Q3 2022 American Airlines Group Inc Earnings Call
Okay.
Thank you for standing by and welcome to American Airlines group's third quarter 2022 earnings call. Today's call is being recorded at this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a.
Question during the session you will need to press star one one on your telephone.
And now I'd like to turn the call over to your moderator head of Investor Relations Mr. Scott Law.
Please go ahead.
Thanks, Marty good morning, everyone and welcome to the American Airlines Group third quarter 2022 earnings Conference call.
On the call. This morning, we have our CEO , Robert Isom, our Vice chair and CFO Derek Kerr.
Number of our other senior executives are also on the call for Q&A session.
Robert will start the call. This morning, with an overview of the third quarter, Derek will follow with details on the quarter and our operating plans in outlets.
Sure.
After derek's comments, we'll open the call for analyst questions, followed by questions from the media.
And as many questions as possible. Please limit yourself to one question and one follow up.
Before we begin today, we must state that today's call contains forward looking statements, including statements concerning future revenues costs forecast of capacity complete plan.
Statements represent our predictions and expectations of future events, but numerous risks and uncertainties could cause actual results to differ from those projected.
Information about some of these risks and uncertainties can be found in our earnings press release that was issued this morning as well as our Form 10-Q for the quarter ended September 32022.
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 financial measures is included in the earnings press release, which 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 we're giving you on this call. This morning is as of today's date and we undertake no obligation to update the information subsequently.
For your interest and for joining us this morning, and with that I'll turn the call over to our CEO Robert Isom.
Thanks Scott.
Good morning, everybody thanks for joining us.
This morning American reported a third quarter GAAP net income of $483 million, excluding net special items, our third quarter net income of $478 million.
We produced revenues of $13 $5 billion, which sets a new record for any quarter in the history of American Airlines.
When I took on the CEO role in March I told you American was going to do two things this year.
Run a reliable operation and returned to profitability.
It's taken us a bit longer than we would've liked to get where we want on the operation side, but we're pleased with how the airline is performing today and we know we're on the right trajectory.
As far as profitability, we've now delivered two profitable quarters in or out and we're forecasting a profitable fourth quarter with continued strength in demand.
We cannot have made either of those commitments will ensure we delivered on them. If it worked for the hard work of the American Airlines team. They do a phenomenal job every day and taking care of our customers and each other their teamwork resiliency and determination allow us to continue our focus of running a reliable operation and sustaining prop.
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We keep that focus because in our business reliability is everything.
This is the foundation of the service we provide our customers.
Predictable solid operation changes the next is the <unk>.
Work experience of our team.
<unk> also enables our long term profitability and achieving sustained profitability is how we will meet our debt reduction targets and continue to invest in our team and deliver the network products and services our customers want.
With that in mind, let's talk more about the third quarter specifically.
Our record quarterly revenue of $13 $5 billion is a 13% increase over 2019.
Notably we achieved this record revenue, while flying nearly 10% less capacity.
We did in the third quarter of 2019.
We're pleased to have exceeded our initial guidance on both revenue and pre tax pre tax margin in the third quarter, despite constraints still facing American and the rest of the industry.
Americans third quarter results, including a record revenue performance are significant considering their macroeconomic uncertainty facing so many people.
Demand remains strong it's clear that our customers in the U S and other parts of the world continue to value air travel and the ability to reconnect post pandemic.
Importantly, many of the demand trends we saw.
Emerged during the pandemic are becoming more consistent and shaping our commercial focus for 2023 and beyond.
Leisure and business revenue remained incredibly strong again, surpassing 2019 levels in the third quarter.
And for small and medium sized businesses and customers travelling for a combination of business and leisure continue to outpace the recovery of managed corporate travel.
As that revenue continues to build there'll be additive to an already strong base of business demand led by small and medium business and blended trips.
That as well as a return of long haul international travel leaves us very bullish about overall demand even in an uncertain economic environment.
The changing nature demand provides an opportunity to rework our commercial offerings to better meet the needs of our customers and create a more resilient and profitable business.
We continue to develop the most comprehensive airline network in the world.
As we have shared on previous calls over the past few years, we have made the decision to greatly simplify our fleet and network focusing on are are flying on where we can create outsized customer value and working with our partners to create choices and value in areas, where it's cost prohibitive to do so ourselves.
This means prioritizing define that can best generate a return today not bringing back flying that was only marginally profitable before the pandemic or that we had hoped we would one day generate a return.
It also means using our partners to fill in the gas and deliver a seamless network to our customers.
That work continues, particularly with our northeast Alliance with Jetblue are West Coast International Alliance, with Alaska, and our Atlantic and Pacific Joint businesses.
To better match, our product offering to customers and network, we recently announced enhancements to our long haul fleet that will give American and unrivaled premium experience among U S carriers.
Starting in 2024 customers will see new flagship suite seat on our Boeing Triple seven 300, ER aircrafts as well as our on our new Boeing 787, nine and Airbus <unk> hundred 21 XLR deliveries.
With these new interiors premium seating on our long haul aircraft will go will grow by more than 45% by 2026.
We're working to give our customers better choices and more access to the world's largest and best travel rewards program and that's advantage.
It's clear that customers want more when they shop for travel where choices ways to earn and use mouse and more incentives to earn miles even when they don't travel.
So turning to our operations as I mentioned at the outset operating reliably is critical to everything we do we have the youngest fleet in the best networking partners in the industry, but we can't take full advantage of those assets, if we arent running reliably.
That's why we continue to invest in our operation with additional resources and new technology and those efforts are paying off.
Despite a challenging operating environment with Hurricanes in Florida, and the Caribbean and flooding.
Dallas Fort worth region, we restored our operating reliability to pre pandemic levels in the third quarter.
And we did it while flying a schedule that was 25% larger than our closest competitor.
We have delivered record on time arrival rate and completion factor so far in October and expect to carry that momentum through the upcoming holiday season and beyond.
Hercules Fiona and yet were devastating for so many including the communities, we serve and the places our team and customers call home.
The American Airlines team stepped up in amazing ways to take care of our customers and each other during very challenging circumstances.
Through our advantage program and the partnership with the Red Cross almost $4 million has been raised to support victims of the storms and American continues to support our teams through the American Airlines family fun.
Storms moved through quickly, but they had an outsized impact on American given the size of our operation in Florida, We had account for more than than 1500 flights for the last four days of September given the impact of Hurricane Ian We estimate right now that the storms reduced revenue by about $40 million.
As we close out the year and look to the first quarter. We continue to size the airline for the resources, we have available and the application and the operating conditions we face.
This approach and our strong operational performance in September and so far in October gave us a lot of confidence as we head into the busy travel holiday season.
In closing we remain very encouraged by the continued strength in demand and the trends we're seeing across the business American have the best team and most efficient assets in the industry and we have built an airline that can be successful in many different demand and economic environments looking ahead.
