Title

Presentation

American Airlines Group Inc. beats earnings expectations. Reported EPS is $-0.59, expectations were $-0.69.

Operator: Thank you for standing by, and welcome to American Airlines Group’s First Quarter 2025 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 ask a question during the session, you will need to press star one one on your telephone. I would now like to hand the call over to Gabriel Jackson, Managing Director of Investor Relations. Please go ahead.

Gabriel Jackson: Thank you, Latif. Good morning, and welcome to the American Airlines Group First Quarter 2025 Earnings Conference Call. On the call with prepared remarks, we have our CEO, Robert Isom, and our CFO, Devon May. In addition to our Vice Chair, Steve Johnson, we have a number of our senior executives in the room this morning for the Q&A session. Robert will follow up with an overview of our performance, and Devon will follow with details on the first quarter in addition to outlining our operating plan 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, cost, forecast of capacity, and fleet plans. These statements represent our predictions and expectations of future events, but numerous risks and uncertainties could cause actual results to differ from those projected. 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-K for the year ended December 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. 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: 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 Airlines Group’s first quarter results and second quarter outlook. 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 Airlines Group, we have the foundational strength, resilience, team, and financial and operating flexibility to navigate the current environment.

The work we have done 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. 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 million of cumulative cost savings as we exit 2025. We’ve utilized our free cash flow to strengthen the balance sheet. At the end of the first quarter, we had our lowest net debt level since the end of 2015, while simultaneously taking action to smooth our debt maturity obligations going forward.

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, 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 Airlines Group. As we move forward, we remain committed to delivering on our long-term growing margins, generating sustainable free cash flow, and further strengthening our balance sheet. Now onto 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. We estimate the impact of American Eagle flight 5342 reduced first quarter revenue by approximately $200 million. 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, especially consumer spending on air travel, decelerated throughout the quarter.

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. 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 Airlines Group 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. 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, 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 Airlines Group 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. 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&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 Airlines Group 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 787-9, and we look forward to the rollout of this product on our new Airbus A321XLR aircraft. These deliveries, along with the planned refresh of existing seats, are expected to grow American Airlines Group’s lie-flat and premium economy seating by approximately 50% by the end of the decade. Additionally, American Airlines Group 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 touchpoints to 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, and just this week, we introduced a new redesigned mobile app to further enhance customer interactions and self-service options. Turning now to our operation. During the first quarter, the American Airlines Group 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 5342 on January 29th. 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 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 US government, and we’re encouraged by the collective commitment to make the US aviation system even safer going forward. Now I’ll turn the call over to Devon to share more about our first quarter financial results and second quarter outlook.

Devon May: Thank you, Robert. This morning, American Airlines Group reported a first quarter GAAP net loss of $473 million. Excluding special items, we reported a first quarter net loss of $386 million, an adjusted loss of $0.59 per diluted share. We produced first quarter revenue of $12.6 billion, 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. 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 million of cost savings in 2025, on top of the $500 million achieved last year.

We also expect an additional $100 million of working capital cash release, bringing our total improvement in working capital to approximately $550 million over the past three years. We continue to see improvements in the productivity of our team and expect mainline full-time employee accounts 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. Based on our current expectations for new deliveries, our 2025 aircraft CapEx, which also includes used aircraft purchases, spare engines, and net PDPs, is expected to be between $2 billion and $2.5 billion, and our total CapEx is expected to be between $3 billion and $3.5 billion. We continue to expect moderate levels of CapEx moving forward, with aircraft CapEx averaging approximately $3.5 billion for the remainder of the decade.

We ended the first quarter with $10.8 billion of total available liquidity, and we produced free cash flow of $1.7 billion in the quarter. During the quarter, we strategically repriced our $2.3 billion Advantage-backed term loan. The repricing lowered the interest rate by nearly 300 basis points and vastly improved the amortization profile, pushing out $1.9 billion of amortization over the next three years into 2028. Additionally, we reduced total debt by $1.2 billion during the quarter. We now have more than $10 billion in unencumbered assets and more than $13 billion 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 billion by year-end 2027.

For the second quarter of 2025, 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. 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 non-fuel 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 $1.00 per diluted share. I’ll now turn the call back to Robert for closing remarks.

