Q1 2025 American Airlines Group Inc Earnings Call
Speaker Change: Thank you for standing by, and welcome to American Airlines Group's first quarter, 2025 Earnings Conference Call. At this time, all participants aren't able to listen only mode. After the speaker presentation, there will be a question and answer session.
Speaker Change: To ask a question during the session, you will need to press star 11 on your telephone.
Speaker Change: To remove yourself from the queue, you may press star, one, one, gain.
Speaker Change: I would now like to hand the call over to Abriell Jackson, Managing Director of Investor Relations. Please, go ahead.
Abriel Jackson: Thank you, Matisse. Good morning, and welcome to the American Airlines Group first quarter, 2025, Earnings Conference Call. On the call with prepared remarks, we have our CEO , Robert Isom, and our CFO , Devon May.
Speaker Change: In addition to our Vice Chair, Steve Johnson, we have a number of our senior executives in the room this morning for the Q&A session.
Devon May: Robert was called to call with an overview of our performance. Devon will follow his details on the first quarter in addition to outlining our operating plans and outlook going forward.
Devon May: After our prepared remarks, we will open the call for analyst questions, followed by questions from the media. To get in as many questions as possible, please limit yourself to one question and one follow-up.
Devon May: These statements represent our predictions and expectations of future events that numerous risk and uncertainties could cause actual results to differ from those projected.
Devon May: Information about some of these risks and uncertainties can be found in our earnings press release that was issued this morning, as well as our Form 10K for the year ended December 31, 2024.
Devon May: A webcast at this call will also be archived on our website.
Devon May: The information we are giving you on the call this morning is asked of today's date, and we undertake no obligation to update the information subsequently.
Devon May: Thank you for your interest and for joining us this morning. With that, I'll turn the call over to our CEO Robert Isom.
Devon May: Good morning, everyone. It goes without saying that we're in a challenging economic environment which has had a significant impact on the industry.
The industry exited the fourth quarter with positive momentum. Let's get started.
But this quickly shifted during the first quarter.
Devon May: The economic uncertainty in the market has pressured demand and impacted Americans' first quarter results and second quarter outlook.
Given this macro-environment, we're withdrawing our full-year outlook.
Devon May: That said, if current demand trends continue, we expect to deliver a profitable year and produce positive free cash flow.
Devon May: At American, we have the foundational strength, resilience, team, and financial and operating flexibility to navigate the current environment.
Devon May: The work we have done the past several years has prepared us for times like these.
Devon May: We completed our fleet renewal in a very different economic environment with lower aircraft costs, lower lease and interest rates, and during a time of OEM and supply chain stability.
Devon May: As a result, we have low aircraft cap-X requirements for the remainder of the decade.
Devon May: We continue to employ our best in class cost management to make the airline more efficient.
Devon May: Through our efforts to re-engineer the business, we now expect more than $750 million of cumulative cost savings as we exit 2025.
Devon May: We've utilized our free cash flow to strengthen the balance sheets, and at the end of the first quarter we had our lowest net debt level since the end of 2015, while simultaneously taking action to smooth our debt maturity obligations going forward.
Devon May: This foundation allows us to focus on our 2025 priorities of running a reliable operation as we reestablish connectivity throughout our network and continue to find ways to run a more efficient airline.
Devon May: We're taking action to deliver on our revenue potential by enhancing our partnership with City.
Devon May: Growing our Advantage Loyalty program, progressing in our sales and distribution indirect channel recovery, and renewing our focus on customer experience to provide the best product and service for everyone who flies with American.
Devon May: As we move forward, we remain committed to delivering on our long-term target.
Devon May: Growing margins, generating sustainable free cash flow, and further strengthening our balance sheet.
Thank you for tuning in.
Now onto our first quarter performance.
Devon May: First quarter unit revenue was up .7% year over year, which continues to lead the industry despite more exposure to a challenging domestic environment.
Devon May: We estimate the impact of American Eagle Fight 5342 reduced first quarter revenue by approximately $200 million.
Devon May: Long Hall International Passage Erasm, continued to lead the way in the first quarter.
Devon May: Atlantic Passendor Rasm was up 10.5% year over year, and Pacific Passendor Rasm was up 4.9% on 24.1% more capacity.
primarily driven by strength in Japan. [inaudible]
Devon May: Short haul Latin passenger rasm increased year-over-year for the first time in more than a year and remains one of the most profitable regions on an absolute basis.
Devon May: We continue to see strong demand for international travel from the U.S.
Devon May: Domestic passenger rasm was down .7% year-over-year in the quarter as US consumer discretionary spending and especially consumer spending on air travel decelerated throughout the quarter.
Devon May: Performance in our premium and loyalty revenues continued to show strength year over year.
Devon May: Premium revenue increased 3% year-over-year in the first quarter on 0.3% lower capacity.
Devon May: Our premium cabin rasmure over your outperformed main cabin rasm by four points in domestic and eight points in international. No.
Devon May: Paid load factor in our premium cabins remained historically high and was up 2.9 points year-over-year.
Devon May: Loyalty revenues were up 5% year over year with spending on our co-branded credit cards up 8% in the quarter.
Devon May: We've begun laying the foundation for our expanded co-branded credit card partnership with City, which is set to begin in 2026 and we remain on track to achieve the long-term growth targets we outlined last year.
Devon May: Most importantly, customers continue to recognize the value of our loyalty program with advantage enrollments increasing 6% year over year.
Advantage members are responsible for 76% of premium cabin revenue.
Devon May: American is proud to have an industry leading travel rewards program that is frequently recognized for providing the best value for its members.
