American Airlines Group Q1 2025 Earnings Call Transcript

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Provided by Quartr
April 24, 2025
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Operator

Thank you for standing by and welcome to American Airlines Group's First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To a question during the session, you will need to press 11 on your telephone. To remove yourself from the queue, you may press 11 again.

Operator

I would now like to hand the call over to Abrielle Jackson, Managing Director of Investor Relations. Please go ahead.

Abriell Jackson
Abriell Jackson
Managing Director of Investor Relations at American Airlines

Thank you, Atif. Good morning, and welcome to the American Airlines Group First Quarter twenty twenty five Earnings Conference Call. On the call with prepared remarks, we have our CEO, Robert Isom and our CFO, Devin May. In addition to our Vice Chair, Steve Johnson, we have a number of our senior executives in the room this morning for the Q and A session. Robert will pause our call with an overview of our performance.

Abriell Jackson
Abriell Jackson
Managing Director of Investor Relations at American Airlines

Devin will follow with details on the first quarter in addition to outlining our operating plans and outlook going forward. 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. Before we begin today, we must state that today's call contains forward looking statements, including statements concerning future revenue, costs, forecasts of capacity and fleet plans. These statements represent our predictions and expectations of future events, but numerous risks and uncertainties could cause actual results to differ from those projected.

Abriell Jackson
Abriell Jackson
Managing Director of Investor Relations at American Airlines

Information about some of these risks and uncertainties can be found in our earnings press release that was issued this morning, as well as our Form 10 ks for the year ended 12/31/2024. In addition, we will be discussing certain non GAAP financial measures, which exclude the impact of unusual items. A reconciliation of those numbers to the GAAP financial measures is included in the earnings press release, which can be found in the Investor Relations section of our website. A webcast of this call will also be archived on our website. The information we are giving you on the call this morning is as of today's date, and we undertake no obligation to update the information subsequently.

Abriell Jackson
Abriell Jackson
Managing Director of Investor Relations at American Airlines

Thank you for your interest and for joining us this morning. With that, I'll turn the call over to our CEO, Robert Isom.

Robert Isom
Robert Isom
CEO at American Airlines

Good morning, everyone. It goes without saying that we're in a challenging economic environment, which has had a significant impact on the industry. Historically, the airline industry has done well in periods of economic growth and certainty. The industry exited the fourth quarter with positive momentum, but this quickly shifted during the first quarter. The economic uncertainty in the market has pressured demand and impacted American's first quarter results and second quarter outlook.

Robert Isom
Robert Isom
CEO at American Airlines

Given this macro environment, we're withdrawing our full year outlook. That said, if current demand trends continue, we expect to deliver a profitable year and produce positive free cash flow. At American, we have the foundational strength, resilience, team, and financial and operating flexibility to navigate the current environment. The work we have done in the past several years has prepared us for times like these. 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.

Robert Isom
Robert Isom
CEO at American Airlines

As a result, we have low aircraft CapEx requirements for the remainder of the decade. We continue to employ our best in class cost management to make the airline more efficient. Through our efforts to reengineer the business, we now expect more than $750,000,000 of cumulative cost savings as we exit 2025. We've utilized our free cash flow to strengthen the balance sheet. And at the end of the first quarter, we had our lowest net debt level since the end of twenty fifteen, while simultaneously taking action to smooth our debt maturity obligations going forward.

Robert Isom
Robert Isom
CEO at American Airlines

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. We're taking action to deliver on our revenue potential by enhancing our partnership with Citi, 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. As we move forward, we remain committed to delivering on our long term targets, growing margins, generating sustainable free cash flow, and further strengthening our balance sheet. Now on to our first quarter performance. First quarter unit revenue was up 0.7% year over year, which continues to lead the industry despite more exposure to a challenging domestic environment.

Robert Isom
Robert Isom
CEO at American Airlines

We estimate the impact of American Eagle Flight 05/1942 reduced first quarter revenue by approximately $200,000,000 Long haul international passenger RASM continued to lead the way in the first quarter. Atlantic passenger RASM was up 10.5% year over year, and Pacific passenger RASM was up 4.9% on 24.1% more capacity, primarily driven by strength in Japan. 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. We continue to see strong demand for international travel from The US. Domestic passenger RASM was down 0.7% year over year in the quarter as US consumer discretionary spending and especially consumer spending on air travel decelerated throughout the quarter.

Robert Isom
Robert Isom
CEO at American Airlines

Performance in our Premium and Loyalty revenues continued to show strength year over year. Premium revenue increased 3% year over year in the first quarter on 0.3% lower capacity. Our premium cabin RASM year over year outperformed main cabin RASM by four points in domestic and eight points in international. Paid load factor in our premium cabins remained historically high and was up 2.9 points year over year. Loyalty revenues were up 5% year over year with spending on our co branded credit cards up 8% in the quarter.

Robert Isom
Robert Isom
CEO at American Airlines

We've begun laying the foundation for our expanded co branded credit card partnership with Citi, which is set to begin in 2026, and we remain on track to achieve the long term growth targets we outlined last year. 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. American is proud to have an industry leading travel rewards program that is frequently recognized for providing the best value for its members. Despite the headwinds in the economy and lower capacity, Managed Business revenue was up 8% year over year in the first quarter.

