Q3 2024 American Airlines Group Inc Earnings Call

October 24, 2024

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Speaker Change: I'd now like to hand, the call over to Scott Long V. P of Investor Relations and corporate development. Please go ahead.

Okay.

Scott Long: Thank you Latif and good morning, and welcome to the American Airlines Group third quarter 2024 earnings Conference call.

Speaker Change: Thank you for standing by and welcome to American Airlines group's third quarter 'twenty 'twenty four earnings conference call.

Scott Long: On the call with prepared remarks, we have our CEO, Robert Isom, and our CFO Devin may and.

Speaker Change: At this time all participants are in a listen only mode.

In addition to our Vice chair, Steve Johnson, we have a number of other senior executives in the room. This morning for the Q&A session.

Speaker Change: After the speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press star one one on your telephone to remove yourself from the queue. You May Press Star one again I would now like to hand, the call over to Scott long VP of Investor Relations and corporate development. Please go ahead.

Scott Long: Robert will start the call with an overview of our performance Devin will follow with details on the third quarter. In addition to outlining our operating plans and outlook going forward.

Scott Long: After our prepared remarks, we will open the call for analyst questions.

Scott Long: Followed by questions from the media to get in as many questions as possible. Please limit yourself to one question and one follow up.

Scott Long: Thank you Latif and good morning, and welcome to the American Airlines Group third quarter 2024 earnings Conference call.

Scott Long: Now before we begin today, we must state that today's call contains forward looking statements, including statements concerning future revenues costs forecast of capacity and fleet plans. These statements represent our predictions and expectations of future events, but numerous risks and uncertainties could cause actual results to differ from those projected.

Scott Long: On the call with prepared remarks, we have our CEO, Robert Isom, and our CFO Devin Mei.

Scott Long: In addition to our Vice chair, Steve Johnson, we have a number of other senior executives in the room. This morning for the Q&A session.

Scott Long: Information about some of these risks and uncertainties can be found in our earnings press release, which was issued this morning as well as our Form 10-Q for the quarter ended September 32024.

Scott Long: After our prepared remarks, we will open the call for analyst questions.

In addition, we'll be discussing certain non-GAAP financial measures, 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.

Scott Long: Claude by questions from the media to get in as many questions as possible. Please limit yourself to one question and one follow up.

Scott Long: And before we begin today, we must state that today's call contains forward looking statements, including statements concerning future revenues costs forecast of capacity and fleet plans. These statements represent our predictions and expectations of future events, but numerous risks and uncertainties could cause actual results to differ from those projected.

Scott Long: Webcast of this call will also be archived on our website.

Scott Long: The information, we're giving you on the call. This morning is as of today's date and we undertake no obligation to update the information subsequently.

Speaker Change: Thank you for your interest and for joining US this morning, and with that I'll turn the call over to our CEO Robert Isom.

Robert Isom: Thanks, Scott and good morning, everyone before we begin I want to acknowledge the devastation caused by the recent hurricanes in the eastern United States Hurricanes, Helene and Milton had a significant impact on so many and I am proud of the way the American Airlines team has stepped up to help.

Robert Isom: We added thousands of seats into and out of the impacted areas and cap fares for customers traveling to get out of the path of the hurricanes.

Robert Isom: Additionally, our cargo team has moved more than eight tons of critical supplies to impacted regions.

Robert Isom: And our team and advantaged members have donated more than $5 million to the American Red Cross to help out those impacted by Helene Milton and other significant weather events. This year.

Robert Isom: Our thoughts are with the communities affected by these disasters and will continue to support recovery efforts.

Robert Isom: Now to the results today American reported a third quarter adjusted pretax profit of $271 million.

Robert Isom: This earnings result is higher than our guidance issued in July with third quarter adjusted earnings per diluted share of <unk> 30.

Robert Isom: I'm, especially proud of this result, given the operational challenges the team faced in the quarter, most notably the impact of Hurricanes, Debbie and Helene and the crowd strike outage.

Robert Isom: The estimated net impact of these disruptions reduced our third quarter earnings by approximately $90 million or <unk> 12 per diluted share.

Scott Long: Year.

Scott Long: Our thoughts are with the communities affected by these disasters and will continue to support recovery efforts.

Robert Isom: Our remarks. This morning will focus on our revenue performance operational reliability and cost execution in the third quarter.

Scott Long: Now to the results today American reported a third quarter adjusted pre tax profit of $271 million.

Robert Isom: Notably we hit or exceeded our prior guidance on every financial metric in the quarter, while also running a reliable operation.

Scott Long: This earnings result is higher than our guidance issued in July with third quarter adjusted earnings per diluted share of <unk> 30.

Robert Isom: We're intently focused on delivering on our commitments in this quarter, we did just that.

Scott Long: I'm, especially proud of this result, given the operational challenges the team faced in the quarter, most notably the impact of Hurricanes, Debbie and Helene and the crowd strike outage.

Robert Isom: Onto our third quarter revenue performance traffic was down 2% in the quarter, one five points better than the midpoint of our prior guidance.

Scott Long: The estimated net impact of these disruptions reduced our third quarter earnings by approximately $90 million or <unk> 12 per diluted share.

Robert Isom: This improvement in the quarter was primarily driven by the steps we've taken to adjust domestic and short haul international capacity, which helped improve the balance of supply and demand.

Scott Long: Our remarks. This morning will focus on our revenue performance operational reliability and cost execution in the third quarter.

Robert Isom: Domestic PRASM was down three 1% year over year with performance improving through the quarter as industry capacity growth decelerated from July.

Scott Long: Notably we hit or exceeded our prior guidance on every financial metric in the quarter, while also running a reliable operation.

Robert Isom: Importantly, flown yields in September were positive year over year, and we were able to narrow the competitive load factor gap, we saw in the third quarter of last year.

Scott Long: We're intently focused on delivering on our commitments in this quarter, we did just that.

Scott Long: Onto our third quarter revenue performance traffic was down 2% in the quarter 1.5 points better than the midpoint of our prior guidance.

Robert Isom: Long haul international continued to perform well in the third quarter with positive year over year unit revenue growth driven by strength in the Atlantic in South America.

Scott Long: This improvement in the quarter was primarily driven by the steps we've taken to adjust domestic and short haul international capacity, which helped improve the balance of supply and demand.

Robert Isom: While short haul Latin RASM was negative for the quarter. The region drove the largest sequential improvement from the second quarter to third quarter, driven by the improving industry supply backdrop.

Scott Long: Domestic PRASM was down three 1% year over year with performance improving through the quarter as industry capacity growth decelerated from July.

Robert Isom: Demand for American's product remains strong as evidenced by the continued strength of our business premium and loyalty revenue performance.

Robert Isom: Managed business revenue was up 6% year over year, and we continue to see yield strength in the segment.

Scott Long: Importantly, flown yields in September were positive year over year, and we were able to narrow the competitive load factor gap, we saw in the third quarter of last year.

Robert Isom: Premium revenue increased by approximately 8% year over year and 3% more capacity.

Scott Long: Long haul international continued to perform well in the third quarter with positive year over year unit revenue growth driven by strength in the Atlantic in South America.

Robert Isom: Paid load factor in our premium cabins remains historically high and was up more than four points year over year with strength in both domestic and international.

Scott Long: While short haul Latin RASM was negative for the quarter. The region drove the largest sequential improvement from the second quarter to the third quarter driven by the improving industry supply backdrop.

Robert Isom: Royalty revenues were up approximately 5% year over year with advantaged members responsible for 72% of premium cabin revenue.

Robert Isom: Spending on our co branded credit cards was up approximately 7% year over year in the third quarter, highlighting the value of Americans loyalty program today and moving forward.

Scott Long: Demand for American's product remains strong as evidenced by the continued strength of our business premium and loyalty revenue performance.

Scott Long: Managed business revenue was up 6% year over year, and we continue to see yield strength in the segment.

Robert Isom: In July we committed to report on progress in regaining our share of revenue lost as a result of our prior sales and distribution strategy.

Robert Isom: We know success ultimately will be measured by improved revenue and earnings in the near term, we're tracking our progress by measuring our agency and corporate booking performance tracking the growth of our new advantage business program and listening to the feedback from our agency partners and corporate customers.

Robert Isom: Our third quarter indirect flown revenue share improved modestly compared with our performance in the second quarter.

Robert Isom: However, the booking trajectory through the quarter is encouraging American.

Robert Isom: Americans corporate and agency phone revenue share of bottomed at 11% below our historical share.

Robert Isom: Since then our share of indirect bookings has started to recover and.

Robert Isom: And we estimate we are currently at 7% below historical levels and we expect to see continued improvement in the months ahead.

Robert Isom: In the third quarter, we continued negotiations for new incentive based agreements with the largest TMC in agencies.

Robert Isom: We now have new competitive agreements in place with more than half of those and are in advanced negotiations with the rest we.

Robert Isom: We rebuilt our agency support capability and based on the team's NPS scores, they're providing world class service.

Robert Isom: These agreements combined with the support enhancements are major steps towards restoring our share in these important distribution channels.

Robert Isom: In September we announced the relaunch of our corporate experience program to address feedback from our corporate customers.

Program provides meaningful benefits, including priority boarding access to preferred seats and priority re accommodations during disruptions.

Robert Isom: Additionally, we have amended agreements with many of our top corporate customers.

Robert Isom: Adoption of advantage business, our program tailored for small and medium sized businesses continued to build during the quarter.

Scott Long: And based on the team's NPS scores, they're providing world class service.

Our actions to expand the benefits which include bookings through agencies enhanced program support and a more simplified enrollment process are clearly working.

Scott Long: These agreements combined with the support enhancements are major steps towards restoring our share in these important distribution channels.

Robert Isom: We expect to accelerate the growth of the program going forward.

Scott Long: In September we announced the relaunch of our corporate experience program to address feedback from our corporate customers. The program provides meaningful benefits, including priority boarding access to preferred seats and priority re accommodations. During disruptions. Additionally, we have amended agreements with many of our top corporate customers.

Robert Isom: Concurrently we've been engaged with our corporate and agency partners to ensure we're addressing the issues that matter most to our customers.

You've heard universally that their worlds are better with three airlines rather than too because of the network in travel rewards program that America delivers.

Robert Isom: Based on this feedback we're confident we're taking the right actions.

Scott Long: Adoption of advantage business, our program tailored for small and medium sized businesses continued to build during the quarter.

Robert Isom: We know full restoration of our revenue will take some time, but with the progress we're seeing in the actions underway. We aim to fully restore our revenue from indirect channels as we exit 2025.

Scott Long: Our actions to expand the benefits which include bookings through agencies enhanced program support and a more simplified enrollment process are clearly working.

Robert Isom: We will continue our relentless focus on reestablishing relationships with our business customers re embracing the agency channel and making it easier to do business with American.

Scott Long: We expect to accelerate the growth of the program going forward.

Scott Long: Concurrently we've been engaged with our corporate and agency partners to ensure we're addressing the issues that matter most to our customers.

Robert Isom: Now turning to our operations the American Airlines team delivered strong operational results in the third quarter, including outperforming our network peers over the peak summer travel period.

Scott Long: You've heard universally they're worlds are better with three airlines rather than too because of the network in travel rewards program that America delivers.

Scott Long: Based on this feedback we're confident we're taking the right actions.

Robert Isom: These results were accomplished despite extended periods of difficult weather in several key hubs and continued supply chain challenges.

Scott Long: We know full restoration of our revenue will take some time, but with the progress we're seeing in the actions underway. We aim to fully restore our revenue from indirect channels as we exit 2025.

Robert Isom: Despite these obstacles American led the U S network carriers in completion factor in the third quarter.

Robert Isom: This is a testament to our team's ability to plan and deliver a safe reliable and consistent product for our customers.

Scott Long: We will continue our relentless focus on reestablishing relationships with our business customers re embracing the agency channel and making it easier to do business with American.

Robert Isom: Earlier, I mentioned, the financial impact of the crash strike outage and Hurricanes, Debbie and Helene the cost of those disruptions could have been far greater if not for our team's quick recovery, which was a result of our focus and investment in the resiliency of our operation.

Scott Long: Now turning to our operation the American Airlines team delivered strong operational results in the third quarter, including outperforming our network peers over the peak summer travel period.

Robert Isom: As we closed the quarter in September and have transitioned into the fall we're seeing some of the best operational performance of the year.

Scott Long: These results were accomplished despite extended periods of difficult weather in several key hubs and continued supply chain challenges.

Robert Isom: And as promised at our Investor Day American is delivering strong operational results and moving forward, we expect to produce the same operational reliability, even more efficiently.

Scott Long: Fight these obstacles American led the U S network carriers in completion factor in the third quarter.

Scott Long: This is a testament to our team's ability to plan and deliver a safe reliable and consistent product for our customers.

Speaker Change: Now I'll turn it over to Devon to share more about our third quarter financial results and our fourth quarter outlook.

Devon: Thank you Robert.

Devon: Net special items, we reported a third quarter net income of $205 million or adjusted earnings per diluted share of <unk> 30.

Speaker Change: We produced record third quarter revenue of $13 6 billion.

Speaker Change: Up one 2% year over year.

Speaker Change: Our unit revenue was down 2% year over year on three 2% more capacity.

Our adjusted EBITDAR margin was 11, 1% and we produced an adjusted operating margin of four 7%.

Speaker Change: Our unit cost, excluding net special items and fuel was up two 8% year over year. This is at the higher end of our guidance range due in part to expenses associated with the crowd strike disruption and two major hurricanes.

Moving to our fleet for 2024, we now expect to take delivery of 17, new aircraft seven of which are planned to be delivered between now and the end of the year.

Speaker Change: Our 2024 aircraft Capex, which also includes used aircraft purchases spare engines and net PDP is expected to be approximately $1 $7 billion and our total capex is expected to be approximately $2 6 billion a reduction of $300 million from our July guidance.

Speaker Change: Looking ahead to 2025 based on our current expectation for new deliveries, we anticipate our aircraft capex will be less than $3 billion.

Speaker Change: Below the low end of our prior guidance range.

Speaker Change: We continue to expect moderate levels of Capex through the end of the decade with aircraft Capex plan to average between three and $3 $5 billion per year from 2026 to 2030.

Speaker Change: We ended the third quarter with $11 8 billion of total available liquidity.

Speaker Change: We produced approximately $170 million of free cash flow in the third quarter and have now produced two $4 billion of free cash flow through the first three quarters of the year.

Speaker Change: On track to reduce our total debt by at least $13 billion from peak levels by the end of this year and we remain committed to our goal of $15 billion of total debt reduction from peak levels by year end 2025.

Scott Long: It will be less than $3 billion below the low end of our prior guidance range.

Scott Long: We continue to expect moderate levels of Capex through the end of the decade with aircraft Capex plan to average between three and $3 $5 billion per year from 2026 to 2030.

Speaker Change: Now turning to the outlook for the fourth quarter.

Speaker Change: As we noted in July we moved quickly to adjust our capacity growth in the back half of the year to better align with demand.

Scott Long: We ended the third quarter with $11 8 billion of total available liquidity.