Robert Isom: Thank you, Devon. The travel industry is a critical engine for the US economy, generating $1.3 trillion in direct spending in the US and supporting one in every eleven 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 Airlines Group 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. This starts with making America a welcoming destination for international travelers, especially in advance of major events like the FIFA World Cup 2026, of which we’re a sponsor, and later, the 2028 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 Airlines Group is committed to working with the administration, regulators, and the rest of the industry to meet each of these challenges. At American Airlines Group, we’re resilient by design. 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.

Operator, you may now open the line for analyst questions.

Operator: You will be limited to one question and one follow-up. Please standby while we compile the Q&A roster. Our first question comes from the line of David Scott Vernon of Bernstein. Please go ahead, David.

David Scott Vernon: Good morning, guys. Robert, so I guess the first question I have for you is 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?

Robert Isom: Mean, clearly, with the financial leverage of the business, you know, I’m sure this is something you guys are looking at. It just like to hear from you kinda what you’re thinking about on the capacity front as we look at two h.

Robert Isom: Thanks, David. Appreciate the question. What we’ve done is obviously pulled our guidance. We’ve we more or less have our capacity plan set, for the summer. We plan on on flying that. You saw in our in our second quarter guide, two to four percent growth. We look beyond that, there’s a lot of uncertainty Our view as as we go forward is we’re gonna be nimble and quick to react. Size demand sized capacity to 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 you know, as as as time develops in the the next several weeks, month, and we’ll have more to talk about on that on future earnings calls.

David Scott Vernon: Alright. May maybe just as a follow-up, as you think about the 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 of recapturing some of that, the business share. Yeah. Thanks for the question. This is Steve.

Steve Johnson: It’s 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.

Savi Syth: Thank you. Good morning, everyone. I know you mentioned it sounds like in 2Q, you’re expecting kind of international in premium to continue leading the way. But I was curious if you can provide a little bit more color across the four entities on on how you you know, what’s in guidance in terms of performance there?

Steve Johnson: Sure. Thanks, Alek. It’s a across the entities. We’re seeing strength through the summer. Really, in each one. Obviously, with with the uncertainty and and just the booking curve visibility beyond the summer’s a little unclear right now, but we’re seeing really, you know, very good strength in our Heathrow and Europe operation. Strength in the North Pacific, strength in the South Pacific, you know, South America to South America, but it it is doing pretty well. And Argentina is kind of the star of the show down there right now. And it also you know, just don’t wanna finish the answer without mentioning that you you know our 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.

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

Steve Johnson: Domestically, you know, we remain strong in 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, 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, 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’s 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: K. Thanks. So just to follow-up there, that that subset of the business that you’re talking about that’s I guess, maybe domestic, main cabin, or indirect. What percentage of the of the total business is that end I if international is staying it sounds like international is positive. If know, correct me if I’m wrong. Like,

Steve Johnson: Right.

Scott Group: 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: Domestic main cabin is weak, and that’s what’s driving, I think, the the overall demand numbers that you’re seeing and the and the weakness in the in the in the the reports. Right? I think I 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: 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 pick you a year ago in q two, I you guys do underperformed on RASM and we heard about well, 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: Hey, Scott. I just let me let me start with this, which is look. There’s a tremendous amount of uncertainty in the environment. We take a look at fourth quarter, tremendous amount of momentum. You go into the first quarter. January kinda came in where we had anticipated. February looked kinda kinda solid. But, really, March and then continuing to April, you know, changed considerably. So we’re cautious about what we’re looking at in terms of of forecast for second quarter. Because there is so so much uncertainty. And it’s why we pulled the our guide beyond that So as we take a look and as Steve mentioned, premium is doing well. International We’re winning back our sales in in in from a sales and distribution perspective. We just don’t have a lot of clarity what goes beyond that. And even as we take a look in to to 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. Please go ahead, Connor.

Connor Cunningham: Hi, everyone. Thank you. Just going back to the US domestic market, I 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? 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 general? Thank you.

Steve Johnson: Sure. Thanks for the question. I I well, 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, you know, along the lines that I just described a moment ago where there’s, you know, 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 a real time basis. 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.

Connor Cunningham: Okay.

Steve Johnson: Okay. And then, you know, you know, I’d spent a lot of time on their call talking about share shift

Connor Cunningham: in Chicago. And, you know, I’m just trying to understand from your corporate

Steve Johnson: travel expectation as you exit this year.

