensure our teams can perform at an even higher level for.

For network, we're finding more to where our customers want to go or.

Our DFW and Charlotte hubs are prime to operate more than 900 700 flights per day, respectively.

Our partnerships with Jetblue in the northeast in Alaska on the West coast and to create an industry leading presence in markets that have historically been difficult <unk> and our proposed investments in South American carrier strengthen our already industry, leading position in that region.

But demand continues to recover and we return to full utilization of our assets American is poised to outperform.

We've extracted one $3 billion of efficiencies or operating and economic fleet that will provide CASM ex tailwind as capacity is restored.

Based on our current assumptions, we expect all of this to result in a return to profitability. Later this year and continued deleveraging as we pay down $15 billion of debt by the end of 2025.

And I am excited to hit the ground running in April and build on our momentum to deliver results in 2022.

So let's get to the business in the quarter. This morning American reported a fourth quarter GAAP net loss of $931 million and our full year GAAP net loss of $2 billion.

Excluding net special items, we reported a net loss of $921 million for the quarter and a net loss of $5 4 billion for the full year.

Our results for 2021 were significantly improved over 2020, but the impact of the omicron variant has affected the timing of all of our full revenue recovery.

We delivered a strong revenue performance in the fourth quarter. Despite the rise in infections.

We reported fourth quarter revenues of $9 4 billion, our highest for any quarter since the start of the pandemic and a sequential increase of $458 million from the third quarter.

Our cargo team continues to do a fantastic.

Fantastic work and delivered record cargo revenues of $1 $3 billion in 2021, 30% higher than our previous record.

As we've seen throughout the pandemic each new variant and a corresponding increase in cases is followed by a faster recovery in demand with fewer regulatory restrictions and changes in travel policies.

Based on what we're seeing we expect overcrowded followed the same pattern.

<unk> are recovering quickly after dropping off considerably in early December though there is still not back to pre <unk> levels.

Your travel, particularly in the U S and short haul international market remains very strong and is approaching a 100% recovery. We expect this trend to continue and interest interestingly, we've seen many of our customers that have historically, we've historically called leisure travelers are actually flying for reasons beyond just vacation.

They may try to feature a mountain destination, but theyre actually going to work remotely for the week.

The lines between leisure and business travel are definitely blur.

The recovery of international and business travel slowed late in the fourth quarter, given the AUM of crowd, but we remain very bullish on both the.

The return of international travel is directly linked to travel restrictions around the globe as restrictions falloff, we expect international travel.

Travel to pick up considerably.

We still expect business travel to come back and forth, but I'll come back in a different way and by that I mean, the overall mix of business customers, how they travel and how we serve them.

As we've shared previously small and medium sized business travel remains the strongest segment in the fourth quarter small and medium business travel was roughly 80% recover while large corporate travel was only 40% recovery and.

In addition, small and medium business revenue at sequential month over month improvement in December in spite of the impact of overcrowding.

We are optimistic that as corporate travel corporate travel returns in a significant way this year and as companies come back more fully into the office and get back on the road, we're going to be back on track, but as we're developing our plans and forecast for this year, we're working to build an airline that can be profitable even without the full return of managed corporate travel.

The demand environment has changed a lot through the pandemic because of this we have to be nimble and responsive.

Bill agile processes that allow us to deliver the network our customers need and want no matter the environment. The game has changed and our team is ready.

Going back our network the way we did in 2020 is a feat in and of itself, but to do so while running a reliable operation and achieving strong revenue results along the way make it even more impressive.

We entered 2022 with tremendous confidence as a result of the way we finished last year and started the new year.

I've noted American had the best reliability of all U S carriers in December and the highest annual likelihood to recommend scores in our history.

Very pleased that 97% of our team has been vaccinated or submitted a request for an accommodation with no one losing their job.

Creative agreements in place with our Union partners to support the operations throughout the pandemic and just recently reached new contract extensions for some of our team members to start the year.

All of this while flying more flights and more passengers than any other U S carrier by a wide margin.

To ensure this momentum continues we have two sharply focused priorities for this year running a reliable airline for our customers.

And returning to profitability.

Returning to profitability is very much tied to the demand revenue environment, but as I mentioned the work we have done during the pandemic has positioned us very well. This includes our cost and efficiency actions, which Derek will touch on momentarily as well as the work that we've done to refocus our network around our most profitable flying.

Enhancing our partnerships around the U S and around the world and driving value through the.

The advantage program and co brand cards has been something that we've done well.

On an absolute basis, new advantaged member acquisitions in 2021, outpace 2019, despite lower levels of capacity and our advantage revenues in 2021 closed in on 2019 revenues.

So in summary.

We're grateful for the incredible work of the American Airlines team over the past year, we remain optimistic about the return of demand and we're very pleased with how American is position. Thanks to the tremendous efforts of our team.

And now with that I'll turn it over to Derrick. Thanks.

Thanks, Robert and good morning, everyone before I review the results I would also like to thank the American Airlines team for their outstanding work during the quarter. This pandemic has been relentless and despite the uncertainty our team continued to show its the best in the business.

This morning, we reported a fourth quarter GAAP net loss of $931 million or a loss of $1 44 per share. Excluding net special items, we reported a net loss of 900920 $1 million or a loss of $1 42 per share.

For the full year 2021, we reported a GAAP net loss of $2 billion and excluding net special items, we reported a net loss of $5 4 billion.

Despite the impact of <unk> that we saw that in this quarter the trajectory of our revenue recovery continues to be positive and it even exceeded our initial expectations as we outlined on our last call. Our fourth quarter revenue was down 17% compared with the same period of 2019 versus our original guidance of down.

20%.

This gradual improvement makes it even clearer to us that despite the uncertain demand environment. The steps we have taken over the past 24 months to bolster our network and improve our revenue generating capabilities are working.

On the cost side, we remain focused on keeping our controllable cost down and we actually had $1 3 billion in permanent annual cost initiatives in 2021, providing a new and more efficient baseline for our 2022 budget.

During the fourth quarter, we made the decision to invest in the operation with a holiday pay program for our employees as well as reducing our peak holiday capacity. These actions did put pressure on our unit cost performance in the fourth quarter, but they lead to a strong operational performance over that period. This included in.

Industry, leading months of operating performance in December when it mattered the most to our customers.

On the fleet side I am pleased to report that our fleet Harmonization project is now nearly complete with our last <unk> hundred 21 going into the shop. This quarter. This is a full year ahead of our original schedule and are excited to have this project behind US. In addition to our consistent product and better experience for our customers the operational benefits of having a sim.

<unk> and streamlined fleet are already being realized.

Changes, we have made to our <unk> hundred 20 ones and 737 enable us to fly 2% more total capacity than we could have with the old configurations, thus, providing a unit cost tailwind as we continue to build back our network.

In addition to better unit cost. These reconfigured aircraft will also generate more revenue, allowing us to recover from the pandemic even faster.

With respect to our wide body aircraft, we continue to have productive conversations with Boeing to determine the timing of our delayed 708 eight deliveries that were expected or arrived last year due to the continued uncertainty of delivery schedule of these aircrafts remained out of our near term schedule to minimize customer disruption.

We expect to fly four aircrafts during our peak summer schedule.

We ended the fourth quarter with $15 8 billion of total available liquidity, which is the highest year end liquidity balance in the company's history.

As we have said in the past the deleveraging of Americans balance sheet remains a top priority and we are committed to significant debt reduction in the years ahead, even with this volatile demand environment, we remain on track with our target of reducing overall debt levels by $15 billion by the end of 2025.

In fact as of the end of 2021, we have already reduced our overall debt levels by $3 7 billion from our peak levels in the second quarter of 2021.

During the quarter, we made $706 million in scheduled debt payments, which resulted in paying off the 2013 dash one <unk> b tranche in the first quarter, we expect to make $337 million of scheduled debt payments, which will include unencumbered 12 aircrafts.

For our pension our funded status improved by $9 two points to 77, 9%, resulting in a $2 billion reduction in the underfunded liability on a year over year basis.

Lastly, during the fourth quarter, we completed approximately $960 million of WPZ financing and we now have financing secured for all our 2022 deliveries through the third quarter.

Our 2022 budget reflects our priorities to run a reliable airline for our customers and returned to profitability. Our plan includes ongoing investments that will help build upon the positive momentum we've seen in our operation, while leveraging cost efficiencies and network enhancements, we've talked so much about.

We believe these actions will provide a solid baseline for both profitability and free cash flow production when demand is fully recovered.

Looking to the first quarter Covid impacted demand and elevated fuel prices will continue to put pressure on our near term margin.

In this environment, we expect our capacity to be down approximately 8% to 10% versus the first quarter of 2019.

Based on current demand assumptions and capacity plans, we expect total revenue to be down approximately 20% to 22% versus the first quarter of 2019.

We expect our first quarter CASM, excluding fuel and special items to be up between 8% and 10%.

While we expect to be unprofitable on a pretax basis in January and February and test anticipate a material improvement in our return to profitability in March as demand returns.

As for 2022 capacity much of our plans are subject to the uncertain timing of deliveries.

788 aircrafts as I've mentioned previously removed these aircrafts from our near term schedule to protect our customers. This reduction is worth approximately one to two points of scheduled capacity for 2022.

With this adjustment, we expect to add back our capacity throughout the year and to have full year capacity you recovered to approximately 95% of 2019 levels. This of course is subject to the future demand environment and we always have the ability to adapt if demand conditions warrant.

As we look at our cost like other airlines, we are seeing inflationary pressures in fuel prices.

Hearing in training for both new hires and existing crews as we brought back our operation, including on the regional side we.

We are also seeing increased starting wages for certain work groups, including vendors. In addition, we are seeing unit cost pressures from the rolling 788 delays as well as the impact from our ramp and mechanic contract that was ratified in early 2020.

Even with these unit cost pressures our fleet simplification strategy enables higher aircraft utilization and higher average gauge both of which will help alleviate some of these pressures.

As such we expect our full year CASM, excluding fuel and special items to be up approximately 5% versus 2019 with the second half of the year much lower than the first half as we fly a more efficient schedule.

For the full year, our projected debt maturities are expected to be $2 6 billion. This includes the cash settlement of our $750 million unsecured notes that mature in June .

Without any additional prepayment of debt we project, our total debt will be down $5 4 billion at the end of 2022 versus our peak levels in 2021.

With respect to capital expenditures, we expect full year 2022, capex to be approximately $2 6 billion, which is significantly lower.

Than in previous years and versus others as our fleet replacement needs are complete.

Net aircraft Capex, including pre delivery deposits is expected to be $1 8 billion and non aircraft capex.

<unk> to be $800 million.

So in conclusion, we are incredibly proud of our team for their continued resilience in a very challenging environment with.

With the bold actions, we've taken and steadfast commitment of our team we are well positioned for the future.

Now before we open up the line to questions I would like to acknowledge Dan Cravens for a minute.

Today is Dan Cravens, 62nd call.

Not quite as many as $107 67 is pretty amazing and final earnings call as part of our American Airlines U S Airways and American West team.

I'd like to personally thank Dan for his two decades of service.

You can see for both the airlines and our investors and for his friendship.

But continue to continually Dan provided continuity excuse me Dan provided over 20 years in his role across multiple airlines multiple crisis and a global academic is unmatched.

We wish him the best of luck in his next adventure, we will be introducing Scott long, who will be stepping into dan's role from our financial planning organization later this month.

So with that I'd like to open up line for analyst questions.

As a reminder, if you'd like to ask a question. Please press. The Star then the number one key on your Touchtone telephone.

Through all your question press the pound key.

In the interest of time, we ask that you limit yourself to one question and one follow up.

Our first question comes from Jamie Baker with J P. Morgan.

Hey, good morning, just quickly Doug.

Love Your prepared remarks, I know the port wasn't to make me feel old, but Paul Candace, Sam I mean, what a throwback.

Yeah.

It really has been a privilege to speak to you on all these calls all these conferences. All these years I did want to just add my own thanks, and congratulations obviously.

Same goes to my friend Dan.

Cravens.

First question on the air traffic liability Derrick so sequentially from the third quarter to the fourth.

Aligned by about $360 million granted this is less than the customary seasonal decline.

But delta and United both experienced flat sequential trends that I'm, just trying to understand what the nuances. The puts and takes are whether it's a network issue differences in forward bookings any additional color on the ATL sequential change.

No.

Not really any different any color I think from a stored value basis, though that stayed pretty much the same.

Future travel dropped from I think we were at six four in total ACL balanced future travel was three six went down to three two which is a normal seasonality for us.

We did see.

I'll pick up at the end of the month.

The end of the month from from.

Normal.

So I think it's just normal seasonality for us in it.

We didn't see as much as the stored value being used and some additions because as you know some of the issues with the cancellations and things that were out there we added a little bit to that but I would have expected it to drop even more but it held up just because of the fact that from an operation standpoint, there were we added.

