Q2 2019 Earnings Call
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And Keith I'll join you now.
Well then follow with commentary on the operational performance in revenue environment and then after we hear from those comments, we'll open the call for analysts questions and lastly questions from the media.
To get in as many questions as possible. Please limit yourself to one question and a follow up.
Before we begin we must state that today's call does contain forward looking statements, including statements concerning future revenues and cost forecast of capacity traffic load factor fleet plans and fuel prices. These statements represent our predictions and expectations as to future events, but numerous risks and uncertainties could cause actual results to differ from those projected information about some of these risks and uncertainties can be found in our earnings press release issued this morning, and our Form 10-Q for the quarter ended June Thirtyth 2019.
In addition, we will be discussing certain non-GAAP financial measures. This morning, such as pre tax profit and CASM, excluding unusual items a reconciliation of those numbers to the GAAP financial measures is included in the earnings press release and that can be found in the Investor Relations section of our website a webcast of this call will be archived on our website. The information that we're giving you on the call is as of today's date and we undertake no obligation to update the information subsequently so thanks again for joining US this morning and at this point I will turn the call over to our chairman and CEO Doug Parker.
Thanks, everybody for being on this is with US this morning.
Today, we are happy to report improved second quarter results for American Airlines.
Company produced pretax income, excluding special items of $1.1 billion for the quarter and a year over year increase in our diluted earnings per share of 10%.
It's a revenue driven improvement we saw record second quarter revenue of $12 billion as well as.
Record second quarter total revenue per available seat mile.
The credit for producing these results goes entirely to our team our 130000 colleagues.
Are doing a great job of taking care of our customers during a peak season.
And they're doing it despite a challenging summer.
Factors that people American are doing heroic things to take care of our customers and it shows in these results and our projections for 2019 earnings which have improved since our last quarterly call.
But as excited as we are about the team's performance. This quarter, we're even more excited about the potential at American airlines and our potential for value creation.
In 2020 and beyond.
The challenges.
We face this summer our near term issues.
That absolutely will be addressed with time.
And as we look to the long term, though the results we produced despite these obstacles.
Give us the utmost confidence in what lies ahead and thats, particularly true as we move into a period when our investments taper off significantly and the results of those investments continue to increase.
So with that I'll turn it over to Derek and then Robert give you more details and then we'll get to questions Derek.
Thanks, Doug and good morning, everybody.
The ongoing grounding of our Max fleet as well as operational issues caused by the weather and the unions and the Union action meant that it was undoubtedly a challenging quarter for American Airlines. However, thanks to the efforts of our team members, we were able to produce financial results that exceeded our expectations at the start of the quarter. So I'd like to thank everyone for their hard work over the past few months.
In the second quarter 2019 earnings press release and Form 10-Q that we filed this morning, we reported second quarter net profit excluding net special items of $810 million of 5.1% increase over the second quarter of 2018, our diluted earnings per share excluding that special items in the second quarter was $1.82 per share up 10% from $1.66 per diluted share. The second quarter of 2018, our second quarter 2019 pre tax profit excluding net special items was $1.1 billion, resulting in a pre tax margin of 9% compared to 8.7. In 2018. This was the first quarter our year over year margin expansion since the first quarter of 2016.
Despite the operational challenges during the quarter. Our total revenues were a record for the second quarter at 12 billion up 2.7% for the set for the second quarter 2018, our total revenue per ASM increase for the 13th consecutive quarter by 3.5% to 16.54 cents also a record for the second quarter.
We saw increased strength in demand for travel during the quarter, which also resulted in passenger revenues increasing by 3.2% to $11 billion. Robert will give you more color on the trends you're seeing in the revenue improvement during his remarks.
Our cargo yields were slightly higher during the quarter, but year over year schedule reductions and falling demand in Asia and Europe markets meant the cargo revenues fell 15.4% to two $221 million despite that increase in yields.
Our loyalty program continues to grow steadily which drove other revenues up by 2.9% to $728 million. This growth was primarily due to new card acquisitions as access to the world's largest program and best network continues to be a strong incentive for new customers.
Total operating expenses in the second quarter of 2017 were 1.6% higher at 10.8 billion when fuel and special items are excluded our unit costs increased in the second quarter by 4.8%.
Higher than previous guidance due primarily to lower than planned second quarter, Asms, which declined 2.8% from 2018 as a result of the operational disruptions I've mentioned earlier.
Turning to the balance sheet, we ended the quarter with approximately 8.2 billion in total available liquidity. So far this year. Our treasury team has completed a number of transactions, including securing financing for 26, new mainline and regional aircraft to be delivered in 2019 and 2020 through mortgage in sale leaseback structures with the exception of three regional aircraft delivered in the fourth quarter, we have committed financing for all aircraft deliveries through 2019. Additionally, we have committed financing for 25 over 2020 deliveries and we will continue to evaluate financing options for our remaining mainline and regional aircraft deliveries.
In May 2019, we raised $750 million in an unsecured notes offering and used the proceeds to fund contributions to our defined benefit plans in aggregate, we made contributions of $858 million to our defined benefit plan in the second quarter for total contributions of $1.2 billion year to date or $436 million in excess of our required contributions as a result, we have pre funded a portion of our 2020 requirements and our remaining minimum funding obligation for next year is now forecasted to be approximately $200 million.
Lastly in June 2019, we completed a spare engine WTC transaction in the U.S private placement market to raise $650 million at attractive rates, which are comparable to those achieved in aircraft doubly tcs.
During the second quarter, we paid dividends of $44 million, we did not repurchase any stock as fuel prices remained high for much of the quarter, which pushed our projected year end liquidity near our target level of $7 billion and prices didn't fall until we had entered the closed trading window, we remain committed to returning cash above our liquidity target to our shareholders.
We continue to expect that are 2019 year end net debt, including pensions in the present value of aircraft rents will be more than a billion dollars lower compared to year end 2018, we expect this trend to continue for the foreseeable future as our capex obligations normalized from the peak years of our fleet transformation program, which will also result in significant free cash flow generation by the airline while we expect 2019 to be relatively flat in terms of free clash cash flow generation due to increased pension contribution. We are currently forecasting to generate significant free cash flow in 2020 and 2021.
On July 14th we announced that we had remove the Boeing Max from our schedules until November 2nd previously we were guided to a full year negative impact to pre tax income of approximately $350 million, which was based primarily on lost revenue from schedule reductions forced by the removal of the Max from our operating fleet.
We have now reviewed all of the data from the second quarter and given the extension of the grounding period, we now anticipate that the impact to the full year will be approximately $400 million. We now estimate that the impact on the second quarter was approximately $175 million and estimate that the impact on the third quarter will be approximately $125 million.