Robert Isom
Robert Isom
CEO at American Airlines

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. We saw specific strength in the financial and professional services sectors during the quarter. 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. 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.

Robert Isom
Robert Isom
CEO at American Airlines

We started the year with a conservative growth plan, and we will continue to be mindful of our capacity deployment. The demand and the competitive environments will continue to serve as the guidepost for our future capacity plans. We'll remain nimble and take action as conditions warrant, And we have many levers at our disposal, such as reducing off peak flying or if circumstances require returning leased aircraft, retiring aircraft, and deferring aircraft deliveries to efficiently reduce capacity without jeopardizing the quality of our core network. We're positioning American for sustained long term success, and a big part of that is transforming our customers' experience and engagement with us. We've established a new customer experience organization, a centralized cohesive team that sits at the intersection of our commercial and operations organizations.

Robert Isom
Robert Isom
CEO at American Airlines

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 to customer feedback. Last week, we announced that Advantage members will receive complimentary high speed satellite Wi Fi beginning in January 2026, thanks to a new sponsorship with AT and T. 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. American continues to have the youngest fleet of The US network carriers. We're excited to debut our new state of the art flagship suite seat on our first new Boeing seven eighty seven-nine, and we look forward to the rollout of this product on our new Airbus A321XLR aircraft.

Robert Isom
Robert Isom
CEO at American Airlines

These deliveries, along with the planned refresh of existing seats, are expected to grow Americans lie flat and premium economy seating by approximately 50% by the end of the decade. Additionally, American has led the way in introducing premium lounges and offers more premium lounges than any other US network carrier. 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. This lounge will be our ninth premium lounge across the system with more to come. Finally, we recently announced several changes to improve our boarding process starting next month.

Robert Isom
Robert Isom
CEO at American Airlines

And just this week, we introduced a new redesigned mobile app to further enhance customer interaction and self-service options. Turning now to our operation. During the first quarter, the American Airlines team demonstrated our resilience and ability to quickly recover from irregular operations. We continue to make investments to drive further enhancements to our operating reliability. Our first quarter operation was impacted by California wildfires, increased winter weather in our Sunbelt hubs, and the tragic accident of Flight 5,342 on January 29.

Robert Isom
Robert Isom
CEO at American Airlines

Before moving on, I want to take a moment to acknowledge the tragedy and pay tribute to the lives lost in the accident. We're supporting the families and loved ones through our Office of Continued Care and Outreach, which we established within a week of the accident. 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. 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. We continue to work closely with the U.

Robert Isom
Robert Isom
CEO at American Airlines

S. Government, and we're encouraged by the collective commitment to make The U. S. Aviation system even safer going forward.

Devon May
Devon May
CFO at American Airlines

Now I'll turn the call over to Devin to share more about our first quarter financial results and second quarter outlook. Thank you, Robert. This morning, American reported a first quarter GAAP net loss of $473,000,000 Excluding net special items, we reported a first quarter net loss of $386,000,000 or an adjusted loss of $0.59 per diluted share. We produced first quarter revenue of $12,600,000,000 down 0.2% year over year, with unit revenue up 0.7% year over year. First quarter unit cost, excluding fuel and net special items, was up 7.8% year over year.

Devon May
Devon May
CFO at American Airlines

We are committed to running the airline as efficiently as possible while enhancing the customer experience. Through best in class workforce management, efficient asset utilization, and procurement transformation, we now expect to achieve approximately $250,000,000 of cost savings in 2025, on top of the $500,000,000 achieved last year. We also expect an additional $100,000,000 of working capital cash release, bringing our total improvement in working capital to approximately $550,000,000 over the past three years. We continue to see improvements in the productivity of our team and expect mainline full time employee count to stay approximately flat relative to 2024. With regard to our fleet, we expect to take delivery of 40 to 50 new aircraft this year.

Devon May
Devon May
CFO at American Airlines

Based on our current expectations for new deliveries, our twenty twenty five aircraft CapEx, which also includes used aircraft purchases, spare engines, and net PDPs, is expected to be between 2,000,000,000 and $2,500,000,000 and our total CapEx is expected to be between 3,000,000,000 and $3,500,000,000 We continue to expect moderate levels of CapEx moving forward, with aircraft CapEx averaging approximately $3,500,000,000 for the remainder of the decade. We ended the first quarter with $10,800,000,000 of total available liquidity, and we produced free cash flow of $1,700,000,000 in the quarter. During the quarter, we strategically repriced our $2,300,000,000 advantage backed term loan. The repricing lowered the interest rate by nearly 300 basis points and vastly improved the amortization profile, pushing out $1,900,000,000 of amortization over the next three years into 2028. Additionally, we reduced total debt by $1,200,000,000 during the quarter.

Devon May
Devon May
CFO at American Airlines

We now have more than $10,000,000,000 in unencumbered assets and more than $13,000,000,000 in additional first lien borrowing capacity. 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 $35,000,000,000 by year end 2027. For the second quarter of twenty twenty five, we expect capacity to be up 2% to 4% year over year as we continue to build back our Northern Hubs. We remain focused on deploying profitable capacity and being nimble in response to the demand and competitive environment. 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
Devon May
CFO at American Airlines

To partially offset this, we expect long haul international and premium bookings to outperform year over year and anticipate additional progress in recovering revenue through our indirect channels. Second quarter nonfuel unit cost is expected to be up 3% to 5% year over year, which is in line with our expectations to start the year. Nearly the entirety of our year over year CASM ex increase is driven by the collective bargaining agreements that we have ratified over the past two years. 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. Based on our current demand assumptions and fuel price forecast, we expect to produce second quarter earnings of approximately $0.50 to $1 per diluted share.