Speaker Change: With our schedule for the balance of the year now finalized we expect to grow capacity by approximately 1% to 3% in the fourth quarter and we expect our full year capacity will be up approximately 5% to 6% in line with our prior guidance.

Scott Long: We produced approximately $170 million of free cash flow in the third quarter and have now produced $2 $4 billion of free cash flow through the first three quarters of the year.

Scott Long: We are on track to reduce our total debt by at least $13 billion from peak levels by the end of this year and we remain committed to our goal of $15 billion of total debt reduction from peak levels by year end 2025.

Speaker Change: We expect fourth quarter travelers to be down, 1% to 3% and full year try them to be down 3% to 4% versus 2023.

Speaker Change: We continue to focus on driving efficiency and productivity through our reengineering. The business initiatives. We are on track to deliver $400 million in cost savings this year with $300 million achieved through the third quarter.

Scott Long: Now turning to the outlook for the fourth quarter.

Scott Long: As we noted in July we moved quickly to adjust our capacity growth in the back half of the year to better align with demand.

Speaker Change: Additionally, we continue to expect to achieve more than $300 million and working capital improvement this year.

Scott Long: With our schedule for the balance of the year now finalized we expect to grow capacity by approximately 1% to 3% in the fourth quarter and we expect our full year capacity will be up approximately 5% to 6% in line with our prior guidance.

Speaker Change: Fourth quarter CASM ex is expected to be up approximately 4% to 6% year over year, the higher sequential year over year unit cost growth is primarily driven by lower capacity growth and the impact of our new agreement with the <unk>.

Scott Long: We expect fourth quarter travelers to be down, 1% to 3% and full year try them to be down 3% to 4% versus 2023.

Speaker Change: We expect our full year CASM ex to be up approximately 2% to 3% consistent with the guidance. We provided in January as we continued to effectively manage expenses.

We continue to focus on driving efficiency and productivity through our reengineering. The business initiatives. We are on track to deliver $400 million in cost savings. This year with 300 million achieved through the third quarter <unk>.

Speaker Change: Our current forecast for the fourth quarter as soon as a fuel price of between $2 20, and $2 40 per gallon.

Scott Long: Additionally, we continue to expect to achieve more than $300 million in.

Speaker Change: Based on our current demand assumptions and fuel price forecast, we expect to produce an adjusted operating margin of between four 5% and six 5% for the fourth quarter. Our earnings of approximately 25 to 50 cents per diluted share.

Scott Long: And working capital improvements this year.

Scott Long: Fourth quarter CASM ex is expected to be up approximately 4% to 6% year over year, the higher sequential year over year unit cost growth is primarily driven by lower capacity growth and the impact of our new agreement with the BFA.

Speaker Change: With this fourth quarter guidance, we expect to deliver a full year adjusted operating margin of between four and a half and five 5% and adjusted earnings per diluted share of $1 35 to $1 60.

Speaker Change: We now expect to generate between one and one $5 billion of free cash flow. In 2024. This includes the impact of a onetime bonus for our flight attendants of approximately $500 million.

Speaker Change: As we prepare for 2025, we are focused on producing capacity that is in line with our expectation of demand growth.

Speaker Change: While capacity planning for the year ahead is ongoing we currently expect our 2025 capacity to grow low single digits year over year.

Speaker Change: This growth will be focused on bringing back capacity in markets that are still not restore to historical levels.

Speaker Change: As we demonstrated with the capacity adjustments we've put in place in the back half of this year, we will remain flexible and will adjust capacity in response to the demand environment and the competitive environment. We are operating in.

Speaker Change: I'll now turn the call back to Robert for closing remarks.

Robert Isom: Thanks Devin.

Robert Isom: We remain focused on operating a reliable airline executing on our initiatives and delivering results.

We continue to produce historically strong operational reliability.

Robert Isom: We remain on track to achieve our balance sheet goals.

Robert Isom: We're reengineering the business to ensure we continue to manage costs with the best in the industry, while delivering a better experience for our customers and team.

Robert Isom: With the changes, we're making in our commercial organization, we're setting the foundation for success as we regain our share of corporate and agency revenue.

Robert Isom: We will continue to make progress on those efforts listening to customer feedback and tracking our performance to ensure the changes we're making are producing the expected returns.

Robert Isom: Winning back the full share of revenue that we've lost will take some time, but we're committed to reaching that objective as we exit 2025 and get back on track with our long term targets, we outlined at our Investor day, and that's growing our margins generating sustainable free cash flow and continuing to strengthen our balance sheet through.

Robert Isom: Debt reduction.

Robert Isom: To accomplish this we need the entire American airlines team working together and pulling in the same direction.

Robert Isom: With the ratification of the new contract with the a P F <unk>.

Robert Isom: And our tentative agreement with the TWU Iam Association, which covers our mechanics and fleet service team members.

Robert Isom: We have reached new agreements covering more team members in a short period of time than ever before.

Robert Isom: Not only do these agreements ensure we're taking care of our team, but they also provide a level of certainty in our planning that will help us efficiently achieved the goals we set for American.

Scott Long: Cash flow and continuing to strengthen our balance sheet through debt reduction.

We're focused on delivering on our commitments and we believe achieving our long term targets will unlock significant value.

Scott Long: To accomplish this we need the entire American airlines team working together and pulling in the same direction.

Robert Isom: And with that operator, please open the line for analyst questions.

Scott Long: With the ratification of the new contract with the <unk> and our tentative agreement with the TWU Iam Association, which covers our mechanics and fleet service team members.

Speaker Change: As a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the queue. You May press Star one one again too.

Scott Long: We have reached new agreements covering more team members in a short period of time than ever before.

Speaker Change: To allow everyone. The opportunity to participate you will be limited to one question and one follow up please standby, while we compile the Q&A roster.

Scott Long: Not only do these agreements ensure we're taking care of our team, but they also provide a level of certainty in our planning that will help us efficiently achieved the goals we've set for American.

Speaker Change: Our first question comes from the line of Andrew the Dora.

Scott Long: We're focused on delivering on our commitments and we believe achieving our long term targets will unlock significant value.

Speaker Change: Bank of America go ahead Andrew.

Andrew Dora: Hi, good morning, everyone.

Scott Long: And with that operator, please open the line for analyst questions.

Andrew Dora: Question for Robert I guess, one when I look at your total revenue growth, it's been sort of flattish.

Speaker Change: As a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the queue. You May press Star one one again too.

Andrew Dora: For the last six quarters here, obviously trailing GDP.

Andrew Dora: But also many other global carriers can you do you think you can get back to GDP type style topline growth what do you need to see to get there from here.

Speaker Change: To allow everyone. The opportunity to participate you will be limited to one question and one follow up please standby, while we compile the Q&A roster.

Robert Isom: Oh, Thanks, Andrew I appreciate that and the answer to that is for sure. So I'll start with this that we did some damage to ourselves with our sales and distribution strategy.

Speaker Change: Our first question comes from the line of Andrew the Dora.

Robert Isom: <unk> talked a lot about that I'm really pleased with what I see in terms of recovery of that.

Speaker Change: <unk> of America go ahead Andrew.

Hi, good morning, everyone.

Robert Isom: Grew our.

Andrew Dora: First question for Robert I guess, one when I look at your total revenue growth, it's been sort of flattish.

Robert Isom: Corporate managed business in the third quarter by 6%, we can do better than that and I know that that's something that we can achieve as we take a look at the efforts that we've put in place to win back that share.

Andrew Dora: For the last six quarters here, obviously trailing GDP.

Andrew Dora: But also many other global carriers can you do you think you can get back to GDP type style topline growth and what do you need to see to get there from here.

Robert Isom: Whether thats restoring full content negotiating new deals and <unk>.

Robert Isom: <unk> existing deals with.

Robert Isom: Our agency partners and also our corporate partners.

Thanks, Andrew I appreciate that and the answer to that is for sure. So I'll start with this that we did some damaged ourselves with our sales and distribution strategy.

Robert Isom: That's all under work and it's taking route and it's showing in terms of our forward bookings.

Robert Isom: As I mentioned.

Andrew Dora: Just talk a lot about that I'm really pleased with what I see in terms of recovery of that.

Robert Isom: Earlier today.

Robert Isom: We bottomed out at.

Robert Isom: Our corporate and agency indirect.

Andrew Dora: Grew our Oh.

Robert Isom: Sure.

Robert Isom: <unk> to historical averages of about 11% down and as we exit.

Robert Isom: September.

Robert Isom: We know that we've recovered back to about 7% down so I see that that Prague.

Robert Isom: Progress continuing on top of that I'll speak to the strength of our network and our partnerships and competing just from a product perspective, and then finally.

Robert Isom: I know that we will make some progress in being more competitive in terms of our co brand relationship and what that can bring to our business as well. So I've got a lot of confidence and pleased with the.

Robert Isom: Progress that I see so far.

Speaker Change: Got it and on that co Brian standpoint perspective, I guess, there was a press article last months.

Robert Isom: Spoke about potentially consolidating your card program with just city.

Speaker Change: Where do you negotiations stand with regards to new economics there.

Speaker Change: At Investor Day, you were talking about maybe timeline by by year end 2024 in terms of potential.

Speaker Change: Potential timeline of getting a deal across the finish line does that still seem reasonable. Thank you.

Speaker Change: Okay. Good thanks for the question that I'm going to hand that over Steve.

Speaker Change: Hey, Thanks, Andrew.

Speaker Change: We.

Speaker Change: Have to really exceptional.

Steve: Friends and partners and Citi and Barclays and I wanted to give a shout out I mean, we've worked together to create a really terrific program that I think has.

Speaker Change: Sensational future.

Speaker Change: We think in terms of talking about our progress I am actually going to give a salute to.

Speaker Change: The Dodgers and dentists, and partly to Steve Trent, who actually frame. This question in July.

Speaker Change: In terms of a baseball game and I'd say that I'd characterize our progress as the bottom of the seventh inning at this point.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Scott Group of Wolfe Research. Please go ahead Scott.

Scott Group: Hey, Thanks, Good morning, guys. So RASM was down 2% in the third quarter I, presumably improved throughout the quarter. The fourth quarter guide down 1% to three I guess, it doesn't really imply any incremental improvement and any color on why and then maybe any regional color.

Speaker Change: So Scott.

Speaker Change: I'll start.

Speaker Change: First off as we take a look at the fourth fourth quarter I.

Scott: I do see a strong demand overall, but it is a quarter in which.

Scott: Strong October and I think a strong December it has some noise in it in terms of expected.

Scott: A softness in demand around the election around and around Halloween.

Scott: But as we take a look at.

Scott: How bookings have progressed I see that.

Scott: October very strong December very strong and as we look out into 2025.

Scott: The same holds true for what we have on the books for January.

Scott: As well, we've got some capacity growth in the quarter.

Andrew Dora: Fourth quarter.

Andrew Dora: I do see strong demand overall, but it is a quarter in which.

Scott: But it's it's modest and has been reduced considerably.

Scott: And we're going to work hard to make sure we deliver on on the forecast that we've produced.

Andrew Dora: Strong October and I think a strong December has some noise in it in terms of expected.

Speaker Change: Okay, and then just secondly, you made a comment about low single digit capacity growth or 25.

Andrew Dora:

Andrew Dora: Softness in demand around the election around and around Halloween.

But as we take a look at.

Speaker Change: What do you think that any early thoughts on what that should mean for CASM and then.

Andrew Dora: How are bookings and progress I see that.

Andrew Dora: October very strong December very strong and as we look out into 2025.

Speaker Change: You sound confident about the corporate recovery by the end of 'twenty five what's the revenue opportunity from that.

Andrew Dora: The same holds true for what we have on the books for January.

Andrew Dora: As well, we've got some capacity growth in the quarter.

Scott Group: Hey, Scott.

Speaker Change: <unk>.

Scott Group: Yeah, we're not going to give CASM guidance for 2025, right now, but as you would expect the largest headwind we faced in 2025.

Andrew Dora: But it's modest it's been reduced considerably.

Andrew Dora: And we're going to work hard to make sure we deliver on the forecast that we have.

Speaker Change: Are the increases in salaries and benefits, resulting from the CBA is that we have reached over the past 18 months. We expect our competitors are going to have very similar CASM pressure, but for us. It's a nice to have the certainty and planning also magnifies the importance of all of our efforts to run a lean operation and invest in the right technology to run a more efficient and ifs.

Andrew Dora: <unk>.

Speaker Change: Okay and then just secondly, you made a comment about low single digit capacity growth 25, what do you think that any early thoughts on what that should mean for CASM and then.

Speaker Change: You sound confident about the corporate recovery by the end of 'twenty five what's the revenue opportunity from that.

Scott Group: The business.

Scott Group: But that's the main area will be on salaries and benefits there'll be some other cost pressures things like regional growing at a faster rate the mainline, but I feel we have been the best in the business at managing our expenses over the past several years and it will be a focus of ours in 2025 as well.

Scott Long: Hi, Scott.

Scott Long: Yeah, we're not going to give Calvin guidance for 2025, right now, but as you would expect the largest headwind we faced in 2025.

And Scott in terms of revenue last quarter, I said that we think that.

Are the increases in salaries and benefits, resulting from the CBA is that we've reached over the past 18 months. We expect our competitors are going to have very similar CASM pressure, but for us. It's a nice to have the certainty and planning also magnifies the importance of all of our efforts to run a lean operation and invest in the right technology to run a more efficient and effective.

Scott Group: In terms of higher yielding corporate and agency related revenue, where we're missing out about 1 billion and a half dollars of revenue over a course of the year now we've replaced some of that with with lower yielding.

Traffic, but our intent is to win the vast majority of that back over the course of 2025 and based on the efforts that we're taking right now.

Scott Long: The business.

Scott Long: But that's the main area will be on salaries and benefits there'll be some other cost pressures things like regional growing at a faster rate the mainline, but I feel we have been the best in the business at managing our expenses over the past several years and it will be a focus of ours in 2025 as well.

Scott Group: I feel confident we'll be able to do that.

Speaker Change: <unk> cyclin, which contracts are established for agencies and incorporate.

Speaker Change: It's it's done on an annual basis, and sometimes that even takes sometimes those those contracts actually run over the course of a couple of years.

Speaker Change: And Scott in terms of revenue last quarter, I said that we think that.

Speaker Change: But what we're seeing right now is a lot of reception.

Speaker Change: [noise] want us back I've talked to not only buyers and purchasing team members from from.

Speaker Change: Our corporate and <unk>, but also the Ceos.

Speaker Change: The world's better for them with another competitor in the mix and so there's a lot of <unk>.

Speaker Change: Positive reaction to us getting more competitive offering in the services and amenities that are competitive.

Speaker Change: Thank you. Our next question comes from the line of Michael Lindenberg of Deutsche Bank. Please go ahead Michael.

Michael Lindenberg: Hey, good morning, everyone.

Michael Lindenberg: Robert I wanted to touch back on the.

Michael Lindenberg: Dubuque short, where you show that sequential improvement I get maybe every point is about $140 million on an annual basis.

Michael Lindenberg: Where are we with the $1 5 billion hole is that still.

