This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk12: Good morning and welcome to the American Airlines Group first quarter 2021 earnings conference call. Today's call is being recorded. At this time, all 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 1 on your telephone. If you require any further assistance, please press star 0. And I would now like to turn the conference over to your moderator, Managing Director of Investor Relations, Mr. Dan Craven.
spk07: Thanks, Crystal, and good morning, everyone, and welcome to the American Airlines Group First Quarter 2021 Earnings Conference Call. Joining us on the call this morning, we have Doug Parker, Chairman and CEO, Robert Isom, President, and Derek Hurd, Chief Financial Officer. Also on the call for our question and answer session are several of our senior execs, including Maya Liebman, Steve Johnson, Vasi Raja, Allison Taylor, and Devin May. Like we normally do, Doug will start the call with an overview of our quarter and the actions we've taken during this pandemic. Robert will then follow with some remarks about our commercial and other strategic initiatives. After Robert's remarks, Derek will follow with the details on the quarter and our operating plans going forward. After Derek's comments, we'll open the call for analyst questions and lastly, questions from the medium. 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, cost, forecast, capacity, fleet plans, and liquidity. These statements represent our predictions and expectations as to future events, but numerous risks and uncertainties could cause actual results to differ from those projected. Information about some of these risks and uncertainties can be found in our earnings press release In addition, we'll be discussing certain non-GAAP financial measures this morning, which exclude the impact of unusual items. A reconciliation of those numbers to the GAAP financials is included in the earnings release, and that can be found on the investor relations section
spk04: Thanks, Dan, and good morning, everybody. This morning, we reported a first quarter pre-tax loss, excluding net special items of $3.5 billion. The loss was driven, of course, by the extreme drop in demand for air travel due to the global pandemic. Our revenues in the quarter were down 62% for the same period in 2019. In the midst of this difficult environment, the American Airlines team produced remarkable results. We flew more customers than any other U.S. airline. We did so reliably and safely. We produced the highest passenger unit revenue of any global U.S. carrier, while having more available seats for sale. We completed the largest financing airline history, a $10 billion transaction, secured by the most valuable loyalty program in the world, the Advantage Frequent Flyer Program. And, excluding debt principle, we were cash positive in the month of March, our first such month since the beginning of the pandemic. These results and more were made possible by our incredible team, without their resiliency, creativity, and capacity. we'd be facing a very different future. Instead, thanks to their hard work and determination, we're starting to see light at the end of this very dark tunnel, and we're on a path that has us well-positioned as demand for air travel returns. That path forward is guided by what we're calling our Green Flag Plan. For our industry, this pandemic has been much like a yellow flag during an auto race, where everyone slows down, takes a pit stop, and gets their cars ready for when the race resumes at full speed. We've used this period to improve and prepare our area so that when the green flag does drop, which appears to be on the horizon, America will be ready. That plan is centered on four initiatives. I'll take a minute to walk through those at a high level, and then Robert and Derek will expand on what we've achieved to date and what we see on the horizon. First, we're doubling down on our commitment to operational excellence. We ran a great operation in the first quarter, carrying more than 24 million passengers on nearly 340,000 flights. During our busiest day of the quarter, we had more than 430,000 customers flying on our aircraft. That's the highest we've had since March of 2020. Our goal is to run the most reliable operations in American Airlines history once everyone's back to a full schedule. And the steps we put in place, including more reliable yet profitable scheduling, new tools and technology to assist our team and customers during irregular operations, and our clean commitment, will ensure we achieve that goal. Second, We're taking this opportunity to reconnect with our customers. Robert will talk more about all we're doing here. As customers return to the skies, they will see an even better American Airlines. One with the broadest and best global network that's now been enhanced by new partnerships. And one with innovative technologies and procedures that make travel more convenient for our customers and ensures they feel safe and comfortable as they return to fly. Third, we're planning to build on the positive momentum we've established with our team. Past years tested our team in ways we couldn't have imagined, but it's also brought us much closer. We worked hand-in-hand with our union leaders to ensure that team members felt cared for, even as we experienced by far the most difficult financial circumstances in our industry's history. We're committed to building on that progress and continue to work together to ensure our team feels cared for every day. On that note, we are very happy to tell 13,000 team members they could tear up their warrant notices following the passage of the COVID-19 relief act. that included an extension of the payroll support program. We will continue to welcome team members back to the operation as we increase our schedule. In fact, earlier this week, we announced we will begin hiring pilots later this year to prepare for 2022 and beyond. Finally, and importantly, we are committed to passionately driving efficiencies across the organization. Derek will elaborate on this, but we are really proud of the aggressive and innovative ways the team has worked to position us to be more efficient on the other side of this pandemic. The efficiencies we've built over the past year will drive more than $1.3 billion of permanent, non-volume-related savings in 2021 and beyond. So before I turn it over to Robert, I'll close with this. We are a long way from where we need to be. This crisis is far from over, and we have to continue fighting to give our customers, shareholders, and team the company they deserve. But there is no doubt the pace of the recovery is accelerating. And thanks to our team and a thoughtful and proactive plan, as the green flag drops, American Airlines is ready.