A little bit in the fourth quarter from.

Issues with the operation, but other than that I think it's just seasonality, but we definitely see I am not sure why others were flat or up other than what they did.

That's perfect and just a quick follow up and I don't want to get bogged down in comparing your guide.

That of United and Delta, but you all expect to arrive at a pretty similar first quarter revenue outcome down 20, plus points from 19, but you have to fly considerably more capacity to arrive at that output can you just remind us what some of the seasonal and network factors that drive this I understand there is.

More seasonality for you in the first quarter, but I'm, just trying to figure out what causes that drag.

Hey, Jamie this is this is vasu.

The reality of where we still are in the first quarter is that there is still probably a pretty penny.

Large variability in first quarter forecast and so much like Derek I won't I won't comment on what our competitors are looking at but we have taken.

Pretty conservative view of what rent.

Revenue production will be in Q1.

We've been encouraged by recent trends.

This growth spikes, we're already seeing bookings come in stronger so we'll see but.

What we've come to realize through the pandemic is that we have.

A lot of levers to go plan, the airline really flexibly and we can ship things up and down and indeed, new capacity from one market to another far more nimbly than we had.

In times past and after so many crises, we thought we were nimble before and we've got even faster so.

Not a lot yet to do in first quarter and we'll see.

How things come together as demand starts picking back okay. That's great. Thank you gentlemen take care.

Thank you Jamie.

Our next question comes from Michael Lindenberg with Deutsche Bank.

Yeah, Hey, good morning, everyone, Yeah really to Echo a lot of what Jamie said, Doug it's been a privilege really and I've learned a lot going all the way back to the early two thousands.

Dan as well.

Dan you've been a great friend and you've been a great supporter and Scott you've got some pretty big shoes to fill there.

Thanks, Mike.

Just quickly onto questions Im sure Youre going to get something along these lines I just wanted to hit on sort of this key five ish or excuse me <unk>.

Yes.

The FAA was out I think yesterday or two days ago, saying something like 62% of the U S fleet is should be fine.

Do you guys stack up and the way we should think about this is this is this going to be is this going to blow over over the next few weeks or is this kind of sort of reappear.

Five six months down the road when maybe some of these exemptions zones or buffer zones around airports, maybe theres changes there.

Like.

What should we be concerned about.

Should we anticipate as this.

Rolls out over time, thank you.

Okay. They are asking me to take this means I'm sorry, Ryan.

<unk>.

The findings.

My last payment.

Anyway.

This is Mike.

We've all been every airline has obviously been involved with us over the holidays it wasn't.

Anyway it wasn't.

Our finest hour I think as a country to get us to that point, but the good news is we now have what should have been going on for quite some time, which manufacturers the telecom the.

Government agencies, all sharing information that they need.

To make sure those can be rolled out.

In a way that all Americans.

And all Americans.

They are quite aren't going to be impacted by that.

Where we sit right now is.

The way that.

The way that we're all able to operate our fleets is because.

The telecoms have agreed.

We deployed some of their towers near airports, so with that agreement.

I'll turn to David.

As far as you'll ever see everything is totally fine.

We don't do that.

Really any any material disruption whatsoever.

As long investment place I was wondering if that's not going to stay in place we need to get to where they can actually.

And we want it gets where they actually can deploy all of the towers that are in place and that we can still do that but no one's going to make no one's going to do that until we all agree.

It can be done without disruption so huawei.

It's taken us a lot of gift to the right spot buy so that when the right spot.

Right Okay.

Slide information and I don't think youre going to see any material disruption going forward because of that.

Great.

What I wanted to hear and just Eric a quick one on the non op.

Expense $360 million for the quarter.

Because one of your pension is.

And maybe the potential gains that youre anticipating in how you bucket into 2022 is there going to be a pension tailwind.

Not only in the March quarter, but for the year and any sort of rough estimate on what we should use from a modeling perspective. Thank you.

Yes, I think there is a pension tailwind into the year. So we ended up the quarter $3 80 for this quarter, we're projecting it to be in that $3 50 range for now.

And slowly declining as we pay off some debt throughout the quarter. So I would I would.

First quarter should be in more in the $353 60 range and declining to about the $3 40 range in the fourth quarter.

That's great. Thank you.

Okay.

Our next.

Question comes from Helane Becker with Cowen.

Thank you very much operator.

Doug it's been.

That hopefully will continue to stay in touch and.

I mean, you've been a really good quarter actually.

It's been a really good.

Since this over the years so thank you very much.

<unk> wishes to both of you.

And I refuse to to tell you how many of those conference calls.

I think I know thanks aligned.

So actually I guess.

No maybe bus tour Robert.

Can you just addressed.

Two things.

You guys have said you're going to hire I guess, the gross number of 18000 people this year.

And some of it is we're gonna be pilots.

We're seeing United and American.

Our delta rather reach.

Journal Jack capacity, because they don't have enough pilots are you going down that similar path or are you in a better position from a training perspective.

So helane thanks, Robert Thanks. Thanks for that question. So we are going to be joining a lot of high end. This year, we did a lot of hiring as well last year. So from a pilot perspective.

A couple of years of the pandemic in which quite frankly, there weren't a lot of people being trained and given the demand.

<unk>.

<unk> in the industry felt by quite a bit so as we all rebound of course, there is a constraint that we're all dealing with there is not enough production I do a pilot I do believe that over time.

That supply and demand imbalance will be remedied.

It's incredibly attractive profession when.

When you think about the starting wages and the ultimate compensation for the industry. So we're doing everything that we can and I know other companies are as well to encourage those that are looking for a great profession to come into the business, but in the short run from a mainline perspective look we we.

American has a very very attractive brand, we're going to have plenty of pilots. The biggest issue that we're dealing with is the throughput of pilots and getting them getting them through training, we've invested an incredible amount of resources and having training assets ready to go those are all coming online.

Again from a mainline perspective, we'll be able to supply all of that we need.

The imbalance is really going to be played out and the regional carriers and on that front like like other carriers, we're going to have issues issues as well.

We have them right right now we're working very hard on that it's impacting us to a certain degree.

But we're going to do everything that we can to make sure that it's not a material impact overtime.

Okay. That's very helpful. Thank you and then just my follow up question.

I don't know who wants to answer this one but when you talk about small and medium sized businesses.

And those folks who are traveling because they really have to for their livelihood.

Can you talk about also whether they've got the credit card and if youre seeing increased credit card acquisition in that category.

And Helane. This is this is vasu.

I'm happy to answer your question. Indeed, this is one of our increasingly his favorite topics to talk about you are correct, we see small and mid market business growth.

Right.

The diversity of who that customer is really can't be.

Over overstated, everybody prompt somebody starting a business and sometimes relatively large companies who are seeing growth through the pandemic and get on the road to drive sales or visit factories or whatever the case might be.

And for US we do very we haven't seen them growing acquisitions on our co branded credit cards. Indeed in Q4, it's not just that our spend levels.

In 2019, but our acquisitions, even net of attrition was equal to and very often for some months and some weeks greater than what it was in 2019, which means that more people are coming to the card that said, we see a real opportunity within the space of <unk>.

Small business mid market business, because the reality is we don't actually have a a true card product or.

Or an entire consumer offering for that segment a lot of things that we have are either tailored for really large corporate accounts.

Our individual travelers. So we see a lot of opportunity as we come out of this and a lot of ways to go and drive a lot more value to that customer and captured in our P&L.

Thanks, very much vasu, thanks to everybody.

Thank you Helane.

Our next question comes from Duane <unk> with Evercore ISI.

Hey, Thanks, Good morning, I wanted to ask you both of the same question I asked Gary and Bob at their Investor Day.

You have worked together for a long time as a team but from a change perspective is there any daylight between the two of you strategically.

Do you have any examples of issues, where you really constructively disagreed over the last decade.

Hi, Joanne Thanks, I'll start look Doug, Doug and I are different leaders.

If I go back.

Are we.

Lead the company.

Different way, it's I'll tell you that in terms of the strategic direction of American.

Not only worked with Doug, but I have been part of every major decision in this company over the last.

Since the merger.

So from that perspective.

We're doing the right things I'm excited about the positioning of American.

Assets that we've put in place whether it's fleet airport alliances our network, we're ready to go.

Demand recovers and we can put our assets to full utilization.

To outperform so from that perspective.

Don't expect to hear a lot of.

Of difference in terms of the way that Doug Doug These things right now.

M solely focused on.

Making sure that we deliver a great product for our customers and that's running a reliable airline and getting back to profitability.

Thanks for that thoughts and appreciate its a tricky question, maybe one for Vasu.

How different would march quarter capacity have been if we never had omicron.

Maybe this is an unfair observation, but it feels like Americans plans relative to the industry are very static in what is obviously, a very dynamic world I. Appreciate you taking the questions.

Yes, absolutely and I appreciate the question.

It's sort of hard to do what hypotheticals.

Would be but what I would say is this.

That part of the reason why maybe there's probably less volatility in our schedules is where our airlines sort of naturally position.

Not only do we operate a lot more of our capacity in domestic we generate a lot more of.

The value for customers and RASM results from buying in domestic sell for most of the pandemic.

Certainly the last several months.

We've oriented about 85 ish percent of our ASM capacity in the domestic and short haul operations as we go into the first quarter.

Be about 80 ish percent and those with another 5% or so constituting a major international markets like London Heathrow for example.

So for us so much of our network is that 65% of our network is.

And our we call Sunbelt hubs Phoenix DFW.

D C. Miami that have been extremely robust due to the pandemic and any one of those hub.

Unit revenues, which are well in excess of what our competitors do so a little bit of what you see as a network composition difference quite frankly as we go out in the first quarter.

Quite frankly, we are flying the things, where we can most directly create value for the customer it outperform and we're not doing the things that down so our long haul schedules are 70% of what they have historically been our short haul schedules are a lot closer to what flattish. So it would be like when demand is back.

<unk> remains to be seen.

But for us the real opportunity when we've said all through the pandemic is less about driving volume and the capacity based on the cost base at the airline.

Changes only very marginally, whether we fly 95% or 92% of the airline the really big thing for us is domestic yield performance.

And as we look out I mean, if indeed demand comes back where we see it is less about how we go and manipulate capacity around the system.

More about how we capture and yield growth.

Appreciate the thoughts.

Thanks, Brian .

Our next question comes from Hunter Keay with Wolfe Research.

Good morning.

Yes.

Robert as you think about taking over the CEO role what are some of the things that you want to accomplish in your first 100 days.

Maybe when your ability to put your stamp on things.

Got it.

Hey Hunter.

You really clear a clear and focused focused on that.

Our goal right now is to get back to profitability as soon as possible to deliver reliable product.

Planet payment plain and simple.

I take a look forward, we've got a great opportunity ahead of us of everything coming together at the right time I do think that we're in a position where.

Demand is poised to reap at everything that we see suggests that there is pent.

Pent up desire for people to get up out on the road, whether its for leisure and business demand and I think I've got a special special opportunity.

One that brings together everything that we've been working so hard to do throughout the pandemic and bringing that bringing that to fruition.

So as I take a look out to the middle of the year I do think that we're going to get back to profitability I do think that American is going to continue to run a very reliable airline and I think we're going to be.

Very very competitive in all the markets that we serve.

Okay.

And we've talked about capacity being driven by demand.

Fuel costs occasionally but.

What is youre not able to hire people.

We will hire the right people that fit the culture that you want to build at American is their decision, where you would decide to be smaller as opposed to hiring people that might not be great cultural fits.

So thanks for that question because look this is something that I'm really proud of last year as we as we built back.

The entire economy all industries.

Struggled with finding the right people and getting them in the right positions.

American as we grew back we really quickly remedied any issues that we had and what we found is American as it is a very very.

Attractive place to work.

American Airlines sells itself in terms of attracting people to it so.

Whether it's the new flight attendant classes that are now graduating.

It's the thousands of people that we're bringing on to work in our reservations.

Agent ranks.

And those pilots mechanics that were bringing in.

We at American.

Get a chance to really choose those that get to be part of the team and that's a great position to be in.

Over time, I think that we're going to have to do a lot of work to make sure that the supply of pilots into our regional carriers is as strong as we needed debate, but youll see us on the forefront of that as well.

Thank you.

Thanks Arne.

Okay.

Our next question comes from David Vernon with Bernstein.

Hey, good morning, everybody and congratulations on.

It's everybody on their next chapters here.

Eric first question for you on cash flow, if we're looking out at our full year guidance, you've laid out capex of $2 six should we be expecting cash from operations to cover that.

I'm just trying to get a sense for how secure are we should be looking at the balance sheet and liquidity do you have on there we're going to be dipping into that from an operating standpoint are we going to be able to cover that based on what you're seeing today.

Well, we'll definitely be able to cover that.

Excellent short and sweet I like it.

Second question, maybe for Robert or Derrick you.