Lower than the impact of the second quarter as we are no longer seeing the short term disruption to passenger travel that the grounding caused in April .
We remain confident in the aircraft and look forward to Reintegrating aircraft into our fleet once all of the regulatory approvals are in place.
During the during the <unk>.
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We announced an order of 50 aircraft Airbus Athree hundred 21, XL our aircraft with delivery scheduled to begin in 2023 and end in 2020 530 of these orders were a conversion of existing Athree hundred 21, Neo orders with the other 20 being an exercise of existing neo options.
Since the aircraft order was already part of our long term fleet plan. It does not materially change our expectations for capital expenditures in these years.
The expected range and capabilities of XL are are impressive and we'll add flexibility to our fleet opening up the potential for exciting new markets for our customers that we will be able to fly very efficiently.
In addition in our fleet plan filed this morning as part of our usual Investor update we announced that we have extended the operating life of some of our Athree 20, 737, and 757 aircraft on a short term basis.
These extensions will allow us more flexibility as we deal with the grounding of the Max and the late delivery of the Athree hundred 21, Neos and provide modest and efficient growth to our fleet.
With the extension of Max cancellations Dome to November 2nd we now anticipate capacity growth of approximately 1.5% for both the third quarter and the full year. This is approximately half the full year capacity, we had expected at the start of the year, which has put upward pressures on our unit cost expectations.
For the full year, we now expect that our 2019 cost per ASM, excluding fuel special items and new labor agreements will grow grow by approximately 4%. This increase from previous guidance of an increase of between two and 3% is driven entirely by the reduction in the anticipated azim growth, primarily driven by the Max.
As a result, we now expect our CASM, excluding fuel special items, and new labor agreements will increase by approximately 5% in the third quarter and 3% in the fourth quarter.
Based on the forward curve as of July 22nd we are forecasting that our average fuel price will be between $2.05 and $2.10 per gallon third quarter and for the full year will be $2.04 to $2.09.
For revenue, we expect our total revenue per ASM will grow between one and 3% in the third quarter and given the cost guidance I outlined above we expect the third quarter pre tax margin, excluding net special items will be between 5.5% to 7.5%.
We now believe that our earnings per diluted share excluding net special items will be between $4.50 to $6 in 2019 and continue to expect that we will see margin expansion expansion in the second half of 2019.
Our total projected capital expenditures for 2019 remain unchanged at $4.4 billion comprised of $1.7 billion in non aircraft Capex and $2.7 billion in aircraft Capex. We now expect total capex of $3.6 billion in 2020 and $2.1 billion in 2021.
The guidance for 2020, and 2021 is slightly lower than the previous guidance as a result of the XL Our agreement I referred to earlier in my remarks.
In conclusion 2019 has certainly presented some unexpected challenges, which have stressed our operation and put our team in some very difficult situations, but our frontline team has met every challenge and done a phenomenal job of helping out our customers and supporting each other we look forward to moving past. These short term headwinds and executing on all of the exciting projects that we have in the pipeline.
And with that I'll turn it over to Robert.
Thanks, Derek good morning, everyone.
Before I begin I too would like to thank our team members for doing a great job of taking care of our customers given the issues that we faced with our fleet in operation.
Their hard work and perseverance were instrumental in our ability to generate record second quarter revenues.
Well weve, while we face some significant challenges during the second quarter. We also had some notable achievements, including the completion of our rollout of our industry, leading premium economy product expansion of our DFW hub.
And the completion of our high speed Wi Fi installation.
I'll spend some time discussing the challenges, but want to spend the majority of my time, emphasizing all of the great things our team is doing and the positive momentum that were seeing within our business.
As for challenges as Derek mentioned in his remarks on July 14th we made the decision to extend the cancellations of our Boeing 737, Max aircraft through November 2nd.
While the return date has shifted from our original expectations.
We remain optimistic that the aircraft will return to service in November .
Our confidence in Boeing the FDA and other regulatory agencies remains intact and we are committed partners along with our Allied pilots Association and association of professional flight attendants in this ongoing process.
As always as new information becomes available we will assess the impact on our schedule and initiate changes as soon as possible to take best care of our customers and team.
In terms of our operation in May we initiated litigation against the Union, representing our mechanic team members for engaging in a coordinated illegal work slowdown.
Plus contract negotiations.
That slowdown has significantly impacted the companys operation.
A temporary restraining order and joining the slowdown and further adoption to the Companys operation was granted by the court.
The court is in the process of rolling on a permanent injunction against the continuation of these alleged illegal activities and we are waiting that decision.
Ultimately our goal is to get back to the negotiating table, where we will work to get our mechanics and fleet.
Fleet service team members the industry, leading contract that they deserve just as we have with all of our other team members.
Throughout the legal work action and really for any disruptions now and in the future. Our team is doing their best to take care of our customers and our co workers.
Fortunately, we have new tools to help in that effort.
Improved customer notifications for delays and cancellations automated hotel meal and transportation arrangements enhanced self service Rebooking.
And snacks and amenities at the gates during longer delays are just some of the measures that are being utilized two inch to ensure that our customers needs are being addressed.
We certainly apologize to any customers that have been inconvenienced and want you to know that our customer relations team is working nonstop to address shortfalls in our service.
As we have discussed on several of our past earnings calls we've been focused on improving our operating reliability.
And we feel very confident that we're making some significant operational improvements based on the performance of our regional operation, which has not been affected by the labor issues at the mainline operation.
For example, at our hubs our regional performance saw a 1.5 point year over year improvement and on time departures.
A 3.2 points year over year improvement and aircraft turn performance.
And a 1.2 points year over year improvement and controllable completion factor.
Thanks to the outstanding efforts of our regional team. This improved performance provides a nice control set and gives us confident confidence that the initiatives that we put in place will be successful across the system. Once we move pass these short term challenges.
Now for positive momentum, we continued to take big steps forward in creating a world class customer experience that further differentiates American from our competitors.
During the second quarter, we opened our new flagship first dining flagship lounge and renovated Admirals club lounge in terminal D at our largest airport DFW.
These enhancements are just the latest in our more than $200 million investment in our premium products and services and complement our other flagship lounges at JFK, Los Angeles, Miami and Chicago O'hare.
In addition, during the quarter, we completed installation of our high speed Wi Fi on our entire long term mainline narrow body fleet of more than 700 aircraft.
This gives American more high speed why five than any other airline satellite based Wi Fi allows customers to stream video without buffering or interruptions upload and download files with ease and do all of this from gate to gate.