Devon May
Devon May
CFO at American Airlines

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

Robert Isom
Robert Isom
CEO at American Airlines

Thank you, Devin. The travel industry is a critical engine for The US economy, generating $1,300,000,000,000 in direct spending in The US and supporting one in every 11 US jobs. With increased global travel to The US comes increased spending and investment in economic growth. Airlines are a big part of that equation, and American is proud to be the largest employer of US workers among them. Anything that spurs demand for travel, both domestically and abroad, is something we will support.

Robert Isom
Robert Isom
CEO at American Airlines

This starts with making America a welcoming destination for international travelers, especially in advance of major events like FIFA World Cup twenty six, of which were a sponsor, and later, the twenty twenty eight Olympic Games in Los Angeles. This means expanding visa free travel, lowering visa processing times, and expediting the deployment of new technologies to make travel more seamless and secure. 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. American is committed to working with the administration, regulators, and the rest of the industry to meet each of these challenges. At American, we're resilient by design.

Robert Isom
Robert Isom
CEO at American Airlines

The underlying strength of our business and balance sheet and our ability to remain nimble and adjust to the environment gives us confidence in our ability to navigate the path forward. We remain focused on delivering on our commitments and producing results for the airline and for our shareholders. And operator, you may now open the line for analyst questions.

Operator

To remove yourself from the queue, you may press 11 again. To allow everyone the opportunity to participate, you will be limited to one question and one follow-up. Please standby while we compile the Q and A roster. Our first question comes from the line of David Scott Vernon of Bernstein. Please go ahead, David.

David Vernon
MD & Senior Analyst at Bernstein

Hey. Good morning, Robert, so I guess the the first question I have for you, the the the 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 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 2H.

Robert Isom
Robert Isom
CEO at American Airlines

Thanks, David. Appreciate the question. 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.

Robert Isom
Robert Isom
CEO at American Airlines

You saw in our second quarter guide, 2% to 4% growth. As we look beyond that, there's a lot of uncertainty. Our view as we go forward is we're gonna be nimble and quick to react, size capacity to demand. But 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.

David Vernon
MD & Senior Analyst at Bernstein

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 reinvestment required in terms of recapturing some of that business share?

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

Yes. 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.

Operator

Thank you. Our next question comes from the line of Savi Syth of Raymond James. Please go ahead, Savi.

Savanthi Syth
Savanthi Syth
MD - Airlines & Advance Air Mobility at Raymond James Financial

Thank you. Good morning, everyone. I know you mentioned, you know, it it sounds like in 2Q, 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 across the four entities on how you what's in guidance in terms of performance there?

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

Sure. Thanks, Alec. It's across the entities, we're seeing strength through the summer, really, in each one. Obviously, the uncertainty and just the booking curve visibility beyond the summer is a little unclear right now, but we're seeing really 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, but, it it is, doing pretty well, Argentina is kind of the star of the show down there right now.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

And I'd also, you know, just don't wanna, finish the answer without mentioning that you you are we're still continue we have a very significant international operation in its short haul in The Caribbean, Mexico, Central America, and that's performing pretty well.

Savanthi Syth
Savanthi Syth
MD - Airlines & Advance Air Mobility at Raymond James Financial

I appreciate that. And if I could, on the domestic side, are you expecting much of a deceleration, or, you know, what's the trend into 2Q there?

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

Domestically, we remain strong in as we described in the opening remarks. Our premium bookings are terrific. Our the bookings through indirect channels are solid. Our business bookings are solid. What we're seeing, though, like the other airlines, is, you know, really significant weakness, 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.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

And, you know, that's that's where the the issue is. 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 gonna go. But, nevertheless, at at the moment, that that we're seeing weakness in those, in those cohorts.

Operator

Thank you. Our next question comes from the line of Scott Group of Wolfe Research. Please go ahead, Scott.

Scott Group
MD & Senior Analyst at Wolfe Research

Hey. Thanks. So just to follow-up there, that subset of the business that you're talking about that's, I guess, maybe domestic main cabin or indirect. What percentage of the total business is that? And if international is staying it sounds like international is positive.

Scott Group
MD & Senior Analyst at Wolfe Research

Correct me if I'm wrong. Are we seeing is this business down? Is this a high down high single digit kind of RASM right now on this more domestic main cabin part of the business?

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

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.

Scott Group
MD & Senior Analyst at Wolfe Research

Okay. And then, I guess, are we seeing any signs of that stabilize, or is it continuing to get worse? And then maybe just, like, bigger picture, you know, a year ago in q two, 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?

Robert Isom
Robert Isom
CEO at American Airlines

Hey, Scott. Just let me start with this, which is, hey, look, there's a tremendous amount of uncertainty in the environment. When we take a look at fourth quarter, tremendous amount of momentum. You go into the first quarter, January kind of came in where we had anticipated February look kind of solid. But really, March and then continue into April changed considerably.