Devon May: Despite the headwinds in the economy and lower capacity, managed business revenue was up 8% year over year in the first quarter.
Devon May: We remain encouraged by the feedback we're receiving from corporate customers as we continue to engage with them to understand how best to meet their needs.
Devon May: Momentum in recovering revenue from indirect channels continued in the first quarter. We hit our target of reducing the gap versus our historical share to 7% in the first quarter. And we forecast to gain back another two points in the second quarter. [inaudible]
Devon May: We remain on track to restore our revenue share from indirect channels to historical levels as we exit this year, despite the current macroeconomic uncertainty
Devon May: We started the year with a conservative growth plan and we will continue to be mindful of our capacity deployment.
Devon May: The demand and the competitive environments will continue to serve as the guidepost for our future capacity plans.
who remain nimble and take action as conditions warrant.
Devon May: And we have many levers that are disposal, such as reducing off peak flying, or if circumstances require returning least aircraft, retiring aircraft, and deferring aircraft deliveries to efficiently reduce capacity without jeopardizing the quality of our core network.
Devon May: We're positioning American for sustained long-term success and a big part of that is transforming our customers experience and engagement with us.
Devon May: We've established a new customer experience organization, a centralized cohesive team that sits at the intersection of our commercial and operations organizations.
Devon May: This team will advocate on behalf of customers, leading the strategy and implementation of initiatives to improve every part of the customer journey, from bookings to the airport, to in-flight experience customer feedback.
Devon May: last week we announced advantage members will receive complimentary high-speed satellite Wi-Fi beginning in January 2026 thanks to a new sponsorship with AT&T.
Devon May: We're excited to be able to offer free high-speed satellite Wi-Fi on more aircraft than any other carrier, and it's a great way to demonstrate that we have renewed our focus on the customer experience.
Devon May: American continues to have the youngest fleet of the US network carriers.
Devon May: We're excited to debut our new state-of-the-art flagship sweet seat on our first new Boeing 787-9 and we look forward to the roll-out of this product on our new Airbus A321 XLR aircraft.
Devon May: These deliveries, along with the planned refresh of existing seats, are expected to grow Americans as lifelike and premium economy seating by approximately 50% by the end of the decade.
Devon May: Additionally, American has led the way in introducing premium lounges and offers more premium lounges than any other US network carrier.
Devon May: We're committed to reinvigorating the customer experience throughout various touch points of the travel journey, and we're on track to open our newest flagship lounge in Philadelphia in May.
Devon May: This lounge will be our ninth premium lounge across the system with more to come.
Devon May: Finally, we recently announced several changes to improve our boarding process starting next month, and just this week we introduced a new redesign mobile app to further enhance customer interaction and self service options.
Devon May: Turning now to our operation. During the first quarter, the American Airlines team demonstrated our resilience and ability to quickly recover from irregular operations.
Devon May: We continue to make investments to drive further enhancements to our operating reliability.
Devon May: Our first quarter operation was impacted by California wildfires, increased winter weather in our sun belt hubs, and the tragic accident of flight 53-42 on January 29th.
Devon May: Before moving on, I want to take a moment to acknowledge the tragedy and pay tribute to the lives lost in the accident.
Devon May: The role and responsibilities of the office will evolve over time, but it will always be focused on ensuring we live out our purpose of caring for people on life's journey.
Devon May: Thank you to our team members who helped in the immediate response to the accident, those who kept the operation running while caring for our customers, and to our care team members who supported the families.
Devon May: We continue to work closely with the U.S. government, and we're encouraged by the collective commitment to make the U.S. aviation system even safer going forward.
Devon May: Now I'll turn the call over to Devon to share more about our first quarter financial results and second quarter outlook.
Thank you Robert.
Devon May: This morning, American reported a first quarter gap net loss of $473 million. Excluding net special items, we reported a first quarter net loss $386 million, for an adjusted loss of $0.59 for diluted share.
Devon May: First quarter unit cost, excluding fuel and net special items was up 7.8% year-over-year .
Devon May: We are committed to running the airline as efficiently as possible while enhancing the customer experience.
Devon May: Through best-in-class workforce management, efficient asset utilization, and procurement transformation, we now expect to achieve approximately $250 million of cost savings in 2025, on top of the $500 million achieved last year.
Devon May: We also expect an additional $100 million of working capital cash release, bringing our total improvement in working capital to approximately $550 million over the past three years.
Devon May: We continue to see improvements in the productivity of our team and expect the main line full-time employee accounts to stay approximately flat relative to 2024.
Devon May: With regard to our fleet, we expect to take delivery of 40 to 50 new aircraft this year.
Devon May: Based on our current expectations for new deliveries, our 2025 aircraft CAPEX, which also includes used aircraft purchases, spare engines, and net PDPs, is expected to be between two and two and a half billion dollars.
Devon May: and our total capex is expected to be between three and three and a half billion dollars.
Devon May: We ended the first quarter with $10.8 billion of total available liquidity, and we produced free cash flow of $1.7 billion in the quarter.
Devon May: During the quarter, we strategically reprised our $2.3 billion advantage-backed term law.
Devon May: Our balance sheet is stronger than it has been in nearly a decade, and we remain committed to reducing our total debt to less than $35 billion by year end of 2027.
Devon May: For the second quarter of 2025, we expect capacity to be up to 4% year-over-year as we continue to build back our Northern hubs.
Devon May: We remain focused on deploying profitable capacity and being nimble in response to the demand and competitive environment.