Connor Cunningham: Like, can you talk about the importance of rebuilding New York

Steve Johnson: in Chicago in general and, you know, how that correlates to to these getting back the the corporate share that you lost from the distribution changes in general. Thank you.

Steve Johnson: Sure. Sure. A a a big complicated question, but let me try to unpack it. First first, if United is gaining share in Chicago, they’re gaining it from somebody other than us. So let’s start there. But and might as well just stick with Chicago. I mean, it’s a it’s a huge market. It’s a huge business. Market. It’s, you know, our third largest hub. It’s a really key part of our network. It has been, you know, profitable in the past. Even as a shared hub. And, you know, 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 you know, pivoted on sales and distribution.

Chicago’s really important to them, and our presence there is really important to our business with them. 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 is New York is is is likewise a, you know, very important part of our network very large market, a market that has always accommodated several airlines. We in New York, we have a large customer and large and loyal customer base.

Significant advantage penetration, significant co brand penetration. And we’re we’re excited about the evolving position that we’re that we’re creating in New York. Lagarde 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 the the halo effect that that New York has. At JFK, we’ve created a really competitive one world hub at t eight in at the airport there. And together with LaGuardia, we and together with our JB partners, we now serve a hundred markets out of New York. We have a 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 we still we’re reimagining the retail at JFK, and I’m told there there’s gonna be sixty new stores and restaurants there as that work is completed. So I we’re evolving in New York. We’re adapting in New York. We’re obviously constrained in New York by spots, but we’re, I think, really happy with 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: Hey, good morning, everybody. First one for Devin. So you know, you’re obviously not buying back stock at the moment, which is, you know, a a 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 which, you know, bucket or buckets, plural, of collateral would you consider easiest to tap given where market yields are right now?

Devon May: Yeah. Well, I’ll I’ll just start by saying I really like the position we’re in. You know, we ended the first quarter with ten point eight billion dollars of liquidity. We have made a ton of progress on the balance sheet. We’ve reduced total debt by fifteen billion dollars from peak levels back in mid twenty twenty one. We have billion dollars of unencumbered assets. We have thirteen billion dollars of first lien capacity. You know, we have really high quality first lien capacity. It’s it’s 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 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: 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. I Can you comment on how RASM you know, sort of at the edges of the workday, however you define that, compares to that of I don’t know. Daylight hours for lack of a better term. Although, I suppose that’s not a good term for the summer. But you get the idea. Yeah.

Steve Johnson: 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 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 slide of the day and the last slide of the day is really important. And so as we think about what we where we wanna end up and 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, and the banks for 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 Dwayne Fenigwerth of Evercore ISI. Your line is open, Dwayne.

Dwayne Fenigwerth: Hey. Hey. Thanks. Appreciate the time. Just just on the corporate share recapture, it’s hard to find that in your guidance and understand it’s a it’s a dynamic back drop for sure. But you know, what would be offsetting this share recapture if you’re winning back corporates?

Steve Johnson: From a margin and from a, I guess, implied, you know, RASM perspective. Thanks. I I think that you’re not seeing it because it’s it’s overwhelmed by the weakness in our main cabin demand.

Robert Isom: And, Steve, I’d I’d add to that. Our government business is Yeah. Is falling off considerably as well. So that would add to it as well.

Dwayne Fenigwerth: Okay. And then apologies. I I really don’t wanna ask another Chicago question, but I’ll but I’ll I’ll venture down the path. Again, it might be hard to parse in this backdrop But can you contrast, you know, 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 you know, help us size you know, the the relative benefit in Charlotte from a RASM and margin perspective versus, you know, the relative investment in Chicago. And I guess, when are we done? What what inning are we in of that rebuild in Chicago? Thank you. A baseball question again. What what the what inning are we in in the rebuild of Chicago?

It’s right now, like, maybe the fourth inning, I think, is 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. You know? It 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. We understand that we’ll probably always be second place in Chicago, but that’s been you know, a very effective, and it means to serve our customers.

Profitable, and a 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’ve our our strategy there is to continue to be as large in Charlotte as we can operate. It’s a, 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: Hey. Good morning, everyone. Thanks so much for the time. 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 in international through the summer. That’s looking strong, often with that being cabin. So I guess underlying your revenue guidance, are you expecting each international geography to see PRASM improve relative to its one q performance and and the desal is all domestic or or have I got that scrambled?