We're focused on investing in our operation our network and our partnerships to ensure we can continue to deliver for our customers and of course, we will do so while remaining focused on achieving sustained profitability and reducing our debt and with that I'll hand, it over to Derrick alright. Thank you Robert and good morning, everyone.
I want to start by thanking the American Airlines team for their efforts during the third quarter. Our airline success during the quarter was only possible because of the hard work of our team during a challenging summer.
This morning, we reported a third quarter GAAP net income of $483 million.
Excluding net special items, we reported a net income of $478 million, both equate to earnings of 69 per diluted share.
Since the beginning of the year, we have been focused on returning the airline to sustained profitability. We are pleased that our third quarter results build on that progress we made in the second quarter.
The high end of our initial earnings expectations due to the continuation of strong of a strong demand environment.
The third quarter was our highest quarterly revenue in company history being in the second quarter of this year, the domestic and short haul international entities continue to lead the revenue recovery and we expect further improvement in long haul international as we continue to grow back our capacity.
The investments, we have made to renew and simple fire fleet position us well for the future. We continue to operate the youngest most fuel efficient fleet among U S network carriers.
August we began taking deliveries of new 788 aircraft from Boeing for the first time in 15 months in the third quarter. We took delivery of four 788, and we expect to receive five the remainder of this year and four in the first half of 2023.
Our Boeing 780, <unk> are still expected to be delivered starting in 2024.
During the quarter. We also took delivery of three <unk> hundred 21 news and reactivated six 737 H from long term storage in the fourth quarter. We now expect to take delivery of eight <unk> hundred 21, <unk> three $1 75. In addition to the $5 788 as I mentioned previously.
Based on our latest guidance from Boeing we now expect to take delivery of 19, 737, Max eight and 2023 compared to the 27 deliveries that were previously expected. This change in timing will ship planned capex out of 2023 into future years, our 2023 aircraft Capex net of leases is now.
I expect it to be one 6 billion.
We ended the third quarter was $14 3 billion of total available liquidity, which is $700 million higher than our initial third quarter forecast due to continued forward bookings strength seen throughout the quarter. This.
This level of liquidity is more than double the amount we had at year end of 2019.
Reducing total debt continues to be a top priority.
<unk> on track with our target of reducing overall debt levels by 15 billion by the end of 2025.
As of the end of the third quarter, we have reduced total debt by $5 6 billion versus the 2021 peak and as I mentioned last quarter. We expect further benefit from a reduction in our pension liability that we will make.
Reflected at the end of the year.
In the fourth quarter, we expect to make approximately $540 million of scheduled debt and finance lease payments freeing up additional collateral in the process.
We maintained our elevated liquidity position throughout the third quarter and continue to balance appropriate target liquidity levels with the expected recovery debt reduction debt reduction opportunities and investment in the business.
We will continue to target, 10% to $12 billion in total liquidity in the medium term and intend to utilize excess liquidity above that level to accelerate our deleveraging initiatives at the appropriate time.
Looking forward. Our next term loan maturity is our $1 2 billion term loan, which does not mature until December of 2023.
Looking to the fourth quarter, we expect to produce an operating margin of between seven and a half or five five and seven 5% based on the current demand and fuel price forecast we currently.
We expect to produce total revenues that are 11% to 13% higher than the fourth quarter of 2019 on capacity that is 5% to 7% lower than 2019 levels.
This continued strength and demand is expected to result in total revenue per available seat mile that is 18% to 20% higher than 2019.
Our fourth quarter CASM, excluding fuel and that special items is expected to be up between 8% and 10% compared to 2019. These higher unit costs versus 2019 are primarily driven by inflationary pressure and lower relative asset utilization.
Our current forecast for the fourth quarter assumes fuel between $3 51, and $3 56.
Which is approximately 70% higher than 2019 levels.
Finally, while we are still in the process of building our 2023 operating plans I'd like to share a few thoughts on our approach. We continue to believe that 2023 demand for air travel will be robust we.
We currently see no signs of demand slowing as we move into the new year, but as always we will continue to keep a close eye on the macroeconomic environment and will adjust as plans if necessary.
Accordingly, we will continue to size the airline for the resources, we have with a focus on reliability and profitability.
As we move into 2023, the constraints facing our business today will remain those constraints are slower than planned aircraft deliveries in.
And lower utilization of our fleet largely driven by regional pilot contract constraints.
Therefore based on our preliminary plans, we expect our 2023 capacity will be between 95 and 100% of 2019 level.
We believe this approach to capacity will produce strong profitability and free cash flow reliable operating performance and allow appropriate levels of flexibility in this very fluid environment.
In conclusion demand for our products is strong and we remain nimble in our planning and execution to ensure we optimize for the environment. We're operating in.
As we close out 2022 and move into 2023, we're confident in our ability to continue to deliver on our stated objectives of operational reliability and sustained profitability because of our world class network efficient fleet and incredible team with that I will open up the line for analyst questions.
Okay.
Thank you and again to ask a question. Please press star one one on your telephone again Thats Star one wanted to queue up for analyst questions.
Our first question comes from the line of David Vernon of Bernstein.
Your line is open thanks for your time.
Jim.
I was wondering maybe if you could talk a little bit about how the fleet changes you guys have made through the pandemic are sort of impacting.
Operational performance, obviously, it's going to have an impact on reliability, but also when you think about sort of scheduling the network, maybe getting better utilization and maybe seeing some peaks out of the schedule.
Being being unconstrained by the directionality of some of the equipment constraints that are in there can you just talk a little bit about how that those fleet changes have impacted overall productivity and the early signs there.
Hey, David how are you. Thanks. Thanks for the question too and we're really proud of what we're able to do over the pandemic you know a bunch of different projects went into place you know the story about rationalizing the fleet getting down really from a mainline perspective down to.
Two types of narrow bodies in two types of wide bodies. We did the same thing in our regional fleet as well, but during the pandemic as well we accelerated our cabin consistency project <unk> project, where we were able to upsize. The 700 Sevens and then also make sure that our <unk> hundred 20 family.
We're consistent in terms of seating as well all of that work is done.
So it's freed up a tremendous amount of resources, but then just in terms of operating thing.
About everything from not having to carry as many part pools in inventory.
Think about.
Pilot training and what's required from going from <unk> on one equipment type to another and the simulators that are required for that the training thats required for that so look as we get back to full utilization of our resources, that's going to be something that I think pays dividends.
Youll start to see as we get back really to full utilization and I think that thats something that plays well long into the future. We see it already I know, it's producing better reliability, it's easier for our team and from <unk>.
Revenue perspective, I'll hand, it off to Vasu I can tell you, it's mack and his job easier yeah, I'll pick up right. There David I think it's a great question.
We went through the pandemic.
Major principle.
We've been planning the airline is to build it in a way where it is as nimble and responsive to the demand is resilient based crisis disease as you look at that over time.