Devon May: We expect second quarter revenue to be down 2% to up 1% year-over-year as we anticipate softness in the domestic main cabin to continue.
Devon May: To partially offset this, we expect long haul international and premium bookings to outperform year-to-year and anticipate additional progress in recovering revenue through our indirect channels.
Devon May: Second quarter, Non-Fuel Unicost is expected to be up 3-5% year-over-year, which is in line with our expectations to start the year.
Devon May: While these collective bargaining agreements have resulted in a meaningful step up in labor costs, we are pleased that all of our largest work groups enjoy contracts that are in line with industry leading agreements and that we have labor cost certainty through 2027.
Devon May: Based on our current demand assumptions and fuel price forecast, we expect to produce second quarter earnings of approximately 50 cents to $1 per deluded share. I'll now turn the call back to Robert for closing remarks.
Robert Isom: Thank you, Devon. The travel industry is a critical engine for the U.S. economy generating $1.3 trillion in direct spending in the U.S. in supporting one in every 11 U.S. jobs.
Robert Isom: With increased global travel to the U.S., comes increased spending and investment in economic growth.
Robert Isom: Airlines are a big part of that equation and American is proud to be the largest employer of US workers among them.
For more information visit www.FEMA.gov
Robert Isom: Anything that spurs demand for travel, both domestically and abroad, is something we will support.
Robert Isom: This starts with making America a welcoming destination for international travelers, especially in advance of major events like FIFA World Cup 26,
and later the 2028 Olympic Games in Los Angeles.
Robert Isom: This means expanding visa-free travel, lowering visa processing times, and expediting the deployment of new technologies to make travel more seamless and secure.
Robert Isom: And of course, ensuring the growth and long-term health of the travel industry in the US will require us to address critical infrastructure issues, the most pressing of which is ATC modernization.
Robert Isom: American has committed to working with the administration, regulators in the rest of the industry to meet each of these challenges.
Robert Isom: We remain focused on delivering on our commitment and producing results for the airline and for our shareholders.
Robert Isom: Operator, you may now open the line for Analyst Questions.
Thank you.
Speaker Change: As a reminder, to ask a question, you will need to press Star 11 on your telephone. To remove yourself from the queue, you may press Star 11 again. To allow everyone the opportunity to participate, you will be limited to one question and one follow-up. To remove yourself from the queue, you will be limited to one question and one follow-up.
Please stand by while we compile the Q and A roster.
Speaker Change: Hey, good morning guys. Robert, so I guess the first question I have for you, the earnings release and materials didn't make much mention around sort of capacity moderation given the weakness that we're seeing in demand. Can you talk about kind of how you're thinking about
Speaker Change: sizing the network as we get through the second half of the year. I mean, clearly with the financial leverage in the business. I'm sure this is something you guys are looking at. I'd just like to hear from you kind of what you're thinking about on the capacity front as we look at 2-H.
Thanks, David. Appreciate your question.
Speaker Change: What we've done is obviously pulled our guidance. We more or less have our capacity plan set for the summer. We plan on flying that, you saw in our second quarter guide, two to four percent growth. As we look beyond that, there's a lot of uncertainty.
Speaker Change: Our view as we go forward is we're going to be nimble and quick to react, size demand, size capacity, two demand.
Speaker Change: I'll tell you right now, we have a negative bias to all capacity as we go forward. We'll know more as time develops in the next several weeks, month, and we'll have more to talk about on that on future earnings calls.
Speaker Change: All right, maybe just as a follow-up, as you think about the corporate sort of share recovery, is that coming in at the yields you would have expected to be coming in or is there a little bit of re-investment required in terms of recapturing some of that the business share?
Speaker Change: Yeah, thanks for the question. This is Steve. It's coming in just as we expected and as Robert said in his opening remarks, we're on track to recover share by the end of the year.
Speaker Change: Thank you. Our next question comes from the line of Savi, of Raymond James. Please go ahead, Savi.
Sabi: Thank you. Good morning, everyone. I know you mentioned, you know, if it sounds like in two, two, you're expecting kind of international and premium to continue leading the way, but I was curious if you can provide a little bit more color.
Speaker Change: across the four entities on how you're, you know, what's in guidance in terms of performance there.
Speaker Change: Sure, thanks, Alex. It's across the entities. We're seeing strength through the summer, really in each one. Obviously with the uncertainty and just the booking curve visibility on the summer's a little unclear right now, but we're seeing really, you know, very good strength in our Heathrow and European operation, strength in the North Pacific, strength in the South Pacific, you know, South America, South America, South America, South America,
Speaker Change: America, but it is doing pretty well in Argentina is kind of the star of the show down there right now. And I'd also, you know, just don't want to.
Speaker Change: finished the answer without mentioning that you know our we're still continue we have a very significant international operation in short haul in the Caribbean, Mexico, Central America and that's performing pretty well. [inaudible]
Speaker Change: I appreciate that and if I could on the domestic side are you expecting much of a dissolution or you know what's the trend into 2Q there? [inaudible]
Speaker Change: Domestically, we remain strong as we described in the opening remarks, our premium.
Speaker Change: in the demand that books through our indirect channels, which is, you know, I think we believe is mostly our most price sensitive customers, our customers for whom travel is most discretionary, and, you know, that's where the issue is.
Speaker Change: You know, we'd like to think that that's demand that's not been lost but demand that's on the sidelines waiting to understand which direction the economy is going to go but nevertheless at the moment that we're seeing weakness in those in those cohorts.
Speaker Change: Thank you. Our next question comes from the line of the Scott Group of Wolf Research. Please go ahead, Scott.