As you look at the capacity and the CASM ex guidance, you've given for 2002 2022 downside upside.

How do we think about in <unk>.

Brushes 'twenty two to 'twenty three if we're up a little.

Relative to 19 and is that is that just going to be kind of a one for one thing or is there more beta to that.

How should we be thinking about the operating leverage coming back into the business as demand gets some sport.

Yes.

Actually what you are saying I think we.

We are under utilizing our fleet without a doubt at this point in time I think as we add back our assets Robert Robert talked about.

Pilots of portability, and making sure the throughput happens and get the throughput through.

So if we.

And the 708, so you have two opportunities to grow this airline at a very cheap cost I think the cost headwind there is probably three or four points of cost headwind, we have in place right now with underutilized in our assets.

And making sure that when those aircrafts get back and we could use them as much as we can we do not need to add costs, we do not need to add aircraft. So we could we could in today's world. We could fly the airlines, probably 5% more with the cost structure. We have today, so it's pretty close to one.

One.

It might be a little bit sticky and they're a little bit, but it's pretty darn close to one for one.

On the first 5% that we could add back.

Alright, Thanks, Jason.

Our next question comes from Dan Mckenzie with Seaport Global.

Oh, Hey, good morning.

Congrats to both Doug and Dan.

What an amazing run its been its really been a pleasure.

A couple of questions here, one housecleaning question, just one follow up on small and medium sized businesses.

Vasu whats factored into the first quarter revenue outlook with respect to the timing of international returning.

Just sort of straight lining current trends or did you factor in some kind of escalation in March potentially.

Hey, Great question, and you're absolutely correct.

Straight line in current trends with the lone exception of our short haul business.

Okay.

Pete tends to peak in the March April time period.

As North America goes on spring break and Easter vacations.

Okay.

Very good.

Secondly, just following up on <unk> question on small and medium sized businesses.

I'm wondering if you can elaborate on kind of their purchase behavior versus a typical leisure travel our daily book further out closer in.

Presumably higher margin business I'm, just trying to get a sense of what that means and I guess I didn't in the Powerpoint I guess or I didnt catch what that revenue from small and medium sized business was as a percent of 2019 revenue and how youre thinking about that training potentially here in 2022.

Sure.

Let me.

And so that isn't a slightly different order.

Small business as we ended December what we call small and mid market business was 80% recovered.

Large corporate business people, who buy on Big managed program was.

40% recovered ballpark.

Interestingly what that means for us.

Directly at 40% of our revenues came from business about 15 points of that were from large corporates and the balance were from small and mid market companies.

Due to the pandemic that has shifted a lot were less than 10 comes from from managed corporates as we think about next year.

Absolutely anticipate a rebound.

Travel.

It's something we're spending a lot more closer to <unk>.

30 points of the 40 or so is coming from small to mid market and managed corporate come down a little this is something which is certainly.

Acuity that we looked upon very favorably in may in many ways be unique to American airlines, because so much of that small business growth to your question about the profile.

Does actually book in a very similar booking window as large.

Large corporate travel a much shorter.

Dave the departure than what leisure in very critically it's originating in markets that are in the center of the country. Thank Oklahoma City are.

Austin, San Antonio and places like that.

Engages in shrimp behavior, which is very different to manage corporate people are willing to go stay a Saturday night and apply on a lower load factor flight, but very importantly, it comes in at the same level as yields is that large corporate businesses.

But at a fraction of the cost of sales cost of sales it looks a lot more like like what leisure is so we see this as a sign of real opportunity and indeed as we as we look out there and if you think about things.

We see that to Robert's comments earlier, the nature of this travel that's starting to change that.

We see small business is traveling.

More people traveling our blended business leisure purposes.

More people willing to go by themselves.

Our premium bear product when a cheaper one is available so we see a lot of opportunity as the world changes.

And we're going to organize and position ourselves to execute on that.

That's terrific. Thanks a lot.

Our next question comes from Catherine O'brien with Goldman Sachs.

Hey, good morning, everyone and just want to Echo My my peers congratulation.

Doug and Dan, it's really been a pleasure working with you.

Yes, I guess, it's almost 12 years now.

Thanks for all the good times.

A question, maybe just on your 2020 growth outlook for that 5% I understand with the uncertainty around the 77. This makes it more difficult, but can you share high level, what youre thinking the breakout between domestic and international growth is based on your current 70 assumption and what's driving the decision on where to allocate that cash.

Thanks.

Yeah, Hey, this is vasu I can I can help with that.

We are looking at as we see it.

Alright, maybe your first question.

We anticipate that with the 787 will be a materially smaller.

Nationally airlines and what we would otherwise like to be operating something which is probably.

Let's call it 75% to 85% of the scale, we had in 2019, but our our short haul network domestic and the narrow bodies, we fly in the Mexico Caribbean Latin America will probably be a lot closer to what what 2019 it.

But there is couple of other important things to note there of course first.

We have a very conservative view of what happens with the 780 Sevens and data.

A pretty conservative view about how international demand even recovers through the course of the year. So a big mix of our international flying and you already see it published schedules.

Oriented around.

Markets, where we can go drive a lot of the connectivity.

Through whether its heathrow or other partner hubs still hard things like that.

That we might not have in times past.

The other thing Thats out there too.

And to an earlier comment I mean, we have a lot more flexibility with with the airline and indeed through the pandemic, we've come to realize that much easier.

A few points, we have a lot of flexibility in how we go and plan the airline.

So we are consciously trying to build the airlines so that.

We can be really efficient and how we utilize our assets and make moves around the system. So that we can go fly the market's a customer's demand most.

Even if it's relatively late in the booking curve so.

While those are broad strokes of where capacity is still things may change and realistically they will change as demand comes back.

Got it and then maybe one more for you again ROTC long just to dig into your short term revenue outlook a bit more.

Understand there's a lot of moving pieces.

RASM performance versus 19 improved each quarter through 2021.

It looks like is going to get worse in the first quarter period guidance.

Of course, you called out impact of Omicron, well can you just help us think of the drivers of that a bit more and anything we should know about cargo or other revenue trends or is that really just your conservative view as you noted on on loads and pricing on the passenger side. Thanks for the time.

Look it's very much the conservative view and having gone through multiple waves of the pandemic one of the things that we've kind of more reliably build forecast on is the amount of time it takes from the.

Cases, peaking to demand recovery.

That's shortened through every wave and the Delta away. It was about a seven week spread between case, peaking demand bottoming out and growing again.

So a lot of our outlook is based on a slightly shortened version of that occurring but indeed, what we've been seeing as cases of peak wherever they peaked in the world Israel U K more recently than domestic.

Not a seven week span, it's not four week span, it's something a lot more like a seven days.

So it's still early to tell as I mentioned earlier, 85% of our capacity is in domestic and <unk>.

I presume last week was the peak of cases across the country.

We've been encouraged by the last few days of bookings.

A lot of our first quarter forecast is based on the conservatism that we've had we're having seen prior waves before and indeed, we anticipate that January and February will remain challenged because.

Historically, they are seasonally the weakest month in our business. So we will see but we remain encouraged for how strong demand comes back in.

Certainly reserving every seat because theres, a customer that wants to travel and want.

Yeah.

Can we move onto the next question.

Our next question comes from Andrew <unk> with Bank of America.

Hi, Good morning, everyone. Doug just wanted to extend my congratulations as well and the same goes to Dan it's been a pleasure working with with both of you over the years.

Just first question around costs.

Eric.

Does the 5% CASM guide include anything from current Labor negotiations and then just secondly on costs.

When you factor in kind of new labor deals.

Kind of the inflation in the economy that you were discussing earlier.

Even if capacity comes back do you think that getting back to pre pandemic CASM X is a realistic expectation over the next few years.

Yes. It does not include it includes year over year deals that were already done. So any deal that has already done is built in.

As Robert talked about we got some real we got some deals done in the past few weeks the huge impact on the cost but really good.

Turning to get those deals done and get them done quick with some of our groups, but it does not include any new contract negotiations that are complete today. So that's number one.

Number two.

I do think.

We had expected 2022 to get back to 2019 levels.

With the with the variant and pulling down the flying from 708 is not being there and also demand not quite being there we will not get to the 2019 levels.

As we get into 2023, it's definitely possible it depends on the growth of the airline and other things that we do.

If we don't get there we will get very close but it that way. So I think in 2023, we've kind of I've always talked about being pretty flat in 2022, that's not happened and really driven by fully.

Fully utilizing our assets.

As we fully utilize those assets and we plan in 2023, I think we can get to that level or pretty close we might not get all the way down to 2019, but we will get pretty close.

Got it that's helpful. And then just lastly for me.

Robert I guess as you assume the CEO role.

Here.

What do you think American needs to do better.

All of this new World post pandemic to help drive Americans.

Margin back towards pre pandemic levels.

Yeah. Thanks, Andrew Hey, look we need to we need to put all the pieces together all of the things that we've been working on over the last three years, and then bring them about and execute and execute very well running reliably finished airlines.

No.

In terms of unit revenues or plays out in terms of unit cost and it definitely pays off in terms of customer satisfaction.

Again American has invested in Albright places.

When we talk about the.

The aircraft in airports and lounges and whatnot.

That's money that has been spent it's in place and now it's time to bring it back and put it into action.

And so we do that I'm quite confident as Derek said I'm quite confident in all aspects of American is poised to outperform.

Thanks, Andrew.

Yeah.

That concludes the analyst Q&A, we will now take questions from the media.

Im here with the media and I would like to ask a question. Please press Star then one on your telephone.

Please standby, while we compile the Q&A roster.

Yeah.

Our first question comes from Alison Sider with Wall Street Journal.

So much high.

Was wondering if you could talk a little bit more about your expectations for 77 deliveries and kind of how confident you are or anything you're hearing from Boeing about what they might expect in terms of the schedule.

On that.

Yeah, Hi, al is there.

We're still on the same schedule.

Mid April is what we're talking about for our first delivery.

That has been locked in on those dates for probably the last couple of months.

And we're still planning on that happening so we haven't got any different.

Information in the past couple of months, where I think we're still on target for those.

And that we would take all 13.

Throughout the year, but we have been conservative only put four in the schedule for the summer.

We had originally thought we could get all 13 in the summer, but we pulled that down to four.

And we've had really good discussions with Boeing and I think they are on track as of today.

To hit that mid April timeframe, and where we are.

We're hopeful that that's still the case and nothing else comes up.

Got it and is this something is this.

The situation, where you would seek any kind of compensation from Boeing for the delays or there was a further delay is that something you would discuss.

Yes, we're in discussions with Boeing.

Where we're at.

There are delayed penalties that are that are paid and Boeing is paying that delay penalties and everything is happening as we speak today.

If there are further delays and it really does impact.

The summer much more than what we think it has been.

We've had good discussions with Boeing that they will.

They will compensate us for the losses that we've had.

For the delay of those aircraft.

Thank you.

Okay.

Our next question comes from David Koenig with the associated press.

Thanks.

Hi.

Doug.

Congratulations as well I hope you have a great retirement.

And you mentioned five G.

And this week's agreement with Verizon and AT&T.

Wondering how long do you get a signal of how long they're willing to delay their full rollout and and why did this have to come down to an 11 power prices like this.

Yes, Thanks, David.

The sense that they are.

Again, the right people are talking to each other and everyone agrees that it doesn't make sense to.

Deploy.

To avoid any more <unk> until we're certain that it's not going to have a disruptive effect on <unk>.

Airlines so.

Again.

That's where we stand at this point and help us Earl stack.

I feel really good about it because again the right people are talking to each other.

Armed with the right people talk to each other.

I don't know we can do a post audit later I'm not quite certain.

Frankly, we are.

Where are the end user of this dysfunction.

Got it.

One of the ones affected our customers and one of them.

<unk>.

And as.

It was getting ready to be deployed and we were therefore being told.

That was going to mean to our operations, we screams as long as we could unfortunately people listen so.

That's where we are today and what should have happened.

This is happening now.

The technical experts that are working not tell us it's really not that complicated once they once they are able to share information and work on it.

So they seem.

<unk>.

We will be able to address this in a way that.

Allows for full deployment of RG <unk>.

Including near airports.

Yes again.

Lower levels or whatever is required.

And also doesn't allow for it doesn't require any disruption.

I'm traveling so.

That's where we are I don't expect until we get to the point that everyone's really comfortable about that you'll see.

Youll see anything turned on airports.

No one wants to go through this again.

So are the airlines talking directly to the telecom or are you going through the regulators.

It's much more about the manufacturers.

Our OEM.

In directly to the telecom, which is happening so.

Boeing and Airbus as the palaces Honeywell.

Colin cetera talking to their counterparts.

AT&T and Verizon.

Obviously with FAA involvement.

What needed to happen and is now happening.

With those organizations those companies able to talk to each other.

Share information.

Because when you do that.

We can get results because people are willing to work together.