spk06: Thanks, Doug, and good morning, everyone. I also want to thank our entire team for everything that they've done for our airline throughout the pandemic. This phenomenal group continues to rise to the occasion and deliver for our customers every day, and we're incredibly grateful. Our first quarter revenue of $4 billion was effectively flat on a sequential basis versus the fourth quarter of 2020. However, our demand and revenue trends accelerated significantly as the quarter progressed. In January, our total revenue was 34% of what it was in 2019. And by March, it was 46% of 2019. This trend was driven by strong leisure demand in the U.S., Mexico, the Caribbean, and Latin America. This momentum has continued as our seven-day rolling average of system daily net bookings has reached 2019 levels this week. And this is in spite of business and long-haul international demand remaining weak, with net bookings of roughly 20% of their 2019 levels. That said, there are early signs of recovery for business. Small business demand, which was roughly 17% of our system revenue, has been improving steadily as vaccination rates have increased and as markets reopened. An increasing number of our largest corporate accounts are coming back to the office and indicating that they'll be traveling in the third quarter and confirming in-person board meetings, conferences, and events for this year. Importantly, we're focused on turning improved bookings and load factors into leading unit revenue performance. We have continued to shape our network and our customer experience as nimbly and thoughtfully as possible, and we're seeing the results. The first quarter of 2021, was the third consecutive quarter in which our passenger unit revenue maturely outperformed each of our network competitors. Thanks to our team, our likelihood to recommend scores have improved for the last three quarters as well. Based on our results in the first quarter, we're on track to have our best LTR year since the merger. We have used the pandemic to reset our airlines so that it consistently outperforms for our customers, our team, and investors. The first sign of this is in our summer schedule and second quarter capacity plans. We expect to fly approximately 80% of our 2019 system seat capacity in the second quarter, and this increases to 90% this summer. We'll continue to devote a larger share of our assets to markets where we can create unique value for our customers, and therefore generate passenger unit revenue premium relevant to our competition. When compared to 2019, We expect to find 90% of our domestic seat capacity during the summer peak and 100% in DFW and Charlotte. Our domestic network will constitute 85% of our system seat capacity in the summer peak. We expect to operate 80% of our international seat capacity compared to 2019 in our peak. Our organic network in the Americas creates more unique choices for customers and more profitability for the airlines. As such, in our summer peak, our Latin American network is expected to be the same size as it was in 2019. Our short and long-haul Latin American network will constitute approximately 12% of our system seat capacity in the summer peak. By contrast, our operation has been much more challenged in the Atlantic and Pacific as those markets have yet to fully reopen. And as a result, in our peak schedule, Seat capacity in those parts of our network will only be 40% of what it was during the same period in 2019. Our Atlantic and Pacific networks will constitute just 3% of our system seat capacity in the summer peak. We expect to bring these markets back slowly, and only when demand conditions warrant. It's important to note there is significant pent-up demand for international travel, and we're seeing it most in markets like Tel Aviv and Athens. where market reopenings are leading to steady increases in demand. As borders continue to open throughout the world, we'll be ready because of the changes that we've made to our fleet and network and the strength of our partnerships around the world. Overall, we will deliver any increase in capacity in