American Airlines Group, Inc.

Good morning, and welcome to the American Airlines Group Third Quarter 2020 Earnings Call. Today's conference is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. To ask a question during a session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. 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, operators. Good morning, everyone, and welcome to the American Airlines third quarter 2020 earnings conference call. In the room, or on the call with us this morning, we have Doug Parker, our chairman and CEO, Robert Isom, president, and Derek Kerr, chief financial officer. Also on the call for our Q&A session are several of our senior execs, including Maya Liebman, chief information officer, Steve Johnson, our EVP of corporate affairs, Basi Raza, our chief revenue officer, Allison Taylor, our Chief Customer Officer, and David Seymour, our Chief Operating Officer. Like we normally do, Doug will start the call with an overview of our quarter and the actions we are taking during this pandemic. Robert will then follow us from remarks about our commercial initiatives, and after Robert's remarks, Derek will follow with the details on our liquidity and cost outlook. After Derek's comments, we will open the call for analyst questions and, lastly, questions from the media. To get in as many questions as possible, please limit yourself to one question and a follow-up. Before we begin, we must state that today's call does contain forward-looking statements, including statements concerning future revenues, costs, forecaster capacity, fleet plans, and liquidity. These statements represent our predictions and expectations as to future events, but there are numerous risks and uncertainties that could cause actual results to differ from those projected. Information about some of these risk and uncertainties can be found in our earnings press release issued this morning and our Form 10Q for the quarter ended September 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 on the investor relations section of our website. A webcast of this call will also be archived on the 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, and at this point, I'd like to turn the call over to our chairman and CEO, Doug Parker.

Thank you, Dan. Good morning, everybody. Thanks for joining us. So, look, there's no doubt this continues to be an unprecedented time for our entire industry, our team, and our customers. At American, we continue to take actions so we can manage through this pandemic and position our airline for success when demand returns. So I'm going to start with a quick summary of our results for the quarter, which are improved versus earlier in the year, but still reflect the extremely challenging environment we're in today. Our third quarter pre-tax loss, excluding net special items, was $3.6 billion. Our revenues were down 73% year over year. In this environment, we continue to focus on controlling what we can, reducing costs and cash burn are front and center. In total, we removed approximately $17 billion in costs from our business, and our cash burn rate declined markedly versus the second quarter. We ended the quarter with a pro forma liquidity balance of approximately $15.6 billion, which is much more liquidity than we've ever had before, and more than double where we began this year. As customer confidence is gradually beginning to return, we continue to evolve in this new era of travel. The foundation of all that, of course, is our incredible team. These are difficult times for sure, but we couldn't be prouder of how the American team is handling this situation. Our team is out there keeping our country moving, safely transporting hundreds of thousands of people around the globe every day. And we're doing an excellent job of generating revenue in this environment, and it's making a difference, both for American Airlines and the United States in general. That's why it was so difficult to see October 1st pass without having the payroll support program and the CARES Act extended, both in support of our team, and the commercial aviation infrastructure that's going to be critical to an economic rebound. There's enormous bipartisan support for an extension, but unfortunately our elected officials still haven't been able to get it enacted because they've been unable to agree on broader COVID relief legislation. So without the extension, we had to throw in 19,000 of our team members beginning October 1st, and we discontinued service to numerous markets around the country. We remain hopeful that our elected officials can come together on this important legislation on behalf of our team, our industry, and working Americans and our economy at large. Elections matter, but there's nothing pulling higher than support for a COVID release stimulus package. And PSP extension will be an important component of any such package. Robert and Derek are going to talk more about our results and our path forward, but know that every action we took in the third quarter centered on our aggressive plan to bolster liquidity, conserve cash, and ensure that customers comply with complete confidence when they travel with Americans. On the liquidity front, American understanding of the third quarter was approximately $13.6 billion of available liquidity, and $15.6 billion when you perform up for an additional $2 billion in authorized capacity for the CARES Act loan program, which was finalized just this week. And also this morning we announced, on top of that, authorization to issue up to $1 billion of equity in and at the market offering. As to conserving cash in this environment, we're focusing on what we can control. To that end, we've worked relentlessly to right-size all aspects of the airline. This has been done primarily through cost savings resulting from reduced flying and long-term structural changes to our fleet and our infrastructure. We continue to realize the benefits, both financially and operationally, of accelerating the retirement of more than 150 aircraft from our fleet. And thanks to these alerts, along with gradual improvements in the revenue environment, we continue to bring down our daily cash burn rate. Our burn rate improved by approximately $14 million per day during the third quarter, from $58 million down to $44 million. And we expect our fourth quarter burn rate to be improved even more, to between $25 million and $30 million per day. And we expect that number to continue to drop going forward as demand for air travel continues to gradually improve. Also during the third quarter, we continue our focus plan to capture the travel demand that does exist. Remarkably, one in every three domestic passengers flew on an American Airlines flight during the third quarter. And if we could say one thing to every American Airlines customer, it's that it's safe to fly. Others have shared this data as well, but it's certainly worth repeating. IATA estimates that 1.2 billion people have flown so far in 2020, and among that group, there are only 44 cases of COVID-19 in which transmission is believed to have been associated with air travel. So it's clear our efforts are working as an industry. Even with our team members being on the front lines and working through the pandemic to support our communities and serve our customers, our team has a lower rate of COVID-19 infection than the national average. And notably, we've seen fewer cases with our airborne team members, our pilots and flight attendants, than with our other work groups. I've personally been flying multiple times every week, and I see it everywhere I go. The level of cleaning, the safety measures, and the diligence from our team and our customers is truly incredible, and we are greatly appreciative. So in closing, we know we have a long road ahead of us, but our entire team remains fully engaged, and we couldn't be prouder of the amazing work they're doing each and every day. We're focused on not just getting through this pandemic, but making sure we're prepared to succeed as demand returns, and we're highly confident that we're going to adjust to that. So with that, I'll turn it over to Robert.