Steve Johnson: The I I I think what we are seeing is solid performance in the long haul international markets that is you know, improved year over year. It’s hard to I think, to compare second quarter performance to first quarter performance because, you know, the demand’s so different. But I would just say sequentially strong. It’s 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 it’s 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: Understood. Thanks. And and maybe one for Devin. You guys understandably pulled for your EPS in this very uncertain backdrop and and, 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, you still thinking CASM would be up mid singles, or or would the incremental cost save you highlighted earlier, could could you do better than that? Thanks for the time.

Devon May: I I think if our 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. Just say that we’re best in the business at managing cost in the long 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. 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.

Steven Trent: Good morning, everybody. And thanks for taking my question. First, I I was kind of curious. When we think about twenty twenty six, 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 you know, vis a vis what we saw in the transatlantic for the the Paris Olympics last year. Or do you guys have a, like, say, a relative advantage versus other peers because of a a high US point of sale? Thank you.

Robert Isom: Hey, Steven. Thanks. No. Hey. We’re really proud to to be a sponsor along with our partner, Qatar. It’s the largest sporting event in in in the world, and it’s unique in that it is spread out across the United States. Canada, and Mexico, and American Airlines Group is the strongest carrier in all of the host sit or in the vast majority of the host cities. So we’re really we’re really proud to be the title sponsor. I tell you, this is an event that’s that’s very different than the Olympics. It’s all concentrated in one city, you know, all at one time, that actually, in some cases, can 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 know, such a a focus.

So tremendous excited. Americans are glad to be at the top of that, and it’s just another indication of us building for the future.

Steven Trent: Okay. Super, Robert. Really appreciate that. And just as a quick follow-up to that, can you sort of refresh my memory approximately where is your the percentage of US point of sale for your international?

Steve Johnson: We we about seventy five percent of our international is sold in US as US point of sale.

Operator: Thank you. Next question. Comes from the line of Ravi Shanker of Morgan Stanley. Your line is open there, Ravi.

Ravi Shanker: Good morning, thanks. Good morning, everyone. Just a follow-up on the normalization of share. It indirect distribution and corporate. How much macro sensitive or agnostic is that share recovery?

Steve Johnson: That’s a really good question. It it is share, first of all. So it’s it it’s it’s not abs absolute numbers. But we’re you know, at this period of uncertainty, we’re seeing that share build very nicely. And with that and and we’re not hearing anecdotally about reduced travel. Our business travel is up overall, as Robert said in his opening remarks. So I you know, it it remains it right now, it doesn’t seem to be macro sensitive. I suppose it remains to be seen, but but right now, business traffic seems strong. Our share is growing. We’re getting a lot of positive feedback with respect to our new sales and distribution efforts. So fingers crossed, it’s it’s it’s going in the right direction and, you know, really positive part of the our of our revenue effort at this point in time.

Ravi Shanker: That’s helpful. And maybe as a follow-up, apologies if I missed this. But can you talk about Book of Bay following the tragic accident accident and whether or not that has normalized sense.

Robert Isom: I I I can’t. It’s it’s look. The five fifty three forty two, as I said in my remarks, it had an impact in in the first quarter, had a material impact in in the first quarter. But that’s largely been something that is unique to that quarter. And as we take a look to the 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: Oh, yeah. Hey. Good morning, everyone. Hey. I just wanna go back with Steve. You talked about corporate you know, trending up for being up. I mean, if we look at managed business revenue, that was up eight percent in the March quarter. Based on what you’re seeing now, and the fact that you also have a fairly easy comp, because of you know, 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 quarter? That managed business revenue will be better than up eight percent? Given kind of the the underlying kind of the factors that I just mentioned.

Steve Johnson: Thanks. As I look out, what I expect is that we’re gonna continue to grow our share in the in the second quarter. Remember, again, as I said a moment ago, that’s share, not absolute. So I’d say, you know, as long as the economy continues to support business traffic, we’re gonna continue to grow business traffic in the second quarter.

Michael Linenberg: Okay. Great. And and we should grow it faster than than the other airlines because of our

Steve Johnson: distribute because of that progress of our distribution efforts.

Michael Linenberg: Okay. Great. And then just a 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 and where we are know, over the next you know, call it six months or so as gates are reallocated Where are you on a on a net basis on a, you know, I mean, I think it’s been reported that you lose Gates but then there’s the offset or there’s the opportunity to use common use gates So on a net basis, what what what happens to your gate position in Chicago? Are you down or are you flat Any color there would be. Thank you.