Robert Isom
Robert Isom
CEO at American Airlines

So we're cautious about, what we're looking at in terms of forecast for the second quarter because there is so much uncertainty. It's why we pulled our guide beyond that. So as we take a look, and as Steve mentioned, premium is doing well. International seems to be holding up well. We're winning back our sales from a sales and distribution perspective.

Robert Isom
Robert Isom
CEO at American Airlines

We just don't have a lot of clarity what goes beyond, that. And even as we take a look in the summer, what we know right now, we're telling you the best what we know. And, you know, we're gonna have to see how things play out.

Operator

Thank you. Our next question comes from the line of Connor Cunningham of Melius Research.

Conor Cunningham
Director - Travel & Transports Analyst at Melius Research LLC

Just

Conor Cunningham
Director - Travel & Transports Analyst at Melius Research LLC

going back to The U. S. Domestic market, I realize this is a short term question and I hate to ask it. But 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?

Conor Cunningham
Director - Travel & Transports Analyst at Melius Research LLC

And the question the reason why I asked that is like 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.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

Sure. Thanks for the question. I I don't have specifics about how Delta and United have set up, but we believe that we are properly set up for a summer that is along the lines that I just described a moment ago, where there's significant weakness in 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, you know, all of the demand that is available, under the existing circumstances. And, obviously, those are levers that we can pull and tweak and, and and manage very carefully on a real time basis.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

We're monitoring the system, the situation, you know, very carefully, make changes every day. But I think right now, our, our our setup is is where it needs to be.

Conor Cunningham
Director - Travel & Transports Analyst at Melius Research LLC

Okay. Okay. And then, you know, you know, spent 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, you talk about the importance of rebuilding New York and Chicago in general?

Conor Cunningham
Director - Travel & Transports Analyst at Melius Research LLC

And how that correlates to this getting back the corporate share that you lost from the distribution changes in general? Thank you.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

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. Might as well just stick with Chicago.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

I mean, it's a huge market. It's a huge business market. It's our third largest hub. It's a really key part of our network. It has been profitable in the past, even as a shared hub.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

And we've been part of Chicago for ninety nine years. We have a really loyal customer base there. We have significant advantage penetration, significant co brand penetration. We've received a really positive reception from our corporate clients as we've, you know, pivoted on sales and distribution. Chicago is really important to them, and our presence there is really important to our business with them.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

Geographically, Chicago is important. It's where you know, we we it's how we take care of and connect to and and provide service to our customers in the Upper Midwest and the Great Lakes Region. It's how we connect passengers across the Northern Tier of The United States. And I can also say that that that so far, the Chicago so far, we have increased our share in Chicago, and the overall performance is, I think, going exactly in accordance with our plans. New York New York is is likewise a, you know, very important part of our network, very large market, a market that has always accommodated several airlines.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

In New York, we have a large customer and large and loyal customer base, significant advantage penetration, significant co brand penetration. And we're excited about the evolving position that we're that we're creating in New York. LaGuardia will be, you know, 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.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

At JFK, we've created a really competitive one world hub at T 8 in at the airport there. And together with LaGuardia, we and together with our JV partners, we now serve a hundred markets out of New York. We have a, you know, really significant franchise in the, transcontinental market, really significant franchise in London Heathrow, the biggest travel market in the world, I think. And we operate at a really at a two really great facilities in New York with, terrific lounge products, terrific retail. Indeed, we're reimagining the retail at JFK, and I'm I'm told there there's gonna be 60 new, stores and restaurants there as that work is completed.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

So I 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 positioning we have there.

Operator

Thank you. Our next question comes from the line of Jamie Baker of JPMorgan Securities. Please go ahead, Jamie.

Jamie Baker
Jamie Baker
Analyst at JP Morgan

Hey. Good morning, everybody.

Jamie Baker
Jamie Baker
Analyst at JP Morgan

First

Jamie Baker
Jamie Baker
Analyst at JP Morgan

one for Devin. So, you know, you're obviously not buying back stock at the moment, which is a good thing. But curious how we should think about your approach to minimum liquidity and CapEx if operating cash flow deteriorates from here. So which bucket or buckets, plural, of collateral would you consider easiest to tap given where market yields are right now?

Devon May
Devon May
CFO at American Airlines

Yeah. Well, I'll just start by saying I really like the position we're in. We ended the first quarter with $10,800,000,000 of liquidity. We have made a ton of progress on the balance sheet. We've reduced total debt by $15,000,000,000 from peak levels back in mid twenty twenty one.

Devon May
Devon May
CFO at American Airlines

We have $10,000,000,000 of unencumbered assets. We have $13,000,000,000 of first lien capacity. You know, we have really high quality first lien capacity that sits out there as well, whether it's, you know, slot gates routes or Mhmm. Advantage backed. We we feel really good about where we're at right now, and, you know, we'll see what we end up doing with it if we do really get into a downside scenario, but we're we're in a great position.