a more efficient and reliable fashion than we did in 2019. We've accelerated the retirement of over 150 older aircraft in our fleet, leaving American with by far the youngest fleet of our global U.S. competitors. We intend to have all of our remaining aircraft active this summer and no longer sitting idle on tarmacs around the country. As Derek will share in a few minutes, we'll soon complete the harmonization of our Boeing 737 and Airbus A321 fleet, driving superior cost efficiency, a simpler operation, and a better customer experience. Just as we used the past year to adapt our fleet network, we have also developed partnerships to offer our customers seamless network in markets where we have structurally underperformed. This has been most true on the West Coast and in the Northeast. We have been unable to grow these markets organically due to infrastructure constraints. However, through our recently announced partnerships with Alaska and JetBlue, we can now offer customers the largest network in these two regions and bring a level of competition and choice that has long been lacking. Of course, to make these partnerships work, the experience must be seamless for our customers. As we like to say, an elite customer anywhere should be treated as an elite customer everywhere. We have several initiatives underway to make that a reality, including our announcement just yesterday to deliver it on the next phase of our partnership with JetBlue. As we look toward the recovery, reconnecting with our customers will be centered on being the easiest airline to do business with. Our goal has always been to remove as many friction points as possible, and in the first quarter, we took a number of steps to help simplify the travel experience for customers as they return to fly. We've enhanced our travel planning tool to help customers make informed decisions on where they travel and what to expect when they get there. Added new pre-flight COVID-19 testing options. Expanded acceptance of VeriFly, the mobile health wallet that simplifies and verifies travel requirements. VeriFly has now accepted for all of our international flights to the U.S. and on flights from the U.S. to 11 countries. Our partners, Aer Lingus, British Airways, Iberia, Japan Airlines, now also accept VeriFly. Building a curb-to-gate contactless journey will be an ongoing effort as we reimagine safe and convenient travel in a post-COVID era. At DFW, we have expanded our touchless technology trial to allow customers to use biometric scanners to check their bags prior to departure, and we'll utilize that same technology to allow customers to gain entrance to an Amos Club lounge later this year. And today, as we celebrate Earth Day, I want to highlight some important strides we've made to run a more sustainable airline. The most important thing any airline can do is retire older aircraft and replace them with new, more fuel-efficient aircraft. And we've done that at American. with $24 billion of investment over the past seven years and the retirement of more than 650 older aircraft. But we need to do more to reach our goal of net zero carbon emissions by 2050. And we have our eye on sustainable aviation fuel. SAF is the most promising advancement available to us in the near to mid-term. We've been taking delivery of SAF for almost a year. And in the first quarter, we reached innovative, offsetting agreements with two of our customers, Deloitte and Cunanago. We appreciate that the Biden administration and many in Congress have engaged with our industry on climate issues, and we're encouraged by the fact that we have common goals, especially when it comes to SAF. So in summary, over the past year, we've greatly simplified and modernized our fleet, rationalized our network, and made many changes to our business and operations to ensure customers have flexibility, and peace of mind when they return to travel. We're encouraged by the trends and demand for air travel across all sectors and believe American is well positioned for the recovery in the months and years ahead. And with that, I'll turn it over to Derek.