Really the wide body fleet for American Airlines was a strange kind of liability because thats. The most volatile part of our business. It's part of our business that our customers have just valued a lot less than our short haul network and so for US as you look out there we.
We took that down so.
Look at the fourth quarter schedule, we are a 15% smaller long haul airline.
But very importantly, what we've also done right is when we have such a big fleet of narrow bodies, we have a lot more flexibility in how we send them. So we've changed our capacity mix pretty materially from pre pandemic as we were entering the fourth quarter. In 2019, we were about a 70 30 short haul long haul airline as we enter the.
The fourth quarter, now, where it's something a lot closer to an 80 20.
Short haul long haul airline.
And that airline that we have is something which is a lot more dynamic there is fewer fleet types like Robert said, if demand changes were much more enabling you adjust quite.
Quite frankly, the short haul business is and has been for the last 20 years are much more durable part of things and frankly, you see it right now right now long haul is doing well.
Some point in time, it'll it'll come down, but short haul remains pretty consistently strong across the business cycle.
And as you think about that plan to get back to 95% to 100% next year is that kind of gets you. The the full benefit of utilizing the new fleet or are we still going to be carrying some.
Additional sort of productivity headwinds from from from training or Resourcing or just just under utilization from a from an hours per aircraft per day kind of thing.
So David I'll start and Derek can chime in here too. It's a good question, but we look at it as upside for the airline we know that we can find more out of the assets that we have there are constraints out there, notably pilot constraints both for the regional side and then a just a massive amount of training that we have to do on the mainline side those constraints are going to be out there over time.
They'll break free, but we're confident that we can actually get more utilization out of their current fleet to actually get us beyond flying at a 100% of 2019 levels and that's where I think the cost story at the airline gets really interesting, but it's going to take a little bit of time to get to that point.
Great. Thanks, a lot for the time guys.
Thank you our next question.
Comes from the line of Savi sight of.
Raymond James Your line is open savvy site.
Good morning, everyone.
Could you please talk about a little bit more on the.
Hiring and training side on the mainline.
Where you are on that and.
Again, my expectations as you as you head into 2023.
Sure Savi I appreciate the question.
Look at.
We're hiring more pilots this year.
Than we ever have in our history in any given quarter.
So we're looking at hiring almost 2000 pilots we're on track to actually accomplish that from a mainline perspective, so I feel really great about that but let's face it training that many parts of something we've never done before coming out of the pandemic. We've had to make sure that resources are all in the right spot.
Whether that's additional <unk>.
Simulators and resources like that or even you know things like the instructors.
That's all working its way through and we feel very confident that over time.
Our pilot pipeline for the mainline is very strong and our training resources are absolutely going to match the need that we have going forward the regional side of the business a little bit different we didn't hire.
And let's face it we did hire for two years during the pandemic at all and then not only that people didn't come into the business.
And so we've got to work our way through that and you've got a supply issue that I think is coming back online I feel really confident about it we're facilitating that through things like our cadet program and creating financing vehicles.
Sure.
People that want to get into the business.
That's all going well, but then the other issue is once you run.
Short you actually have issues of getting kind of pilots from the right seat to the left seat and there are hours requirements that have to that you have to fulfill.
We're working our way through that that's going to take a little bit longer my opinion, that's maybe two to three years to work at versus the mainline side, which I think is something from a training perspective, we really get fully caught up over the course of the next year.
That's helpful and if I might just following up on that so I appreciate the kind of thoughts on where capacity could be next year.
The way you can help us think about the cost side of things and how much of the headwinds that youre seeing today, we might might see can I go away as you kind of get through the next year.
Well Savi I mean, we're still going through our planning process. So we gave the guide for the ASM, but we're we're not ready to guide costs yet.
We will on the January January call working through our budget were in that in that today. So.
The CASM will depend on what we fly, but we will go through that.
The January call.
Understood. Thank you.
Thank you our next question.
It comes from the line of Jamie Baker Jpmorgan, Jamie Baker. Your line is open morning, everybody two quick questions for Derik and then a follow up for Vasu Derek why the pivot from pre tax operating margin guidance and second whats the increase in interest expense year on year at the current.
Forward curve.
For your floating rate debt.
Okay.
Just no reason for that I mean, we're just being consistent with the rest of the airlines.
From an operating perspective, that's what we're focused on and then on the interest rate I mean, our cost of debt.
Debt has gone probably from about 4% to 5% and our fixed floating at 70 30.
As we as we look into next year. Our interest expense is this quarter was around $494 million does that go up in the fourth quarter to about 530, so it's probably about <unk>.
$40 million from our from the third to fourth quarter on interest expense basis, but.
That's totally offset right now with the cash levels we have.
On interest income.
Offsetting that third quarter interest income it depends on where cash is in the fourth quarter.
And you can see that our guide for non op is pretty pretty even quarter over quarter. Yes. Okay. That's why I asked I appreciate that but so far so as I continue to think through.
How are women.
Eric and need to adapt to new travel patterns and look maybe you don't aside from just shifting some capacity to certain days of the week maybe.
Giving return peak shifts a bit but I keep thinking there is more that can be done.
Fare fences promotions advantage.
Just to better capture these new travel patterns out there or is it just as simple as adjusting that.
<unk> schedule is not sure if the reality is an American term, but I Trust you know what I mean.
I think you just made a term Jamie.
Well, we use data there Mike so but that was a long time ago. Just just really wondering if there is more than just pure scheduling nuances to best monetizing all of these new travel patterns that are emerging certainly much to my personal post COVID-19 surprise.
Yeah.
It's a great question Jamie.
Let me start with just some context setting for <unk>.
How indeed the world has changed first of all we are in general really encouraged by what has happened in the factory of demand as we see the demand for travel and for air travel in particular has never been higher and remained strong.
And kind of all future periods, but the shape of that the composition has changed a lot.
Now we're in a place for the quarter were 45% of our revenue came from blended trends about 30% from discretionary or what we've historically called leisure trip and the remaining 25% from.
Non discretionary we've historically called business trends and importantly within business about 17% to 20 points of that is coming actually from a non contracted unmanaged businesses.
The remaining kind of five to eight points or from contracted corporations.
Immediately smaller call it four to five point smaller than historic.
That is the thing that is actually really encouraging for us for a couple of reasons that that big category in blended demand which is growing.
First and foremost.
Managed business is coming in at yield values.
Where they are gross yields are similar to the corporate contracted transactions that are not there, but very importantly, they are net yields none of their cost of sale is actually very often higher than then what we spilled off but two and kind of more directly related to your question. What we find is that.
Indeed, this blended demand uses our airline network in a very economical way.
Half of that demand is using OLED markets in our system, where American's network is uniquely advantaged, but additionally, we've seen that across our system not just for blended demand too.