We didn't have that we had government agencies talking to each other.

That can be less productive.

Alright, thank you.

Thanks, Dave.

Our next question comes from Mary's million sign with Bloomberg News.

Hi, good morning, Congratulations Doug and Robert.

I wanted to ask you if you could talk a little bit about how much of a delay do you see the omicron layer of having on the return to us.

More near normal travel one of your competitors that it pushes it out 60 days, but I wonder how that ties in with <unk> comments about the shortening time between a peak and a.

Bottoming out and then a recovery in demand.

Hey, Mary.

We don't see a lot different.

Look I think that we were recovering nicely after after the Delta variant.

Look into the <unk>.

Giving timeframe.

But then omicron hit demand dropped off fairly fairly rapidly.

And yes, the demand is recovering faster than it had in previous ways, but I think.

We don't view demand is anything more than than delayed we don't think it's diminished.

And if youre, taking a look and kind of the.

<unk> are the two or three months timeframe of how demand. The rebound is pushed out I think that thats, the appropriate timeframe and for us.

I assume as mentioned I know Doug earlier.

As well look as we take a look at in February as especially as we get to.

Alright period, we see a lot of.

Of demand and a lot of strength in the bookings that we're seeing already so I do think that overtime.

As part of this were to come out strong.

Thank you and if I could quickly ask.

And just discussing.

Increased wage levels going forward and as you try to hire more people.

I have been contemplating at all potentially gather unilateral pay increase for unionized workers, either any particular groups or maybe on a more broader basis.

And as I mentioned earlier in the call America, Hasnt very attractive brand we have incredibly.

Generous compensation and benefits programs, we attract people right now with the positions that.

And the compensation structure that we have.

There's pockets throughout the country various positions like in regional carriers.

We take the appropriate action that we have to but I feel really confident in where we are today and what we are contemplating and being able to attract the right people and the right numbers and getting getting in front of it too.

Thank you very much.

Yeah.

Our next question comes from Leslie Josephs with CNBC.

Hi, good morning, everyone.

Hum.

What you guys think the impact is going to be of the multiple labor negotiations you have going on now you're.

We've seen complaints about issues with quality of life schedule changes.

So curious if that changes how you think about scheduling the airline going forward and what sort of thought.

Maybe the thing I would pay increases in.

In 2022 and beyond how do you see that going.

Hey, Leslie Thanks for the question here is the one thing I know is that.

Everybody at American has joined.

And the goal and objective of running a really reliable airline one that returns to profitability.

Soon as possible, so I know that our labor leaders our team members.

Want a profitable and successful American Airlines as we go forward. So as we take a look into any negotiations I know, that's a fast and because of raw kicking it's got.

It has to be a mindset of taking care of our team members certainly.

But also making sure we take care of the company and our shareholders and that's the balance that we've always been able to maintain and we will do going forward. So as I take a look going forward and I've said before I know that we can attract team members to American Airlines, there's always ways, we can get better.

By better it means running an airline that is more reliable too I know everybody is joined in that goal.

Okay. Thanks, and if I can just ask one follow up on the 787 Derik did you say that Boeing is definitely paying compensation now and they could take even more at the <unk>.

Reschedule is affected.

The first answer is yes.

They are delayed penalties that are always in all of these contracts and Boeing is paying the delay penalties for each one of these contracts for each one of these aircrafts and then the rest of it will be a negotiation as we talk to them.

Really we don't have to do anything and hopefully they hit the schedule that they have and we don't have any disruption as we go forward but.

We've been told from the highest level of the Boeing team that if there is.

Compensation needed to come to the airline that.

They are fully.

Breadth to help us.

And to overcome the cost that the.

The 787 has caused us over these last the delay in those aircraft as.

Cost us over the last few years and that's that's a negotiation we will have with the with the Boeing team.

In addition to what they're already paying for the existing delay.

Correct.

Got it thank you.

Okay.

Our next question comes from David Slotnick with TPG.

Yeah.

Good morning, everyone. Thank you for the question.

Gratulation fab.

Robert during your prepared remarks, you mentioned something about a blurring of lines between business and leisure travel I was wondering if you could elaborate on that a bit.

That translates to higher yields more premium cabin sales et cetera.

Obviously, it's going to take this go ahead, Yeah, Hey, David Greg again from you, Yes look we plan to be a really encouraging trend.

You see a blurring of lines were.

No.

The patterns are changing Thursday, which is still our biggest business day of the week is also becoming one of our biggest leisure days of the week.

Having more people too.

By business style fare products travel as if it's a business trip but.

We're going to places leisure destinations Fort Walton Beach things like that so that behavior is starting to change and we can trace that things were.

People work Fridays remotely Oregon.

And a week or two at a time working from some place that is not where they live so all of that is creating a lot more.

<unk> and how we've historically thought about business and leisure, but and that is a lot of opportunities, but clearly as we go through the pandemic.

Customers have a lot more flexibility with their time Theres a lot more savings that are out there and travel has always been one of the most aspirational things for U S. Consumers. So we've seen a lot of that and we benefit a lot from a lot of that in our short haul network. The most are our premium cabin sales have been the most.

Robust and places like the Caribbean and leisure destinations in the U S. More so than they've been and more prototypical business destinations like the transcon markets, our London Heathrow. So we're really encouraged by that trend, we think that it's going to lead to a lot of things. That's why we have done a lot of things where we are.

Increasingly rewarding travel, which is not just for how frequently people fly but.

Or simply spending on credit cards or spending all across the airline and from my earlier comments, we think there's even more to more to do which can be really great for our customers and of course really great for the airline.

Thanks, Bob and just as a follow up do.

Do you see the <unk>.

Taxes inflation, leading to anything.

Higher ticket fares higher prices for customers.

Although it remains to be seen.

The industry has a long history with inflation, where it hasnt always bledsoe cleanly and affairs. So so we will see and we don't make any piece your commentary about about pricing.

But it's early to tell and how whether this level of inflation stays or not early to go and get it back.

Great. Thank you very much.

Thank you David.

Our next question comes from Dawn Gilbertson with USA today.

Hi, good morning.

Doug I'm really jealous. This is your last call, but I'm very happy for you and your family.

I have a couple of questions first for Bob still following up on Barry's question about kind of the lag in bookings because the omicron spring break and summer I'm wondering whether you guys are considering extending your.

The expiration date for tickets and for.

Current travel credits and my second question is probably for Robert but maybe not.

Your call times like a lot of airlines still a pretty high as recently, it's funny. It was four hours plus can you give any specifics on what youre doing to address this persistent problem.

Behind it thanks very much.

Hey, it's great to hear from me to I'll start and then others can add into so first of all we are.

We are assessing different options for what we call it stored value what we do with people who have.

Covid related credits that are out there.

We've been really encouraged by what we've seen here, we're the only airline that allows.

Customers.

The new name changes and reassign them because of that we've seen a lot of consumers go in and take advantage of that flexibility and sell that.

That combined with the fact that we've flown a bigger airline.

Has led us to believe that we may be seeing was probably a little bit different than others, but we're assessing what our options are and and.

And.

We will have more in the not distant future.

Hey, Don.

I want to help me out with this.

With reservations right now with so many changes.

That are going on.

In the environment, whether it's travel restrictions quarantine requirements schedule changes.

You name it.

That level of calls that we're getting right now is really unprecedented and fitness for good reasons.

What we're trying to do with to make sure is that not only do we have all of the resources from reservations perspective available, but we're also investing in things like chat and then cutback functions as well and one of the things I'm really proud of is while we have had.

Some extended callback times as in place I'm really proud of the way we've performed.

The pandemic American has.

Distantly performed better than a lot of our competitors and as we come out of this huge call volumes Spike and I expect us to get back to really reasonable and.

Satisfactory times, Mike do you want to add anything else.

Just following up on some of the technology that we've implemented in rands around virtual assistant, which is sort of artificial intelligence that can respond to some of the easier question without the customer having to interact with an agent and they can that's a win win.

Customer can really synchronously and get their ancillary in short order.

And then just want to check for more difficult questions. Our residents are now trained 100 now trained to be able to handle attack and again allows them to handle more than one interaction at a time, which is better for our customers and more and more productive for our agents and then.

But like Robert said that really helps defray some of the impact of reservation.

At the end of the day the nature of the questions that we're getting are so complex where people are really wanting to fully understand what are the COVID-19 restrictions are traveling here, what kind of vaccination status do I have to ask how do I use this stored value combined with this form of payment and in those cases, we still meet our fabulous.

Thats agents to be able to handle those.

Thank you very much.

Thanks, Don before you before you sign off with everyone listening in you would have absolutely been in my prepared remarks.

<unk>.

But look of all the.

That was good.

Covered airlines, Arizona Republic, we started earlier.

We're at.

All the articles.

They have risen to a level that I've chosen to actually hang onto more of them having come on.

So thank you very much.

Oh really relates to sure Doug.

Thanks, Tom it's been a pleasure.

Thank you.

That concludes today's question and answer session I would like to turn the call back to management for closing remarks.

I think we're done thank you all very much really appreciate I really appreciate it I've enjoyed this immensely.

<unk>.

Maybe my favorite of 107 so.

You all very much congratulations to Robert Congratulations Dan.

And we'll.

We'll be in touch thanks again.

Okay.

This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

[music].

Yes.

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Yes.

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Yes.

Okay.

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Good morning, and welcome to the American Airlines group fourth quarter.

2021 earnings conference call.

Today's call is being recorded.

At this time all lines are in 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 then one on your telephone.

If you require operator assistance during the call. Please press Star then zero.

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

Thank you Lance and good morning, everyone and welcome to the group.

Fourth quarter 2021 earnings conference call on the call. This morning, we have Doug Parker, Chairman and CEO , Robert Isom, President and incoming CEO and Derek <unk>, Our Chief Financial Officer also on the call for Q&A session. Several of our senior execs, including Maya Leibman, Steve Johnson Boston Raj.

David Seymour they've gotten in.

Dan and Matt.

We normally do Doug will start the call with an overview of our quarterly and will update the actions we've taken during the pandemic.

We will then follow up with some remarks about our operations and initiatives for 2022 after Robert Marc will follow with details on the quarter and provide guidance for the year. After <unk> comments, we'll open the call for analyst questions and lastly questions from the media.

And as many questions as possible. Please limit yourself to one question at a time.

Hello.

We began today, we must face in todays call.

Forward looking statements, including statements concerning future revenues costs forecast of capacity and fleet plans. These statements represent our predictions and expectations as to future events, but numerous risks and uncertainties could cause actual results to differ from those projected.

Information about some of these risks and uncertainties can be found in our earnings press release that was issued this morning.

As well as our Form 10-Q for the quarter ended September 32021.

In addition, we will be discussing certain non-GAAP financial measures. This morning, which exclude the impact of unusual items, a reconciliation of those numbers due to GAAP measures.

Included in the earnings release and that can be found in the Investor Relations section of our website a webcast of this call will also be archived on our website and the information that we're giving you on the call. This morning is as of today's date.

No obligation to update.

Information.

So thanks, again and joining us for joining us. This morning at this point I'll turn the call over to our chairman and CEO Doug Parker.

Thank you, Dan and good morning, everybody and thanks for being on the call.

We have a lot to cover today.

I'll start with the Big news.

Last quarter's call at least for me, which is that Robert Isom, it's going to be the next CEO of American Airlines that changes effective on March 31.

He will remain chairman of American Board and most importantly, I have I will have no executives here.

Robert we fully in charge.

As chairman for as long as Robert and the board on that event.

This is a terrific news for our team.

I was going to be the ninth CEO and a nearly 100 year history of American Airlines.

We believe is the best job in all of aviation.

And we are excited for Robert impairment as you all know Robert someone I have worked alongside for several decades.

Extraordinary team builder.

The complexities of operating an airline like America.

He loved the people work in and he brings a fresh perspective to the future of America.

It has been accomplished great things and I'm looking forward to watching that happen along with all of you.

Now what this transaction does it mean.

This is going to be my last earnings call with you always kind of a big deal for me.

Speaking on every quarterly earnings call since I became CFO of America West Airlines in June of 1995.

So by my calculations. This makes this is my 107th consecutive quarterly call.

So.

I'll try to speak as much from this one does it have on the first 106.

Especially as it relates to the company's go forward plan.

Rather I'm going to let those who are leading American Eagle pit you can talk about that future.

But before I can at this stage of the idea of a couple of quick. Thank yous first just to you all.

The sell side analysts and reporters who cover our business you all have very important jobs are in this crazy industry that we all love and you do it extremely well.

I have great respect for what you do and the challenges you face.

And I've done my best throughout my career to treat you with respect you deserve.

Access and the candor you need.

Jonathan.

And you've all been extremely fair to me, which I really appreciate it. So thank you very much that's a blanket. Thank you to all of you on the line.

It also goes to some of the great people, who preceded you.