This upgraded bandwidth ensures customers will experience an uncut compromised internet connection even if every customer chooses to access to access inflight entertainment at the same time.
I should also point out that American is the only us airline to offer live TV on international flights.
Shifting to our network strategy, we remain focused on strengthening our network by accident expanding operations at our most profitable hubs.
This important milestone enables more than 9001 stop travel possibilities through DFW more than any other airline airline hub in the world as part of that growth. We have started service from DFW to 23, new markets, including service to Dublin in Munich, and increased service to more than 80 existing markets.
This growth marks the largest expansion at any hub in the United States in more than a decade.
The early results are very encouraging with margins on the newly added flights coming in at or above the system average.
We remain we remain on track with our growth plans in Charlotte next year and at Reagan National in 2021.
Over the last year, we have also made a number of changes to our international network, eliminating chronically underperforming flights and starting services to unserved markets across the world.
Most of these new flight started in the middle of the second quarter and they are already producing margins at or above the system average.
On the partnership side, we now have final approval from the US Department of transportation for our proposed joint business agreement with Quantus, which will allow us to better serve customers flying between the United States, and Australia and New Zealand.
The joint business agreement allows for commercial integration between American and Quantus, delivering new routes and significant customer benefits.
It will also allow an expanded coach or relationship optimized schedules on South Pacific services.
Better access to see if that is carrier's network on each carriers networks.
Additional frequent flyer benefits and co location at airports.
All of this is designed to better serve our customers and just yesterday Quantus announced new service to Chicago and San Francisco from first bank.
We're thrilled with this news for our customers and stay tuned for more route announcements from US later this year.
We also received approval from the DSP for additional service from DFW and Los Angeles to Tokyo's Haneda Airport.
Our corporate volume continues to grow and further strengthened in the last six weeks of the quarter, where we delivered industry, leading corporate passenger share performance without sacrificing yields.
We continue to see significant growth in the small to medium business segment as evidenced by our nearly double digit revenue growth year over year.
We continue to see growth across our loyalty program existing members are engaging with us more redemption.
Levels redemption bookings are up and we continue to increase our elite population.
On Cobranded credit cards are strong trends in acquisitions card spend and overall account growth continued in the second quarter with record setting absolute results.
We expect that growth to come will continue throughout 2019.
All of this contributed to record setting second quarter revenue of $12 billion.
Up approximately 3% year over year.
On a unit revenue basis total revenue per available seat mile improved 3.5% year over year.
Which marks the 11th consecutive quarter of positive unit revenue growth for American.
We estimate that our unit unit revenue benefited from the Max cancellations in the second quarter, but this this benefit was offset by share loss in April .
We're particularly pleased with these results given the challenge we had with operational disruptions the Max and weather.
I mentioned this on our last call, but I need to say it again in 2018, we made a big investment are in our advantage program, making it more valuable to customers, we significantly increased the inventory available for redemptions in 2018, increasing the value of the miles to our customers, while also giving our customers more flexibility to use their mouth.
For the second quarter. These changes had a negative impact of 0.8 points to unit revenue.
All of which was non cash.
We anticipate a similar impact for the remainder of the year.
Normalizing for this our passenger unit revenue increased by 4.8% in the second quarter two points better than our legacy competitors.
We delivered improved unit revenue revenue unit revenue across every entity as we've mentioned on previous calls we believe we have a unique opportunity to improve load factors without eroding yields and we have been successful in that effort.
To execute against that opportunity.
Overall load factors were up 3.2 points in the quarter on flat yields.
Higher loads without compromise compromising yields is a winning combination we're proud of our revenue management team for their hard work and results.
Domestic market strength was was broad based with improved unit revenue across every hub.
As I mentioned earlier our growth at DFW is performing is as expected notwithstanding an exceptional operational and weather challenges at DFW during the quarter.
We expect the domestic region to be our best performing entity in the third quarter.
Atlantic unit revenue grew by 3% in spite of one and a half points of currency currency headwind.
International point of sale remains challenging, but we successfully shifted to north American point of sale and grew load factor by 3.8 points.
The Latin entity had at the Latin entity had the highest quarter to quarter improvement with unit revenue growing by 4.4% year over year.
Brazil, and Mexico were particularly strong while we faced headwinds in Argentina, and the Dominican Republic.
Pacific unit revenue improved by a half point, thanks to positive unit revenue and Japan, Hong Kong and Australia.
The pricing environment for China was soft, but we were able to grow load factor, while we reduced our capacity exposure to this market.
Looking forward, we expect domestic demand to remain robust and Latin again to be the best performing international entity, we expect our third quarter year over year TRASM.
To be up 1% to 3% and our passenger revenue per ASM to be about a point better than TRASM.
In conclusion, we're incredibly excited about this airline as future. The heavy lifting of integration is behind us our large fleet investments are winding down and our network is being optimized with high margin growth opportunities opportunities at our most profitable hubs, we recognize the need to overcome some nor short some short term challenges, but the core business is strong and with that we'd like to turn the call back over to the operator to begin our Q and a session.
Thank you ladies and gentlemen at this time if you do have a question. Please press Star then the number one key on your Touchtone telephone. If your question has been answered or you wish to then move yourself from the queue. Please press the pound key.
And please limit yourself to one question and one follow up.
Our first question comes from the line of Michael Linenberg of Deutsche Bank. Your line is open.
And Michael Hey, Hey, good morning, everyone two questions here and maybe their bonds for Robert.
At the beginning of the year, you were targeting <unk> billion of revenue improvement and 300 million of cost saves and now with the Max Groundings and the labor disruption how should we think about.
How should we think about re sizing those numbers.
As we move through the year.
Yes, thanks, Michael so.
When we take a look at.
The revenue initiatives, we set out at the front of the year I think the best way to take a look at it as some have have outperformed and others, we will be able to take a benefit of in the longer term.
One that has as it has.
You are really taken a delay is.
The densifying of our 737, and our Athree hundred 21 fleet because of some of the issues that we've encountered with the operational disruptions related to the work slowdown we've had to defer some of those modification lines, we anticipate picking those back up next year and that is benefit yet to come.
In terms of outperformance some of the things that we have really emphasized.
Certainly basic economy is producing as much as we had hoped.
And the work within our revenue management team to improve load factor performance is resulted as well. So we're seeing the $1 billion and as we take a look into the future. We're encouraged that we still have.
More to come down you want to add anything yet and just to reemphasize, what Robert said again digital kind understand our billion dollars and revenue initiatives and our compares year, you're going to normalize for the deferred recognition rate and FSP and when you do that our unit revenues of 4.8%.
Which is about two points better than our kind of legacy competitors seek it you can see where the benefit is just in that.