Two points of traffic shifts from what we'll call the peak business periods in the day, that's pre pre Oh 800 post 600 and into the body of the day. The 800 600 window and so if you think about that historically, we've done a lot to kind of peak hour schedules for for the ends of the day, but now we're seeing a lot.
Lot of really high yielding demand in places, where it's most economical frankly going to run the airline.
And that takes me to the third point, which is where you are starting to go then is as we start to distract and we've done a lot of this where we Wouldnt you don't look at the transaction and look at the customer behind it what we're finding is that a customer who has a blended tripping their profile is twice as likely to go in enrolling the advantage program.
There are three times more likely to sign up for one of our co branded credit cards. If they don't already have it those who have a credit card spend 40% more than than on <unk>.
Typical business customer and these customers are overwhelmingly going to a dot com because it's frankly, the only place where you can go and price in shop for a blended trend.
That is very much influencing how we're thinking and a couple of meaningful ways as you say.
First and foremost the value that we can deliver these customers through our loyalty program.
As we talked about currency partnerships with people such as city.
Paramount importance to our customers and therefore to US and then there is a lot about the selling and distribution model that the airlines have operated on shortly that we've operated under the <unk>.
The warrant some change so that we can go in certain customer demand.
That's super helpful. My risk is aching.
Alright, big down at both the type of Emmett I hadn't thought about the loyalty angles. So thank you very much for that appreciate it.
Sure thing.
Thank you. Our next question comes from the line of Duane category.
Of Evercore ISI your line is open.
Thank you and my compliments on the pronunciation better than many earnings calls.
On the on the 95 to 100 for next year.
I wanted to ask you how that might compare to a theoretical upper upper limit how much of this is conservatism just given fuel and kind of macro uncertainty.
Versus just your modeling of the staffing constraints. So if you really wanted to step on the gas if the environment.
Warranted, how much higher could you could you pushed in that 100%.
Hey, Duane.
For the question.
Look for us right now.
The size of the airline for the resources that we have and the demand environment that we face.
A lot of.
Variability in just about everything that we deal with right now, but the thing that I think that Vasu hotel yet.
Derek and our finance team will tell you. The best thing. We can do is make sure that we have a predictable stable airlines something that we can point to in the future. That's what we're trying to do given all the constraints we face right now so from the perspective of what is that a limiting factor kind of trying to.
Try to probably a little bit more what we've got.
Pilot constraints that are going to take a while to work your way through.
Notably we talked about whats happening on the regional side of things. So in terms of an upper bound I don't I don't have a number Eric.
I don't I don't know, if we've actually gone out calculated a max level.
I think Duane is we talked about on the last call you know we do have some unsupportable.
And supportable aircrafts at this point in time.
As things change on the regional side, it's all dependent on.
On pilot hiring and how much the mainline hired from the regionals and so we're just we're trying to be prudent in what we do as we saw in the summer, making some of those kind of assumptions was not easy. So I think we're being prudent on it if if if there is more capability for us to fly from a regional perspective in the mainline.
Perspective, because those constraints.
Come down then we'll be able to we could fly more with the fleet that we have put it that way. So is that a couple of percent probably.
We flew the whole thing, we could get somewhere in the 5% to 10% range from the fleet that we have.
But I think those constraints are going to be there as Robert said, the regional constraints are going to be there for a longer period of time.
We're working through them and hopefully there is other options that we have are to bring that flying back up.
Helpful perspective, and then just for a quick follow up on ops can you quantify the savings or the assumed savings from running a better operation.
In your <unk> guide and it's an American question frankly, it's an industry question.
Have we learned.
Our institutionalized from this summer.
It gives you confidence that sort of these ops better ops will sustain.
Maybe in the fourth quarter frankly, it's just it's less peak, it's it's fewer asm's, maybe that's the driver and the confidence, but if you can if you can help us understand what's been institutionalized from from from this summer that would be helpful.
Yeah, Hey, Duane.
It's something we talked a lot about it and look.
We talked about utilization and getting more out of it but theres always.
As an offset to that utilization with.
We're running an airline that is potentially less reliable.
What we've done right now is we've taken a look at and given that the pandemic brought so much variability in just about every input to the business. Okay everything from partners at the airport to aerospace limitations too.
Boeing and Airbus delivering aircraft, our pilots and flight attendants, what we're trying to do is build in at least a little buffer and a number of areas right now and that is absolutely something that we're carrying on into end of the fourth quarter, where does it show up it shows up in higher on the reserve levels pilots flight attendants.
Where does it show up it shows up in terms of maybe not running even some of the aircraft that we have is hardest part as you would it shows up in terms of making sure that we're trying to take into account restrictions that we havent airports and with aerospace as well. So we're putting that all in my hope is that as the airline gets up to speed in <unk>.
Our other partners and vendors get up to speed and Thats something that we can slowly take a look at but to the point that.
You brought up this airline American airlines the industry as a whole we need to get back to reliability levels that we had pre pandemic and an even higher that's the focus and youre going to see us invest in that whether it's through.
Putting in the degrees of.
Safety factor in <unk> or yes.
He was just making sure that we.
We fly the airlines are appropriate for demand at.
Operating conditions.
Okay. Thank you very much.
Thank you. Our next question comes from the line.
Michael Lindenberg of Deutsche Bank. Your line is open Michael Lindenberg.
Good morning, everyone.
I wanted to kind of touch on this as sort of a follow on on Jamie's question about sort of structural change here and I don't know if its to Robert or Vasu, Robert you talked about 45% more premium seating in your fleet.
When I look at some of the numbers you can correct me, if I'm wrong, but it looks like Youre like 787 nine the premium seats are going to go up by 60% and then when I look at where you will be on an absolute basis post this new product rollout.
You'll be pretty well ahead of United and Delta and I'm just.
It feels like it's a bit about that and if it is maybe more of a secular shift to have that much premium seating and I'm just I'm thinking.
What is.
The potential downside risks sort of how you think about that and also it looks like I guess, we're going to see the retirement of the first class on the Triple seven is that right.
Yeah, no that <unk> go ahead.
<unk> this one yes.
Mike for the question very good one I'll answer your second one first yes, the first class.
We will not exist on.
The triple seven or for that matter to American Airlines for the simple reason that our customers are buying it.
The quality of the business class seat has improved so much.
And frankly by removing it we can go provide more business class seats, which is what our customers most want or most willing to pay for but look a really important thing to your to your first question.
Starts actually with the structure of the network. That's here now versus what was their pre pandemic.
And then we've talked about it on a lot of calls it probably can be emphasized enough and it's something which you can see through all of the success of the scheduled quarterly schedules through Covid and even in the what we published the rest of this year and early next.
Again remember for US we are running a long haul business now that is 15% smaller than what existed pre COVID-19.
And so and Furthermore of that about 70 ish percent of our system.
Presume, we're an 80 20 short haul long haul split but for US very importantly, 70% of our capacity almost 70% is in our core hubs. What's not there is really some really strong international markets that are very premium heavy Heathrow long haul South America eventually Tokyo places.
