American Airlines Group, Inc.

Good morning and welcome to the American Airlines Group second quarter 2020 earnings call. Today's conference call is being recorded. At this time, all participant lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. To ask a question during the session, you will need to press star then one on your telephone. If you require any further assistance, please press star then zero to speak with an operator. And now I would like to turn the conference over to your moderator, Managing Director of Investor Relations, Mr. Dan Cravens. Please go ahead.

Thanks, Sarah, and good morning, everyone, and welcome to the American Airlines Group's second quarter earnings conference call. new officer, and David Seymour, our chief operating officer. to differ from those projected. Information about some of these risks and uncertainties can be found in our earnings press release issued this morning and our Form 210Q for the quarter ended June 30th, 2020. In addition, we will be discussing certain non-GAAP financial measures this morning which exclude the impact of unusual items. A reconciliation of those numbers to the GAAP financial measures is included in the earnings release and that can be found The webcast of this call will be also archived on our website. The information that we're giving you on the call is as of today's date, and we undertake no obligation to update the information subsequently. So thanks again for joining us this morning, and at this point, I'd like to hand the call over to our Chairman and CEO, Doug Parker.

Thank you, Dan. Good morning, everyone, and thanks for joining us today. I'm going to give some color on the work we're doing to manage the current environment, ensure that we are well-positioned when we come out of this crisis, Derek's going to provide an update on our liquidity and cash part. And then, as Dan noted, we have several executives in the room, including our President, Robert Isom, and our Chief Revenue Officer, Basir Raja, here to answer any questions you may have. So, to begin, I need to acknowledge and applaud the entire America West Airlines team. The past five months have been more than difficult, and our team has consistently risen to the challenge, taking care of our customers and each other as the stability of their own employment remains uncertain. Our team does this. and much more, each and every day. To say that they are leading through this crisis with grace is an understatement of enormous proportion, and we are all humbled by their work ethic and professionalism. Turning now to the actions we're taking in the face of COVID-19 and the resulting severe disruption to global demand for air travel, in short, the crisis continues. Our team has done an exceptional job of managing through that crisis, as evidenced by the trends we saw throughout the second quarter. And we're prepared to weather the storm ahead and be in a position to succeed when demand recovers. In the near term, our actions have centered on three pillars. Building up our cash reserves, conserving the cash we do use, and adjusting the way we fly so that when our customers return to the skies, they can do so with complete confidence. Confidence that it's safe and, indeed, enjoyable to do so. And moreover, that we are flying when and where they want to go. So first on cash. We ended the second quarter with $10.2 billion of available liquidity, which included an important net $3.6 billion that we raised during the quarter through the capital markets. We also have a signed term sheet with the U.S. Department of Treasury for an additional $4.75 billion secured loan under the CARES Act, and we expect that loan to close in the third quarter. In addition, we announced this morning two senior secured note transactions with Goldman Sachs Merchant Bank, totaling $1.2 billion. So when those transactions are combined with our quarter earning liquidity balance of $10.2 billion, we would have a pro forma liquidity balance of approximately $16.2 billion. And we'll have flexibility to raise more if needed, and Eric will talk about that in a few minutes. With regard to conserving cash and our cash burn, our daily cash burn rate for the quarter was around $55 million, which was better than our prior guidance of $70 million per day. We were particularly pleased with the rate of improvement throughout the quarter. That daily burn was nearly $100 million per day in April, then around $56 million in May, and was $30 million per day for the month of June. That improvement was driven by both aggressive cost management, which Derek will discuss in more detail, and significant revenue growth throughout the period. As to revenue, demand was at its lowest point in April, of course, and we had a remarkably low system load factor of 15%. and a remarkably low passenger revenue per ASM of 1.8 cents. But as several states began to reopen, we began to see demand increase, particularly in some markets where we had a network advantage. So with some aircraft ownership and labor costs, we made a tactical decision to fly a larger schedule than some of our competitors did, keeping our large connecting hubs in Dallas, Fort Worth, and Charlotte larger than the rest of our network. So even with that larger schedule, we saw increasing loads and unit revenues across the system. Our load factors jumped from 15% in April to 45% in May and 64% in June. And our passenger revenue per ASM increased from that 1.8 cents in April to 6.9 cents in May and 10.3 cents in June. The hubs at DFW and Charlotte performed particularly well, with 80% of our flights operating at over 60% load factors throughout the month of June. Now this rate of improvement is going to slow as we head into a seasonally softer travel season. and certainly as demand growth is plateaued due to increasing infection rates and state and city quarantine restrictions. We've modified our schedules accordingly, and we now expect our third quarter system capacity to be down approximately 60% year over year. As to cash burn trends, we expect our third quarter burn rates to be well below our second quarter rates, and our fourth quarter rates to be lower than the third. Our goal is to be cash positive in 2021 as demand for air travel gradually improves. Regarding liquidity, we expect in the third quarter of approximately $13 billion, and that assumes no additional financing activity other than those transactions I already mentioned. As to restoring consumer demand, one of the best things we can do during this crisis is to put our energy toward winning customer confidence. To that end, we've established a travel health advisory panel comprised of internal leaders from our operations teams and outside experts to advise us on health and cleaning matters throughout our operations. We've also started working with the Global BioRisk Advisory Council on accreditation for the cleaning and disinfection practices for our aircraft and lounges. These steps, along with more generous change fee waivers and rebooking opportunities for full flights, have helped our customers feel good about flying and feel very good about choosing America. Looking outward, we're building an even more robust network for our customers. Last week, we announced a new partnership with JetBlue that will provide seamless connectivity for travelers in the Northeast, and create more choice for customers across our complimentary domestic and international network. The JetBlue partnership and the West Coast Alliance of Alaska that we announced earlier this year will further strengthen our network and will help to ensure we are positioned for success over the long term. So as good as we feel about how we're managing through this pandemic and our prospects for future success, we feel terribly about the impact it's having on much of our team. We know we will be a smaller airline going forward, and we've worked to right-size all aspects of the organization to that reality. Approximately 5,100 management and support staff positions were eliminated this summer in a manner consistent with the CARES Act, and last week we sent warrant letters to 25,000 American Airlines frontline team members. We're doing everything we can to mitigate the impact, and by working with our union partners, we've put forward new voluntary leave and early-op programs for our frontline team. There's also an effort underway by our union partners to extend the current payroll support program into 2021. We're proud to support this union-led initiative as we believe our entire industry has a shared goal of keeping hardworking frontline team members employed. With that, I'll turn it over to Derek, who will give more detail on liquidity and cash burn. Derek?