And Mike.
Mike from a cost perspective.
We have a.
Lot of initiatives all of them are on target to $300 million in the forecast. So thats all built in and we are realizing those there are a few cost headwinds obviously.
As you have these type of disruptions.
But thats built into the CASM forecast that I gave you.
So that some of them are offset by that but the initiatives that we set out for the one airline project to get a $1 billion 300. This year and then another 200 2020 and 2021 are on target and are built into our forecast.
Okay, Yes for sure it's remarkable given all your headwinds that you still managed to produce margin expansion. So well done there just my second.
Robert on the GBA with Quantcast.
I recall.
Even today.
You highlighted some of the positive trends out of Japan I'm sure. That's held banks can you give us a sense or magnitude.
Of of where we are from a revenue base as the starting point.
With with Quantus line, just trying to size that that joint business agreement, what our baseline as.
Any any any color on that would be great. Thank you.
Michael its yes.
The current size there is a billion and a half.
In a word and we don't we're really not sizing yet publicly the potential benefits, but we do expect that this is going to be something that's.
Positive.
Overall and.
I am pleased with no hearing.
And thats into some new markets and I would anticipate that we have more to add to that in the coming months.
Great. Thanks, everyone.
Thank you Michael.
Thank you. Our next question comes from the line of Brandon Oglenski of Barclays. Your line is open.
Hi, Good morning. This is actually Matt was in husky on for Brandon.
Thanks for taking my question really wanted to suit will expand upon the network strategy, a little bit more set its little bit early and that the DFW expansion, how should we kind of think about the improvements coming through and when would we see.
Ultimately kind of some some from the benefits heading on the piano.
Well, yes.
I'll just start the.
We're just we're just now getting into the real upsizing of DFW, which is which is encouraging so you're seeing some of the benefits already.
But.
Run rate of that is going to be as we progress throughout the throughout the year as we take a look forward as I mentioned 2020, we anticipate.
Our growth focus.
To be on Charlotte.
And so that will ramp up over the first part of next year and then from there it's Reagan national after that in 2021 so.
Don our dairy I do want to give you more color I just and this is really just the beginning when we just we just started ramping up the if they'd be during two Q, we won't see the full benefit of that until we hit the third quarter.
That'll obviously extend into an annualized as we head into 2020 at which point, we'll also be adding Charlotte which will.
A run into 2021 that will have an opportunity to up gauge Dcs. So we have a lot of I think really high quality.
Capacity.
And network opportunities looking out for the next few years and Matt its Doug as Robert sensitive.
In his opening remarks, the early results here are really encouraging.
The markets that we have added out of Dallas.
As Robert said, Mark are coming in at or above system average.
Margins.
As a new startup route usually your marginal growth doesn't come in above average margins in this case they do.
That does give us more encouragement to us that theres more theres.
One, but what we we believe would happen is indeed happening into Theres more of this we can do and we're looking we're looking forward to doing more as we go forward.
Okay great.
And then just as a quick follow up.
Hi.
Pacific capacity was down quite quite meaningfully this quarter and.
I would expect I thought you know kind of anticipated unit revenues to kind of be more beneficial because of that.
You can you can you provide a little more color what's going on in the Pacific region.
Sure its Don.
I'll cover that.
We did that slightly positive unit revenue in the Pacific.
The capacity reductions, we had was the reduction of flying to China to Chicago to Shanghai and Beijing.
We did see actually positive.
Unit revenue growth in Hong Kong, and Japan also in Australia.
With more opportunities coming for written quantity.
The China market.
It was soft was our weakest performing market in the Pacific.
We had about a point and a half of currency headwind as well in the Pacific as we went into the third quarter.
And I think we're pretty happy that we have reduced our exposure to China, because thats really where were seeing some softness, particularly China plan to sell pricing.
Where we see a pretty weak pricing environment right now.
And Hey, Matt Duncan So also.
Thanks for asking that question because it's used to.
Tell more about this look given.
The kind of capacity reduction we're talking about here.
I think it's hard for anyone certainly for those of you who aren't.
You know.
You're in the airlines in everyday to try and.
Estimate what kind of impact that would have between revenue per as members cost per ASM.
Indeed, when we when we raised our guidance.
A couple of weeks ago.
At least.
A number of reports suggested while.
It's.
Really its own market cost story that we have done a better job of keeping our costs in check through some unexpected.
And our revenues came out in line with the reality of at least for the for those of us or is that you're watching results come in.
The the positive surprises were on revenue.
Not on costs and again not that any of you should be able to figure that out on your own because it is such a such a different why this happens, but indeed, when you're when our capacity is going down because.
We're hiring too.
Because we're canceling flights very close.
What happens then is.
You are not able to particularly the peak, we're not able to protect all that revenue. So a 1.5% declined capacity is not does not result in a 100% increase in revenue per ASM or even close to it.
And you are not able and if it is pretty difficult to go find the marginal.
Revenues are the lower revenue per ASM as you do that so at any rate.
That that that's that's what we experienced as the quarter came through as a.
Even though assets were down.
The fact that our earnings came out better than we thought it was through us.
Revenue surprise not a cost.
Okay. Thank you.
Thank you. Our next question comes from the line of Helane Becker of Cowen Your line is open.
Thanks, very much operator, hi, everybody and thank you very much for your time.
I have two questions. My first question is what percent of your fleet to normally replaced.
Every here and how does this year compare to a normal here.
I wouldn't say a percent, but we replaced somewhere it's been a lot more over the past few years. We've we've taken delivery is over 100 aircraft a year for many years in a row since we've gotten here for about five years. This year, we are replacing about 65.
Next year will be about 61 and that includes regional also so.
The steady state.
It would be somewhere between 40 and 50, if youd cafe.
The average age where it is so I think thats kind of where we're at and so when we talk about aircraft Capex going forward. It comes down significantly in 20 to 20, 120, 223 steady state would be somewhere in the neighborhood of 40 to 50 aircraft a year when you get out into the 25 to 2030 range.
Helane to go again, where rents are going to make the appointment.
It's a hard question to answer because there is no normal there's certainly hasn't been.
Since the merger and as Derek said, we've been bringing in.
8400 to 100 airplanes, each year, and then retiring a similar amount.
In this by far the most aggressive modernization of commercial airline fleet in the industry.
Commercial aviation.
So that has been the number.
And that's now largely behind us.
So as we've been doing that also you know the capex that we've had to put into integration.
And the Capex that we put into all the improvements that have been needed to make in two.
Our airline.
That taper papers is not as strong in a verb that comes down significantly as Derek said in the coming years both aircraft Capex.