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

Operator: Our next question comes from the line of Andrew D’Dora of Bank of America. Please go ahead, Andrew.

Andrew D’Dora: Hi. Good morning, everyone. Most of my questions around, certainly, 2Q have been, asked and answered, but Josh, one question for me for for Devin. On the sub thirty five billion dollars of debt by the end of twenty twenty seven. Just curious what you are assuming for liquidity over that time frame as you know, I know you have a a lot of debt coming due, you know, over the next few years. So just curious how you how you’re thinking about liquidity. Thank you.

Devon May: Sure. I I’ll just start by saying we are committed to reducing total debts under thirty five billion 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 ten point eight billion dollars We’ve talked that over time, as we continue to improve the balance sheet, we would expect our levels of liquidity to come down slightly. During this uncertain time, we’re gonna, you know, continue to hold right around this ten billion dollar mark, but that is likely to change over time as we expand margins and improve the balance sheet.

Andrew D’Dora: That’s all I had. Thank you.

Operator: Thank you. Our next question comes from the line of Tom Fitzgerald with of TD Cohen. Your question please, Tom.

Tom Fitzgerald: Hi, everyone. Thanks so much for the time. I’m just kinda curious on corporate generally both you know, large manage managed accounts and the small, and medium sized enterprises. If if there’s any pockets of green shoots or in any sectors that are demand is looking a little more resilient than some of the sectors like autos or agriculture that we hear about on the news,

Steve Johnson: Thanks for the question. I you know, we are not seeing any know, real pullback in business travel at this point across the board. You know, that may come later. It’d be economy continues to deteriorate. But but right now, we’re you know, our it all looks pretty vibrant. We we maybe look you know, have a better position to look in terms of in terms of improvement because of our sales distribution recovery efforts. But right now, business travel looks good across the board.

Tom Fitzgerald: Okay. That’s that’s really helpful. And then just you know, going back to the the topic about know, international travel and cross cross border flows, What have your conversations been like, you know, with your government relations team or your contacts in in in DC about conveying the importance of smooth cross border flows to policy makers. Thanks again for the time.

Robert Isom: No. I appreciate the question. Travel is incredibly important to to to the US. And I think people are aware that almost one in eleven jobs is tied to to travel. One point three trillion dollars of direct spending, two point nine trillion dollars of of overall spending in in in related outside of direct. This is an incredibly important sector to our to our economy. And we have to make this something that is know, the cornerstone of infrastructure. And that starts with not only doing the work we can domestically, but also making the country a a welcoming place. And as we work with the administration, just overall reducing concerns about certainty, we’re also getting ready for, you know, where we should be. And that means 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 when you come to one of our our poor that it’s easy to get into and you feel like it’s it’s a process that’s not cumbersome. 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 to to growth in the industry as we look at, you know, over several years.

Operator: Thank you. Ladies and gentlemen, at this time, the Q and A session is open and for media questions. We are open for media questions. Our first question comes from the line of Allison Cider of Wall Street Journal. Your line is open, Allison.

Allison Sider: Hi. Thanks so much. I guess, just wanna ask a broad question. On the economy. And I’m just curious, you know, Robert, like, do you are you expecting? Like, do you expect the US economy to to sort of tip into a recession and kind of what are you watching or keeping an eye on to to gauge whether that’s happening?

Robert Isom: 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 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. Does that mean? It means that we don’t hire as much. It means that we don’t bring out as many planes potentially. It means, you know, the reduction in overall of of economic activity. Same thing for, you know, the the customer that’s planning a vacation. Nobody nobody really, you know, relishes uncertainty when they’re talking about what you could 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 Airlines Group is incredibly well positioned if uncertainty lasts, you know, quite a long time. Devin mentioned all the steps that we’ve taken to our balance sheet, make sure that we have liquidity on on hand, We’re the best at cost managing. We have refleeted the airline in a period of much greater certainty with OEMs and, in a a a a financial environment that was 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.

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 with a focus on on customer experience. A customer experience is everything from, you know, new flagship suites to a Philadelphia flagship lounge and free Wi Fi. Coming with through partnership with AT and T. And at the end of the day, American Airlines Group has the most opportunity, I believe, to add value to customers and certainly, you know, from a a shareholder return in an environment where the economy comes back. So we’re on both sides of it. Been in this business for thirty years. And have gone through everything from SARS to know, obviously obviously, COVID and and nine eleven and great recession and everything in between.