Like that or else in really long haul markets, where frankly through the strength of our partnerships, we're able to go in and.
Make a larger premium cabin work.
The cause of that.
The airline is actually arc itself to a place where there's a lot more demand for its premium seats.
Last thing I'll say and this actually is picking up right, where where my answer to Jamie left off too isn't.
What we're really encouraged by right now is actually.
Long haul profitability for American Airlines is better than what it's historically been pre 2019 on a margin basis in some cases on an absolute basis, when it's being driven by not just the premium cabin, but interestingly, it's being driven by blended customer demand there I mean, it used to be that.
Large contract incorporations, where as much as 50% of what filled the seat now between 40% and 50% of it is blended demand and the rest of it is actually leisure demand that is willing to go in and pay more for the quality of the business class seat all of that is coming in at a higher net yield values than what was there before.
So we're really encouraged about what the future holds.
That's a lot of the context behind.
Some of these bets, we're making with the with the Bahar configuration.
Very helpful. If I can just sneak in one other one I guess Don on the regional side, you guys seem to be doubling down on adding more regional service, including 50 Seaters.
And I know in the past you've talked about how that historically has been in those markets have been fairly high yield, but how does that square with the rising costs that we're seeing on regional labor other input costs for the regionals.
And as maybe the offset that you have this sort of unique.
From a network perspective, you have among all of the carriers may be the only game in town and so many of these markets that you are still able to make it up in revenue how do you square that thank you.
So let me start with you just well first first off look just in terms of the 50 Seaters that we have we've.
We've reduced the number of 50 Seaters that we've had in place over over time I don't have the exact number at hand.
But.
What we have is our network this ideally suited.
For servicing a number of regional market and you know what 50 Seaters are going to have a place in our system.
Right now the big the Big focus is getting the aircraft that we have backup of the year. There is no. There is not a definitely count, let's say hey, this makes sense before it makes a lot of sense now, especially given what we're seeing with the rest of the marketplace. As we go ahead, yeah, that's right and I'll just add a couple of doses.
A factor to that to that.
What we especially I was really encouraged by it.
When we crossed over from the summer into September which is historically a weaker demand time for the airline.
What we've found is that his.
Historically in let's call it September of 2019.
Only about 20% to 25% of our revenue was coming from places, where orange OND markets, where our network was advantaged.
When we got into September of this year, it was somewhere between 30% to 33% coming from places, where our network with advantage and indeed.
We see this over and over again that we made 30% more ond's are our competitors.
30% more.
<unk> in markets, where we consider them to be advantaged by that I mean, either.
R&D is where we're the only ones who serve better we serve it with the most convenient sketch.
Cool.
And so for us there's not.
We see that very much in the way our network is just structurally built we are the very best at serving all of the small cities of the western hemisphere and connecting customers there to the global marketplace, others are a whole lot better at flying long haul to Asia or whatever the case might be.
But for that reason there are some really unique things to American airlines, where we have a lot of value in a range of of equipment types from the smallest $50 or 75 seat RJ to a 200 seat narrow body, whereas for a lot of others a lot more of the value may be and having multiple flavors of our 300 <unk>.
Wi Fi.
Mike Go ahead go ahead, there at all Mike the only thing I was going to add.
We have three wholly owned Piedmont is going to fly 50 50 seaters.
They'd have today, we're growing those back for sure envoys getting out of the 50 Seaters over time will fly some next year theyre going to move, but I know, you're referring probably to the air Wisconsin transaction.
Mark has been a market, where there's difficulty in pilot supply Air Wisconsin has a.
A great network, we have worked with them before they have a very good pilot supply.
Can fly out of Chicago, and so I think it's an opportunistic transaction to do that in an environment, where there's a pilot constrained on the regional side.
Great. Thanks for the explanation everyone.
Thank you our next question.
Come from the line of Conor Cunningham of Melius Research. Your line is open Conor Cunningham, Okay, Hey, everyone. Thanks for the time.
So obvious question from hiring standpoint, I don't think you actually gave a number on 2023 is there a stated goals from a pilot standpoint, the only reason why I ask is.
Your head count I think is down 2% you are talking about capacity being flat to down size. So basically you are there from a from a from a hirings, Vermont and employee standpoint, so I'm just trying to figure out.
What we're talking about until into next year.
Yes, I think we're going to have the schoolhouse. All next year. So my assumption is if we hired 2000 this year will be higher than the same amount next year as well.
Bring it back the the mainline fleet. So I would expect the school has to be full and as that train of thought as many pilots in 2023 as we are in 2022 and kind of I would just add that some of that as well where we still have.
Considerable retirements due to age 65 were at the peak levels. So while we're hiring 2000. It doesn't mean that there's that incremental 2000 pilot by any means I think we retire somewhere in the neighborhood of 700 750 pilots next year. So that's a lot of those retirements.
Okay. Thank you and then.
The progress being made on profitability is obviously, great to see but I think the question a lot of folks have is just around profitability with new labor deals I'm not trying to get you guys.
So any of that publicly but just how do you think about profitability into 23 is it just more of like the demand picture is just so much better that we can absorb a lot of the pilot pay increases our labor deals and all of that stuff just any high level thoughts that you may have that'd be great. Thanks.
Sure.
I'll start.
Certainly yes.
The thing that we do with our pilots or flight attendants are any of the other.
The team members that were currently negotiating with we do we negotiate with a mind to making sure that we take care of our team that we take care of the company as well when.
When we think about the deals that we have we're going to make sure that they fit with <unk>.
And economic perspective of making money and I'm confident we can do that and it's the best interest of our pilots and flight attendants and mechanics and everybody in this company.
There's win win deals that that'll be that'll be had out there I am confident that we can do it and it's in an environment where yes.
We take a look at travel coming back being something that just in terms of.
Where people want to spend money is a change from prior to the pandemic.
We take a look at the.
Out of growth that the general economy has had and yet the airline business is still okay.
American Airlines, 10% smaller.
And then on top of that we know that travels a bargain itself a general inflation has brought it about 5%.
Ticket prices are up since 2019.
3% or less than 3%.
That's an annual basis.
So I look at all of that and think that the kind of momentum that we have.
And the third and fourth quarter carry in.
And certainly they are offsetting costs that are built in in terms of redundancies that we have in place, but as we get the fleet back up and as Derrek mentioned, a little bit earlier, it may take us a while get the regionals backup maybe through 2023 to get the mainline.
If fully back up as well, but we will have efficiencies that come with up gauging that we've done it will come with the.
Incremental utilization that we can get out of our aircraft and quite frankly, some of the things that <unk> talked about in terms of network in terms of marketing and then also in terms of engaging our customers in a way that they.
Ah well pads for things like credit cards.
The relationship is deepening so on all those fronts I feel really confident that we can put together an airline that can cover.