Just like Paul Karos, Kansas Pruning Sam Patrick.

Quarters like Terry Maxon, Susan Carey Scott Mccartin. Thank.

Thank you all.

The second thank you as to the American Airlines team.

Which I can't begin to do adequately on this call.

I can do to somewhat.

To tell you all about the phenomenal job they did in 2021.

In the year when growing back to meet a huge increase in demand was the most important and challenging objectives for all airlines.

Continued grew back faster and further than anyone else.

We started about 25% more customers than any other airline in 2020, which is phenomenal lineup in our history. The last time any U S airline was that much larger than the next best next highest competitor with more than 10 years ago and that was done by emerging to existing units.

Not through organic growth.

This growth in 2021 lead us to higher 16000, new team members last year, we expect to hire another 18000 in 2022.

To manage that growth, while taking great care of our customers.

We posted the best operating performance in our company's history in 2021 with the highest on time performance and completion factor we've ever had.

We were the second highest of the four largest airlines in all of those metrics. Despite the fact, we grew back so much further and faster than they did.

We're particularly proud of how we ended the year certainly relative to our competitors our team had a far more customers than any other airline in the holidays.

It was much less disruption than our primary competitors American.

American was the top performing airlines among all airlines in December in each of the key operating metrics.

And as our teams performed as well our customers have taken up our full year 2021 likelihood to recommend scores were the highest in American history.

That's an incredible testament to our people.

Not only show up every day to operate the world's largest airline let me do sort of way to welcome back our customers with open arms.

And all of this translated to our shareholders shareholders as well and a year of very difficult stock performance from the industry American stock increased 19% far more than any other U S airline.

So I wanted to summarize all of this to convey my gratitude to the incredible American Airlines team.

I want to thank each of them on behalf of our customers, our shareholders and everyone who counts on them every day.

This performance gives us great confidence and momentum as we head into 'twenty, two 2022 and beyond.

So with that thank you all again.

I'll now turn it over to our soon to be CEO , Robert Isom, just talk about what lies ahead Robert.

Thanks, Doug and good morning, everyone I want to start by thanking the entire American Airlines team for the effort in the fourth quarter and throughout the entire pandemic and I'd like to reiterate how honored I am to be taking on the role of CEO .

I Express my appreciation for God's partnership and friendship over the years as you all know that leaves behind an incredible legacy having opened many doors for our airlines and our industry I look forward to continuing to work closely with him over the coming months to ensure a seamless transition.

And taking on this role at a very important time for America over the past few years, our airline and our industry have gone through a period of transformative change and American has made good use of that time, especially in regard to renewing our fleet facilities and network and making the company as efficient as possible.

For fleet, we have dramatically simplified.

Now operate just for fleet types.

That gives us operating flexibility reliability and efficiency.

Americans fleet remains the youngest in the U S network carriers. Our aircraft are equipped with industry, leading Wi Fi new interiors and we've added seats to our 737 <unk> hundred 21 fleet, bringing us more in line with the rest of the industry for.

For facilities.

We have expanded the number of gates, we operate that our largest hubs in Dallas Fort worth and Charlotte and we have inaugurated a wonderful new regional concourse Reagan national which is historically, our most profitable hub.

We've also invested more than $200 million in languages over the past five years with new animals club <unk> opening at Reagan National and Laguardia.

New and upgraded airport spaces are underway in New York, Chicago, and Los Angeles as well.

So updated maintenance training and corporate spaces throughout the system to ensure our team can perform at an even higher level.

For network, where find more to where our customers want to go <unk>.

Our DFW and Charlotte hubs are prime to operate more than 900 700 flights per day, respectively.

Our partnerships with Jetblue on that in the northeast in Alaska on the West Coast.

And industry, leading presence in markets that have historically been difficult for American and our proposed investments in South American carrier strengthen our already industry, leading position in that region.

But demand continues to recover and we return to full utilization of our assets American is poised to outperform.

We've extracted one $3 billion of efficiencies or operating and economic fleet that will provide CASM ex tailwind as capacity is restored.

Based on our current assumptions, we expect all of this to result in a return to profitability. Later this year and continued deleveraging as we pay down $15 billion of debt by the end of 2025.

And I am excited to integrate running in April and build on our momentum to deliver results in 2022.

So let's get to the business in the quarter. This morning American reported a fourth quarter GAAP net loss of $931 million and our full year GAAP net loss of $2 billion.

Excluding net special items, we reported a net loss of $921 million for the quarter and a net loss of $5 4 billion for the full year.

Our results for 2021 were significantly improved over 2020, but the impact of the <unk> variant has affected the timing of all of our full revenue recovery.

We delivered a strong revenue performance in the fourth quarter. Despite the rise in infections.

We reported fourth quarter revenues of $9 4 billion, our highest for any quarter since the start of the pandemic and a sequential increase of $458 million from the third quarter.

Our cargo team continues to do a fantastic work and delivered record cargo revenues of $1 $3 billion in 2021, 30% higher than our previous record.

As we've seen throughout the pandemic each new variants and corresponding increase in cases is followed by a faster recovery in demand with fewer regulatory restrictions and changes in travel policies.

First on what we're seeing we expect AUM required to follow the same pattern bookings are recovering quickly after dropping off considerably in early December so they are still not back to pre <unk> levels.

Please your travel, particularly in the U S and short haul international market remains very strong and is approaching a 100% recovery. We expect this trend to continue and interest interestingly, we've seen many of our customers that have historically that we've historically called leisure travelers are actually flying for reasons beyond just vacate.

They may try to a future of mountain destination, but they are actually going to work remotely for the week.

The lines between leisure and business travel are definitely blur.

The recovery of international and business travel slowed late in the fourth quarter, given the home crowd, great, but we remain very bullish on both the.

The return of international travel is directly linked to travel restrictions around the globe as restrictions falloff, we expect international travel.

Travel to pick up considerably.

We still expect business travel to come back and forth, but I'll come back in a different way and by that I mean, the overall mix of business customers, how they travel travel in how we serve them.

As we have shared previously small and medium sized business travel remains the strongest segment in the fourth quarter small and medium business travel was roughly 80% recover while large corporate travel was only 40% recovery and.

In addition, small and medium business revenue and sequential month over month improvement in December in spite of the impact of <unk>.

We are optimistic that as corporate travel corporate travel returned in a significant way this year and as companies come back more fully into the office and get back on the road, we're going to be back on track.

And as we're developing our plans and forecast for this year, we're working to build an airline that can be profitable even without the full return of managed corporate travel.

The demand environment has changed a lot through the pandemic because of this we have to be nimble and responsive.

Bill agile processes that allow us to deliver the network our customers need and want no matter the environment. The game has changed and our team is ready.

Going back our network the way we did in 2020 is a feat in and of itself, but to do so while running a reliable operation and achieving strong revenue results along the way it makes it even more impressive.

We entered 2022 with tremendous confidence as a result of the way. We finished last year and started the new year as Doug noted American had the best reliability of all U S carriers in December and the highest annual likelihood to recommend scores in our history.

Very pleased that 97% of our team has been vaccinated or submitted a request for an accommodation with no one losing their job.

Creative agreements in place with our Union partners to support the operations throughout the pandemic and just recently reached new contract extensions for some of our team members to start the year.

All of this while flying more flights and more passengers than any other U S carrier by a wide margin.

To ensure this momentum continues we have two sharply focused priorities for this year running a reliable airline for our customers.

And returning to profitability.

Returning to profitability is very much tied to the demand revenue environment, but as I mentioned the work we have done during the pandemic has positioned us very well. This includes our cost and efficiency actions, which Derek will touch on momentarily as well as the work that we've done to refocus our network around our most profitable client.

Enhancing our partnerships around the U S and around the world and driving value through the.

The advantage program and co brand card has been something that we've done well.

And on an absolute basis, new advantaged member acquisitions in 2021, outpace 2019, despite lower levels of capacity and our advantage revenues in 2021 closed in on 2019 revenues.

So in summary.

We're grateful for the incredible work of the American Airlines team over the past year, we remain optimistic about the return of demand and we're very pleased with how American is position. Thanks to the tremendous efforts of our team.

And now with that I'll turn it over to Derrick. Thanks.

Thanks, Robert and good morning, everyone before I review the results I would also like to thank the American Airlines team for their outstanding work during the quarter. This pandemic has been relentless and despite the uncertainty our team continued to show its the best in the business.

This morning, we reported a fourth quarter GAAP net loss of $931 million or a loss of $1 44 per share. Excluding net special items, we reported a net loss of $9 2900, $21 million or a loss of $1 42 per share.

For the full year 2021, we reported a GAAP net loss of $2 billion and excluding net special items, we reported a net loss of $5 4 billion.

Despite the impact of <unk> that we saw in this quarter the trajectory of our revenue recovery continues to be positive and it even exceeded our initial expectations as we outlined on our last call. Our fourth quarter revenue was down 17% compared with the same period of 2019 versus our original guidance of Dow.

20%.

This gradual improvement makes it even clearer to us that despite the uncertain demand environment. The steps we have taken over the past 24 months.

Holster, our network and improve our revenue generating capabilities are working.

On the cost side, we remain focused on keeping our controllable cost down and we actually had $1 3 billion in permanent annual cost initiatives in 2021, providing a new and more efficient baseline for our 2022 budget.

During the fourth quarter, we made the decision to invest in the operation with a holiday pay program for our employees as well as reducing our peak holiday capacity. These actions did put pressure on our unit cost performance in the fourth quarter, but they lead to a strong operational performance over that period. This included.

Industry, leading months of operating performance in December when it matters most to our customers.

On the fleet side I am pleased to report that our fleet Harmonization project is now nearly complete with our last <unk> hundred 21 going into the shop. This quarter. This is a full year ahead of our original schedule and are excited to have this project behind US. In addition to our consistent product and better experience for our customers the operational benefits of having a sim.

Five and streamlined fleet are already being realized.

The changes we have made to our <unk> hundred $21 737 enable us to fly 2% more total capacity than we could have with the old configuration, thus, providing a unit cost tailwind as we continue to build back our network. In addition to better unit cost. These reconfigured aircraft will also generate more revenue.

Allowing us to recover from the pandemic even faster.

With respect to our wide body aircraft, we continue to have productive conversations with Boeing to determine the timing of our delayed 708 eight deliveries that were expected or arrived last year due to the continued uncertainty of delivery schedule of these aircrafts remained out of our near term schedule to minimize customer disruption we.

Back to slide four aircrafts during our peak summer schedule.

We ended the fourth quarter with $15 8 billion of total available liquidity, which is the highest year end liquidity balance in the company's history.

As we have said in the past the deleveraging of Americans balance sheet remains a top priority and we are committed to significant debt reduction in the years ahead, even with this volatile demand environment, we remain on track with our target of reducing overall debt levels by $15 billion by the end of 2025.

In fact as of the end of 2021, we have already reduced our overall debt levels by $3 7 billion from our peak levels in the second quarter of 2021.

During the quarter, we made $706 million in scheduled debt payments, which resulted in paying off the 2013 dash one double ATC b tranche in the first quarter, we expect to make $337 million of scheduled debt payments, which will include unencumbered 12 aircrafts.

For our pension our funded status improved by nine two points to 77, 9%, resulting in a $2 billion reduction in the underfunded liability on a year over year basis.

Lastly, during the fourth quarter, we completed an approximately $960 million of WPZ financing and we now have financing secured for all our 2022 deliveries through the third quarter.

Yes.

Our 2022 budget reflects our priorities to run a reliable airline for our customers and return to profitability. Our plan includes ongoing investments that will help build upon the positive momentum we've seen in our operation, while leveraging cost efficiencies and network enhancements, we have talked so much about.

We believe these actions will provide a solid baseline for both profitability and free cash flow production when demand is fully recovered.

Looking to the first quarter Covid impacted demand and elevated fuel prices will continue to put pressure on our near term margin.

In this environment, we expect our capacity to be down approximately 8% to 10% versus the first quarter of 2019.

Based on current demand assumptions and capacity plans, we expect total revenue to be down approximately 20% to 22% versus the first quarter of 2019.

We expect our first quarter CASM, excluding fuel and special items to be up between 8% and 10%.

While we expect to be unprofitable on a pretax basis in January and February we anticipate a material improvement in our return to profitability in March as demand returns.

As for 2022 capacity much of our plans are subject to the uncertain timing of deliveries.

788 aircrafts as I mentioned previously removed these aircrafts from our near term schedule to protect our customers. This reduction is worth approximately one to two points of scheduled capacity for 2022.

With this adjustment, we expect to add back our capacity throughout the year and to have full year capacity you recovered to approximately 95% of 2019 levels. This of course is subject to the future demand environment and we always have the ability to adapt if demand conditions warrant.

As we look at our cost like other airlines, we are seeing inflationary pressures in fuel prices hiring and training for both new hires and existing crews as we build back our operation, including on the regional side.