Jamie Baker
Jamie Baker
Analyst at JP Morgan

Okay. And then following on Connor's question, and it wouldn't be an American earnings call, I suppose, if I didn't ask about one of your hubs. But looking at, Chicago, it it seems that a pretty material portion of the capacity restoration is really early in the morning or pretty late at night. Can you comment on how RASM 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.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

Sure, Jamie. I mean, as you grow markets, you you particularly hub markets, you you grow them by adding banks. And so we've added banks at the beginning of the day and the end of the day. There's obviously, those are those are gonna be weaker than in the heart of the day, but but they it's cheaper to add those by just improving your asset utilization. Also, it's important to know that, you know, the first flight of the day and the last flight of the day is really important.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

And so as we think about what we where we wanna end up in Chicago, that's, that that's a big step. And, you know, ultimately, those, we expect that those banks will improve performance as, you know, we have the opportunity to to fly them and have the our customers get more, remember American, and and those will those will be better. Really important part of our local traffic offering for our Chicagoans is the banks are the first part of the day, the banks are the last part of the day. So, yeah, they're that's that's what we had always planned and what you would have expected to see.

Operator

Thank you. Our next question comes from the line of Duane Pfennigwerth of Evercore ISI. Your line is open, Duane.

Duane Pfennigwerth
Senior Managing Director at Evercore ISI

Hey, thanks. Appreciate the time. Just on the corporate share recapture, it's hard to find that in your guidance and understand it's dynamic backdrop for sure. But what would be offsetting the share recapture if you're winning back corporates from a margin and from a, I guess, implied RASM perspective?

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

Thanks. I think that you're not seeing it because it's overwhelmed by the weakness in our main cabin demand.

Robert Isom
Robert Isom
CEO at American Airlines

And Steve, I'd add to that. Our government business is falling off considerably as So that would add to it as well.

Duane Pfennigwerth
Senior Managing Director at Evercore ISI

Okay. And then apologies, I really don't want to ask another Chicago question, but I'll venture down the path. Again, might be hard to parse in this backdrop, 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. Can you just help us size the relative benefit in Charlotte from a RASM and margin perspective versus the relative investment in Chicago? And I guess when are we done?

Duane Pfennigwerth
Senior Managing Director at Evercore ISI

What inning are we in of that rebuild in Chicago? Thank you.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

A baseball question again. What what the what inning are we in in the rebuild of Chicago? I think it's right now, like, maybe the fourth inning, I think, about right. Fourth or fifth inning, something like that. And our strategy to grow Chicago didn't have anything to do with our strategy in Charlotte.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

You know? Chicago was a place that that is a place that we have been very successful in the past. We took down our Chicago operation during the pandemic. As we we grew our operation after the pandemic, we deployed our assets in the places where demand was the strongest first. Chicago just, you know, was slower to to rebound, but now we're focused on rebuilding the position that we've traditionally had in Chicago.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

We understand that we'll probably always be second place in Chicago, but that's been, you know, a very effective means to serve our customers, profitable, and a 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 in Charlotte, you know, we our our strategy there is to continue to be as large in Charlotte as we can operate. It's, you know, very efficient, very geographically well placed hub, very low cost for for purposes of connecting. But, we are, you know, close to capacity, at that airport, and so we're just not in a position at least right now to grow it any further.

Operator

Thank you. Our next question comes from the line of Catherine O'Brien of Goldman Sachs. Please go ahead, Catherine.

Catherine O'Brien
Catherine O'Brien
Analyst at Goldman Sachs

Hey. Good morning, everyone. Thanks so much for the time. Maybe just one more on the 2Q revenue guidance, if you allow it. Steve, I think you were talking about you're expecting to see momentum in international through the summer.

Catherine O'Brien
Catherine O'Brien
Analyst at Goldman Sachs

That's looking strong, offsetting some of that being cabin. So I guess underlying your revenue guidance, are you expecting each international geography to see PRASM improve relative to its 1Q performance and the D cell is all domestic, or have I got that scrambled?

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

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, compare second quarter performance to first quarter performance just because the demand is so different. But I would just say sequentially strong, still positive. If you if what you're asking is, 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 decelerating a little bit, but still strong, and, again, fueled by really strong premium demand, really strong demand for, the premium cabins.

Catherine O'Brien
Catherine O'Brien
Analyst at Goldman Sachs

Understood. Thanks. And and, maybe one for Devin. You guys understandably pulled full year EPS in this very uncertain backdrop, you know there's downside bias to your capacity outlook. But if you wind up growing low single digits, as was your plan back in January, are you still thinking CASM would be up mid singles?

Catherine O'Brien
Catherine O'Brien
Analyst at Goldman Sachs

Or or with the incremental cost savings you highlighted earlier, could could you do better than that? Thanks for the time.

Devon May
Devon May
CFO at American Airlines

No. I I think if our 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. I'd just say that we're best in the business at managing costs both near term and also driving efficiencies over the long term that are 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.

Devon May
Devon May
CFO at American Airlines

On the other side, if we do pull capacity, I think we're gonna be really effective in managing costs out as well.

Operator

Thank you. Our next question comes from the line of Steven Trent of Citi. Please go ahead, Steven.

Steve Trent
Steve Trent
Managing Director at Citi

Good morning, everybody. And thanks for taking my question. First, I I was kind of curious when we think about 2026, I know it seems like an eternity from now. But looking at sort of the World Cup event on the horizon, would you guys expect any flux vis a vis what we saw in the Transatlantic for the Paris Olympics last year? Or do you guys have a, let's say, a relative advantage versus other peers because of a high US point of sale?

Steve Trent
Steve Trent
Managing Director at Citi

Thank you.