Michael Lindenberg: This year. Despite the fact that we are starting to see improvement right now and.

Michael Lindenberg: In fact that we are seeing this type of improvement.

Michael Lindenberg: It doesn't seem like Youre really incorporating most of it in the fourth quarter given the fat.

Michael Lindenberg: Flat RASM or excuse me the down 1% to 3% RASM guide similar to what you did in the September quarter.

Speaker Change: Thanks for the question I'll just start with this.

Speaker Change: We've taken a very deliberate approach.

Speaker Change: As we've sat down with our agency partners and corporate buyers.

Speaker Change: We've seen tremendous progress.

Speaker Change: It said evidenced by.

Speaker Change: Forward bookings, but not a lot of that has showed up in the <unk>.

Speaker Change: The third quarter we.

Speaker Change: We expect to see more as we progress into the fourth quarter and then acceleration as we move in to 2025 again, we got to give a chance for the contracts to actually be in place changes to be changes to be made and then ultimately I am looking for restoration.

On an accelerated basis as we move into 2025, Okay. Great and then just a capacity question I do see that.

Speaker Change: Our supply is down a bit in some of your international markets like Trans Atlantic and presumably thats being driven by airplanes that are going through a reconfiguration can you just talk about that reconfiguration program and maybe how many wide bodies.

Speaker Change: It will take out.

Speaker Change: As your fleet is he is he.

Speaker Change: And your premium offering thanks for taking my questions.

Speaker Change: No thanks for that and in terms of a.

Speaker Change: Rick aircraft Reconfigurations.

Speaker Change: 300.

Speaker Change: 20, Triple seven three hundreds that we have there are due to start their reconfigurations next year.

Speaker Change: We'll be talking more about that as we get into our 2025 planning cycle, but there's not any of that as we take a look into fourth quarter more what youre seeing is us just aligning the capacity to where we can best utilize.

Speaker Change: The aircrafts and quite frankly serve our customers and generate the most revenue. So one of the things <unk> seen is that capacity has been I think brought more into balance and London, Heathrow and that bodes well for us, we're certainly seeing that and stronger London Heathrow yields.

Speaker Change: Trans Atlantic as we move into the fourth quarter overall appears to be.

Speaker Change: A fairly a very solid and so it's more.

Speaker Change: And aircraft deployment issue as we get into 2025 will be able to say more about impact of reconfigurations on our wide body fleet.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line excuse me. Our next question comes from the line of Jamie Baker of Jpmorgan Securities. Your question. Please Jamie.

Jamie Baker: Hey, good morning, everybody.

Jamie Baker: If we look at the third quarter non-GAAP earnings were <unk>.

Jamie Baker: Pretty similar to those of <unk>.

Jamie Baker: Last years third quarter, but on fuel.

Jamie Baker: Ooh 40 cents a gallon lower if we look at the guide for the fourth quarter at the midpoint.

Jamie Baker: EPS Youre, obviously up year on year, but fuel that 70 <unk> floor.

Jamie Baker: The point is if we normalize for fuel.

Jamie Baker: Your core in the fourth quarter year on year looks like it's doing worse.

Jamie Baker: In the third quarter, what do you think explains that.

Speaker Change: Hey, good morning, everybody.

Speaker Change: So if we look at the third quarter non-GAAP earnings were pretty similar to those of last years third quarter, but on fuel.

Jamie Baker: Hey, Jamie.

Jamie Baker: I think as we've always talked about there's a relationship between fuel and revenue.

Speaker Change: So we have adjusted capacity of the industry has adjusted capacity to the current supply environment. Obviously, if fuel was 70 cents higher we would be producing slightly less capacity than we are today I think the industry would probably be adjusting at the same time. So none of this can be looked at in isolation. You are right that earnings in the fourth quarter relatively flat just up slightly.

Speaker Change: <unk> 40, a gallon lower if we look at the guide for the fourth quarter.

Speaker Change: The midpoint of EPS, Youre, obviously up year on year, but on fuel that.

Speaker Change: 70 <unk> slower.

Speaker Change: The point is if we normalize for fuel your core in the fourth quarter year on year.

Speaker Change: At the midpoint.

Speaker Change: We expect to do better than that and as we head into 2025, we are looking forward to margin expansion.

Speaker Change: Looks like it's doing worse than in the third quarter, what do you think explains that.

Speaker Change: And second when we and thanks, Kevin when we think about management priorities. Robert has said that he's spending a lot of time.

Speaker Change: Hey, Jamie.

Speaker Change: I think as we've always talked about there is a relationship between fuel and revenue.

Speaker Change: Hoping repair corporate relationships and and progress is being made in operations are markedly improved our balance sheet continues to improve there's loyalty kicker coming.

Speaker Change: So we have adjusted capacity of the industry has adjusted capacity to the current supply environment. Obviously, a few almost 70 cents higher we would be producing slightly less capacity than we are today I think the industry would probably be adjusting at the same time. So none of this can be looked at in isolation. You are right that earnings in the fourth quarter relatively flat just up slightly.

Speaker Change: These are all good things.

Speaker Change: My question relates to the network I'm curious what you think your greatest network deficiencies are and more importantly does.

Speaker Change: Does management have the appetite or is it a priority to address those deficiencies.

Speaker Change: At the midpoint.

Speaker Change: We expect to do better than that and as we head into 2025, we are looking forward to margin expansion.

Speaker Change: Yes.

Speaker Change: And second when we and thanks, Kevin when we think about management priorities. Robert has said that he is spending a lot of time.

Speaker Change: Thanks, Jamie and look our highest priorities right now are making sure that we make best use of the assets that we have and notably regaining our corporate and agency share getting our co brand credit card renegotiated and then competing.

Speaker Change: Helping repair corporate relationships and.

Speaker Change: And progress is being made in operations are markedly improved the balance sheet continues to improve there's loyalty kicker coming.

With on product and service, but in regard to the network.

Speaker Change: These are all good things.

Speaker Change: My question relates to the network I am curious what you think your greatest network deficiencies are and more importantly does the does management have the appetite or is it a priority to address those deficiencies. Thanks in advance.

Speaker Change: Look I, we said at the Investor day, and I'll underscore it again.

Speaker Change: We have a fantastic network it can take customers anywhere they want to get in the world. We have the best set of partnerships in the biggest business.

Speaker Change: And travel destinations.

Speaker Change: Around the world, we've been aggressive in the past in terms of making sure that we.

Speaker Change: Thanks, Jamie and look our.

Speaker Change: Sure up any any deficiencies, most notably we have a relationship with Alaska Airlines out on the West Coast.

Speaker Change: We tried to strengthen our position on.

Speaker Change: On the east coast with with with the NDA.

Speaker Change: And as we take a look at going forward.

Speaker Change: We're very focused on making sure our network appeals to customers.

Speaker Change: From a leisure basis international and certainly from a business perspective.

Speaker Change: And as you take a look at what we're doing in New York and Los Angeles I'll note that in New York.

Speaker Change: Between Laguardia and JFK.

Speaker Change: We have we will be flying as we move into next year. The largest schedule that we've had since since the pandemic I'm really pleased with the product that we're putting in place whether it's the lounges.

Speaker Change: <unk> hundred 20, <unk> and ultimately the <unk> that will be flying transcon. The great relationship that we have with VA to set up just the best.

Speaker Change: Shuttle to London, Heathrow and the work that we're doing out on the West Coast again with Alaska, our combined position.

Speaker Change: Certainly puts us at great strength and even on our own in the La basin airports, we have considerable strength. So it's about knitting. All these things together and are utilizing to the greatest extent.

Speaker Change: The greatest benefit for our customers and making sure that we.

Speaker Change: Do our best.

Speaker Change: Yield up wherever we can we've got a lot of work ahead of us, but that's all upside with the assets that we have today.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Savi <unk> of Raymond James. Please go ahead savi.

Speaker Change: Hey, good morning.

Speaker Change: Let me take it that just kind of follow up on Scott's question earlier.

Speaker Change: A little bit more color on the fourth quarter it trend here and you call that noise.

Speaker Change: Election.

Speaker Change: Sure.

Speaker Change: Not sure if that was announced and then attacking there I wonder if you could.

Speaker Change: Just help us understand the unit revenue that you provided and what the core trend might be well, it's kind of in that domestic.

Speaker Change: Various international markets.

Speaker Change: Yeah, Savi, what I'll say is we take a look at the fourth quarter overall and I'd say again there's.

Speaker Change: Strength in demand, we're not going to have any trouble filling up our planes.

Speaker Change: Do you think that that's a result of.

Speaker Change: The supply and demand balance being.

Speaker Change: Relatively more in shape and I think that that's going to progress as well I think that from a supply perspective.

Speaker Change: We continue to see improvements, but the fourth quarter as a whole strong October some weakness in early parts of November as a result of Halloween and the election not unexpected.

Speaker Change: Fourth quarter, we see a lot of strength.

Speaker Change: I'm, sorry, and as we move into December so yeah, a lot of strength around the holidays, so a lot of strength over over Thanksgiving as well.

Speaker Change: So people that people want to travel and we're very optimistic about how the.

Speaker Change: Bookings look for the fourth quarter.

Speaker Change: I appreciate that and then just on the I know, it's very early days on the 2025 capacity growth and I appreciate the color there just curious.

Speaker Change: In connection to the unit cost headwinds mentioned, maybe a little bit more regional growth that mainline I was curious if you can talk about how high level, how you're thinking about kind of domestic growth, whereas it may be near international versus international.

Speaker Change: Okay. So not a whole lot of color at this point on growth by entity for 2025, but obviously the regional growth will be entirely focused on domestic it just doesn't drive a ton of this ams, but.

Speaker Change: We bring back capacity is probably a percent of consolidated capacity or more thats coming out of regional that will largely be on the domestic side.

Speaker Change: The rest of the growth I think it will be split relatively evenly maybe a little more international than domestic but we got a letter plans develop a bit.

Speaker Change: And Savi, just a little more color on that coming out of the pandemic, we really focused on restoring our sunbelt hubs to get them to full capacity you will see us possess.

Speaker Change: Physician more capacity in the northern northern northern tier hubs.

Speaker Change: <unk> are going to give us.

Speaker Change: Great flexibility in being able to make sure that we can take customers, where they want to go when they want to go.

Speaker Change: Yeah.

Speaker Change: Thank you our next question.

Comes from the line of Conor Cunningham of Melius Research. Your question. Please Conor.

Conor Cunningham: Hi, everyone. Thank you maybe following up to Jamie's question.

Speaker Change: On the product side.

Speaker Change: And to your corporates know pretty exactly right.

Conor Cunningham: Imagine you're engaging with regular customers in general, but just have preferences changed at all in terms of onboard experience.

Speaker Change: United talking about free Wi Fi of southwest Rolling out their premium experience just curious on how you view.

Speaker Change: How Americans product kind of stacks up to the industry at this point. Thank you.

Speaker Change: Yes, Thanks, Kevin I'll start with this theres clearly a preference for more premium type services and one of the things you will note in our results as our premium revenues have risen by 8% quarter over over.

Speaker Change: In 2023 over the third quarter of 2023.

Speaker Change: I think that bodes well for us.

Speaker Change: Maybe it's paid load factor and its yield.

Speaker Change: But it bodes well for us because youll see over the course of the next two years through 2026 that are premium seating is going to grow by about 20% and that's as a result of the reconfiguration of triple seven three hundreds.

Speaker Change: But as well as the introduction of the 707 nines with.

Speaker Change: The flagship suites.

Speaker Change: XL ours, and then also domestically reconfiguration of our 300 Twenty's and our 319.

Speaker Change: So there is absolutely a preference from that perspective, I think that that's going to continue and we're going to be on.

Speaker Change: The right side of the ledger on that in terms of product you mentioned customers want control and an inconvenience.

Speaker Change: We've invested.

An incredible amount in terms of technology will continue to do that to give customers the ability to control their itineraries and then also to be able to help them recover when.

Speaker Change: There are any any any type of disruptions as part of that people want to be connected whenever and wherever they fly American was the first to get.

Our.

Speaker Change: Narrow body fleet fully equipped with.

Speaker Change: <unk> preference from that perspective, I think that that's going to continue I think we're going to be on the right side of the ledger on that in terms of product you mentioned customers want control.

Speaker Change: Satellite based Wi Fi, we're gonna be expanding that for our large regional jet.

Speaker Change: Our portfolio as well so it will be the first to have satellite based Wi Fi on the combined narrow body and regional fleet and I think that we're going to have to take a look at that making sure that we serve customers' needs from that perspective as.

Speaker Change: Inconvenience.

Speaker Change: We've invested.

Speaker Change: An incredible amount in terms of technology, and we'll continue to do that to give customers the ability to control their itineraries and then also to be able to help them recover.

Speaker Change: When.

Speaker Change: As well, but you will see us.

Speaker Change: There are any any any type of disruptions as part of that people want to be connected whenever and wherever they fly American was the first to get.

Speaker Change: Invest in our product.

Speaker Change: We will have.

<unk> suites.

Speaker Change: In terms of new deliveries on the <unk> and the.

Speaker Change: Our.

Speaker Change: 707 nines those will have seatback video those will also have international satellite Wi Fi as well.

Speaker Change: Narrow body fleet fully equipped with <unk>.

Speaker Change: Satellite based Wi Fi, we're gonna be expanding that for our large regional jet.

Speaker Change: And then from a services perspective on the ground same thing.

Speaker Change: We're the first to really up the game in terms of lounge experience with flagship dining and I'm really proud of the facility that we have in New York with.

Speaker Change: Three lounge options.

Speaker Change: Really a set of standard Youll see us next year.

Speaker Change: As well, but youll see us.

Speaker Change: Invest in our product.

Speaker Change: Invest and rollout new lounge experiences in Philadelphia, and planning upgrades and other places throughout the system as well so as we take a look out in the future I think that customers are looking to.

Speaker Change: We will have four.

Speaker Change: Likes of suites.

Speaker Change: In terms of new deliveries on the <unk> and the.

Speaker Change: 707 nines those will have seatback video those will also have international satellite Wi Fi as well.

Speaker Change: Having a more premium experience, we're going to accommodate that they want more control.

Speaker Change: And then from a services perspective on the ground same thing.

Speaker Change: We're going to try the extra that will engage them on that front and overall I think that the game plan for American is going to be very beneficial and unlocking a lot of value from a revenue perspective.

Speaker Change: We're the first to really up the game in terms of lounge experience with our flagship dining and I'm really proud of the facility that we have in New York with <unk>.

Speaker Change: Three lounge options.

Speaker Change: Super detail I appreciate that Robert and then you know you're talking about renegotiation with corporates and engaging with them again.

Speaker Change: Really a set of standard you'll see us next year <unk>.

Speaker Change: Is that in line with your expectations.

Right.

Speaker Change: And then what.

Speaker Change: That caught me by surprise I think it was just you dropped the word competitive cause you renegotiated the contract does that mean that the revenue recapture that you're seeing is coming in at a lower margin.

Speaker Change: Having a more premium experience, we're going to accommodate that they want more control.