Any increased labor expenses and still make margins that that we think are appropriate.
Positive for the airlines.
I appreciate it.
Okay.
Thank you. Our next question comes from the line of Helane Becker of Cowen. Your line is open Alain Becker.
Right.
Hey, Alan.
Yeah.
Okay.
Helane.
Your lines will be open now please go ahead.
Thank you can you hear me now.
Yes.
Okay.
I'm not sure exactly what happened there because I was not on mute.
So one question for clarification, what's the paid load factor in business versus upgrades in business class.
Hey, Helane this is vasu.
Off the top of my head.
I don't know well enough to go and tell you, but I will say this.
That our payloads in business are growing as a percentage of what they've been historically, but change a lot between July and.
September is being shifted over.
But a major part for that is simply changes that we've made with our upgrade program that we used to have a lot of differ.
Different what I'll call cottage upper.
Upgrade concepts that could be had through different certificates through our loyalty programs and things like that we've been trying to go in and simplify that for our customers digitize a whole lot more of that and frankly offer more fair products to customers. So we're now getting to a place where we're probably in a law.
Most of time I'm as little as 60% could've been paid now we're in a place where indeed again, the domestic system something closer to 80 or so.
Okay. That's very helpful. Thank you and then if I could follow up.
On the aircraft deliveries in the schedule.
Derek you talked about the under on the number of aircraft you actually have one on after delivery scheduled for next year.
Scheduling the airline are you, assuming I guess I suppose a lower level of deliveries.
Or are you could you just walk me through how you plan the network not knowing how many aircrafts you're actually going to have available to fly.
Yeah, I think as we look into 2023, we didnt have a lot of deliveries anyway, we probably had 32 deliveries.
What we've done is we know that for seven to eight Asia coming in and we know what those data are so we can plan that <unk> come in one neo coming in we know that the Max's we've worked with Boeing to put our level of ops together. We response against 27 aircraft. We've now taken that down to 19, and we have the delivery schedule.
That we believe.
That Boeing will meet.
They need to meet those dates for us to hit the level of apps, but that's the way we're planning at the good news for Us is.
Is that we don't have a lot of deliveries next year, our Capex was way down we know what our fleet is.
The uncertainty for us from a level of operations perspective is probably more on the regional side.
And what we're doing is being conservative on the regional side.
Planned three months out we'll put a level of ops together for the full year of what we where are we think we are and if.
The constraints fall off and we have more ability to fly we'll add those back into the schedule.
As we move throughout the year, but we'll plan it at the level that we gave you which is the 95 to 100 that assumes the push in the Max's to only 19 aircrafts and that they come in a little bit later.
And we will plan to schedule that way.
We do have capabilities of.
Putting the schedule out and we can change it every three months and things like that so you may see an adjustment to our our plans as we go forward.
But we were sticking the stake in the ground with this level with this aircraft a lot easier to do this year than it has in the past not knowing when the.
700 answer comment, but it's still just the murkiest part for US is really the regional side and making sure that we.
We can we can do the regionals at the levels, we have them today.
I'll, just add to something that Darin extent, they're really consistent with our principle and just making the airline as nimble and resilient as possible one of the things that and huge credit to Brian's note, and then and Roni and many people in our network and operations team, but we figured out ways, where effectively instead of ability.
Efficient delivery plan, we can build on what we know and add as we can.
Call them lines of flying and on top of it whether that is for regional jets at from main lines and indeed as you go out and look at schedules at a time when so many airlines cut capacity close in probably the at least the only one that I've seen and published schedules being able to add capacity back as American Airlines.
And so we're finding more ways to do it.
Doing that puts us in a much better place to go manage the airline operationally and financially it makes it a little bit harder to go and manage things like the peak days after Thanksgiving, but it's a much more practical way to go manage through some of these infrastructure uncertainties that we've got.
And that's hugely helpful. Thank you very much.
Thanks Helane.
Thank you. Our next question comes from the <unk>.
Line of Stephen Trent of Citi. Your line is open Stevens.
Good morning, everybody and thanks very much for squeezing me in.
Most of my questions have been answered I just had one quick question about fleet I know you guys have gone through all of that the operational dislocation with the Max grounding in 2019.
And as you think about longer term.
Any high level view sort of what's optimal for American airlines with respect to.
Owning versus leasing versus sale leaseback, you know an ideal mix when you consider what's happening with interest rates.
Aircraft residual values, which I love to hear some color on that thank you.
Yes, Steve.
I mean, the one thing I will say is we are very happy that we did our fleet replacement program.
At a time, where we could finance aircrafts at 3% level. So.
Our.
As we look back at what we've done and where others have to go in this 6% to 7% range, but we're very happy where we're at with the financing of our aircraft as we look forward. We don't have many aircrafts in 2023. So that's good news.
Only about 32 aircraft, we already have five of them financed.
We look at all markets, we look at the WTC market the sale leaseback market the mortgage market.
And we are getting attractive pricing in those markets today, so our focus will be on the.
The back half of 2023 and to finance those aircraft. We're all good through 2022 are all good through the first half of 2023 with very attractive financing.
And hopefully as we go forward.
We don't have a significant amount of aircraft. We have 2020 for next year and then we go into $15 50 to two years after that so we've done our fleet replacement program.
Under really really good rates that are going to be with us for a long time.
So we're very happy where we're positioned now from an aircraft financing perspective.
Yeah.
That's super helpful. Thanks, very much.
Okay.
Thank you. Our next question comes from Sheila <unk>.
Jefferies Sheila Coghlan.
Your line is open.
Maybe if we could talk about just revenue trends to start Q3 was the first quarter were international passenger revenue outperformed domestic any color on how you get how.
How do you think about that trend going forward and potentially the impact on the U S.
Dollar strength.
Oh, sure yoga and start and I want to add something at the NBA, Okay, Yeah, absolutely absolutely.
Well look we as mentioned before.
The long haul business is.
And if you look back at it over any time period, you want on has a much more volatile.
Line of business to be and then the short haul business.
We think that's absolutely the case.
And we're really encouraged where things are right now.
There is clearly demand thats out there for the long haul product.
That too is taking shape in a very different way than what was there before the pandemic, but coming in at levels that are that are far greater than what was there before the pandemic.
Less known is that we're still in a place where so many markets are still opening up as a <unk>.
Optical matter, Japan really only opened up last week. So there is no major parts of the international system that are coming back yet.
Any number of inefficiencies, there, which I know Robert can talk to them a lot more.
There are gonna yet.
A bit of a drag but over the long run we're really excited for it so much so that even though I've said that the airline is going to be an 80 20 short haul long haul carrier. Nonetheless, we're taking 700 Asia, we still have an order for for <unk> and things like that out there because we do think that the the long haul business will come back and come back in.
And which can be really beneficial certainly to us and our customers that hey, phospholipid theres things that we're doing as a country that are actually hindering the recovery of demand internationally. It could be stronger a lot stronger and you know I want to make sure that you know people are aware of that right now.