Speaker Change: Staying, it sounds like international is positive, you know, correct me if I'm wrong, like, are we think is this business down, is this a high down, a high single digit kind of rasm right now on this more domestic main cabin part of the business. [inaudible]
and Scott Long. Thank you.
Speaker Change: Well, domestic main cabin is weak and that's what's driving. I think the overall demand numbers that you're seeing and the weakness in the reports. Right, I think I'd say mid to high single digit weakness in those groups particularly over the course of the summer is what we're looking at. [inaudible]
Okay, and then, I guess. [inaudible]
Are we seeing any signs of that? [inaudible]
Speaker Change: Stabilize, or is it continuing to get worse? And then maybe just like bigger picture, you know, a year ago in Q2, you guys, you know, underperformed on Rasm, and we heard about while we lost a lot of corporate, we're now getting the corporate back. Why aren't we seeing the Rasm benefit of that, at least relative to some of the others? [inaudible]
Speaker Change: Scott, let me start with this, which is hey look, there's a tremendous amount of uncertainty. [inaudible]
Speaker Change: in the environment. When we take a look at the fourth quarter, tremendous amount of momentum, you go into the first quarter, January kind of came in, where we had anticipated February to look kind of solid, but really march and then continue into April , you know, change considerably.
Speaker Change: So we're cautious about what we're looking at in terms of forecast for second quarter because there is so much uncertainty and it's why we pulled our guide beyond that.
Speaker Change: We just don't have a lot of clarity what goes beyond that and even as we take a look into the summer what we know right now or tell you the best what we know and you know we're going to have to see how things play out.
Speaker Change: Thank you. Our next question comes from the line of Conor Cunningham of Melius Research. Please go ahead Conor.
Conor Cunningham: Hi everyone, thank you. Just going back to the U.S. domestic market, I realize this is a short-term question and I hate to ask it, but
Conor Cunningham: Can you talk about how you've changed your revenue management systems? Are you doing what Delta and United are doing essentially in opening up basic economy earlier? And the question the reason why I asked that is like
Conor Cunningham: The industry in general has a lot more seats to sell in June versus April . So are you seeing incremental discounting into a month like that relative to the month of April in general? Thank you.
Conor Cunningham: Our main cabin demand, significant weakness among our most discretionary travelers. So our inventory systems and our pricing is set up to accommodate that to capture all of the demand that is available under the existing circumstances.
Conor Cunningham: and obviously those are levers that we can pull and tweak and manage very carefully on a real time basis. We're monitoring the system, the situation very carefully, make changes every day, but I think right now our setup is where it needs to be. [inaudible]
Bye-bye.
Conor Cunningham: Okay, and then, you know, you know, it's been a lot of time on their call talking about share shift in Chicago and, you know, I'm just trying to understand from your corporate travel expectation as you exit this year, like can you talk about the importance of rebuilding New York?
Conor Cunningham: in Chicago in general, and how that correlates to this, getting back the closure you lost from the distribution changes in general. Thank you.
Conor Cunningham: Sure, a big complicated question, but let me try to unpack it. First, if United is gaining share in Chicago, they're gaining it from somebody other than us. So let's start there. But, and might as well just stick with Chicago. I mean, it's a huge market. It's a huge business market. It's, you know, our third largest hub. [inaudible]
Conor Cunningham: to really keep part of our network. It has been profitable in the past, even as a shared hub.
Conor Cunningham: and we've been part of Chicago for 99 years. [inaudible]
Conor Cunningham: We have a really loyal customer base there. We have a significant advantage penetration, significant co-brand penetration. We've received a really positive reception from our corporate clients as we've pivoted on sales and distribution. Chicago is really important to them and our presence there is really important to our business with them.
Conor Cunningham: Geographically, Chicago's important. It's how we take care of and connect to and provide service to our customers in the upper of Midwest in the Great Lakes region.
Conor Cunningham: It's how we connect passengers across the northern tier of the United States. And I can also say that so far we have increased our share in Chicago and the overall performance is, I think, going exactly in accordance with our plans.
Weat,
Conor Cunningham: In New York, we have a large customer and large and loyal customer base, significant advantage penetration, significant co-brand penetration, and we're...
Conor Cunningham: We're excited about the evolving position that we're creating in New York. We're going to be the largest, I think, operation that we've had in history. We've optimized it. We think for our New York customers, we've optimized it for our hubs and spokes, and we've optimized it to maximize the halo effect that New York has.
Conor Cunningham: At JFK, we've created a really competitive one-world hub at T-8 at the airport there. And together with LaGuardia, we and together with our JB partners, we now serve 100 markets out of New York. We have a really significant franchise in the transcontinental market, really significant franchise in London, Heathrow, the biggest travel market in the world, I think.
Conor Cunningham: and we operate at a two really great facilities in New York with terrific lounge products, terrific retail. Indeed we're imagining the retail at JFK, and I'm told there's gonna be 60 new stores and restaurants there as that work is completed. We're going to have a look at some of the new stores that we're going to have a look at right now.
Conor Cunningham: So we're evolving in New York, we're adapting in New York, we're obviously constrained in New York by slots but we're I think really happy with the position we have there.
Speaker Change: Thank you. Our next question comes from the line of Jamie Baker, of JP Morgan Securities. Please go ahead, Jamie.
Jamie Baker: operating cash flow deteriorates from here. Which bucket or bucket plural of collateral would you consider easiest to tap given where market yields are right now?