Speaker Change: We're gonna extra extra that will engage them on that front and overall I think that the game plan for American is going to be very beneficial and unlocking a lot of value from a revenue perspective.

Speaker Change: Going forward. Thank you.

Speaker Change: I'll start on this and Steve can can Phil.

Speaker Change: First off I'll, just restate that the reaction I have received from the countless Ceos.

Speaker Change: Stupid detail I appreciate that Robert and then.

Speaker Change: And professionals at agencies and corporate buying groups has been thank goodness you're back.

Speaker Change: Youre talking about renegotiation with corporates and engaging with them again.

Speaker Change: Is that in line with your expectations the exit rate.

Speaker Change: We want to engage we want to engage in a way that is sustainable and profitable over the long run. So I've been very very pleased with the reception, Steve you want to give some more detail.

Speaker Change: And then what.

Speaker Change: They're caught me by surprise I think was just you've dropped the word competitive you renegotiated the contract does that mean that the revenue recapture that you're seeing is coming in at a lower margin.

Steve Trent: Yes, sure maybe more generally about the third quarter, because theres been a couple of questions that I would characterize as kind of why is it taking so long, but when we when I think about the last 90 days, we had a handful of objectives I think that were.

Speaker Change: Going forward. Thank you.

Speaker Change: I'll start on this and Steve can can Phil.

Speaker Change: First off I'll, just restate that the reaction I have received from the countless Ceos.

Steve Trent: Immediate and needed to be focused on that first we had to stabilize the ship and refocused the team that we've had a very significant disruption and I'm really pleased with the progress that we made on that.

Steve Trent: We needed to rebuild our foundation and our infrastructure for being able to participate in the traditional sales and distribution channels that have largely been dismantled.

Steve Trent: And we need to build that in a way that it would be lasting and that.

Steve Trent: Our partners would trust. The fact that we were back in the game and I think we've made it really we've made really significant progress on that.

Steve Trent: Third and I think most importantly, we needed to re establish and start re developing our relationships I mean that men listening and listening to a lot of people.

Steve Trent: And ultimately you're getting passed.

Steve Trent: Stage that was really anger.

Steve Trent: And getting.

Steve Trent: We acquainting ourselves with these people in.

Steve Trent: Gaining their trust in a way that was really important.

Steve Trent: That meant talking to people it meant negotiating agreements on a kind of counter party by counterparty basis.

Speaker Change: And it just meant engagement and as Robert has said a couple of times I mean, that's been really positive we've made a lot of progress on that and.

Steve Trent: And we've heard over and over and over again that.

Steve Trent: The agencies the Tmc's are corporate customers that their world is better with three airlines competing instead of just two.

Steve Trent: Fourth we wanted to shift some share we talked about that and we said that we would measure ourselves by Sharon and we accomplished that as Robert has mentioned a couple of times.

Steve Trent: Fifth we wanted to outperform guidance, we hadn't done that in a long time and.

Steve Trent: And we did that this time and I think everybody is really proud of that effort and then finally, we wanted to we wanted that outperformance to be meaningful and beating that we wanted to do it in a way that we didn't lose additional ground to our principal competitors and I think we accomplished that.

Steve Trent: The third quarter as well.

Steve Trent: I'm not going to say that we're done or or anything nearly that there's tons of work to be done, but I would like to think that thats, a solid start and I think it has the team and Robert and Devin and I really excited about what we can accomplish in the next 90 days in 2025.

Steve Trent: Thank you.

Steve Trent: Our next question.

Speaker Change: Comes from the line of Duane Fenech worth of Evercore ISI. Please go ahead Duane.

Duane Fenech: Hey, good morning. Thanks.

Duane Fenech: Just a couple.

Duane Fenech: On the fleet delays I'm, just wondering how impactful.

Duane Fenech: These are to your 2025 planning if you if you have any sense for what your 2025 growth.

Duane Fenech: Might have looked like absent any fleet delays.

Duane Fenech: Or is this more about delaying aircraft retirements and then relatedly in a follow up to Savi. How are you thinking about utilization expansion next year, which I think was a big theme entering this year.

Duane Fenech: Hey, Duane.

Speaker Change: Capacity for 2025 is being impacted by these delays like we're fortunate to have a fleet that can run at pretty strong utilization you saw that this year were.

Speaker Change: Versus the start of the year, we probably took delivery of <unk>.

Speaker Change: 15, or 20, less airplanes or something like that and what we expected and we still met our capacity guidance for the year next year, we'd probably be a little bit higher in terms of capacity if it weren't for our expected delays that being said, we can push utilization a little bit we still think we could if we wanted to and if the competitive or demand environment dictated that we could grow.

Speaker Change: Head of our low single digit guide.

Speaker Change: But it has impacted us to some extent on the utilization side for next year, you will mostly see it with regional aircrafts or region, where utilization will be up pretty materially as we have gotten back to pulse affordability throughout this year mainline utilization maybe.

Speaker Change: Maybe up slightly but it won't be as material as what we've seen on the regional side.

Speaker Change: Thanks, Thanks for that and then.

Speaker Change: In terms of corporate share recovery I don't know if you're willing to speak to this but where do you think the old strategy hurt you. The most geographically was it was the share loss really even across your network and.

Speaker Change: In places like DFW, and Charlotte and Steve maybe your Dodger shout out.

Speaker Change: Thats, a clue I don't want to read too much into it, but where where do you think this pivot will help you most.

Speaker Change: Clearly in the big cities that are the most competed.

Speaker Change: New York La Chicago.

Speaker Change: We definitely were hurt disproportionately in places, where we're less strong.

Speaker Change: And so and that's what we're seeing.

Speaker Change: We see this start to come back that's where it's starting to come back.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Stephen Trent of Citi. Your.

Speaker Change: Your line is open.

Stephen Trent: Yes, good morning, gentlemen, and thanks for taking my time, taking the time for my questions and to the other Steve on the call. We're quite baseball focused here as well so I appreciate that.

Stephen Trent: Just a bit of a follow up when I think about maintenance I know you guys have.

Stephen Trent: Relatively young fleet, but have you thought.

Stephen Trent: How about maybe other strategies engine module swaps or using drones or are these kind of things. When you think about your aircraft maintenance strategy. Thank you.

Stephen Trent: So.

I'll start.

Stephen Trent: And just just first with this Ah.

Stephen Trent: I think.

Stephen Trent:

Stephen Trent: Move out into 2025 and beyond.

Stephen Trent: I think that the industry is going to continue to have a shortfall of resources.

Stephen Trent: Yep American is very well protected and resource in an environment, where the supply chain struggles, especially around may.

Stephen Trent: Maintenance related items, we have the largest group of.

Stephen Trent: Mechanics, all represented by the TWU Iam Association of of any carrier, we have the world's largest commercial maintenance overhaul based in Tulsa, Oklahoma.

Stephen Trent: And in all of that I know right now from what I see that we're outperforming others in the industry whether that be other airlines and also MRO is I know that because of the kind of the turn times that we produce on our CFM CFM 56 engine. So I think we're really well.

Stephen Trent: <unk> positioned in a world, where there's constrained resources on top of that and I'll, Let David C. Moore, our chief operating operations Officer speak.

Speaker Change: We have the largest group of.

Speaker Change: Mechanics, all represented by the TWU Iam Association of any carrier, we have the world's largest commercial maintenance overhaul based in Tulsa, Oklahoma.

Stephen Trent: I know as well that we're bringing to bear the best in terms of technology.

Stephen Trent: To not only maintenance, but all aspects of the operation.

Stephen Trent: Robert Thank you the team is exploring all of those and Thats new technology, that's out there, but we're looking at whether it's drones are using.

Speaker Change: And in all of that I know right now from what I see that we're outperforming others in the industry whether that be other airlines and also.

Stephen Trent: By definition.

Stephen Trent: Cameras to be able to pinpoint.

Speaker Change: MRO is I know that because of the kind of the turn times that we produce on our CFM CFM 56 engine. So I think we're really well positioned in a world where there's constrained resources on top of that and I'll, Let David C. Moore, our chief operating operations Officer speak I know as well that we're bringing to bear there.

Stephen Trent: Damn image assess damage and those types of things that we would do ordinarily in heavy check environment. So that field is starting to grow we are definitely exploring options in that to get more efficient with what we do.

Stephen Trent: And David I'll, just I'll just add the strip business technology is going to be a key.

Speaker Change: Best in terms of technology.

Stephen Trent: Item for us as we look forward.

Speaker Change: To not only maintenance, but all aspects of the operation.

Stephen Trent: When we talk about aircraft utilization.

Stephen Trent: Identifying any type of.

Speaker Change: Robert Thank you the team is exploring all of those and Thats new technology, that's out there, but we're looking at whether it's drones are using.

Stephen Trent: Improvement.

Stephen Trent: In order to play around in a way that I think we can recover better than any other airline we're using that technology and the tools that David mentioned in terms of our training and one of the things that you'll see is that through.

Speaker Change: High definition.

Speaker Change: Cameras to be able to pinpoint.

Speaker Change: Damn image assess damage and those types of things that we would do ordinarily in heavy check environment. So that field is starting to grow we are definitely exploring options in that to get more efficient with what we do.

Stephen Trent: Deployment of.

Stephen Trent: I basically ipads.

Stephen Trent: Throughout the system, whether that be for our pilots and flight attendants and ultimately for our mechanics out on the line there jobs becomes so much easier so.

Speaker Change: And David I'll, just I'll just add the strip business technology is going to be a key.

Speaker Change: Item for us as we look forward.

Stephen Trent: This is something that we're going to excel in we're all really really really strong and it's going to be a differentiator for the company.

Speaker Change: When we talk about aircraft utilization.

Speaker Change: Identifying any type of.

Speaker Change: Improvement.

Speaker Change: Very helpful. Thank you very much strengths and just a quick follow up as well all the changes youre, making with with corporate and what have you.

Speaker Change: In order to play around in a way that I think we can recover better than any other airline we're using that technology and the tools that David mentioned in terms of our training and one of the things that you'll see is that through.

Speaker Change: Have you contemplated make any adjustments or any other adjustments in your frequent Flyer program. For example, some of your competitors have.

Speaker Change: Deployment of.

Speaker Change: Mileage programs, whether they're points don't expire thank you.

Speaker Change: I basically ipads.

Speaker Change: Throughout the system, whether that be for our pilots and flight attendants and ultimately for our mechanics out on the line there jobs becomes so much easier so.

Speaker Change: So from a loyalty perspective look we were really proud of.

Speaker Change: The advantage program overall.

Speaker Change: Constantly looking at ways to better engage.

Speaker Change: This is something that we're going to excel in we're all really really really strong and it's going to be a differentiator for the company.

Speaker Change: Our customers now.

Speaker Change: Not only from a loyalty perspective, but just also from a value perspective.

Speaker Change: Very helpful. Thank you very much strengthened just a quick follow up as well all the changes youre, making with corporate and what have you.

Speaker Change: And.

Speaker Change: While there may be some carriers that are doing something different I do know one thing that.

Speaker Change: You take a look at any type of assessment of the value of a mile on American airlines versus anyone else Youll see that we.

Speaker Change: Have you contemplated make any adjustments or any other adjustments in your frequent Flyer program. For example, some of your competitors have minor.

Absolutely.

Speaker Change: Generate more value for our customers.

Speaker Change: Mileage programs, whether they're points don't expire.

Speaker Change: Yeah.

Speaker Change: <unk>.

Speaker Change: Thank you.

Speaker Change: So from a loyalty perspective look we were really proud of.

Speaker Change: Question.

Speaker Change: Comes from the line of Tom Fitzgerald of T. D. Cohen Your line is open Tom.

Speaker Change: The advantage program overall.

Speaker Change: Constantly looking at ways to better engage.

Tom Fitzgerald: Thanks, so much for the time everyone.

Speaker Change: Our customers now.

Speaker Change: Not only from a loyalty perspective, but just also from a value perspective.

Tom Fitzgerald: Thinking about the Wi Fi and if that <unk>.

Tom Fitzgerald: Free Wi Fi starts to become table stakes across the industry or are you concerned at all about the revenue headwind that could present.

Speaker Change: And.

Speaker Change: While there may be some carriers that are doing something different I do know one thing that.

Speaker Change: Tom Thanks for the question no I'm not concerned because first off.

Speaker Change: You take a look at any type of assessment of the value of a mile on American airlines versus anyone else Youll see that we.

Speaker Change: You need to have high speed Wi Fi to be able to offer it.

Speaker Change: Absolutely.

Speaker Change: Generate more value for our customers.

Speaker Change: At any level to give customers confidence that there'll be able to access it and use it we're going to be expanding coverage for our Wi Fi as I mentioned, our regional fleet will have it along with our narrow body fleet and we're going to be really competitive we're going to make sure that our customers are taken care of.

Speaker Change: Thank you our next question.

Speaker Change: Comes from the line of Tom Fitzgerald of TD Cowen Your line is open Tom.

Tom Fitzgerald: Thanks, so much for the time everyone.

Thinking about the Wi Fi and if that free.

Speaker Change: And what they want, especially our most loyal customers, we're going to make sure that they're protected and taken care of we already offer a number of opportunities for our customers to engage with us on a fee basis and also on a free basis with some partners. We will keep an eye on that and make sure that we don't fall.

Tom Fitzgerald: Free Wi Fi starts to become table stakes across the industry or are you concerned at all about the revenue headwind that could prove that.

Speaker Change: Tom Thanks for the question no I'm not concerned because first off.

Speaker Change: You need to have high speed Wi Fi to be able to offer it.

Speaker Change: Short even for a second thanks.

Speaker Change: At any level to give customers confidence that there'll be able to access it and use it we're going to be expanding coverage for our Wi Fi.

Speaker Change: That's really helpful. Thanks, and then just quickly on the with the Capex some of that shifting to the right would you look to accelerate any debt paydown. Thanks again for the time.

Speaker Change: As I mentioned, our regional fleet will have it.

Speaker Change: Along with our narrow body fleet and we're going to be really competitive we're going to make sure that our customers are taken care of.

It's a good question and a fair question right now we feel pretty good about the outlook.

Speaker Change: And what they want, especially our most loyal customers, we're going to make sure that they're protected and taken care of we already offer.

Speaker Change: With what we're doing on total debt reduction we stay consistent with our goal of $15 billion of total debt reduction right. Now we have two maturities in 2025. It will have some options around whether we do a refinancing on those maturities or.

Speaker Change: Number of opportunities for our customers to engage with us on a fee basis and also on a free basis with some partners. We will keep an eye on that and make sure that we don't fall.

Speaker Change: We pay down and that will be dependent on.

Speaker Change: Short even for a second thanks.

Speaker Change: Where we're at with free cash flow and our liquidity outlook.

Speaker Change: That's really helpful. Thanks, and then just quickly on the what's the Capex some of that shifting to the right would you look to accelerate any debt paydown. Thanks again for the time.

Speaker Change: For now we are feeling really good about the $15 billion total debt reduction goal and yeah, we may look to advance that or further.

Speaker Change: Reduce debt dependent on what happens throughout 2025.