We are also seeing increased starting wages for certain work groups, including vendors. In addition, we are seeing unit cost pressures from the rolling 788 delays as well as the impact from our ramp and mechanic contract that was ratified in early 2020.

Even with these unit cost pressures our fleet simplification strategy enables higher aircraft utilization and higher average gauge both of which will help alleviate some of these pressures.

As such we expect our full year CASM, excluding fuel and special items to be up approximately 5% versus 2019 with the second half of the year much lower than the first half as we fly a more efficient schedule.

For the full year, our projected debt maturities are expected to be $2 6 billion. This includes the cash settlement of our $750 million unsecured notes that mature in June .

Without any additional prepayment of debt we project, our total debt will be down $5 4 billion at the end of 2022 versus our peak levels in 2021.

With respect to capital expenditures, we expect full year 2022, capex to be approximately $2 6 billion, which is significantly lower than.

And then in previous years in versus others as our fleet replacement needs are complete and net aircraft capex, including pre delivery deposits is expected to be $1 8 billion and non aircraft capex.

Spectrum to be $800 million.

So in conclusion, we are incredibly proud of our team for their continued resilience in a very challenging environment with.

With the bold actions, we've taken and steadfast commitment of our team we are well positioned for the future.

Now before we open up the line to questions I would like to acknowledge Dan Cravens for a minute.

Today is Dan Cravens, 62nd call snack.

Not quite as many as $107 67 is pretty amazing and final earnings call as part of our American Airlines U S Airways and American West team.

I'd like to personally thank Dan for his two decades of service.

Advocacy for both the airlines and our investors and for his friendship.

The continue that continue right Dan provided or the continuity excuse me Dan provided over 20 years in his role across multiple airlines multiple crisis and our global academic is unmatched.

We wish him the best of luck in his next adventure, we will be introducing Scott long, who will be stepping into dan's role from our financial planning organization later this month.

So with that I'd like to open up the line for analyst questions.

As a reminder, if you'd like to ask a question. Please press. The Star then the number one key on your Touchtone telephone to withdraw your question press the pound key.

The interest of time, we ask that you limit yourself to one question and one follow up.

Our first question comes from Jamie Baker with JP Morgan.

Hey, good morning, just quickly Doug.

Love Your prepared remarks, I know the port wasn't to make me feel old, but Paul Candace, Sam I mean, what a throwback.

Got it.

It really has been a privilege to speak to you on all these calls all these conferences all these years.

I did want to just add my own thanks, and congratulations and obviously it will take.

It goes.

To my friend Dan.

Davidson.

First question on the air traffic liability Derrick so sequentially from the third quarter to the fourth it declined by about $360 million granted this is less than the customary seasonal decline.

Delta and United both experienced flat sequential trends and I'm, just trying to understand what the nuances. The puts and takes are whether it's a network issue differences in forward bookings or any additional color on the ATL sequential change.

No there's not really any different any color I think from a stored value basis, though that stayed pretty much the same.

Future travel dropped from I think we were at six four in total ACL balanced future travel was three six went down to three two which is a normal seasonality for us.

We did see.

I'll pick up at the end of the month alright at.

At the end of the month from from.

Normal buying so I think it's just normal seasonality for us.

What we didn't see as much as the stored value via unused.

Some additions because as you know some of the issues with the cancellations and things that were out there we added a little bit to that but I would have expected it to drop even more but it held up just because of the fact that from an operation standpoint, there were we added a little bit in the fourth quarter from.

Issues with the operation, but other than that I think it's just seasonality, but we definitely see I am not sure why others were flat or up.

Alright, Thats perfect and just a quick follow up and then.

I don't want to get bogged down in comparing your guide.

To that of United and Delta, but you all expect to arrive at a pretty similar first quarter revenue outcome down 20, plus points from 19, but you have to fly considerably more capacity to arrive at that output can you just remind us what some of the seasonal and network factors that drive this I understand.

And there is more seasonality for you in the first quarter, but I'm just trying to figure out what causes that drag.

Hey, Jamie this is this is vasu.

The reality is.

Where we still are in the first quarter is that there is still probably a pretty pretty.

Hum.

Large variability in first quarter forecast.

Hi, Derik I won't I won't comment on what our competitors are looking at but we have taken.

Pretty conservative view of what.

Revenue production will be in Q1.

We've been encouraged by recent trends as case growth spikes, we're already seeing bookings come in stronger so we'll see but yes.

What we've come to realize through the pandemic.

We have a lot of levers to go plan the airline relief flexibly, and we can ship things up and down and indeed loose capacity from one market to another.

Good morning, Lee than we had in <unk>.

Time has passed and after so many crises.

We thought we were nimble before and we got even faster. So there's still a lot yet to do in first quarter and we'll see.

How things come together as demand starts picking back up okay. That's great. Thank you gentlemen take care. Thank.

Thank you Jamie.

Our next question comes from Michael Lindenberg with Deutsche Bank.

Yeah, Hey, good morning, everyone, and yes really to echo a lot of what Jamie said, Doug it's been a privilege really and I've learned a lot going all the way back to.

2000 and.

Dan as well.

Dan you've been a great friend and you've been a great supporter and Scott you got some pretty big shoes to fill there.

Thanks, Mike.

Just quickly onto questions Im sure Youre going to get something along these lines I just wanted to hit on sort of this two five ish or excuse me <unk>.

The FAA was out I think yesterday or two days ago, saying something like 62% of the U S. Fleet is should be fine, where do you guys stack up and the way. We should think about this is this is this going to be is this going to blow over over the next few weeks or is this kind of sort of reappear.

Six months down the road when maybe some of these exemptions zones or buffer zones around airports may be theres changes there like like.

What should we be concerned about what should.

Should we anticipate as this.

Rolls out over time, thank you.

Okay. You are asking me to take this morning, I was hoping to talk very much biased.

Yes.

Mike My last assignment.

Anyway.

This is mark.

We've all been every airline has obviously been involved with us over the holidays.

Is it.

It wasn't.

Our finest hour I think as a country to get us to that point, but the good news is we now have what should have been going on for quite some time.

Manufacturers of telecom.

Government agencies, all sharing information that they need to.

To make sure that this can be rolled out.

In a way that all Americans IMG and all Americans.

Eric flights arent going to be impacted by that.

Where we sit right now.

The way that.

The way that we're all able to operate our fleets is because.

The telecoms have agreed not to fully deploy some of their towers near airports.

With that agreement Everything's fine.

I'll turn to David.

As far as you'll ever see everything is totally fine.

We don't.

Really any any material disruption whatsoever.

Why invest in place now as we're going to stay in place, we need to get to where they can actually.

And we want to get to where they actually can support all the power they have in place and that we can still do that but no one's going to make there was going to go do that until we all agree.

It can rebound without disruption so long way of me, saying.

The second one again to the right spot buy so that we're in the right spot.

Right Okay.

Can you provide information and I don't think youre going to see any material disruption going forward because of this.

Great.

What I wanted to hear and just Eric a quick one on the non op.

Expense $360 million for the quarter.

Because one of your pension is and maybe the potential gains that youre anticipating in how you bucket into 2022 is there going to be a pension tailwind.

Not only in the March quarter, but for the year and any sort of rough estimate on what we should use from a modeling perspective. Thank you.

Yes, I think there is a pension tailwind into the year. So we ended up the quarter, 3% for this quarter, our projecting it to be in that $3 50 range.

And slowly declining as we pay off some debt throughout the quarter.

First quarter should be more in that $353 60 range and declining to about the $3 40 range in the fourth quarter. That's great. Thank you.

Okay.

Okay.

Our next question comes from Helane Becker with Cowen.

Thank you very much operator.

Doug it's been.

That hopefully will continue to stay in touch.

And.

Jan.

<unk> been a really good quarter actually your whole team has been a really good support of our conference with over the years. So thank you very much.

Best wishes to both of you.

<unk>.

And I refuse to to tell you how many of those conference call.

I think I know.

No worries.

So actually I guess I don't know.

Sure Robert.

Hmm.

One can you just address too.

Thanks.

You guys have said you're going to hire I guess, the gross number of 18000 people this year.

Yes.

And some of it is we're going to be pilots.

United and American and Delta rather.

Regional jet capacity, because they don't have enough pilots are you going down that similar path or are you in a better position from a training perspective.

So helane thanks, Robert Thanks. Thanks for that question. So we are going to be doing a lot of high end. This year, we did a lot of hiring as well last year. So from a pilot perspective, yes, we had a couple of years of the pandemic in which quite frankly, there weren't a lot of people being trained and given the demand.

The capacity in the industry felt by quite a bit so as we all rebound of course, there is a constraint that we're all dealing with there is not enough production I do.

I do believe that over time.

<unk> <unk>.

Supply and demand imbalance will be remedied.

Yes.

It's incredibly attractive profession.

When you think about the starting wages and the ultimate compensation for the industry. So we're doing everything that we can I know other companies are as well to encourage.

Those that are looking for.

Profession.

Come into the business, but in the short run and from a mainline perspective look we we have American is a very very attractive brand, we're going to have plenty of pilots. The biggest issue that we're dealing with is the throughput of pilots and getting them and getting them through training.

And then invested an incredible amount of resources and having training assets ready to go those are all coming online and.

Then from a mainline perspective, we'll be able to supply all that we need.

The imbalance is really going to be played out and the regional carriers and on that front like like other carriers, we're going to have issues issues as well.

We have them right right now we're working very hard on that it's impacting us to a certain degree.

But we're going to do everything that we can to make sure that it's not a material impact overtime.

Okay. That's very helpful. Thank you and then just my follow up question.

I don't know who wants to answer this one but when you talk about small and medium sized businesses.

And those folks who are traveling because they really have to for their livelihood.

Can you talk about also whether they've got the credit card and if youre seeing increased credit card acquisition in that category.

Hey, Helane. This is this is vasu.

I'm happy to answer your question. Indeed, this is one of our increasingly with favorite topics to talk about you are correct, we see small and mid market business growth.

Right.

The diversity of who that customer is really can be.

Over overstated, everybody problems somebody starting a business and sometimes relatively large companies who are seeing growth through the pandemic and get on the road to drive sales or visit factories or whatever the case might be.

And for US we do very we haven't seen growing acquisitions on our Cobranded credit cards. Indeed in Q4, it's not just that our spend levels.

In 2019, but our acquisitions, even net of attrition was equal to and very often for some months and some lease greater than what it was in 2019, which means that where people are coming to the client that said, we see a real opportunity within the space of.

Small business mid market business because the reality is we don't actually have a true card product alright.

Alright entire consumer offerings for that segment a lot of things that we have are either tailored for really large corporate accounts.

Our individual travelers. So we see a lot of opportunity as we come out of this and a lot of ways to go and drive a lot more value to that customer and captured in our P&L.

Thanks, very much vasu, thanks to everybody.

Thank you Helane.

Our next question comes from Duane <unk> with Evercore ISI.

Hey, Thanks, Good morning, I wanted to ask you both of the same question I asked Gary and Bob at their Investor Day.

You have worked together for a long time as a team but from a change perspective is there any daylight between the two of you strategically and do you have any examples of issues, where you really constructively disagreed over the last decade.

Hey, Julien thanks.

I'll start look Doug, Doug and I are different leaders and we definitely go about.

We.

Lead the company.

Different ways, but I'll tell you that in terms of the strategic direction of American.

Not only worked with Doug, but I have been part of every major decision in this company over the last since the merger.

So from that perspective.

Doing the right. Thanks, I'm excited about the positioning of American the assets that we've put in place whether it's fleet airport alliances our network, we're ready to go.

Demand recovers and we can put our assets to full utilization we are poised to outperform so from that perspective, I don't expect to hear a lot of.

The difference in terms of the way that Doug Doug do you think the right now.

Solely focused on.

Making sure that we deliver a great product for our customers and that's running a reliable airline and getting back to profitability.

Thanks for that thoughts and I appreciate it's a tricky question, maybe one for Vasu.

How different would march quarter capacity have been if we never had OMA chron.

Maybe this is an unfair observation, but it feels like Americans plans relative to the industry are very static in what is obviously, a very dynamic world I. Appreciate you taking the questions.

Yes, absolutely and I appreciate the question.

It's sort of hard to do hypotheticals.

Hypotheticals.

Would be but what I would say is this.

The part of the reason why maybe there's probably less volatility in our schedule is where our airlines sort of naturally position.

Not only do we operate a lot more of our capacity in domestic we generate a lot more of.

The value for customers and RASM results from flying in domestic sales for most of the pandemic.

Certainly the last several months we've.

Oriented about 85% of our ASM capacity in the domestic and short haul operations as we go into the first quarter it'll.

It'll be about 80 ish percent and those with another 5% or so constituting major international markets like London Heathrow for example.

For us so much of our network is that 65% of our network is.

We call Sunbelt hubs Phoenix, DFW, Charlotte DC, Miami that have been extremely robust due to the pandemic and any one of those hub.