spk08: Thanks, Robert, and good morning, everyone. Before I begin my remarks, I, too, want to take the opportunity to thank our team. Their leadership and hard work truly embodies what American Airlines team members are known for. This morning, we reported a first quarter gap net loss of $1.3 billion, or $1.97 per share. Excluding net special credits, we reported a net loss of $2.7 billion, or $4.32 per share. Robert talked about many of the commercial activities we're working on and the trends we're seeing in the demand environment, so I'll focus my remarks on the cost side of our P&L and our balance sheet as we look to the future. Throughout the entire pandemic, we have remained focused on keeping our capacity aligned with demand while preserving the maximum amount of flexibility to respond as demand returns. We took aggressive actions to reduce our cost structure, and we have reduced our first quarter total operating expense, excluding net special items, by 26% versus 2020 on a 39% reduction in total capacity. Non-fuel operating expenses, excluding net special credits, were up 6% sequentially from the fourth quarter as we gradually added back capacity. We ended the first quarter with $17.3 billion in total available liquidity, including approximately $3.1 billion of PSP2 funds we received from the Treasury Department during the quarter. We were recently notified that this amount will be increased by approximately $463 million to be received in the second quarter. In addition, we expect to receive $3.3 billion in PSP3 funds by the end of the second quarter. We saw positive trends in our daily cash burn rate throughout the quarter. Our average daily cash burn was approximately $27 million per day, which came in better than our guidance of $30 million per day. This happened despite the drop-off in demand we saw in January and February and a significant increase in fuel prices at the beginning of the quarter. As a reminder, our definition of cash burn includes approximately $9 million per day of regular debt principal and cash severance payments. For the month of March, our estimated average daily cash burn rate was approximately $4 million per day, and excluding approximately $8 million per day of regular debt principal and cash severance payments made in March, as Doug noted, the company's cash burn rate turned positive for the month. During the quarter, our Treasury team did a phenomenal job of continuing to strengthen our liquidity through a series of capital market transactions. Notably, we completed our $10 billion financing transaction that was backed by the Advantage Program at a blended rate of 5.6%, less than half of what we would have been able to do last summer, and used those proceeds to repay in full the $550 million secured loan we had with the Treasury Department. We also had $530 million of aircraft amortization payments, including the maturity of our 2011-1 WTC, which together with mortgage maturities resulted in 35 mainline aircraft and nine regional aircraft becoming unencumbered. During the quarter, we also repaid in full our $2.8 billion of revolving credit facilities. This was a liquidity-neutral transaction that reduced the company's outstanding debt by $2.8 billion. Importantly, we still retain the flexibility to either draw upon these revolving commitments again as needed or leave them undrawn until October 2024. During the quarter, we took delivery of seven Boeing 737 MAX aircraft, and we expect to take one more delivery later this year. As a reminder, these aircraft were built while the MAX was grounded and were efficiently financed through leasing transactions. In addition, we recently exercised our remaining deferral rights on 18 Boeing 737 MAX aircraft that were previously scheduled to be delivered in 2021 and 2022. These deliveries are now expected to occur in 2023 and 2024. Lastly, we reached an agreement with Boeing related to our remaining 787-8 deliveries. Under the revised terms of the agreement, We have elected to defer and convert five 787-8 aircraft to 787-9 aircraft. These deliveries are now expected to occur in 2023. The remaining 14 deliveries of 787-8 aircraft have been rescheduled to occur by the end of the first quarter of 2022, and all of these aircraft will retain their existing financings. In January, the company made $241 million in contributions to its pension plans, In March, the new COVID-19 relief bill included, among other things, funding relief for single-employer pension plans. These new funding rules reduced the company's remaining required cash contribution for 2021 to zero, while lowering our projected required contributions over the next five years by over $2 billion. Under these new provisions for funding purposes, the combined plans are expected to be funded in excess of 90% for planned year 2021. As Doug and Robert mentioned, we are starting to see signs of what appears to be a strong economic recovery. This fantastic news makes our $1.3 billion of efficiency measures even more important as we prepare our business for the return to a more normal environment. On the fleet side, we have talked a lot about our fleet simplification efforts and the elimination of smaller subfleets, which resulted in the removal of more than 150 older and inefficient aircraft. Many of these aircraft