In the past in 2019, 43% of international visitation into the U S that came from countries, where you had to have a set to come into the United States.
And back then 2019 for people that wanted to come in for a first time VSAT.
A big event Meteoric Convention you maybe had to go in and spend a few weeks to get a visa. So you can actually buy a ticket with some reasonable assurance that you'd actually be able to travel well now that process of getting a visa is can be over a year well over a year and really important pig.
Markets like countries, like Brazil, and Mexico, and India, and when I talk about that 43% of inbound travel of international.
Visitation.
It's not like we're limiting ourselves just.
On.
Air Airfares in ticket prices and airline revenue those people spent $120 billion.
When they came into the United States, So the country as a whole is harp.
What we're trying to do about it because we need to we need to get out.
The international recovery would be so much stronger if we got this out of the way we're working with the state Department.
We've got to make sure that we are.
Respond to the situation to do so quickly and it really comes in to making sure that <unk> applicants why come United States participating meetings, you know that they are eligible to do so instead of taking their travel someplace else, which is what they are doing right. Now so anyway I just wanted to make that point back to the international travel could be stronger.
No that's great color guys and maybe just one follow up for about two one of the comments earlier on the loyalty program and credit card spend.
How are you thinking about the loyalty program has there been a change in.
Hello American dealing and its important for the operation relative to 2019.
Short answer yes, absolutely.
We've seen it in any number of ways that.
Look so much of the marketplace has changed maybe the simplest way to think of it as this those customers who are blending travel value travel.
For a lot of our customers prior to the pandemic they might of travel because their employer made them.
They had to go and do it so we're seeing people travel with a lot more intentionality.
And when that happens those same customers are much more willing to go in.
Earn miles so that they can go and take their family on vacation for example.
That's where we see.
Advantage enrollments are growing.
Record levels everywhere.
Our partnerships expand we're seeing growth in places like the west coast and the northeast at levels that we've never seen before but importantly people are doing things like spending on their credit card, we did something where we've counted.
Credit card spending towards status and that's been something really really well received by our customers too.
And the last thing I'll tell you that as we just see a lot of upside here.
If you as you compare our prints out there.
In the sort of traditional network business, we're in a place where it domestically and in Latin America, we can be.
10% to 20% larger than our competitors and produce unit revenues that are 5% to 10% larger than than than what they are and.
And Thats, a really good place to be in but even still.
Compared to one of our largest network competitors, we run 90% the airline that we do but they produce $1 billion more do there their co branded credit card program. So we're really focused on that because we think it's a huge value driver for our customers a very obvious one for us and we're really encouraged by the progress we've made with our with our partner in city, but as we.
We look forward, we see that as a really key place where we need to have a strategic partnership in order to really create the value that's there.
Great. Thank you.
Thank you that concludes the analyst Q&A, we will now take questions from the media. If you are a member of the media and we'd like to ask a question. Please press star one one at this time again, if you our friends from the media and we'd like to ask a question.
Please press star one one at this time.
Thank you for standing by our first question from the media comes from Alison Sider of Wall Street Journal. Your line is open Alison Sider.
Okay.
Talk about what these different travel patterns more blended travel you have different types of leisure travel.
And I'm just curious.
This trend did they kind of fully off that.
Lots of managed corporate travel that still seem like if there was sort of a stall in the corporate recoveries with.
With these kind of new lead her type or a blended type bookings make up for it.
Absolutely.
Way more than offset and then you can see it in the results right.
The contracted corporations are 80% recovered, but this is a second quarter in a row, where revenues have never been higher and our history and indeed, that's on the strength of this blended demand there.
And unmanaged.
Business related demand all of which has come in at a higher yield values all of which tends to attach itself to really high margin ancillary products like premium cabin seats, the credit card loyalty programs things like that so we're very much seeing.
A shift that's there and what's really encouraging all the more encouraging because as we look forward.
Really the airline revenue airline revenues haven't totally recovered their historical level historically there'd be about 1% of GDP, we're still not all the way there.
And so we think there is yet a lot of headroom that there. We are really encouraged and absolutely. We are very much seeing that the the managed corporate hasn't come back yet it's more than being offset.
And the last thing I'll say to you is.
The managed corporate hasn't come back to the really critical word in that sense is the word yet.
As more as more countries open up as the visa inefficiencies that Robert talked about get rectified.
Or is that.
That can really unlock yet a lot of demand that's out there which is.
More to the upside for the travel business.
Got it thanks, and I guess, just what you mentioned the GDP relationship. So maybe that's part of the answer but do you like what gives you the confidence that these are real permanent shift and not just you know spillover for the summer and eventually to see inflationary pressures will get to be too much and people are just you know.
Travel spending well.
Paul by the way side like other spending categories are seeing.
Yes.
It's a great question and there's probably a third.
<unk> parts to the answer first it's not a thing that we've just observed recently, we've been seeing this and talking about this probably for a couple of quarters now.
And is it is a real and a meaningful shift.
<unk>.
It's not that we see the data in aggregate, we get to we get the luxury of seeing it.
In particular, so for example in 2021 and 2022 those customers on a blended trip who enrolled in our advantage program in 2022 are producing.
Our revenue there their revenues to us or about 10% higher than customers, who traveled in 'twenty, one and 'twenty, two but didn't enroll program.
We see meaningful shifts when people actually go and spend on the credit card. They are more likely to go and fly on the airline and vice versa. So there's a lot of things out there which are quite striking in the data that we see.
And are very consistent.
Then the last thing that I'll mention.
Yes, even though other consumer demand for other consumer products is changing just never forget that for us in real dollars. The price of airfares are less now than what they were in 2019.
So you can still go out there I know, it's not like that the depth of the pandemic, where there were $29 one way fares another $49 one way fare. So air travel has never been the bargain that it is today and.
That's going to be a theme.
Last for quite a while going forward.
To the good of our customers and our business.
Thanks, so much.
Thank you. Our next question comes from Leslie Josephs with CNBC Youre line is open Leslie Josephs.
Buddy.
I was wondering how you're thinking about the advantage program and with so many people are getting cards lots of sign up very high spend in Peru lots of miles.
Are you thinking about just the sheer number of people that have so many miles and whether you can deliver.
Our product.
It takes more people to remain in the program and to keep using it and I'm thinking like.
Competition for upgrades and things like that and then my second question in 2023.
You're 100% back to 2019 level.
If you do have the aircraft's U C waterflood more or is there a concern that that would drive down stairs in revenue.
Hi, Hey, I'll, let me. This is vasu I can I can start into that and others others may want to join in for the second part of your question.
So look.
We like to say.
Burned against firm.
The most important thing is people are earning more miles we want them to keep continuing to do it it's valuable to them they want to be able to unlock future travel opportunities and the really important thing is for that to happen they need to be able to affirm their miles.