There were all of this food. [inaudible]
Speaker Change: Start by sand, I really like the position we're in. We ended the first quarter with $10.8 billion of liquidity. We have made a ton of progress on the balance sheet. We reduced total debt by $15 billion from peak levels back in mid-2021.
We have...
Speaker Change: $10 billion is what it comes with assets, we have $13 billion of first-lane capacity.
Speaker Change: We have really high quality first thing capacity. It's out there as well, whether it's, you know, slot gates, routes, or advantage back. We feel really good about where we're at right now and we'll see what we end up doing with it if we do really get into a downside scenario, but we're in a great position. [inaudible]
Speaker Change: Okay, and then following on Conor's question, and it wouldn't be an American earnings call, I suppose if I didn't ask about one of your ups.
Speaker Change: But looking at Chicago, it seems that a pretty material portion of the capacity restoration is really early in the morning or pretty late at night.
Speaker Change: Can you comment on how Rasm, you know, sort of at the edges of the workday, however you define that, compares to that of, I don't know, daylight hours for lack of a better term, although I suppose that's not a good term for the summer, but you get the idea.
Banks,
Speaker Change: and so we've added banks at the beginning of the day and the end of the day. Obviously those are going to be weaker than in the heart of the day, but it's cheaper to add those by just improving your asset utilization. Also, it's important to know that the first flight of the day and the last flight of the day is really important. And so as we think about where we want to end up in Chicago, that's a big step. And ultimately, we expect that those
Speaker Change: Suspects will improve performance as we have the opportunity to fly them and have our customers get more, remember American and hand.
Speaker Change: Those will be better. Really important part of our local traffic offering for our Chicagoans is the banks of the first part of the day and the banks of the last part of the day. So yeah, that's what we had always planned and what you would have expected to see.
Thank you. Bye.
Speaker Change: Thank you. Our next question comes from the line of Duane Pfennigwerth of Evercore ISI. Your line is open Duane.
Duane Sennigworth: Hey, thanks. I appreciate the time. Just on the corporate share recapture.
Speaker Change: It's hard to find that in your guidance and understand it's a dynamic backdrop for sure, but, you know, what would be offsetting this share or capture if you're winning back corporates?
Duane Sennigworth: from a margin and from a, I guess, implied, you know, rasm perspective. Thank you.
Speaker Change: Thanks, I think that you're not seeing it because it's overwhelmed by the weakness in our main cabin demand.
Speaker Change: It's Steve, I did that, our government business is falling off considerably as well, so that would add to it as well.
Speaker Change: Okay, and then apologies, I really don't want to ask another Chicago question, but I'll venture down the path. Again, it might be hard to parse in this backdrop.
Speaker Change: But can you contrast, presumably some of this was about taking pressure off of a market like Charlotte versus the investment that you're making in a market like Chicago?
Speaker Change: Can you just, you know, help us size, you know, the relative benefit in Charlotte, from arasement, margin perspective versus, you know, the relative investment in Chicago, and I guess when are we done? What, what ending are we in of that rebuild in Chicago? Thank you.
A baseball question again. [inaudible]
Speaker Change: Well, what ending are we in in the rebuild of Chicago? I just right now by 50 to 4, ending I think is about right, 4 to 5th, ending something like that.
Speaker Change: Chicago was a place that is a place that we have been very successful in the past.
We took down our Chicago operation during the pandemic.
Speaker Change: as we grew our operation after the pandemic, we deployed our assets.
in the places where demand was the strongest first.
Speaker Change: Chicago was just slower to rebound, but now we're focused on rebuilding the position that we've traditionally had in Chicago.
Speaker Change: A position that we like a lot. So that's what we're focused on is rebuilding Chicago because Chicago is a really important part of our network, not history.
Speaker Change: In Charlotte, our strategy there is to continue to be as large in Charlotte as we can operate. It's very efficient, very geographically well-placed hub, very low cost for
Speaker Change: for purposes of connecting, but we are close to capacity at that airport, and so we're just not in a position at least right now to grow it any further.
Thank you.
Thank you.
Speaker Change: On its question comes from the line of Catherine O'Brien of Goldman Sachs. Please go ahead, Catherine.
Good morning everyone, thanks so much for the time. [inaudible]
Speaker Change: Maybe just one more on the 2Q revenue guidance if you'll allow it. Steve, I think you were talking about...
Speaker Change: You're expecting to see momentum and international through the summer that's looking strong off the next one that being cabin.
Speaker Change: So I guess underlying your revenue guidance, are you expecting each international geography to see the prasim improve relative to its one-cube performance and the D-cell is all domestic or if I got that scrambled?
Thank you.
Speaker Change: I think what we are seeing is solid performance in the long haul international markets.
that has improved year over year.
It's hard to, I think to compare. [inaudible]
Speaker Change: Still positive. What you're asking is the year-over-year growth in the second quarter as good as the year-over-year growth in the first quarter, I'd say, to be celebrating a little bit.
Speaker Change: But still strong, and again fueled by really strong premium demand, really strong demand for the premium captains.
Thanks, and maybe one for Devon.
Speaker Change: You know you guys understandably pulled for your EPS and it's very uncertain backdrop and you know there's downside bias here capacity outlook but if you wind up growing low single digits as was your plan back in January are you still thinking chasm would be up mid singles or with the incremental cost savings you highlighted earlier could you do better than that thanks for the time. Thank you.
I think if our...
Speaker Change: If our capacity ends up being largely in line with where we started the year, our costs are also going to be largely in line with where we started the year.
Speaker Change: We're best in the business at managing costs in the next bill here in term and also driving efficiencies over the long term that are...