And some of the non aircraft Capex, so we get the benefits of all and invest.
Okay the amount of money.
And then the then to follow that up to $1 billion and debt pay down that I think Derek mentioned.
Should we think about that as accelerating through the next five or seven years as.
You are kind of steady state declined from 100 aircraft to 50 aircraft.
No front from a debt pay down perspective.
We have our normal debt paydown schedule, which is somewhere between.
$3 billion a year over that over the next few years.
So that pay down does not accelerate I think.
There are pay down of doubly Dcs and other.
Debts that we have but as you look at our Paydown schedule from in 2019, we will pay off $3.7 billion of debt in 2020, we have $2.7 billion. Due 2021, we have $4.2 billion do so it runs around a $3 billion to $4 billion of debt Thats paid off that scheduled debt pay downs.
You know that go along with the pension payments, but that's all in the numbers that Doug talked about.
When we talk about free cash flow Thats, all assume that those debt payments are paid in each one of those years and that we pay off debt as it comes due.
Okay. Okay. Thanks, very much I appreciate your help thanks Helane.
Of course.
Thank you and our next question comes from the line of Hunter Keay of Wolfe Research. Your line is open.
Thanks, Good morning, everybody.
A question about the comment you made about market share loss in April can can you give me some color on that comment what do you mean by that where was it what type of share wasn't and how do you get that back.
Sure hundreds its Don mean, when we had the ended up grounding. The Max there was a lot of schedule uncertainty as to how long. This was going to last and how are we going to move aircraft around to try and cover this.
And so during that period sort of really starting mid March through.
The third week in April we did see close in bookings and close in bookings, particularly for corporate travel.
Lag right. So we definitely lost share we definitely saw some book away during that time period.
To our competitors that did bounce back by the time, we got through April and in fact, if you look at the last six weeks of our kind of corporate share performance. We're number one in the industry in terms of corporate share.
So thats really completely bounce back from us, but it was entirely just response.
To schedule uncertainty if you wanted to get your meeting during that time period.
Sometimes people are choosing not to flash so they weren't sure whether we're going to change our schedule on.
I see.
Thank you Don and then.
Doug when you think about the relationship between employees buying in reliable operations and consistent cost performance. That's arguably the three areas that you guys need to show the most improvement and if we assume all three of those things kind of feed into one another which order do they have to get fixed and how do you get started with the first one.
Employees buying in.
Like reverse either way I mean, you can define them any order you want so it's by in operations and just good cost performance, so like which one has to start first.
Which one sort of.
Manifest into the other two getting better and how do you started.
Yes.
First off I'm not exactly sure to characterize that we're going to.
Both talk about that.
Mhm employee perspective, you're doing that which generally are.
First let me just go to the operations.
In this we.
As a company.
Under Robert's leadership have made great strides in our operations reliability.
For me.
From the time, we emerged airlines improving year over year up until.
28 team, we had a setback.
Last summer.
Unrelieved related primarily to things like.
Cfmfifty six engines things, we tried to do our best to fly through and Didnt make changes of scheduling in retrospect.
We realized that we were kind of let me operation would be the buffer not something.
Weve in retrospect.
Would have made the same decision going forward.
So.
In response to that.
We put in place again with Robert leadership, and David's Your leadership carries leadership are huge operational reliability improvement plan for 2019.
And thank goodness, we did those things that made it a large difference in our ability to manage through.
What we're dealing with now so.
We feel really good about where we are in terms of operational reliability, but floor.
What we are dealing with the current time, which is a huge increase in the aircraft out of service to begin the day.
That when we were when we are as we are today.
So having to start today with so many airplanes more airplanes out of service that we have spares.
By definition that means you're starting the day by canceling some flights and by definition that we have is not going to be a particularly good operating reliability of it. So that's that's the that's the that's the situation with operational reliability. They not to say there is not more we can do and won't do.
To improve it but once that issue.
Once that issue is removed.
Well I'll say it this way we believe it worked for that issue, we would be running the best airline in the history of American Airlines, which was our goal for this year.
And all the data that we have supports that and as Robert noted we are seeing that on the regional side, where we don't have this issue so operation reliability I feel extremely good about.
Where we are and our trajectory.
Going forward, we do need to get to the near term issue.
So.
As it relates to culture.
I think I know, what you're I guess, what you're getting at or maybe not if it's not even as you can tell me.
But anyway.
Yeah. It's a fair question. Thanks for asking how you know what we're going through.
Relates to all the work we have underway.
On cultural transformation and what I'll tell you the cultural initiatives that we've put in place.
Since the time of the merger and again remember back when we put these three things together.
Five and half years ago.
How big an issue that was particularly given the history of American Airlines and.
And those those those.
Our working.
We've made huge strides things really good leadership.
The people that I get to work with.
To lead our team who.
Every time, you know that I'd, most when I go out and our team members prior to the merger. It was all about there's going to be able to care about me on now as we gotten talked to people, we still have issues with are there.
Rarely that.
They aren't that.
And to the extent there are issues they are all about.
Desire for more tools to do the job the whether or not to do is take care of their customers, which is exactly where you'd like that to you.
Exactly what our job is to deliver to them. So look there is more to do there, but cultural transformation. Obviously takes time takes a lot of time, but we're really pleased with the progress we've made to date.
And we'll continue to.
Make in the future.
Our objective here is to make culture competitive advantage not just to improve the culture.
Not just to transform it from what wasn't very strong 121 is really strong but to make it so strong.
That people actually prefer to fly America.
That's not that's not that we're not there yet that aspiration of a longer term objective when we're committed to and one that we think is.
Best for our shareholders.
So that work continues but really happy with the progress.
You can fair to ask you if thats the case and why are you going to this issue right now.
To which adds to which.
Now I would tell you look while we're while that culture. What goes on there is no change to the fact that this is a highly unionized airline.
And Union negotiations.
No.
We'll continue to be.
The negotiations and some of them, we haven't even gotten through the first one yet and this is one amazingly enough is that we're still working on joint collective bargaining agreement.
With.
This union and we haven't been able to get to get that done we obviously got them done.
Quite quickly with all of our other work groups.
Indeed, we are.
We are beginning negotiations on contracts were signed five years ago.
As juicy views with pilots and flight attendants today, so it's a source of frustration for sure.
But look this is this is a different animal one that we're still trying to work through.
But.
Unlike the other contracts we work through we are dealing with.
Two unions here chose to form one union.
I'm sorry in Association partnership.
We are dealing with international unions.
Were the primary decision makers aren't even American airlines team members.
The culture doesn't make that much of a difference or as they are concerned.
So look we will we will we will work through this will get through a contract and thats. The real goal here of course.