So stay tuned for more but we're looking at a lot of ways, where we can make status more rewarding and more meaningful and also where we can do more things where people can can can use their miles more we would really encourage this summer we actually experimented with a lot of ways, where we went and expanded availability for award redemption and things like that.
And we've found the take rates amongst our customers to be really promising.
And so we see a lot of opportunities for that both within AA, but also in conjunction with many of our partners. So more on that soon.
And then if you could just repeat your second question Susan.
Add into that look you know whether or not.
Yeah.
The advantaged members are out.
Pacing the growth advantaged members are outpacing our ability to service them.
That's where we talk about what we're doing with our premium seats.
And making sure that we have the ability to serve.
Customers, but as well you know were put where we're creating a world class product as well and so many different places take on Laguardia lapses you haven't been there. Please go see it because the best domestic lounge in the country and it's only going to be beaten when we open up our new DCA lounge.
And Youll see that were doing this kind of things to make sure that we can accommodate.
A much broader group and we're going to spend for it it's worthwhile to do that and we're attracting the right right customers. So then the last thing is would we be find more right now if these constraints weren't out there we've been fighting a little bit more it will take a look at that for next year, but as I said before the biggest thing for US is making sure that we have certainty in terms of our <unk>.
And so we're going to make sure that we don't outpace what we haven't either in terms of aircraft deliveries if that's the constraint or if it's you know.
Highlights at a regional level or our ability to train pilots from a mainline perspective.
Yeah.
Thank you.
Yeah.
Thank you our next question.
Our next question comes from the line of marrying swinging thing Bloomberg. Your line is open please Mary.
Okay.
Please standby.
Maryann Your line is open.
Yeah.
Im not muted can you hear me.
Yeah.
Excellent great. Thank you.
For a long time, the thinking and the industry was at the domestic market wasn't mature and so the best opportunities for growth outside of the U S and that seems to be the exact opposite of what Youre doing now and I wanted to see if you could comment on.
Whether there was some sort of change whether that belief across the industry was just.
And air or I'm misreading of the of the industry and then the second question was on the 80 20 short haul long haul mix is that.
Our base for you in terms of long haul or could we see that potentially fall further going forward.
Hey, Thanks Mary.
The second of your question.
It's pretty unlikely that it falls further going forward.
Yes.
How we build it back over time kind of remains to be seen.
A big part of our 2023 and beyond planning.
But it would be pretty surprising at this point about anything materially lower than than that and at least through so many of these partnerships.
It would probably be more ways to grow it and then any desire to shrink.
Then.
The first of your questions Yeah look what I'd say is that.
North America has been originating market is a very mature market, but it's also the highest area of airline demand the highest yielding marketplace anywhere in the world.
And what we find is indeed.
So much of what's happened, especially post pandemic across the U S is theres, a significant amount of demand growth and economic growth outside of the historically large big coastal cities that are there.
Places like Phoenix, Arizona.
Austin, Texas, Oklahoma City places like that are growing at a pretty meaningful level and with that Theres, just a lot of people who want to be able to come in and and travel and we do great as we connect them into the global marketplace, whether that is new York or Heathrow or whatever the case might be.
Maybe put a bit of an example on that like take a market like New York City, New York City is a place where there's more flights a day to Paris, and there arent a little rock, Arkansas American Airlines out of the first flight from little rock to New York.
And it was made possible through our partnership with Jetblue in the NDA.
But by having that we've created opportunities for customers that they wouldn't have had before so we see yet a lot of opportunities to do that and indeed.
The results kind of speak for it the more of that we do the more encouraged we are that our customers value and are willing to pay for it.
Thank you.
Yeah.
Thank you. Our next question comes from the line.
Kyle Arnold of Dallas News. Your line is open in Cal auto.
Good morning, everyone can you guys talk a little bit about how the blended travel trend is going to play into the holidays. What are you seeing more people.
Shift into earlier in the week outside of that maybe pre Thanksgiving day in and is there a different kind of cadence to that.
The summer versus the winter, where maybe the the winter where those peak days.
We're a little tighter.
Hey, Kyle. This is this is vasu and yes, we do see a little bit of that of that day a week shift.
Not only do we see it just in general at the time of day shift where people are coming out of what we'll call. The peak business travel time channels and into the body of the airline day.
More growth happening on things like Hum.
Wednesday evenings, or Thursday mornings places, where while there was demand was traditionally not as great as what it would be on a Thursday evening at six o'clock.
So with that in mind, yes, we are indeed, anticipating that it's not just that the Thanksgiving week.
Weekend for example will be peak, but even the days around it will have a level of demand.
If you look at our at our Thanksgiving schedule right now Theres less peak to trough variability. There then certainly I've seen in the schedule for for a number of years, So hey, Kyle I'll add.
Organization is our revenue management team in it.
Every now and then they take take take me through the the warm chart that shows how.
We are booking at various points in the year.
And I'll tell you this what I saw earlier this week as compared to 2019 than in prior years look the holidays are booking really well.
And so I think that that bodes well.
But what I think I'm not sure you also probably.
Note is that getting a seat.
Something's going to be hard to it's going to place it it's.
There's going to be a move in terms of where people can fly just based on availability absolutely right now which is a good thing.
Scott is that our last question.
Is that right.
Hey, I'll just.
Close with this.
Is it you can't tell us.
We're pleased with our results.
It's been.
A heck of a few a few years in the pandemic and its great to be at a point, where not only are we reported a profit on.
On a quarterly basis, but looking at into.
Into the future as well demand remains strong we're very optimistic and American is really in a position of strength, taking full advantage of the recovery.
Because of the things that we've done with our network with our partnerships with our fleet you know getting the airlines really situated to fly we can we can do best.
We are focused on reliability.
And that is something that.
Everybody in the company has a top of mind I'm really pleased with how.
We're performing here in October and.
In September as we closed out August as well.
And my.
My confidence is bolstered by a number of things just first I look at the metrics that we run every day, so things like aircraft out of service.
We're running record all time lows I got to give a shout out to our technical operations team for having our aircraft in better shape than they've ever been in.
But as well as things like reserve reserve levels for our pilots and flight attendants and just making sure things are ready to go I feel really confident the way that we recovered post the just the horrific hurricanes and the flooding that was here in DFW.
Backend back in August It gives me great confidence that even when you throw the enormous disruption that we can get back on our feet really quickly that reliability translates into profitability and yes, we've said it over and over again.
We have to be profitable in order to.
<unk> really serve the needs of our communities our customers and the shareholders of this company, we're intent on doing it and we.
We're going to make sure that this airline is one that you can count on in terms of producing profits ultimately reducing debt over time and being a.
Anable from a profitability perspective, so we're hard at work, we're going to get back to it as soon as we get off this call and I appreciate everybody spending time with us and thanks.
Okay.
This concludes today's conference call. Thank you for participating you may now disconnect.
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