Speaker Change: Good for our customers, also good for our team members. That was built into our plan for this year. So while there may be some trimming around the edges, I think we have all of the right plans in place to run a really effective and efficient business this year.
Speaker Change: On the other side, if we do pull capacity, I think we're going to be really effective in managing costs out as well.
Speaker Change: Thank you. Our next question comes from the line of Stephen Trent of City. Please go ahead, Stephen.
Stephen Trent: Good morning everybody, and thanks for taking my question. First, I was kind of curious when we think about...
Stephen Trent: You know, vis-a-vis what we saw in the transatlantic for the Paris Olympics last year, or do you guys have a like say a relative advantage versus other pairs because of a high US point of sale? Thank you.
Speaker Change: Hey Stephen, thanks. Hey, we're really proud to be a sponsor along with our partner, Qatar.
Speaker Change: It's the largest sporting event in the world and it's unique in that it is spread out across the United States.
Speaker Change: Canada, and Mexico, and American is the strongest carrier in all of the vast majority of the host cities.
So I'm really really proud to be the title sponsor. Thank you very much.
Speaker Change: I tell you, this is an event that's very different than the Olympics. It's all concentrated in one city, you know, all at one time that actually in some cases can diminish the demand over a period of time. This is one in which we see tremendous interest in travel and spending time. And we don't believe that we'll have an impact on the other business that goes into these cities. [inaudible]
Speaker Change: Namely because it's spread out, and because it will be something that is, you know, such a focus. So, tremendous excited, Americans are glad to be at the top of that, and it's just another indication of us building for the future.
Speaker Change: Okay, super rubber, really appreciate that. And just as a quick follow up to that, you would sort of refresh my memory approximately where is the percentage of US point of sale for your international? Thank you.
Speaker Change: We, about 75% of our international is sold in U.S. point of sale. We, about 75% of our international is sold in U.S. point of sale.
and Scott Long. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Ravi Shanker of Morgan Stanley . Your line is open to Ravi.
Ravi Shankar: Great. Thanks, morning everyone. Just to follow up on the normalization of share in indirect distribution and corporate, how macro sensitive or agnostic is that share recovery? Great.
Speaker Change: That's a really good question. It is share, first of all, so it's not absolute numbers, but we're at this period of uncertainty. We're seeing that share build very nicely and we're not hearing anecdotally about reduced travel. Our business travel is up overall as Robert said in his opening remarks. So it remains indeed.
Speaker Change: It's right now, it doesn't seem to be macro sensitive. I suppose it remains to be seen, but right now business traffic seems strong. Our share is growing. We're getting a lot of positive feedback with respect to our new sales and distribution efforts. So
Speaker Change: fingers crossed, it's going in the right direction and a really positive part of our revenue effort at this point in time.
Speaker Change: That's helpful, and maybe it's a follow-up, I apologize if I missed this, but can you talk about the book of a following the tragic accident and whether or not that has normal license?
Speaker Change: I can't, it looked the 55342, as I said in my remarks, it had an impact in the first quarter, it had a material impact in the first quarter, but that's largely been something that is unique to that quarter, and as we take a look to the future, we don't anticipate any impact. All right.
Thank you.
Speaker Change: Our next question comes from Michael Linenberg of Deutsche Bank. Please go ahead, Michael.
Speaker Change: Oh, yeah, hey, good morning, everyone. Hey, I just want to go back.
Speaker Change: with Steve, he talked about corporate trending up or being up. I mean, if we look at managed business revenue, that was up 8% in the March quarter, based on what you're seeing now, and the fact that you also have a fairly easy comp because of the sort of...
Speaker Change: The distribution strategy from a year ago and the fact that you are gaining back share, is that increase, should we expect that increase to be higher in the June quarter? That managed business revenue will be better than up 8%?
Speaker Change: Given kind of the underlying kind of factors that I just mentioned.
Thanks.
So as I look out what...
Speaker Change: I expect is that we're going to continue to grow our share in the second quarter. Remember, again, as I said a moment ago, that's share, not absolute. So, I'd say, you know, as long as the economy continues to support business traffic, we're going to continue to grow business traffic in the second quarter.
Speaker Change: Okay, great. And then we should grow it faster than the other airlines because of the progress of our distribution efforts.
Speaker Change: Okay, great, and then just on a second question here, obviously there seems like there's a lot of movement around with respect to the real estate in Chicago.
Speaker Change: We think about your deep position today and where we are over the next, call it six months or so as gates are reallocated. Where are you on a net basis?
Speaker Change: You know, I mean, I think it's been reported that you lose gates but then there's the offset or there's the opportunity to use common use gates so on a net basis.
Speaker Change: What happens to your gate position in Chicago? Are you down or are you flat?
Any color there would be, thank you.
Speaker Change: Sure, yeah, thanks. I mean, first of all, as I think you saw, we disagree with that.
Speaker Change: The airports in the city of Chicago's determination on that and we're appealing that decision.
that would have gates be reallocated during 2025.
Speaker Change: I think we're in, we feel like we're in good shape. Remember, we're growing Chicago back and I expect that we will be able to accommodate our growth in Chicago all the way until the, you know, next summer with the gate footprint that we have, but we also expect that gate, that growth in Chicago will put us in a really good position to. [inaudible]
Speaker Change: to benefit from the reallocation of gates that's going to take place again next February and March.
Speaker Change: Thank you. Our next question comes from the line of Andrew Didora, of Bank of America. Please go ahead, Andrew.