Robert Isom
Robert Isom
CEO at American Airlines

Hey, Steven. Thanks. No, hey, we're really proud to be a sponsor along with our partner Qatar. It's the, largest sporting event in the world, and it's, unique in that it is spread out, across The United States, Canada, and Mexico. And American is the strongest, carrier in all of the host city, or in the vast majority of the host cities.

Robert Isom
Robert Isom
CEO at American Airlines

So we're really proud to be the title sponsor. But I tell you, this is an event that's very different than the Olympics. It's all concentrated in one city, 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 it will have an impact on the other business that goes into these cities, namely because it's spread out and because it will be something that is such a focus. So tremendously excited.

Robert Isom
Robert Isom
CEO at American Airlines

Americans, glad to be at the top of that, and it's just another indication of us building for the future.

Steve Trent
Steve Trent
Managing Director at Citi

Okay. Super, Robert. Really appreciate that. And just as a quick follow-up to that, could you sort of refresh my memory approximately where is your the percentage of U. S.

Steve Trent
Steve Trent
Managing Director at Citi

Point of sale for your international?

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

We about 75% of our international is sold in US as US point of sale.

Operator

Thank you. Our next question comes from the line of Ravi Shanker of Morgan Stanley. Your line is open, Ravi.

Ravi Shankar
Ravi Shankar
ED - Institutional Equity Sales at Morgan Stanley

Great. Thanks. Good morning, everyone. Just a follow-up on the normalization of share in indirect distribution and corporate. How macro sensitive or agnostic is that share recovery?

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

That's a really good question. 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.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

So I you know, it remains it's right now, it doesn't seem to be macro sensitive. I suppose it remains to be seen, but but right now, 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 fingers crossed, it's going in the right direction and, you know, really positive part of our revenue effort at this point in time.

Ravi Shankar
Ravi Shankar
ED - Institutional Equity Sales at Morgan Stanley

That's helpful. And maybe as a follow-up, apologies if I missed this, but, can you talk about, book away, following the tragic accident and whether or not that has normalized since?

Robert Isom
Robert Isom
CEO at American Airlines

I can. Look, 05/2002, 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.

Operator

Thank you. Our next question comes from Michael Linenberg of Deutsche Bank. Please go ahead, Michael.

Michael Linenberg
Michael Linenberg
Analyst at Deutsche Bank

Yes. Hey, good morning, everyone. Hey, I just want to go back with Steve. You talked about corporate trending up or being up. I mean, if we look at managed business revenue, that was up 8% in the March.

Michael Linenberg
Michael Linenberg
Analyst at Deutsche Bank

Based on what you're seeing now and the fact that you also have a fairly easy comp because of the sort of 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 that managed business revenue will be better than up 8% given kind of the underlying kind of factors that I just mentioned?

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

Thanks. As I look out, what 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 share, not absolute. So I'd say as long as the economy continues to support business traffic, we're going to continue to grow business traffic in the second quarter. Okay.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

Great. And we should grow it faster than than the other airlines because of our, distribute because of the progress of our distribution efforts.

Michael Linenberg
Michael Linenberg
Analyst at Deutsche Bank

Okay. Great. And then just a second question here. Obviously, there's it seems like there's a lot of movement around with respect to the real estate in Chicago. If we think about your gate 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 on a I mean, 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.

Michael Linenberg
Michael Linenberg
Analyst at Deutsche Bank

So on

Michael Linenberg
Michael Linenberg
Analyst at Deutsche Bank

a net

Michael Linenberg
Michael Linenberg
Analyst at Deutsche Bank

basis, what happens to your gate position in Chicago? Are you down? Or are you flat? Any color there would be great. Thank you.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

Sure. Yes. Thanks. I mean, first off, as I think you saw, we're we disagree with the airports and the city of Chicago's determination on that, and we're appealing that decision, that would have, Gates be reallocated during, 2025. That said, it's gonna take a while to sort that out, I I I expect.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

And and, you know, to the extent that it's not sorted out by October when the new, regime would go into place, I think we're in we we feel like we're in good shape. Remember, we're growing Chicago back, and I 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, to benefit from the reallocation of gates that's gonna take place again next February and March.

Operator

Thank you. Our next question comes from the line of Andrew Didora of Bank of America. Please go ahead, Andrew.

Andrew Didora
Andrew Didora
Senior Equity Research Analyst at Bank of America Merrill Lynch

Hi, good morning, everyone. Most of my questions around certainly 2Q have been asked and answered. But just one question from me for Devin. On the sub-thirty $5,000,000,000 of debt by the end of twenty twenty seven, 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.

Devon May
Devon May
CFO at American Airlines

Sure.

Devon May
Devon May
CFO at American Airlines

I'll just start by saying we are committed to reducing total debt to under $35,000,000,000 at the end of twenty twenty seven. And 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. When we think about liquidity, you know, right now, we're holding $10,800,000,000. 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.

Devon May
Devon May
CFO at American Airlines

During this uncertain time, we're gonna, you know, continue to hold right around this $10,000,000,000 mark, but that is likely to change over time as we expand margins and improve the balance sheet.

Andrew Didora
Andrew Didora
Senior Equity Research Analyst at Bank of America Merrill Lynch

That's all I had. Thank you.