Speaker Change: It's a good question and a fair question right now we feel pretty good about the outlook.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: It comes from the line of Daniel Mckenzie of Seaport Global. Please go ahead Daniel.

Daniel Mckenzie: Oh, Hey, thanks, good morning, guys.

Speaker Change: Going back to technology being a key item in your comment on it investments yeah.

Speaker Change: If we pay down and that will be dependent on.

Daniel Mckenzie: I understand that can drive improved maintenance revenue.

Speaker Change: Where we're at with free cash flow and our liquidity outlook.

Daniel Mckenzie: Is there a revenue opportunity from getting the right offer in front of the customer at the right time and for those with a longer timeframe. What does the upside look from looked like from that potential upsell.

Speaker Change: For now we are feeling really good about the $15 billion total debt reduction goal and we may look to advance that or further.

Speaker Change: Reduced debt dependent on what happens throughout 2025.

Speaker Change: So I'll start and Steve you can you can add onto this as well I'll just I'll just start with with Us Dan.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: It comes from the line of Daniel Mckenzie of Seaport Global. Please go ahead Daniel.

Speaker Change: First off we've invested billions $12 billion in terms of technology over the last.

Daniel Mckenzie: Oh, Hey, thanks, good morning, guys.

Daniel Mckenzie: Going back to technology being a key item in your comment on it investments yeah.

Speaker Change: And that kind of investment is going to continue as part of of.

Speaker Change: Where are we.

Daniel Mckenzie: I understand that can drive improved maintenance revenue.

Speaker Change: Focus our efforts and whether it's in operations, which David covered to an extent or our operations control, which is definitely something that is as a as an area of focus.

Speaker Change: Attention is on our customers, making sure that where it's easy to do business as possible that they can afford themselves of everything that they want.

Speaker Change: So I'll start and Steve you can you can add onto this as well I was just I'll just start with with this Dan.

Speaker Change: In terms of services and amenities and that they have the control for that so you'll continue to see us.

Speaker Change: First off we've invested billions $12 billion in terms of technology over the last.

Speaker Change: And that kind of investment is going to continue as part of.

Speaker Change: Invest in things that make us easier to do business with and as part of that.

Speaker Change: Tying back to our product strategy, we know customers want.

Speaker Change: Where are we.

Speaker Change: Focus our efforts and whether it's in operations, which David covered to a certain extent.

Speaker Change: Access to more premium products, making that available to them in an easy fashion is going to be a focus I'm not going to put a number on it right now, but it is it's a big effort.

Speaker Change: Or our operations control, which is definitely something that is.

Speaker Change: As an area of focus.

Speaker Change: Attention is on our customers, making sure that where it's easy to do business as possible that they can afford themselves of everything that they want.

Speaker Change: Thanks, Robert and I'd just add.

Speaker Change: As you might guess spend most of my time, focusing on some of the issues that we've been discussing over the last two earnings calls, but all of my free time is focused on excitement about what new technologies and artificial intelligence can do to help us.

Speaker Change: In terms of.

Speaker Change: Services and amenities and that they have the control for that so you'll continue to see us.

Speaker Change: And things that make us easier to do business with and as part of that.

Speaker Change: Both deliver better products to customers more tailored products to customers engage better with our customers.

Speaker Change: And tying back to our product strategy, we know customers want access to more premium products, making that available to them in an easy fashion is going to be a focus I'm not going to put a number on it right now, but it is it's a big effort.

Speaker Change: And ultimately.

Speaker Change: <unk> revenues, it's really an exciting part of the business and where we.

Speaker Change: We are very focused on it thanks for the question.

Speaker Change: Yeah, and I guess, if I could just follow up with one more on AI driving improved efficiency, because that's exactly what I was getting at.

Speaker Change: Thanks, Robert and I'd just add.

Speaker Change: <unk>.

Speaker Change: Bigger picture, what do you want the efficiency metrics to look like say, one or two years from now and what kind of cost savings could that potentially in play.

Speaker Change: As you might guess spend most of my time, focusing on some of the issues that we've been discussing over the last two earnings calls, but all of my free time.

Speaker Change: Focus on excitement about what new technologies and artificial intelligence can do to help us.

Speaker Change: So Dan I'll start Devin can add into this look we're intent on margin expansion.

Speaker Change: And one of the efforts that I ask Devin to take on.

Speaker Change: Both deliver better products to customers more tailored products to customers engage better with our customers.

Speaker Change: Now.

Speaker Change: Well over a year ago.

Speaker Change: And ultimately improved revenues, it's really an exciting part of the business.

Speaker Change: We're a year and a half into it was reengineering the company from an efficiency perspective, the first effort down that path. It was really to make sure that we're getting the most out of the assets that we have today the relationships that we have today, so everything from purchasing to freeing up working capital.

Speaker Change: We are very focused on it thanks for the question.

Speaker Change: Yes, and I guess, if I could just follow up with one more on AI driving improved efficiency, because thats exactly what I was getting at.

Speaker Change: Bigger picture, what do you want the efficiency metrics to look like say, one or two years from now and what kind of cost savings could that potentially imply.

Speaker Change: To just doing things in a better fashion, a little bit better fashion than we do today those efforts have paid off.

Speaker Change: I think that in devins comments, he mentioned that we're on track for producing $400 million in terms of.

Speaker Change: So Dan I'll start Devin can add into this look we're intent on margin expansion.

Speaker Change: Savings in 2000, 22024, which will grow as we move into 2025, freeing up working capital as well.

Speaker Change: And one of the efforts that I ask Devin to take on now.

Speaker Change: Well over a year ago.

Speaker Change: We're not going to stop.

Speaker Change: At this first effort in terms of reengineering. The next effort will then be to put an AI lens to everything that we do and on that front I'm really pleased with the collaboration between Devin.

Speaker Change: Just doing things in a better fashion, a little bit better fashion than we do today those efforts have paid off.

Speaker Change: May our chief financial Officer, and can ask Jairam.

Speaker Change: Head of information technology and digital.

Speaker Change: I think that devins comments, he mentioned that we're on track for producing $400 million in terms of.

Speaker Change: Both on it and we look forward to talking more about our efforts as we get into 2025.

Speaker Change: Savings in 2000, 22024, which will grow as we move into 2025, freeing up working capital as well.

Speaker Change: I really don't have much to add we're really proud of the progress we have made so far to drive efficiencies in the business.

Speaker Change: We're not going to stop.

Speaker Change: At this first.

Speaker Change: I think it's a huge opportunity ahead, you're going to see it in metrics like we talked about at Investor day things like this year, we're growing the airline five 5% but.

Speaker Change: Effort in terms of reengineering. The next effort will then be to put an AI lens to everything that we do.

Speaker Change: That front I'm really pleased with the collaboration between Devin.

Speaker Change: We're growing our head count by a percent I think you'll see the same types of outcomes as we invest more into.

May our chief financial Officer, and can ask Jairam.

Speaker Change: Jen AI and other technologies that are going to allow us to better utilize our assets better utilize our people and better serve our customers.

Speaker Change: Ahead of information technology and digital.

Speaker Change: Both on it and we look forward to talking more about our efforts as we get into 2025.

Speaker Change: Yeah.

Speaker Change: Thank you analysts for your questions at this time. The line is open to media. Please press star one on your telephone to remove yourself from the queue. You May Press Star one one again again the line is open to the media questions. Please standby, while we compile the Q&A roster.

Speaker Change: I really don't have much to add we're really proud of the progress we have made so far to drive efficiencies in the business.

Speaker Change: I think it's a huge opportunity ahead, you're going to see it in metrics like we talked about at Investor day things like this year, we're growing the airline five 5% but.

Speaker Change: We're growing our head count by a percent I think youll see the same types of outcomes as we invest more into <unk>.

Speaker Change: Thank you our first question.

Speaker Change: Comes from the line of Mary Slogging State of Bloomberg. Your line is open Mary.

Speaker Change: <unk> and other technologies that are going to allow us to better utilize our assets better utilize our people and better serve our customers.

Hey, Thank you good morning.

Mary Slogging: As you guys work on your corporate.

Speaker Change: Thank you analysts for your questions at this time. The line is open to media. Please press star one on your telephone to remove yourself from the queue. You May Press Star one one again again the line is open to media questions. Please standby, while we compile the Q&A roster.

Mary Slogging: Rebuilding strategy I'm trying to win business can you say at this point.

Speaker Change #101: Well once again.

Speaker Change #102: The main point of where you went wrong.

Speaker Change #103: What point did you realize that your strategy the wrong strategy and and.

Speaker Change #103: How do you get to that point, if you can just kind of maybe break that down just a little bit.

Speaker Change: Thank you. Our first question comes from the line of Mary Slogging State of Bloomberg. Your line is open Mary.

Speaker Change #104: So Mary I'll tell.

Speaker Change #105: I repeat what I said in the second quarter look our revenue performance fell off as we moved into the second quarter of this year. It became noticeable and it would be something and something that we knew we had to address in terms of.

Mary Slogging: Okay. Thank you.

Mary Slogging: Hey, as you guys work on your corporate.

Mary Slogging: Rebuilding strategy I'm trying to win business can you say at this point.

Speaker Change #105: The efforts that we were trying to bring about which is technology changing.

Well once again.

Mary Slogging: The main point of where you went wrong.

Speaker Change #105: Really trying to spur.

Speaker Change #105: The marketplace.

Mary Slogging: What point did you realize that your strategy with the wrong strategy and.

Speaker Change #105: Have to be conscious of the competitive environment, we have to be conscious of technology and most importantly, we have to be conscious of what our customers want at the end of the day, we absolutely can do a better job listening Steve is engaged on that front I am pleased with the progress, we're making and getting back in reestablishing.

Mary Slogging: <unk>.

Mary Slogging: How did you get to that point, if you can just kind of maybe break that down just a little bit.

Speaker Change: So Mary.

Mary Slogging: Repeat what I said in the second quarter look our revenue performance.

Speaker Change #105: Our commitment to customers and I know that the revenue rebound is going to follow from that effort.

Mary Slogging: It fell off as we moved into the second quarter of <unk>.

Mary Slogging: This year, it became noticeable and it would be something and something that we knew we had to address in terms of.

Speaker Change #106: So do you do you feel in retrospect breakdown.

Mary Slogging: The efforts that we were trying to bring about which is the technology change.

Speaker Change #106: Fair enough.

Speaker Change #106: Sure.

Speaker Change #106: Lost business that you weren't taking the wrong stops.

Mary Slogging: Really trying to spur.

Mary Slogging: The marketplace.

Speaker Change #108: Mary This is an opportunity for us and its upside at American as we regain our share that's something that I think that is unique to American and we're intent on doing that in serving our customers. How they want to be served and in that case, we have a lot of customers.

Mary Slogging: You have to be conscious of the competitive environment, we have to be conscious of technology and most importantly, we have to be conscious of what our customers want at the end of the day, we absolutely can do a better job listening Steve is engaged on that front I am pleased with the progress, we're making and getting back in reestablishing.

Speaker Change #106: Really want to.

Mary Slogging: Our commitment to customers and I know that the revenue rebound is going to follow from that effort.

Speaker Change #106: Invest in technology and move forward, we have other customers that.

Don't really want to take a different approach, we're going to make sure that we're serving them. All when we are in the business of taking care of customers all customers and making sure that they have a place.

Speaker Change: So do you do you still in retrospect quite that.

Speaker Change: Perhaps enough.

Speaker Change: Sure.

Speaker Change: <unk> lost business that you werent, taking the wrong stops.

Speaker Change #106: At American and feel like they are well taken care of.

Speaker Change: Mary This is an opportunity for us and its upside at American as we regain our share that's something that I think that is.

Speaker Change #109: Thank you. Our next question comes from the line of Leslie Joseph of CNBC. Your question. Please.

Speaker Change: As unique to American.

Speaker Change: We're intent on doing that in serving our customers how they want to be served and in that case, we have a lot of customers that really want to <unk>.

Leslie Joseph: Hi, Good morning, everyone. I was wondering if you have an update on the cabin refurbishment for the Triple seven and 321 does seem to be a bit behind schedule. When do you expect those to be complete or make some progress there and then.

Speaker Change: Invest in technology and move forward, we have other customers that.

Speaker Change: You don't really want to take a different approach, we're going to make sure that we're serving them. All when we are in the business of taking care of customers all customers and making sure that they have a place.

Speaker Change #109: Secondly, do you have any ideas there.

And on a low end booking around the election is it any different.

Speaker Change #109: And its scale then than previous election.

Speaker Change #111: Thanks Leslie.

Speaker Change: At American and feel like they are well taken care of.

Speaker Change #112: Start with the last which is look we expect there to be some distraction around Halloween and the election, we adjusted our capacity to account for that so it's not surprising.

Speaker Change: Thank you. Our next question comes from the line of Leslie Joseph of CNBC Youre question. Please Leslie.

Speaker Change #111: And as I said.

Leslie Joseph: Good morning, everyone.

Speaker Change #111: October and December certainly look very strong and the Thanksgiving holiday as well. So we're pleased what we see overall just have to be cognizant that.

Leslie Joseph: Was wondering if you have an update on the cabin refurbishment for the Triple seven and 321 does seem to be a bit behind schedule. When do you expect those to be complete or make some progress there and then.

Speaker Change #111: During election time, and Halloween there is usually a little bit of a tapering off of demand in terms of.

Leslie Joseph: Secondly, do you have any idea there.

Leslie Joseph: On a lull in bookings around the election is it any different.

Leslie Joseph: And at scale then than previous election.

Speaker Change #111: Any reconfigurations we're doing.

Speaker Change: Thanks Leslie.

Speaker Change: With the last which is look.

Speaker Change #111: We have triple seven three hundreds we have $3 19 and $3 <unk>.

Leslie Joseph: We expect there to be some distraction around Halloween and the election, we adjusted our capacity to account for that so it's not surprising.

Speaker Change #111: That will all be going in to modification work.

Speaker Change #111: Those all vary in terms of timing the triple seven three hundreds or more likely towards the end of.

Speaker Change: And as I said.

Speaker Change: October and December certainly look very strong in the Thanksgiving holiday as well. So we're pleased what we see overall just have to be cognizant that.

Speaker Change #111: As we get out of the summer of 2025.

Speaker Change #111: Other programs will be.

Speaker Change #111: Started in progress overtime.

Speaker Change #111: The biggest thing I can say on all those fronts, though is that we are dependent on the supply chain.

Speaker Change: During election time, and Halloween there is usually a little bit of a tapering off of demand and in terms of.

Speaker Change #111: Right now that supply chain, especially.

Speaker Change #111: Especially in regard to seats is very tight and so message to our suppliers. Our partners is to work with us to make sure that we get those.

Speaker Change: Any reconfigurations we're doing.

Speaker Change: We have triple seven three hundreds we have $3 19 and $3 <unk>.

Speaker Change #111: That equipment.

Speaker Change: That will all be going in into modification work.

Speaker Change #111: Doc as expected and we're really pushing to make sure that that's the case right now.

Speaker Change: Those all vary in terms of timing the triple seven three hundreds or more likely towards the end of it.