Is to make sure we get we get a contract in place when we do that.
We're going to have.
We're going to have a.
Bye.
A long term contract with our outstanding mechanics, and fleet service team members, that's going to be industry, leading which.
And that will be a good day, so that will help significantly, but we need to get through this delinquent regarding agree with this group.
And right now we have been able to get through that I will add them.
Sorry for the long answer 100, but I will add.
I will add.
On that front.
So what we the way, we get through and through joint collective bargaining agreements to get back to talking to each other.
These negotiations are under the.
Under the control of the National Mediation Board at this time, which is a good thing and a bad thing is the National Management Board Hasnt.
Call them negotiating Cessna since April .
Because of all the way.
You can ask them why but.
Effective havent.
And.
As a result.
No. We havent, we Havent had talks good news, we heard last night from the MB.
But I would like to have a status conference with all of US on August 15th.
We've been really good news by that time, we think we'll probably have a permanent injunction in place which will.
Which will help with.
What we are dealing with.
Good goal this is not have people.
Coming to work and doing their jobs because according to the gold is people coming to work in doing their jobs because we're excited about.
The company and.
The future of the company and to do that we need to get a contract in place. We're trying to do that we're working extremely hard at it and I know that we will get one.
Exactly when but we will get to a contract.
This issue that we're dealing with today will be behind us.
Thank you Jeff.
Thanks Hunter.
Thank you. Our next question comes from the line of Duane pending Glory.
Of Evercore ISI your line is open.
Good morning.
Hey, Thanks, good morning.
Sorry, if I missed it in your prepared remarks, but when do you expect a decision on the injunction.
Steve Johnson.
Hi.
Yeah, I you never know for sure, but my best guess would be late next week early the week after that.
Thank you and then just as a follow up.
As you think about this this cost of the Max grounding, which you've estimated at 400 million.
Relative to perhaps your future aircraft order book value of about three and a half billion.
Is that is the right way to think about potential compensation as a discount to that future value. So maybe a 10% to 12% discount on your existing order book as we sit here today.
We we would encourage you to think about it in any way because we don't know.
We haven't had any discussions with our partners at Boeing about the details of how this compensation might occur we saw.
As I know you did they set aside they put a reserve aside.
We've had we've had high level conversations with our.
The.
The highest levels of Boeing about what our expectations are but we havent had any detailed conversations about how those expectations will be met.
Okay. Thank you.
Thank you and our next question comes from the line of Dan Mckenzie of Buckingham Research. Your line is open.
Hey, Thanks, good morning.
Healthy corporate demand that strengthened the last six weeks in the quarter. Despite some severe operational interruptions disruptions. That's that's a surprise.
But we know there's a direct link between business travel in and operation. So the idea of book away when when operations are bad. So the question is I'm wondering if you can elaborate.
On any book away challenges in that in the third quarter outlook.
How they might be a headwind or an opportunity at some point here and does the current outlook embed symbolically.
Yes, Thanks, Dan I'll, let Dan give you specifics but.
But again just want to reiterate what Robert said in his comments.
While this is going on.
Our team is doing.
Really really great work to make sure.
While we have operational disruption it's not.
It's not felt nearly to the degree it would be otherwise by our customers.
First and foremost is once we realize that this was.
Well a near term issue one that were going to be going on for a matter of weeks and months.
We began we've begun the process and that continues not waiting until the day of to do.
Cancellations, but do them.
Several days in advance that allows us to.
Re accommodated customers again, not the best thing you want to do much better than having customers.
Five of their their travels been disrupted on the issue of the airport. So that makes a big difference and then as we do that particularly as it relates Robert talked more about this probably isn't rates through our most frequent flyers.
Make sure that they are having.
They are having the least impact.
Of all and to the extent they are there.
They know the company is reaching out to them. So we're working really hard on those issues.
Don who received anything in terms of yeah, just to add that we've actually been tracking completion factor for our corporate customers rents at which as you know we have been canceling flights, but kind of which flights with our weekends and relative to the kind of travel patterns of our corporate customers on a year over year basis.
There has really not been a very material change in the completion factor for corporate customers. So we've done a good job of figuring out kind of what the cancel as it pertains to the outlook.
We aren't really seeing anything right now that would cause any book away.
And we expect our performance in the for domestic in the third quarter to be pretty similar.
And maybe even a touch better than it was in the second quarter.
Here I'll, just give a shout out to our sales team and our customer relations team as well with any issues.
We have opened up new means of communicating.
To ensure that any issues are addressed and I've also stepped up our efforts to be out there with our corporate clients and that includes our head of sales Alice House, and Taylor and myself and a number of the other executives here. So we're hearing first hand of where the issues are is that we can get in front of them whenever possible.
Very good.
Good job.
Second question here is we do have a tale of two economies.
So you got the industrial which is slowing in the consumer which is strong and we've seen this in prior years as well and I guess not I'm just wonder if you can talk about how you think one affecting the other at some point if they do what are the key metrics that give you confidence that demand can continue to remain from here.
And at this point are you in sort of revising any implicit fourth quarter revenue.
Assumptions.
Again, if you go look at kind of what's been happening right. We've seen some softness right in international fund sale right. Some of that's currency some of that's economy, but the domestic market has remained very robust.
And we've been able to backfill really any international shortfalls with higher yielding domestic originating business.
And we've been able to successfully.
Grow our load factors were surely were up actually two points overall in the second quarter and were up really in every entity that as we look forward I mean were actually booked ahead.
As we look forward into future months.
And we're not seeing really anything.
That would make us concerned at this point around.
Continued strength in domestic demand.
Thanks I appreciate it.
Thank you.
Our next question comes from the line of Jamie Baker of JP Morgan Your line is open.
Hey, good morning, everybody most of my questions have been asked and.
Well answered.
So one from me.
I know, it's the view of your aviators that.
Some of the reliability issues are related to.
Scheduling practices and maybe some IP deficiencies. This is a difficult one for me to reconcile with the data that I have access to so I guess the question is whether you believe.
Are you extracting all the potential efficiency of the current pilot contract and whether there is some IP investment that does need to be made if so what might that cost.
So Jamie that hey, thanks for the question and that's that's a.
The good news at least for all of US in this that there is terrific I still believe tremendous upside so.
In our operation so while we are dealing with.
The mechanic slowdown and then weather anomalies and you name. It. We're finally getting the chance to to run an integrated airline and as we do that with all of our systems were able to move past the point of just integration to taking a look at what the next generation of systems are so.
When we take a look at scheduling practices.
We know that there are potential efficiencies that we can bring about that potentially saves on on a flight times.