Operator

Thank you. Our next question comes from the line of Tom Fitzgerald of TD Cowen. Your question please, Tom.

Thomas Fitzgerald
Analyst at TD Cowen

Hi, everyone. Thanks so much for the time. I'm just kind of curious on corporate generally, both large managed accounts and the small and medium sized enterprises, if there's any pockets of green shoots or any sectors that demand is looking a little more resilient than some of the sectors like autos or agriculture that we hear about on the news?

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

Thanks for the question. 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, we're it all looks pretty vibrant. We may be look 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.

Thomas Fitzgerald
Analyst at TD Cowen

Okay. That's that's really helpful. And then just, you know, going back to the the topic about, international travel and cross border flows, what have your conversations been like with your government relations team or your contacts in D. C. About conveying the importance of smooth cross border flows to policymakers?

Thomas Fitzgerald
Analyst at TD Cowen

Thanks again for the time.

Robert Isom
Robert Isom
CEO at American Airlines

No, I appreciate the question. Travel is incredibly important to The US. And I think people are aware that almost one in 11 jobs is tied to travel. Dollars 1,300,000,000,000.0 of direct spending, dollars 2,900,000,000,000.0 of overall spending related outside of direct. This is an incredibly important sector to our economy, And we have to make, this something that is, the cornerstone of infrastructure.

Robert Isom
Robert Isom
CEO at American Airlines

And that starts with not only doing, the work we can domestically, but also making the country a welcoming place. And as we work with the administration, just overall reducing concerns about certainty, we're also getting ready for where we should be. And that means making sure visa wait times are very, very limited. That means that we open up travel without visa opportunities. That means that we work with the administration on safe and secure so that when you come to one of our ports that it's easy to get into and you feel like it's a process that's not cumbersome.

Robert Isom
Robert Isom
CEO at American Airlines

And then ultimately, we look to the future of making sure that the 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 over several years.

Operator

Thank you. Ladies and gentlemen, at this time, the Q and A session is open for media questions. As a reminder, to ask a question, please press 11 on your telephone. To remove yourself from the queue, you may press 11 again. You will be limited to one question and one follow-up.

Operator

We are open for media questions. Our first question comes from the line of Allison Sider of Wall Street Journal. Your line is open, Allison.

Alison Sider
Reporter at Wall Street Journal

Hi. Thanks so much. I guess just wanted to ask a broad question on the economy. And just curious, Robert, like, you what are you expecting? Do you expect The US economy to sort of tip into a recession?

Alison Sider
Reporter at Wall Street Journal

And kind of what are you watching or keeping an eye on to gauge whether that's happening?

Robert Isom
Robert Isom
CEO at American Airlines

Hey, Ali, thanks. Right now, there's uncertainty in the marketplace. I know we you've heard that that over and over again, but it's no different in, you know, our planning process than it is for, you know, a domestic leisure passenger. 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 as we take a look out to to the rest of the year.

Robert Isom
Robert Isom
CEO at American Airlines

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 a reduction in overall of economic activity. Same thing for the customer that's planning a vacation.

Robert Isom
Robert Isom
CEO at American Airlines

Nobody nobody really, you know, relishes uncertainty when they're talking about what people do on a vacation and and and spend hard earned dollars. 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. All that said, though, we have to be ready no matter the environment. And American is incredibly well positioned if uncertainty lasts quite a long time.

Robert Isom
Robert Isom
CEO at American Airlines

Devin 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 refleeted the airline in a period of much greater certainty with 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.

Robert Isom
Robert Isom
CEO at American Airlines

And we're ready for that. The investments that we're making, you heard some of of what we talked about in terms of building back our network. But on top of that, it's it's also worth a focus on on customer experience. The customer experience is everything from, you know, new flagship suites to Philadelphia flagship lounge and free Wi Fi, coming with through partnership with AT and 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.

Robert Isom
Robert Isom
CEO at American Airlines

So we're on both sides of it. Been in this business for thirty years and have gone through everything from SARS to, obviously, COVID and nineeleven and Great Recession and everything in between. We have a leadership team here that is better prepared, experienced. And also from what I see this airline throughout my entire career going into any type of better position than I've ever been.

Alison Sider
Reporter at Wall Street Journal

Thanks.

Operator

I'm sorry. Our next question comes from the line of Mary Schlangenstein of Bloomberg News. Your line is open, Mary.

Mary Schlangenstein
Correspondent Covering Airlines at Bloomberg News

Thank you. I wanted to ask if you could address the issue of tariffs, whether you plan to pay the tariffs on any Airbus deliveries and the impact that you expect from tariffs both on aircraft and on parts? And then secondly, you just mentioned, Robert, manpower in this uncertain environment. I'm wondering if you've already frozen hiring for the rest of the year or taken any steps in that direction.

Robert Isom
Robert Isom
CEO at American Airlines

Hey, Mary. I appreciate the question. So first off, aircraft cost too much already. I don't want to pay any more for aircraft. It doesn't make sense.

Robert Isom
Robert Isom
CEO at American Airlines

And certainly, we're pulling guidance. Certainly, is not something we would intend to absorb. And I'll tell you, it's not something that I would expect our customers to welcome. So we've got to work on this. We fortunately don't have any near term deliveries.