Andrew DeDora: Hi, good morning, everyone. Most of my questions around certainly two queue have been asked and answered, but there was one question from me for Devon. On the sub 35 billion dollars of debt by the end of 2027, just curious what you are assuming for liquidity over that time frame as I know you have a lot of debt coming due over the next few years. So just curious how you're thinking about liquidity. Thank you. Thank you.
Andrew DeDora: Sure, I'll just start by saying we are committed to reducing total debt to under 35 billion at the end of 2027.
Andrew DeDora: Structurally, we're set up really well to do that. We've talked about our limited CAPEX requirements over that period, so it gives us the potential for a lot of free cash flow.
Andrew DeDora: When we think about liquidity, right now we're holding $10.8 billion. We've talked that over time, as we continue to improve the balance sheet, we would expect our levels of liquidity to come down slightly. During this uncertain time, we're going to continue to hold right around this $10 billion mark, but that is likely to change over time as we expand margins and improve the balance sheet. We're going to continue to hold right around this $10 billion mark, but that is likely to change over time.
That's all I had. Thank you
Thank you.
Speaker Change: Our next question comes on the line of Tom Fitzgerald of TD Cohen. Your question please Tom.
Tom Fitzgerald: Hi, everyone. Thanks so much for the time. I'm just kind of curious on corporate generally, both, you know, large-managed accounts and the small and medium-sized enterprises. If there's any pockets of green shoots or any sectors that are demand is looking a little more resilient than some of the sectors like autos or agriculture that we hear about on the news.
Thanks for the question.
Tom Fitzgerald: We are not seeing any real pullback in business travel at this point across the board. That may come later if the economy continues to deteriorate, but right now it all looks pretty vibrant. We may be have a better position in terms of improvement because of our sales and distribution recovery efforts, but right now
Business Travel looks good across the board.
http://TheBusinessProfessor.com
Tom Fitzgerald: Okay, that's really helpful. Going back to the topic about…
International Travel and Cross-Border Flows.
Tom Fitzgerald: What have your conversations been like with your government relations team or your contacts in DC about conveying the importance of smooth cross-border flows to policymakers? Thanks again for the time.
Now, I appreciate the question.
Trials incredibly important to the US.
Tom Fitzgerald: and I think people are aware that almost one in eleven jobs is tied to, to travel.
Tom Fitzgerald: $1.3 trillion of direct spending, $2.9 trillion of overall spending in related outside of direct.
Tom Fitzgerald: This is an incredibly important sector to our economy and we have to make this something that is the cornerstone of infrastructure. And that starts with not only doing the work we can to domestically but also making the country a welcoming place. [inaudible]
Tom Fitzgerald: And as we work with the administration, just overall reducing concerns about certainty, we're also getting ready for you know where we should be and that means
Tom Fitzgerald: making sure VISA weight times are very, very limited. That means that we open up travel without VISA opportunities.
Tom Fitzgerald: Industry as a whole can continue to grow. That's the long-term plan, and from that perspective, we're working with the administration on air traffic control reform which is likely the biggest limiter to growth in the industry as we look at, you know, over several years. Thank you very much.
Speaker Change: Thank you. Ladies and gentlemen, at this time, the Q&A session is open for media questions.
Speaker Change: As reminder to ask a question, please press star 11 on your telephone to remove yourself from the queue. You may press star 11 again. You will be limited to one question and one follow up. We are open for media questions.
and Scott Long. Thank you.
Speaker Change: Our first question comes from the line of Alison Sider of Wall Street Journal. Your line is open to Alison.
Allison Sider: Hi, thanks so much. I guess I just wanted to ask a broad question on the economy and just curious in the Robert, what are you expecting if you expect the US economy to tip into a recession and what are you watching or keeping an eye on to gauge whether that's happening?
Hey Allie, thanks.
Speaker Change: Right now, there's uncertainty in the marketplace, I know you've heard that over and over again, but it's no different
Speaker Change: in our planning process, and it is for a domestic leisure passenger.
Speaker Change: You know, right now we don't know what is going to happen. That means that we're taking a, you know, a very cautious, even a negative approach to, you know, growth as we take a look out to the rest of the year.
Speaker Change: What does that mean? It means that we don't hire as much. It means that we don't bring out as many planes potentially. It means, you know, the reduction in overall of economic activity. Same thing for, you know, the
Speaker Change: The customer is planning a vacation. Nobody, nobody really, you know, relishes uncertainty when they're talking about why nobody could do on a vacation and spend hard earned dollars.
Speaker Change: So I think that that is an overhang, but it's one that I know that the administration is aware of and wants to get back on track as soon as possible. Certainty will restore the economy, and I think it will restore it pretty quickly. Thank you very much.
All that said though, we have to be ready.
Devon May: No matter the environment, and American is incredibly well-positioned, if uncertainty lasts quite a long time, Devon mentioned all the steps that we've taken to improve our balance sheet, make sure that we have liquidity on hand, we're the best at cost managing, we have refleated the airline in a period of much greater certainty with
Devon May: OEMs, and a financing environment that was much more favorable as well. So we're ready for that. And on the other end, on the other side, travel always comes back.
Devon May: And we're ready for that, the investments that we're making, you heard some of what we talked about in terms of building back our network.
Devon May: But on top of that, it's also with folks on customer experience.
A customer experience is everything from...
New flagship sweeps to Philadelphia, flagship blounds and free Wi-Fi.
Devon May: coming through partnership with AT&T, and at the end of the day, American has the most opportunity, I believe, to add value to customers, and certainly, you know, from a shareholder return in an environment where the economy comes back. [inaudible]
So we're on both sides of it.