Unit revenues, which are well in excess of what our competitors do so a little bit of what you see as a network composition difference quite frankly as we go out in the first quarter.

Quite frankly, we are flying the things, where we can most directly create value for the customer it outperformed.

We're doing the things are down so our long haul schedules or 70% of what they have historically been short haul schedules are a lot closer to what flattened so what it would be like when when demand is back remains the scene.

For us the real opportunity when we've said all through the pandemic is less about driving volume isn't the capacity based on our cost base with the airline.

Change is only very marginally whether we fly at 95% or 92% of the airline they're really big thing for us is.

<unk> yield performance and as we look out I mean, if indeed demand comes back where we see it is less about how we go in and manipulate capacity around the system and more about how we capture and yield growth.

I appreciate the thoughts.

Thanks, Brian .

Our next question comes from Hunter Keay with Wolfe Research.

Good morning.

Robert as you think about taking over the CEO role what are some of the things that you want to accomplish in your first 100 days.

Maybe when your ability to put your stamp on things has got its highest.

Hey, Hunter Im going to just be.

You really clear a clear and focused focused on that.

Our goal right now is to get back to profitability as soon as possible to deliver reliable product.

This plan is plain and simple.

As I take a look forward, we've got a great opportunity ahead of us of everything coming together at the right time I do think that we're in a position.

<unk> were.

Demand is poised to reap at everything that we see suggests that there is.

Pent up desire for people to get up out on the road, whether its for leisure and business demand and I think I've got a special special opportunity.

One that brings together everything that we've been working so hard to do throughout the pandemic and bringing that bringing that to fruition.

As I take a look out to the middle of the year I do think that we're going to get back to profitability I do think that American is going to continue to run a very reliable airline and I think we're going to be.

Very very competitive in all the markets that we serve.

Okay.

We talked about capacity being driven by demand.

Fuel costs occasionally but.

What is you are not able to hire people wonder if youre unable to hire the right people that fit the culture that you want to build at American is their decision, where you would decide to be smaller as opposed to hiring people that might not be great cultural fits.

So hey, Hunter. Thanks for that question because look this is something that I'm really proud of last year as we as we built back.

The entire economy all industries.

Struggled with finding the right people and getting them in the right positions.

American as we grew back we really quickly remedied any issues that we had and what we found is American as it is a very very.

Attractive place to work.

American Airlines sells itself in terms of attracting people to it so.

Whether it's the new flight attendant classes that are now graduating.

It's the SaaS and the people that we're bringing on to work in our reservations.

Agent ranks.

And those pilots and mechanics that were bringing in.

We at American.

Get a chance to really choose those that get to be part of the team and that's a great position to be in overtime I think that we're going to have to do a lot of work to make sure that the supply of pilots into our regional carriers is as strong as we needed debate, but youll see us on the forefront of that as well.

Thank you.

Thanks Arne.

Okay.

Okay.

Our next question comes from David Vernon with Bernstein.

Hey, good morning, everybody and congratulations on.

To everybody on their next chapters here Derek first question for you on cash flow if we're looking at it.

Full year guidance, you've laid out capex of $2 six should we be expecting cash from operations to cover that.

Im just trying to get a sense for how secure are we should be looking at the balance sheet and liquidity do you have on there we're going to be dipping into that from an operating standpoint are we going to be able to cover that based on what you're seeing today.

Well, we'll definitely be able to cover that.

Excellent short and sweet I like it.

And the second question, maybe for Robert or Derek.

You look at the capacity and the CASM ex guidance, you've given for 2000 to 2022 downside upside how.

How do we think about in broad brushes 22 to 'twenty three if we're up a little.

Relative to 19 and is that is that just going to be kind of a one for one thing or is there more beta to that.

How should we be thinking about the operating leverage coming back into the business as demand was get some support.

Yes.

Actually what you are saying I think we.

We are under utilizing our fleet without a doubt at this point in time I think as we add back our assets Robert Robert talked about.

But some portability and making sure the throughput happens and get the throughput through.

So if we.

And the 708, so yes, two opportunities to grow this airline at a very cheap cost I think the cost headwinds there is probably three or four points of cost headwinds we have in place right now with underutilized in our assets.

And making sure that when those aircrafts get back and we could use them as much as we can we do not need to add cost.

Do not need to add aircraft so.

We could in today's world, we could fly the airline probably 5% more with the cost structure. We have today, so it's pretty close to one for one it.

It might be a little bit sticky and they're a little bit, but it's pretty darn close to a one for one.

On the first 5% that we could add back.

Alright, Thanks, Jason.

Our next question comes from Dan Mckenzie with Seaport Global.

Oh, Hey, good morning.

Congrats to both Doug and Dan.

What an amazing run its been its really been a pleasure.

A couple of questions here, one housecleaning question, just one follow up on small and medium sized businesses.

Vasu, what's factored into the first quarter revenue outlook with respect to the timing of international returning.

Just sort of straight lining current trends or did you factor in some kind of escalation in March potentially.

Hey, Great question, and you're absolutely correct.

Straight line in current trends with the lone exception of our our short haul business.

Okay.

Tends to peak in the March April time period.

As North America goes on spring break and Easter vacation.

Okay.

Very good.

Secondly, just following up on <unk> question on small and medium size businesses.

I'm wondering if you can elaborate on kind of their purchase behavior versus a typical leisure travel or delayed book further out closer in.

Presumably the higher margin business I'm, just trying to get a sense of what that means and I guess I didn't in the Powerpoint I guess, Aaron I Didnt catch what that revenue from small and medium sized business was as a percent of 2019 revenue and how youre thinking about that training potentially here in 2022.

Sure.

Let me.

Answer to that is in a slightly different order first.

Small business, we ended December what we call small and mid market business was 80% recovered.

Large corporate business people, who buy on Big managed program was.

40% recovered ballpark.

Interestingly what that means for us.

Correctly, 40% of our revenues came from business about 15 points of that were from large corporates and the balance were from small and mid market companies.

And then I got shifted a lot were less than 10 comes from managed corporates as we think about next year.

Absolutely anticipate a rebound a bit.

Travel.

It's something we're spending a lot more closer to <unk>.

30 points of the 40, or so is coming from from small and mid market and manage corporate come down a little this is something which is certainly.

An opportunity that we looked upon very favorably in may in many ways be unique to American airlines, because so much of that small business growth to your question about the profile.

Does actually book in a very similar booking window as large.

A large corporate travel it's much shorter.

Dave the departure than what leisure in very critically originating in markets that are in the center of the country, Oklahoma City are.

Austin, San Antonio and places like that.

Engages in shrimp behavior, which is very different to manage corporate people are willing to go stay a Saturday night and to fly on a lower load factor flight, but very importantly, it comes in at the same level as yields is that our large corporate businesses.

But at a fraction of the cost of sales cost of sales it looks a lot more like what leisure is so we see this as a sign of real opportunity and indeed as we as we look out there and if you think about things.

We see that add to Robert's comments earlier the nature of this travel is starting to change that.

We see small businesses traveling.

More people traveling our blended business leisure purposes.

More people willing to go by themselves.

Our premium bear product when a cheaper one is available so we see a lot of opportunity as the world changes.

And we're going to organize and position ourselves to execute on that.

That's terrific. Thanks lawsuits.

Our next question comes from Catherine O'brien with Goldman Sachs.

Hey, good morning, everyone and just want to Echo My my peers congratulation to you.

Doug and Dan, it's really been a pleasure working with you.

Yes, I guess almost 12 years now.

Thanks Rolla the good times.

A question, maybe just on your 2020 growth outlook for that 5% I understand with the uncertainty around the <unk> 77. This makes it more difficult, but can you share high level, what youre thinking the breakout between domestic and international growth as Keith on your current 70 assumption and what's driving the decision on where to allocate that capacity.

Thanks.

Yeah, Hey, this is vasu I can I can help with that.

We are looking at as we see it.

Your first question.

We anticipate that with the 787 will be a materially smaller international airlines and what we would otherwise like to be operating something which is probably.

Call it 75% to 85% of the scale, we had in 2019, but our our short haul network domestic in the narrow bodies, we fly in the Mexico Caribbean Latin America will probably be a lot closer to what what 2019.

But there is a couple of other important things to note there of course first we.

We have a very conservative view of what happens with the 780 Sevens and data.

A pretty conservative view about how international demand even recovers through the course of the year. So a big mix of our international flying and you can already see it published schedules.

<unk> at around.

Markets, where we can go drive a lot of the connectivity.

Through whether its heathrow or other partner hubs Doha things like that.

That we might not have in times past.

The other thing that's out there too.

And to the earlier comment I made we have a lot more flexibility with with the airline and indeed through the pandemic, we've come to realize that much easier.

A few points, we have a lot of flexibility in how we go in and plan the airline.

And so we are consciously trying to build the airlines so that we.

We can be really efficient and how we utilize our assets and make moves around the system. So that we can go fly the market's a customer's demand most.

Even if it's relatively late in the booking curve so.

While those are broad strokes of where capacity is.

Things may change and realistically they will change as demand comes back.

Got it and then maybe one more for you again Mark.

Just to dig into your short term revenue outlook a bit more.

Understand there is a lot of moving pieces, but your RASM performance versus 19 improved each quarter through 2021.

It looks like it's going to get worse in the first quarter period guidance.

Of course, you call out impact of Amazon, but can you help us think of the drivers of that a bit more than anything we should know about cargo or other revenue trends or is that really just your conservative view as you noted on on loads and pricing on the passenger side. Thanks for that.

Look it's very much the conservative view in Edinburgh, having gone through multiple waves of the pandemic one of the things that we've kind of more reliably build forecast on is the amount of time. It takes from the type of cases, peaking to demand recovery.

That shortened through every wave and the Delta away. It was about a seven week spread between case, peaking demand bottoming out and growing again.

So a lot of our outlook is based on a slightly shortened version.

Of that occurring and indeed, what we've been seeing as cases of peak wherever they peaked in the world Israel U K more recently than domestic.

Not a seven week span has not four week span, it's something a lot more like a seven day span.

It's still early to tell as I mentioned earlier, 85% of our capacity is in domestic and if you.

Presumed last week was the peak of cases across the country.

<unk> been encouraged by the last few days of bookings.

A lot of our first quarter forecast is based on the conservatism that we've had we're having seen prior waves before.

We anticipate that January and February will remain challenged because.

Historically, they are seasonally the weakest month.

So we will see but we remain encouraged for how strong demand comes back in.

We are certainly reserving every seat is there is a customer that wants to travel and <unk>.

Can we move onto the next question.

Our next question comes from Andrew <unk> with Bank of America.

Hi, Good morning, everyone. Doug just wanted to extend my congratulations as well and the same goes to Dan.

Pleasure working with with both of you over the years.

Just first question.

Around costs.

Derek.

Look 5% CASM guide include anything.

Currently we're in negotiations and then just secondly on costs.

When you factor in kind of new labor deals.

Kind of the inflation in the economy that you were discussing earlier.

Even as capacity comes back do you think that getting back to pre pandemic CASM X is a realistic expectation over the next next few years.

Yes. It does not include I mean, it includes year over year deals that were already done. So any deal that has already done is built in.

As Robert talked about we got some real we got some deals done in the past few weeks there were huge impact on the cost, but but really good.

Opportunity to get those deals done and get them done quick with some of our groups, but it does not include any new contract negotiations that are complete today. So that's number one.

Number two.

I do think.

We had expected 2022 to get back to 2019 levels.

But with the with the <unk>.

<unk> and pulling down the flying from 780, <unk> not being there and also demand not quite being there we will not get to the 2019 levels.

As we get into 2023.

Really possible it depends on the growth of the airline and other things that we do.

If we don't get there we will get very close put it that way. So I think in 2023, we've kind of I've always talked about being pretty flat in 2022, that's not happened and really driven by.

Fully utilizing our assets.

As we fully utilize those assets and we plan in 2023, I think we can get to that level or pretty close we might not get all the way down to 2019, but we will get pretty close.

Got it that's helpful. And then just lastly for me.

Robert I guess as you assume the CEO role here.

Or.

What do you think American needs to do better I'll call. It the new World post pandemic to help drive Americans.

Margin back towards pre pandemic levels. Thanks.

Yes, Thanks, Andrew Hey, look we need to we need to put all the pieces together all of the things that we've been working on over the last three years, and then Brian bring them about and execute and execute very well running reliably finish airline.

No.

In terms of unit revenues or pays off in terms of unit costs and it definitely pays off in terms of customer satisfaction.

Again American has invested in all the right places.

When we talk about the.

The aircraft in airports and lounges and whatnot.

That's money that has been spent it's in place and now it's time to bring it back and put it into action.

We do that.

Im confident as Derek said I'm quite confident in all aspects of American is poised to outperform.

Thanks, Andrew.

Okay.