We know that for our pilots and flight attendants that there are ways that we can meet their needs in actually creating more.
Lifestyle improved schedules that should also reduce the impact of redundancies and reserve levels.
And we know that there is a lot more work that we can do.
On on aircraft routing as well.
Now that we have the system all in one place and don't forget even when it comes to maintenance operations.
We still are operating with a couple of different systems out there so restricting ourselves in some way so more upside is how I view things and thanks for bringing it up because I think the opportunity for investment is good and the payoff will be.
Nice when we.
Get to it.
Any guess on timing and thank you very much.
So in terms of timing due 2020 will be a year in which.
We have our eyes firmly on operations prudent, especially in regard to a to efficiency. So.
It's going to be over the next few years there are some larger our longer term issues in terms of.
Flight management systems and crew scheduling systems, where we will have to move past some of the legacy systems.
And think about next generation, but theres many improvements we can make along the way and.
Mike do you want to add anything here.
Thanks.
We're always working on improving our systems, it's just an ongoing.
Aspect of what we do.
Good news around Thanksgiving was good news for US is we have a lot a lot of upside here. Thanks, Jamie often.
Thanks. Thanks. Thanks.
Thank you. Our next question comes from the line of Kevin Crissey of Citi Group. Your line is open.
Hey, good morning, everybody. Thank you for the time.
Maybe if I could ask you to fast forward past this weve.
Past this being the Max the mechanics.
Let's look out whether it be 2020 or 2021, but let's just if we can start with 2020 not looking for specific guidance by any stretch at all but broad strokes as to what what all the changes in 2019 does to your 2020 capacity cost structure.
Should we see the kind of the inverse of the negative impacts in 2019.
As it relates to 2020 on a year over year basis, how should we think about that.
Yes, without giving any guidance or.
As we have.
We're not prepared to give just yet.
On the glow on a global basis, and almost like I think in terms of.
In terms of what it means for.
Growth next year it certainly.
Two things going on one.
You have growth being stifled this year for the for these issues that won't.
And then on top of that Weve told you the growth that we put in place.
The growth that we plan to put in place is doing exceptionally well.
So you should expect us to continue along that so.
This this will be a.
We will certainly be a growing airline as we move into 2020.
And then what that means.
Again.
Setting aside the economic issues that may or may not happen what it means for US we think is.
That ability to certainly visa via the industry is probably the best way to think about it because who knows where what happens.
Global issues.
Vis-a-vis industry, we think as that happens for all the reasons, we've talked for a lot of the reason we talked about.
Which is.
Upside that Robert is talking about.
I think we would hope that on that growth.
C R.
Unit revenues improve at a rate thats greater even than the industry.
And our cost as Derek is district as described.
Staying well inject.
And that should result in things like.
We would hope.
Margin improvement and certainly.
Improved more improvement.
Than the group in total.
Okay.
And then on top.
And if you're if I'm remotely right about that.
Because of what their subscribers in terms of our in terms of our Capex profile.
That.
That results in real cash flow generation.
And certainly more than I think you'll see from our competitors.
Yes. Thanks, Thank you for that I'm. We're we're obviously looking for good CASM next year, we had been a little hopeful that it would be this year.
I wasn't sure about next year. This maybe creates the opportunity for that.
Yes.
I am sorry, it more to come on that but we're not.
We agree.
Okay. Thank you.
And maybe for Don can you talk about the Trans Atlantic outlook, there's been some commentary about it being softer me maybe I missed it in the prepared remarks or during Q and a.
And if it is softer as we look into Q3 and beyond.
Why that's the case.
Sure.
I guess I I, here's the way I would describe I mean, we've seen.
Some softness again in.
Europe point of sale in terms of both demand and yields again, the domestic markets been strong we've been able to backfill that and grow unit revenue again, we were up 3% in the second quarter, and that's with one and a half points of currency headwind.
Third quarter, we don't have quite as much.
Headroom on the load factor side year over year, but if you go look out into the fourth quarter.
On the Atlantic industry capacity is growing at the lowest rate since it has been since 2012. So we are really seeing kind of moderating and lower industry capacity and in particular the capacity that's coming out of the Atlantic as we head into the fall and winter is really low cost carrier low price carriers that are taking the capacity out so.
I think the Atlantic although at some so we see softness in know your point of sale I think the capacity profile as we move forward is actually quite positive and we would expect that to start to translate into improved yields in the economy cabin as we head into the next winter.
Excellent thanks, and if I could sneak in one more with.
We haven't talked about Miami, when we look at the data the South Florida region looks soft internationally is that kind of an area of weakness for you talked a lot about regions that were above system average.
We assume that might be one that might be below.
No actually it's actually been quite good for us.
I see for Us Miami as our gateway into Latin America, and Brazil is very very strong Caribbean was good mexicos very very strong we had we had over 20% unit revenue growth of Mexico.
And so our profile Miami actually is.
Actually we're quite encouraged by Miami.
And it was actually our best performing unit revenue hub in the third quarter or second terrific.
Perfect. Thank you.
Thank you and at this time I'd like to open up the call to any media with questions. Please press star one on your Touchtone telephone and again at this time I would like to open up the call to any media questions. Please press star and the number one on your Touchtone telephone.
Just one moment.
Okay and our first question from the media comes from Mary Slant Dinstein of Bloomberg News. Your line is open.
Good morning.
One other thing Don you had been talking a lot about demand, but can you talk a little bit more in detail about domestic demand whether youre surprised at how it's held up and specifically what you think is fueling that ongoing strong demand.
Yes, I mean.
Demand has been strong now for long time, something that's just.
Happened overnight.
And as I mentioned earlier, when we look at.
Going forward, we expect that.
We're seeing nothing right that's off the trend line that we've seen for domestic.
So again I don't I'm not I don't think we can tied to anything any recency in terms of anything that's happened domestic has been been this place now for for quite a while.
And there's nothing that we see that's going to take us off this trend line.
Okay, and if I can I ask about the Athree 21, Neo delays Jetblue talk this week about.
Hearing of additional delays from Airbus and can you talk about where you guys are at how many planes you had delayed and if there has been any additional either time delays or aircraft delays for you.
Mary This is Derek.
We have not heard of any additional delays we had the <unk>.
Conversations with Airbus.
Probably a month ago, and we really looked at the schedule and got those deliveries all set up as part of the.
XLR negotiations. So that's been said I haven't heard of any further delays a at this point in time, but we'll we'll check back in with Airbus After hearing.
Those conversations to make sure that our aircraft are as planned from our XLR negotiations, where we re spread them a little bit from the original delivery dates.
And can you say, how many a 321 neos are involved.