Ben in this business for 30 years. [inaudible]
Devon May: and have gone through everything from SARS to obviously COVID and 9-11 in great recession and everything in between. We have a leadership team here that is better prepared, experienced.
Devon May: and also from what I see this airline throughout my entire career, going into any type of better position than I've ever been.
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Thanks.
Thank you.
David Vernon, David Vernon, David Vernon, David Vernon,
Speaker Change: I'm sorry, our next question comes from the line of Mary Schlangenstein, of Bloomberg News. Your line is open, Mary.
Mary Schlangenstein: Thank you. I wanted to ask if you could address the issue of tariffs, whether you plan to pay the tariffs on any air bus deliveries and the impact that you expect from tariffs both on aircraft and on parts. And then secondly, you just mentioned Robert Manpower in the Sun Certain Environment. I'm wondering if you've already frozen hiring for the rest of the year or taken any steps in that direction. Thank you.
Speaker Change: Say, Mary, I appreciate the question. So first off, aircraft cost too much already. I don't want to pay anymore for aircraft. It doesn't make sense. And certainly, you know, we're pulling guidance.
Speaker Change: And I'll tell you, it's not something that I would expect our customers. First.
to welcome. So,
Speaker Change: We've got to work on this. We fortunately don't have any near-term deliveries. We have deliveries at the end of the year that would be potentially subject to tariffs, the 321 XLRs that are built over in Europe . But I would tell you, we've got to do some work before then. We've got to do some work before then. We've got to do some work before then.
Speaker Change: and from an overall perspective, I would tell you there's good reason to do something in regard to aviation, civil aviation because 1979.
Speaker Change: that has been zero for zero. No tariff in, and no tariff purchasing out. That's worked very well for civil aviation, and by that I mean everything from aircraft to engines and to parts as well.
Speaker Change: Framework has led to an industry, a sector that has produced the largest level of exports.
of any industry.
Speaker Change: And so I know that that's where we want to end up. Now, there may be changes to that framework, but the end result has to be that the US is a powerhouse and continues to be incredibly strong from an aviation perspective. Thank you.
Speaker Change: We're part of that. We ultimately operate these aircraft. We're part of that aircraft.
Speaker Change: and I anticipate in working with the administration that we're going to end up with a framework that really does ensure that aviation in the US is competitive. In regard to questions about
Are people?
Speaker Change: We're taking a very cautious approach and we're going to be nimble depending on what we see in the environment.
Thank you.
Next question.
Speaker Change: comes from the line of Leslie Josephs of CNBC. Please go ahead Leslie.
Hey everyone, thanks for taking my questions. [inaudible]
Speaker Change: I'm just wondering if you're seeing any gained market share in the Dallas area since your competitor of in-house bag fees and some of the other policy changes that there's any kind of detail on the take-up rate of status matches and things like that. And then broadly on domestic demand directionally, is it getting worse, is it getting better and are there any geographies?
Speaker Change: that you're seeing or doing worse or better. I'm seeing $7,800 tickets to New York, LA in the summer, and then $100 tickets to Florida. So kind of curious if you could break down where you're seeing the weakness in the main cabin. Thanks.
Stephen Trent: Leslie, hi, thanks, it's Steve. First on the DFW question, we have a great product. In DFW, it's our largest hub, fantastic penetration for our frequent flyer program, a fantastic number of co-brand card holders. We're going to operate the largest operation at DFW in history this summer, so we're really well positioned to compete.
Stephen Trent: We competed with Southwest, you know, through thick and thin over the last 40 years, very successfully. We recognize that they've
Stephen Trent: You know, made a very significant change in their business model. We saw that they reported some good numbers yesterday, but we're prepared to compete with them and DFW is our favorite place to compete with them.
Stephen Trent: for whom travel is really discretionary, that tends to be the main cabin, and that is weak, and the other airlines have identified that it's a source of weakness for them, and in those circumstances, you do see prices that are lower, you do see some of the sales prices that you quoted. I think that's going to continue to be the case until we understand where, which direction the economy is going, and [inaudible]
and Scott Long. Thank you all.
Thank you.
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.
Speaker Change: Thanks, Lateef. And, hey Steve, thanks for the response on that. In regards to DFW, I'll just also note that we continue to invest. And I think there's going to be some really exciting cool news coming up in the next week or so regarding American's position at DFW and look forward to talking more about that. I'll close with this.
Speaker Change: Yeah, uncertainty is what we're living with now. It is something I know that the country wants to move beyond and I know that everybody is working to that end.
Drone, Drone, Drone
No matter the environment, American is well positioned.
from a prolonged period of uncertainty. We're ready for it. We're ready for it.
Over the long run.
Travel comes back.
Speaker Change: People want to travel in American as well prepared for that as well.
We have a renewed focus on customer experience.
Speaker Change: You will see American investing in our premium product. We do believe no matter the economic environment that customers will want to be treated better, they will want services and amenities that they're certainly willing to pay for. American has committed to being a leader on that front. We've got a great network, a great fleet, an incredible set of partners. And over the long run, I know that our priorities. Thank you very much.
Speaker Change: of operating with excellence, of ensuring that we treat our customers right, working to expand our industry leading loyalty program and partnering with city, delivering on our full revenue potential.
Speaker Change: And continuing to re-engineer the business, it will enable us to get back to growing map margins, delivering free cash flow, and strengthening our balance sheet so American is ready for whatever may come long into the future. So thank you and I appreciate the time.
Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.
and Scott Long
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