Speaker Change #111: Yeah.

Speaker Change #113: This concludes the Q&A portion of the call I would now like to turn the conference back to Robert Isom for closing remarks, Sir.

Speaker Change: As we get out of the summer of 2025.

Speaker Change: Other programs.

Speaker Change: We'll be <unk>.

Speaker Change: <unk> and progress overtime.

Robert Isom: Well, thanks, and thanks for that and thanks, everybody for making time for us.

Speaker Change: Biggest thing I can say on all those fronts, though is that we are dependent on the supply chain.

Speaker Change #113: I will.

Speaker Change: Right now that supply chain, especially.

Robert Isom: With this I am pleased with the progress that we're making it's great to get back on track delivering on what we say we're going to do that's been something that I've wanted to make sure is a hallmark of American and <unk>.

Speaker Change: Especially in regard to seats is very tight and so message to our suppliers. Our partners is to work with us to make sure that we get those.

Speaker Change: That equipment.

Robert Isom: We're going to get back on track to doing that.

Speaker Change: On dock as expected and we're really pushing to make sure that that's the case right now.

Robert Isom: And to that end this is about making sure we deliver on some of the things that we talked about in Investor day, and that is making sure that we have margin expansion free cash flow production strengthening of the balance sheet.

Speaker Change: Yeah.

Speaker Change: This concludes the Q&A portion of the call I would now like to turn the conference back to Robert Isom for closing remarks, Sir.

Robert Isom: The kinds of things that we talked about today.

Robert Isom: Well, thanks, Thanks for that and thanks, everybody for making time for us.

Robert Isom: In terms of regaining share competing vigorously.

I will.

Robert Isom: Establishing a new co brand credit card relationship all of those are upside for for American So as we work through 2025 I know that these are all going to take root and I'm very optimistic about our future I want to give a shout out to our team.

Robert Isom: I'll close with this I am pleased with the progress that we're making it's great to get back on track delivering on what we say we're going to do that's been something that I've wanted to make sure is a hallmark of American and <unk>.

Robert Isom: We're going to get back on track to join that.

Robert Isom: Never been harder to run an airline.

Robert Isom: Industry, leading reliability and circumstances that we have I think is just.

Robert Isom: And an incredible accomplishment. Thank you very much for your time.

Speaker Change #114: This concludes today's conference call. Thank you for participating you may now disconnect.

Robert Isom: The kind of things that we talked about today.

Robert Isom: In terms of regaining share competing vigorously.

Robert Isom: It's never been harder to run an airline.

Robert Isom: Industry, leading reliability and circumstances that we have I think it was just.

Robert Isom: And then incredible accomplishment. Thank you very much for your time.

Robert Isom: Yeah.

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

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Speaker Change: Thank you for standing by and welcome to American Airlines group's third quarter 2024 earnings Conference call.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: After the speaker's 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 to remove yourself from the queue. You May Press Star one one again I would now like to hand, the call over to Scott long VP of Investor Relations and corporate development. Please go ahead.

Scott Long: Thank you Latif and good morning, and welcome to the American Airlines Group third quarter 2024 earnings Conference call.

Scott Long: On the call with prepared remarks, we have our CEO, Robert Isom, and our CFO Devin Mei.

Scott Long: In addition to our Vice chair, Steve Johnson, we have a number of other senior executives in the room. This morning for the Q&A session.

Robert will start the call with an overview of our performance Devin will follow with details on the third quarter. In addition to outlining our operating plans and outlook going forward.

Scott Long: After our prepared remarks, we will open the call for analyst questions.

Scott Long: Followed by questions from the media to get in as many questions as possible. Please limit yourself to one question and one follow up.

Scott Long: In addition, we'll be discussing certain non-GAAP financial measures, 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.

Scott Long: Cast of this call will also be archived on our website.

Scott Long: The information, we're giving you on the call. This morning is as of today's date and we undertake no obligation to update the information subsequently.

Speaker Change: Thank you for your interest and for joining US this morning, and with that I'll turn the call over to our CEO Robert Isom.

Robert Isom: Thanks, Scott and good morning, everyone before we begin I want to acknowledge the devastation caused by the recent hurricanes in the eastern United States Hurricanes Helene at Milton have had a significant impact on so many and I am proud of the way the American Airlines team has stepped up to help.

Robert Isom: We added thousands of seats into and out of the impacted areas and cap fares for customers traveling to get out of the path of the hurricanes.

Robert Isom: Additionally, our cargo team has moved more than eight tons of critical supplies to impacted regions.

Robert Isom: Our thoughts are with the communities affected by these disasters and will continue to support recovery efforts.

Robert Isom: Now to the results today American reported a third quarter adjusted pre tax profit of $271 million.

Robert Isom: This earnings result is higher than our guidance issued in July with third quarter adjusted earnings per diluted share of <unk> 30.

Robert Isom: The estimated net impact of these disruptions reduced our third quarter earnings by approximately $90 million or <unk> 12 per diluted share.

Our remarks. This morning will focus on our revenue performance operational reliability and cost execution in the third quarter.

Robert Isom: Notably we hit or exceeded our prior guidance on every financial metric in the quarter, while also running a reliable operation.

Robert Isom: We're intently focused on delivering on our commitments in this quarter, we did just that.

Robert Isom: Onto our third quarter revenue performance traffic was down 2% in the quarter, one five points better than the midpoint of our prior guidance.

Robert Isom: Domestic PRASM was down three 1% year over year with performance improving through the quarter as industry capacity growth decelerated from July.

Robert Isom: Importantly, flown yields in September were positive year over year, and we were able to narrow the competitive load factor gap, we saw in the third quarter of last year.

Robert Isom: Long haul international continued to perform well in the third quarter with positive year over year unit revenue growth driven by strength in the Atlantic in South America.

Robert Isom: Demand for American's product remained strong as evidenced by the continued strength of our business premium and loyalty revenue performance.

Robert Isom: Managed business revenue was up 6% year over year, and we continue to see yield strength in the segment.

Robert Isom: Premium revenue increased by approximately 8% year over year and 3% more capacity.

Robert Isom: Paid load factor in our premium cabins remains historically high and was up more than four points year over year with strength in both domestic and international.

Robert Isom: Royalty revenues were up approximately 5% year over year with advantaged members responsible for 72% of premium cabin revenue.

Robert Isom: Spending on our co branded credit cards was up approximately 7% year over year in the third quarter, highlighting the value of Americans loyalty program today and moving forward.

Robert Isom: In July we committed to report on progress in regaining our share of revenue lost as a result of our prior sales and distribution strategy.

Robert Isom: We know success ultimately will be measured by improved revenue and earnings in the near term, we're tracking our progress by measuring our agency and corporate booking performance tracking the growth of our new advantaged business program and listening to the feedback from our agency partners and corporate customers.

Robert Isom: Our third quarter indirect flown revenue share improved modestly compared with our performance in the second quarter.

Robert Isom: However, the booking trajectory through the quarter is encouraging Americans.

Robert Isom: Americans corporate and agency phone revenue share bottomed at 11% below our historical share.

Robert Isom: Since then our share of indirect bookings has started to recover and.

Robert Isom: And we estimate we are currently at 7% below historical levels and we expect to see continued improvement in the months ahead.

Robert Isom: In the third quarter, we continued negotiations for new incentive based agreements with the largest TMC in agencies.

Robert Isom: We now have new competitive agreements in place with more than half of those and are in advanced negotiations with the rest we.

Robert Isom: We rebuilt our agency support capability and based on the team's NPS scores theyre, providing world class service.

Robert Isom: These agreements combined with the support enhancements are major steps towards restoring our share in these important distribution channels.

In September we announced the relaunch of our corporate experience program to address feedback from our corporate customers.

Robert Isom: Program provides meaningful benefits, including priority boarding access to preferred seats and priority re accommodations during disruptions.

Robert Isom: Additionally, we have amended agreements with many of our top corporate customers.

Robert Isom: Adoption of advantage business, our program tailored for small and medium sized businesses continued to build during the quarter.

Robert Isom: Our actions to expand the benefits which include bookings through agencies enhanced program support and a more simplified enrollment process are clearly working we expect to accelerate the growth of the program going forward.

Robert Isom: Concurrently we have been engaged with our corporate and agency partners to ensure we're addressing the issues that matter most to our customers.

Robert Isom: We've heard universally they're worlds are better with three airlines rather than too because of the network in travel rewards program that America delivers.

Robert Isom: Based on this feedback we're confident we're taking the right actions.

Robert Isom: We will continue our relentless focus on reestablishing relationships with our business customers.

Robert Isom: Embracing the agency channel and making it easier to do business with American.

Robert Isom: These results were accomplished despite extended periods of difficult weather in several key hubs and continued supply chain challenges.

Robert Isom: Despite these obstacles American led the U S network carriers in completion factor in the third quarter.

Robert Isom: This is a testament to our team's ability to plan and deliver a safe reliable and consistent product for our customers.

Robert Isom: Earlier, I mentioned, the financial impact of the crash strike adage and Hurricanes, Debbie and Helene the cost of those disruptions could have been far greater if not for our team's quick recovery, which was a result of our focus and investment in the resiliency of our operation.

Robert Isom: As we closed the quarter in September and have transitioned into the fault, we're seeing some of the best operational performance of the year.

Speaker Change: Now I'll turn it over to Devin to share more about our third quarter financial results and our fourth quarter outlook.

Devin Mei: Thank you Robert.

Devin Mei: Net special items, we reported a third quarter net income of $205 million.

Devin Mei: Our adjusted earnings per diluted share of <unk> 30.

Devin Mei: We produced record third quarter revenue of $13 6 billion.

Devin Mei: Up one 2% year over year.

Devin Mei: Our unit revenue was down 2% year over year on three 2% more capacity.

Devin Mei: Our adjusted EBITDAR margin was 11, 1% and we produced an adjusted operating margin of four 7%.

Devin Mei: Our unit cost, excluding net special items and fuel was up two 8% year over year. This is at the higher end of our guidance range due in part to expenses associated with the crowd strike disruption and two major hurricanes.

Devin Mei: Moving to our fleet for 2024, we now expect to take delivery of 17, new aircraft seven of which are planned to be delivered between now and the end of the year. Our 2024 aircraft Capex, which also includes used aircraft purchases spare engines and net PDP is expected to be approximate.

Devin Mei: <unk>, one 7 billion.

Devin Mei: And our total Capex is expected to be approximately $2 6 billion.

Devin Mei: A reduction of $300 million from our July guidance.

Devin Mei: Looking ahead to 2025 based on our current expectation for new deliveries, we anticipate our aircraft capex will be less than 3 billion.

Devin Mei: Below the low end of our prior guidance range we.

Devin Mei: We continue to expect moderate levels of Capex through the end of the decade with aircraft Capex plan to average between three and $3 $5 billion per year from 2026 to 2030.

Devin Mei: We ended the third quarter with $11 8 billion of total available liquidity.

Devin Mei: Reduced approximately $170 million of free cash flow in the third quarter and have now produced $2 $4 billion of free cash flow through the first three quarters of the year.

Devin Mei: We are on track to reduce our total debt by at least $13 billion from peak levels by the end of this year and we remain committed to our goal of $15 billion of total debt reduction from peak levels by year end 2025.

Devin Mei: Now turning to the outlook for the fourth quarter.

Devin Mei: As we noted in July we moved quickly to adjust our capacity growth in the back half of the year to better align with demand.

With our schedule for the balance of the year now finalized we expect to grow capacity by approximately 1% to 3% in the fourth quarter and we expect our full year capacity will be up approximately 5% to 6% in line with our prior guidance.

Devin Mei: We expect fourth quarter <unk> to be down, 1% to 3% and full year try them to be down 3% to 4% versus 2023.

Devin Mei: We continue to focus on driving efficiency and productivity through our reengineering. The business initiatives. We are on track to deliver $400 million in cost savings. This year with 300 million achieved through the third quarter. Additionally, we continue to expect to achieve more than $300 million.

Devin Mei: And working capital improvement this year.

Devin Mei: Fourth quarter CASM ex is expected to be up approximately 4% to 6% year over year, the higher sequential year over year unit cost growth is primarily driven by lower capacity growth and the impact of our new agreement with the BFA.

Devin Mei: We expect our full year CASM ex to be up approximately 2% to 3% consistent with the guidance. We provided in January as we continued to effectively manage expenses.

Devin Mei: Our current forecast for the fourth quarter as soon as a fuel price of between $2 20, and $2 40 per gallon.

Devin Mei: Based on our current demand assumptions and fuel price forecast, we expect to produce an adjusted operating margin of between four 5% and six 5% for the fourth quarter. Our earnings of approximately 25 to <unk> 50 per diluted share.

Devin Mei: With this fourth quarter guidance, we expect to deliver a full year adjusted operating margin of between four five and five 5% and adjusted earnings per diluted share of $1 35 to $1 60.

Devin Mei: We now expect to generate between one and one $5 billion of free cash flow. In 2024. This includes the impact of a onetime bonus for our flight attendants of approximately $500 million.

Devin Mei: As we prepare for 2025, we are focused on producing capacity that is in line with our expectation of demand growth.

Devin Mei: While capacity planning for the year ahead is ongoing we currently expect our 2025 capacity to grow low single digits year over year.

Devin Mei: This growth will be focused on bringing back capacity in markets that are still not restore to historical levels.

Devin Mei: As we demonstrated with the capacity adjustments we've put in place in the back half of this year, we will remain flexible and will adjust capacity in response to the demand environment and the competitive environment. We are operating in.

Speaker Change: I'll now turn the call back to Robert for closing remarks.

Robert Isom: Thanks Devin.

Robert Isom: We remain focused on operating a reliable airline executing on our initiatives and delivering results.

Robert Isom: We continue to produce historically strong operational reliability.

Robert Isom: We remain on track to achieve our balance sheet goals.

Robert Isom: We're reengineering the business to ensure we continue to manage costs with the best in the industry, while delivering a better experience for our customers and team.

Robert Isom: With the changes, we're making in our commercial organization, we're setting the foundation for success as we regain our share of corporate and agency revenue.

Robert Isom: We will continue to make progress on those efforts listening to customer feedback and tracking our performance to ensure the changes we're making are producing the expected returns.

Robert Isom: Debt reduction.

Robert Isom: To accomplish this we need the entire American airlines team working together and pulling in the same direction.

Robert Isom: With the ratification of the new contract with the IPSA and our tentative agreement with the TWU Iam Association, which covers our mechanics and fleet service team members.

Robert Isom: We have reached new agreements covering more team members in a short period of time than ever before.

Robert Isom: We're focused on delivering on our commitments and we believe achieving our long term targets will unlock significant value.

Robert Isom: With that operator, please open the line for analyst questions.

As a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the queue. You May press star one again.

Speaker Change: To allow everyone. The opportunity to participate you will be limited to one question and one follow up please standby, while we compile the Q&A roster.

Speaker Change: Our first question comes from the line of Andrew the Dora.

Speaker Change: Bank of America go ahead Andrew.

Andrew Dora: Hi, good morning, everyone.