That concludes the analyst Q&A, we will now take questions from the media.

With the media and I'd like to ask a question. Please press Star then one on your telephone.

Please standby will be compile the Q&A roster. Our first question comes from Alison Sider with Wall Street Journal.

So much high.

I was wondering if you could talk a little bit more about your expectations for 77 deliveries and kind of how confident you are or anything youre hearing from Boeing about what they might expect in terms of the schedule.

On that.

Yes, Hi, al is there.

We're still on the same schedule.

Mid April is what we're talking about for our first delivery.

That has been locked in on those dates for probably the last couple of months.

And we're still planning on that happening so we haven't got any different.

Information in the past couple of months, where I think we're still on target for those.

And that we would take all 13.

Throughout the year, but we have been conservative only put four in the schedule for the summer.

We had originally thought we could get all <unk> in the summer, but we pulled that down to four and.

And we've had really good discussions with Boeing and I think they are on track as of today.

It hit that mid April timeframe than we are.

We're hopeful that that's still the case and nothing else comes up.

Got it and is this something is this.

In situations, where you would seek any kind of compensation from Boeing for the delays are there was a further delay is that something you would discuss.

Yes, we are in discussions with Boeing.

Where we're at.

There are delayed penalties that are that are paid and Boeing is paying the delay penalties and everything is happening as we speak today.

If there are further delays and it really does impact.

This summer much more than what we think it has been.

We've had good discussions with Boeing.

They will compensate us for the losses that we've had.

For the delay of those aircraft.

Thank you.

Thanks, John .

Our next question comes from David Koning with the associated press.

Thanks.

Hi.

Doug.

Congratulations as well I hope you have a great retirement.

And you mentioned five G.

And this week's agreement with Verizon and AT&T.

Wondering how long do you get a signal of how long they're willing to delay their full rollout and and why did this have to come down to an 11 power prices like this.

Yes, Thanks, David.

The sense that they are.

Again, the right people are talking to each other and everyone agrees that it doesn't make sense to.

Deploy.

Two.

Any more <unk> until we're certain that it's not going to have a disruptive effect on <unk>.

Airlines so.

Again.

That's where we stand at this point out of home plus rural stack.

I feel really good about those royalty because again the right people are talking to each other.

Armed with the right people talk to each other.

<unk>.

We can do a post audit later I'm not quite certain frankly.

Frankly, we are.

Where are the end user of this dysfunction.

Got it.

One of the ones affected our customers one on one is affected.

And as.

It was getting ready to be deployed and we were therefore being told.

That was going to mean to our operations, we screamed as long as we could unfortunately people listen so.

That's where we are today and what should have happened.

This is happening now.

The technical experts that are working on it tell us it's really not that complicated once they once they are able to share information and work on it.

They seem encouraged.

That will be able to address this in a way that.

Allows for full deployment of RG <unk>.

Including near airports.

Yes again.

Lower levels or whatever is required.

And also doesn't offer it doesn't require any disruption.

Air travel so.

That's right, that's where we are I don't expect until we get to the point that everyone's really comfortable about that you'll see.

Youll see anything turned on their parts.

No one wants to go through those again.

So are the airlines talking directly to the telecom or are you going through the regulators.

It's much more about the manufacturers.

Our OEM.

In directly to the telecom, which is happening so the Boeing Airbus and the palace's Honeywell.

Collyn cetera talking to their counterparts.

AT&T and Verizon.

Obviously with FAA involvement.

Yes.

What needed to happen and is now happening.

With those organizations those companies able to talk to each other.

Share information.

Okay.

<unk>.

We can get results because people are willing to work together.

We don't have that we had government agencies talking to each other.

That can be less productive.

Alright, thank you.

Thanks, Dave.

Yeah.

Our next question comes from William Stein with Bloomberg News.

Hi, Barry Good morning, Congratulations Doug and Robert.

I wanted to ask you if you could talk a little bit about how much of a delay you see beyond mccaughan layer of having on the return to.

More near normal travel one of your competitors that it pushes it out 60 days, but I wonder how that ties in with <unk> comments about the show.

Shortening time between a peak, yet and sort of bottoming out and then a recovery in demand.

Hey, Mary.

Hey, Thanks a.

A lot different.

Look I think that we were recovering nicely after after the Delta variance as we took a look into the Thanksgiving timeframe.

But Dan Omicron hit demand dropped off fairly fairly rapidly.

Yes, the demand is recovering faster than it had in previous ways, but I think.

We don't view the demand is.

More than than delayed we don't think it's diminished.

And if youre, taking a look and kind of the one or the.

Two to three months timeframe of how demand the rebound is pushed out I think that that's the appropriate timeframe and for us.

As <unk> has mentioned I know Doug earlier.

Set us well look as we take a look at in February as especially as we get to.

Great period, we see a lot of.

Demand and a lot of strength in the bookings that we're seeing already so I do think that as <unk>.

That is almost all of this were to come out strong.

Thank you and if I can quickly ask.

And just discussing increase.

Increased wage levels going forward.

Try to hire more people is American contemplating at all.

As we gather unilateral pay increase for unionized workers, either any particular groups or maybe on a more broader basis.

And as I mentioned earlier in the call American has a very attractive brand we have incredibly generous.

Generous compensation and benefits programs, we attract people right now with the physicians.

And the compensation structure that we have.

Pockets throughout the country various positions like in regional carriers.

We take the appropriate action.

We have to but I feel really confident in where we are today and what will.

We are contemplating and being able to attract the right people and the right numbers and getting getting in front of it too.

Okay. Thank you very much.

Yes.

Our next question comes from Leslie Josephs with CNBC.

Hi, good morning, everyone.

Okay.

What you guys think the impact is going to be of the multiple labor negotiations you have going on now.

Complaints about issues of quality of life physical changes.

Curious if that changes how are you.

You think about scheduling the airline going forward.

What sort of.

With me are the thing with pay increases.

In 2022 and beyond how do you see that going.

Hey, lastly, thanks for the question here. So one thing I know is that.

Everybody at American has joined.

And the goal and objective of running a really reliable airline one that returns to profitability as soon as possible. So I know that our labor leaders are team members. They want a profitable and successful American Airlines as we go forward. So as we take a look into any negotiations I know that thats a possibility.

We're all taking it's got it has to be a mindset of taking care of our team members certainly.

But also making sure we take care of the company and our shareholders and that's the balance that we've always been able to maintain and we will do going forward. So as I take a look going forward and I've said before I know that we can attract team members to American Airlines and there is always ways, we can get better.

By better it means running an airline that is more reliable too I know everybody is joined in that goal.

Okay. Thanks, and if I can just ask one follow up on the 787 Derik did you say that Boeing is definitely paying compensation now and they could pay even more at the <unk>.

Schedule is affected.

Okay.

The first answer is yes.

They are delayed penalties that are always in all of these contracts and Boeing is paying the delay penalties for each one of these contracts for each one of these aircraft and then the rest of it will be a negotiation as we talk to them.

Really we don't have to do anything and hopefully they hit the schedule that they have and we don't have any disruption as we go forward but.

We've been told from the highest level of the Boeing team that if there is.

Compensation needed to come to the airline that.

They are fully.

Our breadth to help us.

And to overcome the cost that.

787 has caused us over these last the delay in those aircraft as.

Cost us over the last few years and.

That's a negotiation we will have with the with the Boeing team.

In addition to what they're already paying for the existing delay.

Correct.

Got it thank you.

Okay.

Our next question comes from David Slotnick with TPG.

Good morning, everyone. Thank you for the question.

Congratulations Doug.

Robert during your prepared remarks, you mentioned something about a blurring of lines between business and leisure travel I was wondering if you could elaborate on that a bit.

Does that translate to higher yields more premium cabin sales et cetera.

So he is going to take this go ahead, Yeah, Hey, David Greg again from you, Yes look we find to be a really encouraging trend.

We didn't see a blurring of lines were.

The trip patterns are changing Thursday, which is still our biggest business day of the week is also becoming one of our biggest leisure days of the week.

We're having more people who.

By business style fare product travel as if it's a business trip but.

They're going to place leisure destinations Fort Walton Beach things like that.

That behavior is starting to change and we can trace its the things were.

People work Friday is remotely, Oregon spent a week or two at a time working from some place that is not where they live.

All of that is creating a lot more.

Variation in how we've historically thought about business and leisure, but and that is a lot of opportunity.

Clearly as we go through the pandemic.

Customers have a lot more flexibility with their time Theres a lot more savings that are out there and travel has always been one of the most aspirational things for U S consumers.

We've seen a lot of that and we benefit a lot from a lot of that in our short haul network. The most are our premium cabin sales have been the most robust and places like the Caribbean and leisure destinations in the U S. More so than they've been and more prototypical business destinations like the transcon markets are.

London Heathrow. So we're really encouraged by that trend, we think that it is going to lead to a lot of things.

While we have done a lot of things, where we are increasingly rewarding travel which is not just for how frequently people fly but.

Or simply spending on credit cards or spending all across the airline.

My earlier comments, we think there's even more to more to deal which can be really great for our customers and of course really great for the airline.

Thanks Duffy.

The follow up.

Do you see the <unk>.

Taxes inflation, leading to anything.

Higher ticket fares higher prices for customers.

It remains to be seen.

<unk> has a long history with inflation, where it hasnt always bledsoe cleanly and affairs. So so we'll see and we will make any future commentary about about pricing.

But it's early to tell and how whether this level of inflation stays or not it's even early to go in and guess at that.

Great. Thank you very much.

Thank you David.

Our next question comes from Dawn Gilbertson with USA today.

Hi, good morning.

Doug I'm really jealous. This is your last call, but I'm very happy for you and your family.

I have a couple of questions first for Bob So following up on Barry's question about kind of the lag in bookings.

On your spring break and summer I'm wondering whether you guys are considering extending your.

The expiration date for tickets and four.

Current travel credits and my second question is probably for Robert but maybe not.

Your your call times like a lot of airlines is still a pretty high as recently as Friday. It was four hours plus can you give any specifics on what youre doing to address this persistent problem.

What's behind that thanks very much.

Hey, it's great to hear from me, Joe I'll start and then others can add into.

First of all we are assessing different options for what we call stored value, what we do with people who have.

Covid related credits that are out there.

We've been really encouraged by what we've seen here. We're the only airline that allows customers to do name changes and reassigned them because of that we've seen a lot of consumers go in and take advantage of that flexibility and so that combined with the fact that we've flown a bigger airline.

Let us believe that we may be seeing is probably a little bit different than others, but we're assessing what our options are and and and.

We will have more in the not distant future.

Hey, Don.

They want to help me out with that.

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With reservations right now with so many changes.

That are going on.

In the environment, whether it's travel restrictions quarantine requirements schedule changes.

Yes, you name it.

The level of calls that we're getting right now.

Really unprecedented in fitness for good reasons.

And what we're trying to do with to make sure is it not.

Only do we have all of the resources from reservations perspective available, but we're also investing in things like chat and then call back functions as well and one of the things I'm really proud of is while we have had.

Some extended callback times as in place I'm really proud of the way we've performed throughout the pandemic American has.

Incidentally performed better than a lot of our competitors and as we come out of this huge call.

Spike and I expect us to get back to really reasonable in and cut is.

Satisfactory times, Mike do you want to add anything else.

Just following up on some of the technology that we've implemented and raise around virtual assistant which is sort of artificial intelligence that can respond to some of the easier question without the customer having to interact with an agent and then that's a win win because the customer can really do that.

Synchronously and get their ancillary in short order.

Then this is going to chat for a more difficult question. Randy agents are now trained 100 now trained to be able to handle it.

And again this allows them to handle more than one interaction at a time, which is better for our customers and more more productive for our agents and then.

Like Robert said that really helps defray some of the impact of reservation.

At the end of the day the nature of the questions that we're getting are so complex where people are really wanting to fully understand what are the COVID-19 restrictions are traveling here, what kind of vaccination status do I have that how do I use this stored value combined with this form of payment and in those cases, we still meet our fabulous.

That agents to be able to handle those.

Thank you very much.

Thanks, Don before you before you sign off with everyone listening again, you would have absolutely been in my prepared remarks, where as it appears on the line.

But look of all of the year.

We don't know.

Covered airlines, Arizona Republic, when we started American west.

When we were at American spirit of all the articles.

They have risen to a level that I've chosen to actually hang onto more of them Havent Don Gilbertson alright.

So thank you very much.

Really really appreciate it Doug.

Thanks, Tom it's been a pleasure.

Thank you.

That concludes today's question and answer session I would like to turn the call back to management for closing remarks.

I think we're done thank you very much really appreciate I really appreciate it I've enjoyed this immensely.

Maybe my favorite of 107 so.

Thank you very much congratulations to Robert Congratulations Dan.

And we'll.

We will be in touch thanks again.

Okay.

This concludes today's conference call. Thank you for participating you may now disconnect.