Robert Isom
Robert Isom
CEO at American Airlines

We have deliveries at the end of the year that would be potentially subject to tariffs, the three twenty one XLRs that are built over in Europe. But I would tell you, we've got to do some work before then. And from an overall perspective, I would tell you there's good reason to do something in regard to aviation, civil aviation. Because since 1979, we've operated under a tariff regime that has been zero for zero. No tariffs in and no tariffs purchasing out.

Robert Isom
Robert Isom
CEO at American Airlines

That's worked very well for civil aviation. And by that, I mean everything from aircraft to engines and to parts as well. That framework has led to an industry, a sector that has produced the largest level of exports, the largest level of surplus of any industry. And so I know that that's where we wanna end up. Now, there may be changes to 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.

Robert Isom
Robert Isom
CEO at American Airlines

We're part of that. We ultimately operate these aircraft. 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. Now, in regard to questions about our people, right now, we are planning for the peak of our schedule. And so we're getting ready for that.

Robert Isom
Robert Isom
CEO at American Airlines

As we take a look into the fall, it's generally not a time where we do a lot of hiring. But we're very focused on that. Right now, we don't quite know exactly where, we'll end up in capacity at the end of the year. And, that's certainly, coloring our views of 2026 as well. So stay tuned on that.

Robert Isom
Robert Isom
CEO at American Airlines

Right now, we're taking a very cautious approach, we're going be nimble depending on what we see in the environment.

Operator

Thank you. Our next question comes from the line of Leslie Josephs of CNBC. Please go ahead, Leslie.

Leslie Josephs
Airline Reporter at CNBC

Hi, everyone. Thanks for taking my questions. Just wondering if you're seeing any gained market share in the Dallas area since your competitor announced 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?

Leslie Josephs
Airline Reporter at CNBC

And are there any geographies that you're seeing are doing worse or better? I'm seeing 708 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.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

Leslie, hi, thanks. It's Steve. First on the DFW question, we have a great product. It's in DFW. It's our largest hub with fantastic penetration for our frequent flyer program, fantastic number of co brand cardholders.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

We're going to operate the largest operation at DFW in history this summer. So we're really well positioned to compete. We've competed with Southwest, you know, through thick and thin over the last forty years very successfully. We recognize that they've, you know, made a very significant change in their business model. We saw that they reported some good numbers yesterday, but, you know, we're prepared to compete with them, and DFW is is our favorite place to compete with them.

Steve Johnson
Steve Johnson
VC & CSO at American Airlines

With respect to demand, I I just reiterate what I said earlier is that what we're seeing is, you know, strength in the premium cabin, strength in long haul international, strength in bookings through indirect channels, you know, through travel agencies, and pretty significant weakness in, you know, the the the part of our business that is, you know, that's very sensitive to economic conditions, that is super price sensitive, or that is you know, for whom travel is really discretionary, that tends to be are the main cabin, and that's that is weak. And 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 gonna continue to be the case, until we understand where you know, which direction the economy is going and and, we remove some of this uncertainty and some of that demand comes off the sidelines.

Operator

This concludes the q and a portion of the call. I would now like to turn the conference back to Robert Isom for closing remarks. Sir?

Robert Isom
Robert Isom
CEO at American Airlines

Thanks, Latif. 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 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.

Robert Isom
Robert Isom
CEO at American Airlines

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. No matter the environment, American is well positioned. From a prolonged period of uncertainty, we're ready for it. As I've said before, we have a balance sheet, exemplary cost management, a fleet that is ready and incredibly flexible, a team that is experienced to handle whatever may come our way.

Robert Isom
Robert Isom
CEO at American Airlines

Over the long run, travel comes back, people want to travel, and American is well prepared for that as well. We have a renewed focus on customer experience. 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.

Robert Isom
Robert Isom
CEO at American Airlines

American is 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 of operating with excellence, of ensuring that we treat our customers right, working, to expand our industry leading loyalty program and partnering with Citi, delivering on our full revenue potential, and continuing to reengineer the business, it will enable us, to get back to growing 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.

Operator

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

Analysts
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Key Takeaways

  • American has withdrawn its full-year outlook due to macroeconomic uncertainty but still expects a profitable year and positive free cash flow if current demand trends persist, underpinned by a strong balance sheet and cost management.
  • In Q1, unit revenue rose 0.7% year-over-year, leading the industry, with Atlantic passenger RASM up 10.5%, Pacific up 4.9% and Latin short-haul returning to growth, while domestic RASM fell 0.7%.
  • The airline has achieved $500 million in cost savings in 2024 and targets another $250 million in 2025 for >$750 million cumulative savings, reduced net debt to its lowest level since 2015, and ended Q1 with $10.8 billion of liquidity and $1.7 billion of free cash flow.
  • Q2 guidance calls for capacity up 2–4%, revenue down 2% to up 1%, nonfuel CASM up 3–5%, and earnings of $0.50–$1.00 per share, with plans to remain nimble on capacity deployment and biased toward moderation if demand weakens.
  • To boost the customer experience, American has formed a new customer experience organization, will offer complimentary high-speed Wi-Fi to Advantage members in 2026, introduce new flagship suites on B787-9 and A321XLR aircraft, and expand its premium lounge network.
A.I. generated. May contain errors.
Earnings Conference Call
American Airlines Group Q1 2025
00:00 / 00:00

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