Andrew Dora: First question for Robert I guess, one when I look at your total revenue growth, it's been sort of flattish.

Andrew Dora: For the last six quarters here, obviously trailing GDP.

Andrew Dora: But also many other global carriers can you do you think you can get back to GDP type style topline growth and what do you need to see to get there from here.

Andrew Dora: Oh.

Robert Isom: Thanks, Andrew I appreciate that and the answer to that is for sure.

Robert Isom: I'll start with this that we did some damaged ourselves with our sales and distribution strategy.

Robert Isom: You've heard us talk a lot about that I'm really pleased with what I see in terms of recovery of that.

Robert Isom: We grew our.

Robert Isom: Whether thats restoring full content negotiating new deals.

Robert Isom: Enhancing existing deals with our agency partners and also our corporate partners. That's all Underwork and it's taking route and it's showing in terms of our forward bookings.

Robert Isom: As I mentioned.

Robert Isom: Earlier today we.

Robert Isom: We bottomed out at.

Robert Isom: Corporate and agency indirect.

Robert Isom: Sure.

Robert Isom: Compared to historical averages of about 11% down and as we exit <unk>.

Robert Isom: September.

Robert Isom: We know that we've recovered back to about 7% down so I see that that.

Robert Isom: Our progress continuing on top of that I'll speak to the strength of our network and our partnerships and competing just from a product perspective, and then finally I know.

So that will make some progress and being more competitive in terms of our co brand relationship and what that can bring to our business as well. So I've got a lot of confidence in that pleased with the progress.

Robert Isom: Progress that I see so far.

Speaker Change: Got it and on that co Brian standpoint perspective, I guess, there was a press article last months.

Speaker Change: Spoke about potentially consolidating your card program with just city.

Speaker Change: Where the negotiations stand with regards to new economics there.

Speaker Change: At Investor Day, you were talking about maybe timeline by by year end 2024 in terms of potential.

Speaker Change: Potential timeline of getting a deal across the finish line does that still seem reasonable. Thank you.

Speaker Change: Okay. Good thanks for the question that I'm going to hand that over Steve.

Speaker Change: Hey, Thanks, Andrew.

Speaker Change: We.

Speaker Change: Have to really exceptional friends and partners and Citi and Barclays and I wanted to give a shout out I mean, we've worked together to create a really terrific program that I think has.

Speaker Change: Sensational future.

Speaker Change: We think in terms of talking about our progress I'm actually going to give a salute to.

Speaker Change: The Dodgers and dental core importantly, Steve Trent, who actually frame. This question in July.

Speaker Change: In terms of a baseball game and I would say that I'd characterize our progress as the bottom of the seventh inning at this point.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Scott Group of Wolfe Research. Please go ahead Scott.

Scott Group: Hey, Thanks, Good morning, guys. So RASM was down 2% in the third quarter, presumably improved throughout the quarter. The fourth quarter guide down 1% to three I guess it doesn't really imply any incremental improvement any color on why and then maybe any regional color.

Speaker Change: So Scott.

Speaker Change: I'll start.

Speaker Change: First off as we take a look at the fourth fourth quarter I.

Speaker Change: I do see strong demand overall, but it is a quarter in which.

Speaker Change: A strong October and I think a strong December has some noise in it in terms of expected.

Speaker Change: Softness in demand around the election around and around Halloween.

Speaker Change: But as we take a look at.

Speaker Change: How bookings have progress I see that.

Speaker Change: October very strong December very strong and as we look out into 2025.

Speaker Change: Same holds true for what we have on the books for January.

Speaker Change: As well, we've got some capacity growth in the quarter.

Speaker Change: But it's modest and has been reduced considerably.

Speaker Change: And we're going to work hard to make sure we deliver on the forecast that we have.

Speaker Change: <unk>.

Speaker Change: Okay and then just secondly, you made a comment about low single digit capacity growth 25, why do you think that any early thoughts on what that should mean for CASM and then.

Speaker Change: You sound confident about the corporate recovery by the end of 'twenty five what's the revenue opportunity from that.

Speaker Change: Thanks Scott.

Speaker Change: Yeah, we're not going to give.

Calvin guidance for 2025, right now, but as you would expect the largest headwind we faced in 2025.

Speaker Change: The increases in salaries and benefits, resulting from the CBA is that we have reached over the past 18 months. We expect our competitors are going to have very similar CASM pressure, but for us. It's nice to have the certainty and planning also magnifies the importance of all of our efforts to run a lean operation and invest in the right technology to run a more efficient and effective.

Speaker Change: The business, but.

Speaker Change: But that's the main area will be on salaries and benefits there'll be some other cost pressures things like regional growing at a faster rate the mainline, but I feel we have been the best in the business at managing our expenses over the past several years and it will be a focus of ours in 2025 as well.

Speaker Change: And Scott in terms of revenue last quarter, I said that we think that.

Speaker Change: In terms of higher yielding corporate and agency related revenue, where we're missing out about 1 billion and a half.

Speaker Change: Of revenue over a course of the year now we've replaced some of that with with lower yielding.

Speaker Change: Traffic, but our intent is to win the vast majority of that back over the course of 2025 and based on the efforts that we're taking right now.

Speaker Change: I feel confident we'll be able to do that.

Speaker Change: The cyclone, which contracts are established for agencies and incorporate.

Speaker Change: It's done on an annual basis, and sometimes that even takes sometimes those those contracts actually run over the course of a couple of years.

Speaker Change: What we're seeing right now is a lot of reception people want us back.

Speaker Change: I've talked to not only buyers and purchasing team members from from.

Speaker Change: Our corporate and <unk>, but also the Ceos.

Speaker Change: <unk> better for them with another competitor in the mix and so theres a lot of.

Speaker Change: Positive reaction to us getting more competitive offering the services and amenities that are competitive.

Speaker Change: Thank you. Our next question comes from the line of Michael Lindenberg of Deutsche Bank. Please go ahead Michael.

Michael Lindenberg: Hey, good morning, everyone.

Michael Lindenberg: Robert I wanted to touch back on.

Michael Lindenberg: Distribution chart, where you show that sequential improvement I guess.

Michael Lindenberg: Every point is at about $140 million on an annual basis.

Michael Lindenberg: Where are we with the $1 5 billion hole is that still.

Michael Lindenberg: This year. Despite the fact that we are starting to see improvement right now and.

Michael Lindenberg: We are seeing this type of improvement.

It doesn't seem like Youre really incorporating much of it in the fourth quarter given the fact the.

Michael Lindenberg: RASM or excuse me the down 1% to 3% RASM guide similar to what you did in the September quarter.

Speaker Change: Thanks for the question I'll just start with this.

Speaker Change: We've taken a very deliberate approach.

As we've sat down with our agency partners and corporate buyers.

Speaker Change: Seen tremendous progress.

Speaker Change: Set evidenced by.

Speaker Change: Forward bookings, but not a lot of that has showed up in the.

Speaker Change: Third quarter.

Speaker Change: We expect to see more as we progress into the fourth quarter and then acceleration as we move in to 2025 again, we got to give a chance for the contracts.

Speaker Change: Actually be in place changes to be changes to be made and then ultimately im looking for restoration.

Speaker Change: On accelerated basis, as we move into 2025, okay.

Speaker Change: Okay, Great and then just a capacity question I do see that your.

Speaker Change: Your supply is down a bit in some of your international markets like Trans Atlantic and presumably thats being driven by airplanes that are going through a reconfiguration can you just talk about that reconfiguration program and maybe how many wide bodies.

Speaker Change: It will take out.

Speaker Change: As your fleet as you as you.

Speaker Change: Expand your premium offering thanks for taking my questions.

Speaker Change: No thanks for that and in terms of.

Speaker Change: Rick aircrafts.

Speaker Change: <unk> thousand 320.

Speaker Change: 20, Triple seven three hundreds that we have there are due to start their reconfigurations next year.

Speaker Change: Best utilize the aircraft and quite frankly, some of our customers and generate the most revenue. So one of the things <unk> seen is that capacity has been I think brought more into balance and London, Heathrow and that bodes well for us, we're certainly seeing that and stronger London Heathrow yields.

Speaker Change: Trans Atlantic as we move into the fourth quarter overall appears to be.

Speaker Change: A fairly a very solid and so it's more.

Speaker Change: And aircraft deployment issue as we get into 2025 will be able to say more about impact of reconfigurations on our wide body fleet.

Speaker Change: Thank you our next.

Speaker Change: Question comes from the line excuse me. Our next question comes from the line of Jamie Baker of Jpmorgan Securities. Your question. Please Jamie.

Jamie Baker: Hey, good morning, everybody.

Jamie Baker: So if we look at the third quarter non-GAAP earnings were pretty similar to those of last years third quarter, but on fuel.

Ooh 40 cents a gallon lower if we look at the guide for the fourth quarter at the midpoint of EPS Youre, obviously up year on year, but on fuel that <unk>.

Jamie Baker: 70, <unk> flower dips.

Jamie Baker: The point is if we normalize for fuel.

Speaker Change: Our core in the fourth quarter year on year looks like it's doing worse than in the third quarter. What do you think explains that.

Jamie Baker: Hey, Jamie.

Speaker Change: I think as we've always talked about there is a relationship between fuel and revenue.

Speaker Change #100: So we have adjusted capacity the industry has adjusted capacity to the current supply environment. Obviously, a fuel was 70 cents higher we would be producing slightly less capacity than we are today I think the industry would probably be adjusting at the same time. So none of this can be looked at in isolation. You are right that earnings in the fourth quarter relatively flat just up slightly.

Speaker Change #100: At the midpoint.

Speaker Change #100: We expect to do better than that and as we head into 2025, we are looking forward to margin expansion.

Speaker Change #102: And second when we and thanks, Kevin when we think about management priorities. Robert has said that he is spending a lot of time, helping.

Speaker Change #102: Hoping repair corporate relationships and and progress is being made in operations are markedly improve the balance sheet continues to improve there's loyalty kicker coming.

Speaker Change #102: These are all good things.

Speaker Change #103: My question relates to the network I am curious what you think your greatest network deficiencies are and more importantly does it does.

Speaker Change #103: Management have the appetite or is it a priority to address those deficiencies. Thanks in advance.

Speaker Change #104: Thanks, Jamie and look our highest priorities right now are making sure that we make best use of the assets that we have and notably regaining our corporate agency share getting our co brand credit card renegotiated and then competing.

Speaker Change #103: With on product and service, but in regard to the network.

Speaker Change #103: Look we said at Investor day, and I'll underscore it again.

Speaker Change #103: We have a fantastic network it can take customers anywhere they want to get in the world. We have the best set of partnerships in the biggest business and travel destinations around the world we've been aggressive in the past in terms of making sure that we.

Speaker Change #103: Sure up any any deficiencies, most notably we have a relationship with Alaska Airlines out on the West Coast.

Speaker Change #103: Tried to strengthen our position on.

Speaker Change #103: On the east coast with with with EMEA.

Speaker Change #103: And as we take a look at going forward.

Speaker Change #103: We're very focused on making sure our network appeals to customers.

Speaker Change #103: Our leisure basis International and certainly from a business perspective, and as you take a look at what we're doing in New York and Los Angeles and note that.

Speaker Change #103: In New York.

Speaker Change #103: Between Laguardia and JFK.

Speaker Change #103: We have we will be flying as we move into next year.

Speaker Change #103: Just schedule that we've had since since the pandemic I'm really pleased with the product that we're putting in place whether it's the lounges.

Speaker Change #103: 102000, <unk> and ultimately the <unk> that will be flying transcon, the great relationship that we have with VA.

Speaker Change #103: Set up.

Speaker Change #103: The best.

Speaker Change #103: Shuttle to London, Heathrow and the work that we're doing out in the West Coast again with Alaska, our combined position.

Speaker Change #103: Certainly puts us at great strength and even on our own in the La basin airports, we have considerable strength. So it's about knitting. All these things together and are utilizing to the greatest extent.

Speaker Change #103: The.

Speaker Change #103: The greatest benefit for our customers and making sure that we are.

Do our best.

Speaker Change #103: Yield up wherever we can we got a lot of work ahead of us, but that's all upside with the assets that we have today.

Speaker Change #103: Thank you.

Speaker Change #105: Our next question.

Speaker Change #106: Comes from the line of Savi <unk> of Raymond James. Please go ahead savi.

Savi Raymond: Hey, Good morning, I was wondering if you could just kind of follow up on Scott's question earlier.

Speaker Change #108: A little bit more color on the fourth quarter it trend here and you call that noise.

Speaker Change #108: Election, I think.

Speaker Change #108: Not sure if that was announced back in there I'm wondering if you could.

Speaker Change #108: Just help us understand the unit revenue that you provided and what the core trend might be both kind of in the domestic.

Speaker Change #108: Various international markets.

Speaker Change #110: Yes, Savi, what I'll say is we take a look at the fourth quarter overall and I'd say again.

Speaker Change #110: The strength in demand, we're not going to have any trouble filling up our planes.

Speaker Change #111: Do you think that that's a result of.

Speaker Change #111: The supply and demand balance being.

Speaker Change #111: Relatively more in shape I think that that's going to progress as well I think that from a supply perspective.

Speaker Change #111: To see an improvement, but the fourth quarter as a whole strong October some weakness in early parts of November as a result of Halloween and the election not unexpected.

Speaker Change #111: Fourth quarter, we see a lot of strength.

Speaker Change #112: I'm, sorry, and as we move to December so yeah, a lot of strength around the holidays, so a lot of strength over over Thanksgiving as well.

Speaker Change #112: So people that people want to travel and we're very optimistic about how the.

Speaker Change #112: Bookings look for the fourth quarter.

Speaker Change #113: I appreciate that and then just on the I know, it's very early days on the Tony's jointed pipe capacity growth on I appreciate the color there just curious.

Speaker Change #114: Connections or the unit cost headwinds mentioned, maybe a little bit more regional growth that mainline I was curious if you can talk about at high level, how you're thinking about kind of domestic growth versus maybe near international versus international.

Speaker Change #115: Okay. So not a whole lot of color at this point on growth by entity for 2025, but obviously the regional growth will be entirely focused on domestic it just doesn't drive a ton of this ams, but.

Speaker Change #115: We bring back capacity is probably a percent of consolidated capacity or more thats coming out of regional that will largely be on the domestic side.

The rest of the growth I think it will be split relatively evenly maybe a little more international than domestic but we got a letter plans develop a bit.

Speaker Change #116: And Savi just.

Speaker Change #116: Little more color on that coming out of the pandemic, we really focused on restoring our sunbelt hubs to get them to full capacity, you'll see us positioned.

Speaker Change #116: Physician more capacity than the northern northern northern tier hubs regionals are going to give us.

Speaker Change #116: Great flexibility in being able to make sure that we can take customers, where they want to go when they want to go.

Speaker Change #116: Yeah.

Speaker Change #117: Thank you our next question.

Speaker Change #118: It comes from the line of Conor Cunningham Ameliorates Research your question. Please Conor.

Hi, everyone. Thank you maybe following up to Jamie's question.

Speaker Change #118: On the product side.

Speaker Change #118: And to your corporates now pretty rapidly right now.