It's more like there's about I think there was five to 10 that just got delayed and then they just push the whole schedule out a little bit so.
Somewhere in that in that range or the amount that they have been delayed but what we did is as part of our negotiations is just re spread them.
To put them put them in a order where Airbus can deliver and we can plan a little bit better.
Okay. Thank you.
Thanks Mary.
Thank you and our next question is from the line of Chris Van Cleef of CBS News. Your line is open.
Okay. Thanks for the time today real quick can you talk about you mentioned that you're having the clerical some white.
Excellent.
Uh huh.
Hey, Chris we completely last June .
All right you there are exactly how many Hudson had the cronto because the mechanics. If we were if you have that as a bucket. They every number or weekly market, where you are with the that in addition to the map.
Hey, Chris So you know what do I tell you is as Doug mentioned you know every every morning, we're seeing a lot of more aircraft out of service and that had been planned and we're taking actions to address that so you know to I can't give you a specific number you know every day, but it did it it's certainly been impactful the operation and some days.
You know we've gotten on most days, we were way in front of it and so that we're addressing customers needs, but it can be in the number it can be in the dozens of flights a day.
Okay, and when you look at.
Pick the Mac southwest reports for tackling held one Larry.
How confident are you in November timeline, obviously competent up you didn't change but.
You see that as as realistic before the holidays or <unk> you have some level of expectation that lingered on for Korean war, but we're staying in close contact with both Boeing and the FAA.
And you know were is I think is up to speed as anybody and as a matter of fact Boeing had their earnings call yesterday and I was in touch with their team last night afterwards, so from what we heard.
You know a month or so ago.
We really havent don't have any new information that leads us to to make changes, but we're staying close and we will certainly assess based on what we know today.
We should be able to hit the timeline of being backup in November .
We will continue to reassess yep. Thanks. Thanks.
Thank you. Our next question comes from the line of Alison Fighter F wealth of Wall Street Journal. Your line is open.
Hi, everyone I'm out in theory.
Thanks, Erika you could say, whether you've had any done any additional work looking at your how customers are feeling about the Max right. Now you know there you have the sense that sentiment has evolved one way or the other.
Grounding it stretched on.
Yeah, Alison <unk>, we don't.
Really have you answer that directly to your question is no we don't have a.
Specific to give you any insight certainly what we know is this.
You know when the F.A. J.
Declares this aircraft is safe to fly it will be saved why anyone American pilots declare that.
We are comfortable flying it it'll floor and what I know what I know is our customers will view those two things.
As extremely important in their view about whether or not the airplanes that deployment and so until that time.
I'm I'm certain.
You know there.
Any any customer survey data would show some concerns I believe once we get to that point those will be largely mitigated and certainly will overtime.
But but nothing that we can tell you specifically today, but will vote.
Were there.
Got it thanks, and I guess is there anything you're hoping for from Boeing in terms of sort of like rehabilitating its brand or restoring trust and confidence in aircraft is there any thing you're hoping that they'll do on that front.
Again, what is most important to us.
Is that the airplane has been recertified and because the Epay has come to the conclusion that everything that led them to ground. The aircraft is mitigated when that happens.
And our our pilots.
Our attic believe they're adequately trained to fly the aircraft.
And it's it's as now it's been certified.
That's that's what we're that's what we're focused upon and we believe those two set of events more than anything else.
We will make the difference in.
Our consumer consumer attitudes about the aircraft so.
Okay. Thank you thanks.
Thank you and our next question comes from the line of David Koning of the associated Press. Your line is open.
Hi, good morning.
Oh, I'm, sorry, I'm going to probably kicked the same dead horse that Allison was kicking [laughter].
And let me put it another way well first of all Doug if you could explain a little bit more you said that you had some conversations with the highest levels of Boeing about what your expectations are.
Relating to compensation can you say that you to Mr. Malone burger or something less than that if its robert talking to somebody or whatever and then secondly.
What what's your campaign going to be to convince passengers to get on the plane or beyond EFI, a your pilot showing confidence in the plane what are you going to do.
Yeah, Yeah David.
No further information on who is talking to her but anywhere where we have a great relationship with Boeing and they're great partners and I suspect they will.
[noise] there will continue to be great partners as we as we worked through all of this is that we certainly have been today. So I'm you know that.
That's that's where we are with as it relates to Boeing and again, we've got and the I just I just say that you know the one piece of planning that a I think is noteworthy is that we anticipate sometime between the aircraft being ungrounded and when we actually put the.
Aircraft into commercial service, where our pilots and flight attendants, you know, we'll get Reacquainted with aircraft and we'll we'll actually be flying you know some level of of our team members around and so I think that that is going to going to be helpful. But as Doug has said that the biggest thing is having our pilots and flight attendants and team you know all behind this and you know ultimately flying. This this aircraft at that is going to be something that is going to be a big part of our fleet and we look forward to.
You know taking advantage of all the capabilities that it offers once it's a re certified.
Are you going to have any kind of advertising campaign, though.
I don't anticipate that this time, yes, again I think the biggest thing is being able to provide you know really comfortable.
And certainly reliable service and that's what when this aircraft is recertified and our team members are out behind it I think that that will be you know something that is a hallmark of this aircraft going forward.
All right. Thank you.
Thanks, David.
Thank you and our next question comes from the line of Leslie Joseph of CNBC. Your line is open hi, good morning, everybody.
Just a question on hiring southwest talks about some issues with hiring pilots because of a 737 maxs grounding in Ah. Some promotion classes are you seeing anything similar without.
No.
No we'd that yeah.
The good news is as American as a fantastic place to work and you know we have.
You really for all categories of our team members. We have we have people that want to join the team.
We're certainly monitoring.
The pilot sourcing for our regional carriers, but we feel really confident there as well that we have the.
The scheduling practices and compensation tools to be able to track the team members that we need.
Okay, and just one follow up for passengers, who maybe don't want to fly the Max once it returns or maybe wait a few months for it to fly safely and is there any way that they can.
Get out of those reservations or without paying a change fear cancellation fee, that's something you're looking at that we've heard that from some of the other airlines as well yeah.
Like it like others will be sure to make the appropriate accommodations, but over the long run. This is an aircraft that is going to be about in service and flying well and you know we anticipate that.
Everybody's needs will be taking care of.
Thank you.
Thank you and this does conclude our question and answer session for today I'd like to turn the conference back over to Mr., Doug Parker for closing remarks excellent. Thanks, everybody. Thanks for your interest and thanks for sticking with us through this any further questions. Let the other corporate communications and Investor Relations Ma'am. Thanks for your time bye.
Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program you may now disconnect everyone have a great day.