We have a leadership team here that is better prepared, experienced. And, also, you know, from what I see, this airline in throughout my entire career going into any type of of a lot better positioned than I’ve ever been.

Allison Sider: Thanks. I’m sorry. Our next question comes from the line of Mary Schlongenstein.

Operator: Of Bloomberg News. Your line is open. Mary,

Mary Schlangenstein: Thank you. I wanted to ask if you could address the issue of tariffs whether you plan to pay the tariffs on any 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 in any steps in that direction?

Robert Isom: Hey, Mary. I appreciate the question. So first off, aircraft cost too much already. I don’t wanna pay any more for aircraft It doesn’t make sense. And, certainly, you know, we’re pulling guidance. Certainly, this 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 gotta work on this. We fortunately don’t have any near term deliveries. We have deliveries at the end of the year that would be potentially subject to tariffs. The three twenty one XLRs that are built over in Europe But I would tell you, we gotta 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 nineteen seventy nine, we’ve operated under a tariff regime that has been zero for zero. No tariffs in and no tariffs, you know, purchasing at That’s worked very well for civil aviation. And by that, I mean, everything from, you know, aircraft to engines and and 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. We’re part of that. You know, we’re the the we ultimately operate these aircraft. And I I anticipate in working with with the administration that we’re gonna end up with with a framework that really does ensure that aviation in the US is competitive.

Now in regard to questions about our people, you know, right now, we are planning for the the peak of our schedule. And so we’re getting ready for that as we take a look into the fall, it’s generally not a time where we do a lot of hiring, but we’re we’re very focused on that. Right now, we don’t quite know exact And and that’s certainly coloring our views of twenty twenty six as well. So stay tuned on that. Right now, you know, we’re we’re We’re gonna be nimble depending on what we see in in the the environment.

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

Leslie Josephs: Hi, everyone. Thanks for taking my questions. Just wondering if you’re seeing any gains market share in the Dallas area, since your competitor announced bad fees and some of the other policy changes. That there’s any kind of detail on the take up rate of status matches and things like that. And then broadly on, domestic demand, directionally, is it getting worse? Is it getting better? And are there any geographies that you’re seeing or or doing worse or better? I’m seeing seven, eight hundred dollar tickets New York, LA, the summer, and then a hundred dollar tickets to Florida. So kinda curious if you could break down where you’re seeing the the weakness in the main cabin. Thanks.

Steve Johnson: Leslie, hi. Thanks. It’s it’s Steve on on first on the the DFW question, we have a great product. It’s in DFW. It’s our largest hub. We’ve fantastic penetration for our frequent flyer program. Fantastic number of co grand cardholders. We’re gonna 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 recognized that they’ve you know, made a very significant change in their business model. We saw that they were reported some good numbers yesterday, but, we, you know, we’re prepared to compete with them in DFW is is our favorite place to compete with them.

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 cabins, strength in long haul international, strength in bookings through indirect trials, 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 our 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&A portion of the call. I would now like to turn the conference back to Robert Isom for closing remarks. Sir?

Robert Isom: Thanks, Latif. And hey, Steve. Thanks for the the response on that. In regards to DFW, I’ll just also note that we continue to to to invest I think there’s gonna be some really exciting, cool news coming up in the the next week or so. Regarding America’s position at DFW and and look forward to talking more about that. I’ll close with this. You know, uncertainty is what we’re living with now. It is something I know that the country wants to to move beyond, and I know that everybody is is working to that end. No matter the environment, American Airlines Group is well positioned. From a prolonged period of 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 and incredibly flexible.

A team that is experienced to handle what whatever may come our way. Over the long run, travel comes back, people wanna travel, American Airlines Group is well prepared for that as well. We have a renewed focus on customer experience, You will see American Airlines Group investing in our premium product. We do believe no matter the the economic environment, that customers will want to be treated better. They will want services and amenities that they’re certainly willing to pay for. American Airlines Group is committed to being a leader on that front. We 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 customers right, working to expand our industry leading loyalty program and partnering with Citi, delivering on our full revenue potential, and continuing to to engine reengineer the business.

It will enable us to get back to growing margins, delivering free cash flow strengthening our balance sheet so American Airlines Group is ready for whatever make come long into the future. So thank you, and, I appreciate the the time.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.