Speaker Change #119: Imagine you're engaging with regular customers in general, but just have preferences changed at all in terms of onboard experience.

Speaker Change #119: United talking about free Wi Fi of southwest Rolling out their premium experience just curious on how you view.

Speaker Change #119: How Americans product stacks up to the industry at this point. Thank you.

Speaker Change #120: Yes, Thanks, Kevin I'll start with this there is clearly a preference for more premium type services and one of the things Youll note in our results is a premium revenues have risen by 8% quarter over over.

Speaker Change #119: Quarter.

Speaker Change #119: 2023 over the third quarter in 2023.

Speaker Change #119: I think that bodes well for us.

Speaker Change #119: Because it's paid load factor and its yield, but it bodes well for us because youll see over the course of the next two years through 2026 that are premium seating is going to grow by about 20% and that's as a result of the reconfiguration of triple seven three hundreds.

Speaker Change #119: But as well as the introduction of the 707 nines with.

Speaker Change #119: The flagship suites.

Speaker Change #119: XL ours, and then also domestically reconfiguration of our 300, Twenty's and our $3 19.

Speaker Change #119: So there is absolutely a preference from that perspective, I think that that's going to continue we're going to be on.

Speaker Change #119: The right side of the ledger on that in terms of product you mentioned customers want control an inconvenience.

Speaker Change #119: Invested.

Speaker Change #119: An incredible amount in terms of technology will continue to do that to give customers the ability to control their itineraries and then also to be able to help them recover when.

Speaker Change #119: There are any any any type of disruptions as part of that people want to be connected whenever and wherever they fly American was the first to get.

Speaker Change #119: Our.

Speaker Change #119: In Aero body fleet fully equipped with.

Satellite based Wi Fi, we're going to be expanding that for our large regional jet.

Speaker Change #119: Our portfolio as well so it will be the first to have satellite based Wi Fi.

Speaker Change #119: The combined narrow body and regional fleet and I think that we're going to have to take a look at that making sure that we serve customers' needs from that perspective as.

Speaker Change #119: As well, but youll see us.

Speaker Change #119: Invest in our product.

Speaker Change #119: We will have <unk>.

Speaker Change #119: <unk> suites.

Speaker Change #119: In terms of new deliveries on the <unk> and the.

Speaker Change #119: 707 nines those will have seatback video those will also have international satellite Wi Fi as well.

Speaker Change #119: And then from a services perspective on the ground same thing.

Speaker Change #119: We're the first to really up the game in terms of lounge experience with flagship dining and I'm really proud of the facility that we have in New York with.

Speaker Change #119: Three lounge options.

Speaker Change #119: Really set a standard youll see us next year.

Speaker Change #119: Invest and rollout new lounge experiences in Philadelphia, and planning upgrades and other places throughout the system as well so as we take a look at in the future I think that customers are looking to.

Speaker Change #119: Having a more premium experience, we're going to accommodate that they want more control.

Speaker Change #119: We're gonna extra extra that will engage them on that front and overall I think that the game plan for American is going to be very beneficial and unlocking a lot of value from a revenue perspective.

Speaker Change #121: Super detailed appreciate that Robert and then.

Speaker Change #122: Youre talking about renegotiation with corporates and engaging with them again.

Speaker Change #123: Is that in line with your expectations the exit rate.

Speaker Change #124: And then what.

Speaker Change #125: That caught me by surprise I think was just you dropped the word competitive as you renegotiated the contract does that mean that the revenue recapture that youre seeing is coming in at a lower margin.

Speaker Change #125: Going forward. Thank you.

Speaker Change #126: I'll start on this and Steve can Ken.

Speaker Change #127: First off I'll, just restate that the reaction I have received from the countless Ceos.

Speaker Change #127: And professionals at agencies and corporate buying groups has been thank goodness you're back.

Speaker Change #128: We want to engage we want to engage in a way that is sustainable and profitable over the long run. So I've been very very pleased with the reception Steve you want to give some more detail, yes, sure maybe more generally about the third quarter, because theres been a couple of questions.

Speaker Change #129: Characterizes kind of why is it taking so long, but when we when I think about the last 90 days, we had a handful of objectives I think that we're in.

Steve: Immediate and needed to be focused on first we had to stabilize the ship and refocused the team that we've had a very significant disruption and I'm really pleased with the progress that we made on that second we needed to rebuild our foundation and our infrastructure for being able to participate in the traditional sales.

Steve: In distribution channels that have largely been dismantled.

Steve: And we need to build that in a way that it would be lasting and that.

Steve: Our partners would trust. The fact that we were back in the game and I think we've made it really we've made really significant progress on that.

Steve: And I think most importantly, we needed to re establish and start re developing our relationships that meant listening and listening to a lot of people.

Steve: And ultimately you're getting passed.

Steve: A stage that was really anger and getting.

Steve: Re acquainting ourselves with these people.

Steve: <unk>.

Steve: Regaining their trust in a way that was really important.

Steve: That meant.

Steve: Talking to people at negotiating agreements on a kind of counter party by counterparty basis.

Speaker Change #131: And it just meant engagement and as Robert had said a couple of times I mean, that's been really positive we've made a lot of progress on that.

Steve: And we've heard over and over and over again that the.

Steve: The agencies the TMC are corporate customers that their world is better with three airlines competing instead of just two.

Steve: Fourth we wanted to shift some share we talked about that and we said that we would measure ourselves by Sharon.

Speaker Change #132: We accomplish that as Robert has mentioned a couple of times.

Speaker Change #132: Fifth we wanted to outperform guidance, we hadn't done that in a long time and.

Speaker Change #132: And we did that this time and I think everybody is really proud of that effort.

Speaker Change #132: And then finally, we wanted to we wanted that outperformance to be meaningful and beating that we wanted to do it in a way that we didn't lose additional ground to our principal competitors.

Speaker Change #132: We accomplished that in the third quarter as well.

I'm not going to say that we're done or or anything nearly that there's tons of work to be done, but I would like to think that thats, a solid start and I think it has the team and Robert and Devin and I really excited about what we can accomplish in the next 90 days in 2025.

Speaker Change #132: Yeah.

Speaker Change #133: Thank you art.

Speaker Change #134: Our next question.

Speaker Change #135: Comes from the line of Duane Fenech worth of Evercore ISI. Please go ahead Duane.

Duane Fenech: Hey, good morning. Thanks.

Duane Fenech: Just a couple.

Duane Fenech: On the fleet delays I'm, just wondering how impactful.

Duane Fenech: These are to your 2025 planning if you if you have any sense for what your 2025 growth.

Duane Fenech: Might have looked like absent any fleet delays.

Duane Fenech: Hey, Duane.

Duane Fenech: Yes capacity for 2025 is being impacted by these delays like we're fortunate to have a fleet that can run at pretty strong utilization you saw that this year were versus the start of the year, we probably took delivery of 15.

Duane Fenech: <unk> 15, or 20, less airplanes or something like that and what we expected and we still met our capacity guidance for the year next year, we'd probably be a little bit higher in terms of capacity if it weren't for our expected delays that being said, we can push utilization a little bit we still think we could if we wanted to and it's a competitive or demand environment dictated that we could grow.

Duane Fenech: Head of our low single digit guide.

Duane Fenech: But it has impacted us to some extent on the utilization side for next year, you'll mostly see it with regional aircraft or a region, where utilization will be up pretty materially as we have gotten back to pulse affordability throughout this year mainline utilization maybe.

Duane Fenech: Maybe up slightly but it won't be as material as what we've seen on the regional side.

Speaker Change #138: Thanks, Thanks for that and then.

Speaker Change #139: In terms of corporate share recovery I don't know if you're willing to speak to this but where do you think the old strategy hurt you. The most geographically was the was the share loss really even across your network.

Speaker Change #138: In places like DFW, and Charlotte and Steve maybe Youre Dodger shout out.

Speaker Change #140: It gives us a clue.

Speaker Change #140: To read too much into it but.

Speaker Change #140: Where do you think this pivot will help you most.

Speaker Change #141: Clearly in the big cities that are the most competed.

Speaker Change #141: New York La Chicago.

Speaker Change #141: Sure.

Speaker Change #141: We definitely were hurt disproportionately in places, where we're less strong.

Speaker Change #141: So.

Speaker Change #141: And that's what we're seeing.

Speaker Change #141: As we see this start to come back that's where it's starting to come back.

Speaker Change #142: Thank you.

Speaker Change #143: Our next question.

Speaker Change #144: Comes from the line of Stephen Trent of Citi.

Speaker Change #143: Your line is open.

Speaker Change #146: Just a bit of a follow up when I think about maintenance I know you guys have relative.

Stephen Trent: A relatively young fleet, but have you thought.

Stephen Trent: About maybe other strategies engine module swaps or.

Stephen Trent: Using drones or are these kind of things when you think about your aircraft maintenance strategy. Thank you.

Stephen Trent: So.

I'll start.

Stephen Trent: And just just first with this.

Stephen Trent: I think.

Stephen Trent: As we move out into 2025 and beyond.

Stephen Trent: I think that the industry is going to continue to have a shortfall of resources.

Stephen Trent: American is very well protected and resource in an environment, where the supply chain.

Stephen Trent: Struggles, especially around.

Stephen Trent: Maintenance related items, we have the largest group of.

Stephen Trent: Mechanics, all represented by the TWU Iam Association of any carrier.

Stephen Trent: Have the world's largest commercial maintenance overhaul based in Tulsa, Oklahoma.

Stephen Trent: And all of that I know right now from what I see that we're outperforming others in the industry whether that be other airlines and also.

Stephen Trent: MRO is I know that because of the kind of the turn times that we produce on our CFM CFM 56 engine. So I think we're really well positioned in a world where there's constrained resources on top of that and I'll, Let David C. Moore, our chief operating operations Officer speak I know as well that we're bringing to bear there.

Stephen Trent: First in terms of technology.

Stephen Trent: To not only maintenance, but all aspects of the operation.

Stephen Trent: Robert Thank you the team is exploring all of those and Thats new technology, that's out there, but we're looking at whether it's drones are using.

Stephen Trent: By definition.

Stephen Trent: Cameras to be able to pinpoint.

Stephen Trent: And David I'd, just I'd just add this technology is going to be a key.

Stephen Trent: Item for us as we look forward.

Stephen Trent: When we talk about aircraft utilization.

Stephen Trent: Identifying any type of.

Stephen Trent: Improvement.

Stephen Trent: Right.

Stephen Trent: That I think we can recover better than any other airline.

Stephen Trent: Using that technology and the tools that David mentioned in terms of our training and one of the things that you'll see is that through.

Stephen Trent: Deployment of.

Stephen Trent: I basically ipads.

Stephen Trent: Throughout the system, whether that be for our pilots and flight attendants and ultimately for our mechanics out and align their jobs becomes so much easier so.

Stephen Trent: This is something that we're going to excel in we're all ready really strong and it's going to be a differentiator for the company.

Very helpful. Thank you very much strengths and just a quick follow up as well all the changes youre, making with with corporate and what have you.

Speaker Change #147: Have you contemplated making any adjustments.

Speaker Change #148: Any other adjustments in your frequent Flyer program for example, some of your competitors have.

Speaker Change #148: Mileage programs, whether they are points don't expire thank you.

Speaker Change #149: So from a loyalty perspective look we were really proud of.

Speaker Change #148: The advantage program overall.

Speaker Change #148: Constantly looking at ways to better engage.

Speaker Change #148: Our customers now.

Speaker Change #148: Not only from a loyalty perspective, but just also from a value perspective.

Speaker Change #148: And.

Speaker Change #148: While there may be some carriers that are doing something different I do know one thing that.

Speaker Change #148: You take a look at any type of assessment of the value of a mile on American airlines versus anyone else Youll see that we.

Speaker Change #148: Absolutely.

Speaker Change #148: Generate more value for our customers.

Speaker Change #150: Thank you.

Speaker Change #151: Our next question.

Speaker Change #152: Comes from the line.

Speaker Change #153: Tom Fitzgerald of TD Cohen.

Speaker Change #154: Your line is open Tom.

Tom Fitzgerald: Thanks, so much for the time everyone.

Tom Fitzgerald: Thinking about the Wi Fi.

Tom Fitzgerald: That.

Speaker Change #155: Free Wi Fi starts to become table stakes across the industry or are you concerned at all about the revenue headwind that could prove that.

Speaker Change #156: Tom Thanks for the question no I'm not concerned because first off.

Speaker Change #156: You need to have high speed Wi Fi to be able to offer it.

Speaker Change #156: At any level to give customers confidence that they'll be able to access it and use it we're going to be expanding coverage for our Wi Fi as I mentioned, our regional fleet will have it along with our narrow body fleet and we're going to be really competitive we're going to make sure that our customers are taken care of.

Speaker Change #156: And what they want, especially our most loyal customers, we're going to make sure that they're protected and taken care of we already offer a number of opportunities for our customers to engage with us on a fee basis and also on a free basis with some partners.

Speaker Change #156: Keep an eye on that and make sure that we don't fall.

Speaker Change #156: Short even for a second thanks.

Speaker Change #157: That's really helpful. Thanks, and then just quickly on the with the Capex some of that shifting to the right would you look to accelerate any debt paydown. Thanks again for the time.

Speaker Change #156: Okay.

Speaker Change #158: That's a good question and fair question right now, we feel pretty good about the outlook.

Speaker Change #159: With what we're doing on total debt reduction we stay consistent with our goal of $15 billion of total debt reduction right. Now we have two maturities in 2025. It will have some options around whether we do a refinancing on those maturities or.

Speaker Change #159: We pay down and that will be dependent on.

Speaker Change #159: Where we're at with free cash flow and our liquidity outlook.

Speaker Change #159: For now we are feeling really good about the $15 billion total debt reduction goal and yes, we may look to advance that or further.

Speaker Change #159: Reduce debt dependent on what happens throughout 2025.

Speaker Change #159: Yeah.

Speaker Change #160: Thank you.

Speaker Change #161: Our next question.

Speaker Change #162: Comes from the line of Daniel Mckenzie of Seaport Global. Please go ahead Daniel.

Daniel Mckenzie: Oh, Hey, thanks, good morning, guys.

Speaker Change #163: Going back to technology being a key item in your comment on investments.

Daniel Mckenzie: I understand that can drive improved maintenance revenue.

Speaker Change #164: So I'll start and Steve you can you can add onto this as well I'll just start with with Us Dan.

Speaker Change #164: First off we've invested $1 billion $12 billion in terms of technology over the last.

Speaker Change #164: And that kind of investment is going to continue as part of.

Speaker Change #164: Where are we.

Speaker Change #164: Focus our efforts and whether it's in operations, which David covered to a certain extent or our operations control, which is definitely something that is.

Speaker Change #164: <unk> is an area of focus.

Speaker Change #164: Attention is on our customers, making sure that where it's easy to do business as possible that they can afford themselves of everything that they want.

Speaker Change #164: In terms of.

Speaker Change #164: Services and amenities and that they have that control for that so you'll continue to see us.

Speaker Change #164: Best in things that make.

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