Retired aircraft have already been sold, and by May we will have completed disposal of all of our 737 aircraft and Embraer 190 aircraft, generating more than $300 million in proceeds. Our fleet changes are expected to drive significant operational and cost savings in 2021 and beyond. With only four mainline aircraft types remaining, we will see improved aircraft utilization, and operational efficiencies in the back half of 2021 through the increase in gauge and reduction in inactive aircraft, including spares and maintenance allocations. Additionally, our fleet harmonization project is picking up steam, and we expect to have our entire 737 fleet completed in the second quarter of this year. These aircraft have 172 seats and come with larger overhead bins and in-seat power. We expect to have the A321 fleet completed by the end of this year. Aside from a better customer experience, these projects will provide significant opportunities to improve revenue production and lower our unit costs now and well into the future. So when demand returns to more normalized levels, we'll be able to efficiently fly 2019 levels of capacity with approximately 10% fewer aircraft. In terms of our balance sheet following our transactions in the first quarter, 32% of our outstanding debt is prepayable without penalty. After all the COVID-related financings we have completed to date, our average cost of debt is approximately 4.5%. As we have said in the past, we will naturally reduce our debt from where we are today by $8 to $10 billion over the next five years through regularly scheduled debt amortizations. We know going forward that since we are now starting at a higher debt level on account of pandemic-related debt, we will need to delever even more. In the near term, we plan to maintain higher liquidity levels until we are generating sustained positive cash flow. Once this occurs, when combined with our efficiency measures and a lower CapEx profile, we plan to use any excess cash flow to more strategically delever our balance sheet by proactively retiring prepayable debt and concurrently increasing our unencumbered assets. As part of our plan, we also anticipate resetting our target minimum liquidity levels. Overall, we expect second quarter total capacity to be down approximately 20% to 25% versus second quarter of 2019. With these capacity and demand assumptions, we expect to see a significant increase in our revenue versus the first quarter, with our total revenue to be down approximately 40% versus the second quarter of 2019. These inputs lead to an estimated second quarter pre-tax margin excluding net special items of between negative 27 and 30 percent. We presently expect to end the second quarter with approximately $19.5 billion in total available liquidity, which includes the additional PSP2 and PSP3 funds I mentioned earlier. That would be the highest liquidity position in company history and our fifth consecutive quarter of increased liquidity, despite the demand-driven operating losses we have incurred over that period. Given these projected liquidity levels and the positive cash and demand trends, we are no longer looking to raise liquidity in America for the first time since the pandemic struck. For the full year 2021, our debt principal payments will be $2.8 billion, excluding the prepayment of our revolving credit facilities. In the second quarter, we expect to pay down $595 million of aircraft and engine debt in addition to the $250 million PDP facility we paid off earlier this month. Our full-year CapEx is still expected to remain minimal. Non-aircraft CapEx will be $900 million. And due to our negotiated settlements with Boeing, attractive aircraft financing, and our already modernized fleet, our net aircraft CapEx, including PDPs, will be an inflow of $1 billion. While we feel great about how much we have accomplished, we recognize that we still have a long way to go to get our business back to normal. Our team has done an amazing job of bolstering our liquidity, conserving cash, and driving efficiencies throughout the organization, and we are very well positioned for the future. And with that, I'll open up the line for analyst questions.
spk12: Ladies and gentlemen, if you have a question at this time, please press star, giving number one on your touchtone telephone. If your question has been answered and you wish to remove yourself from the queue, please press the pound key. Your first question comes from the line of Joseph Dinardi with Stifle.
spk13: Doug, two questions for you on the loyalty program. I wanted to ask you a question I asked a few years ago at your investor day. Given how valuable the loyalty program has become and how lucrative the business of selling miles has become, do you need to reconsider what American Airlines is? Are you an airline or are you a marketing company?
spk04: We're an airline, Joe, and always will be. The Advantage program is a big part of that, which helps us to market the airline we're an airline.
spk13: So, Doug, in 2019, your loyalty program generated roughly the same amount of EBITDA as Marriott did. My question is, did you know that? Does that surprise you? And lastly, why don't you allocate 40% of the time on these calls to the loyalty program since that's how much EBITDA it represents for you all? Thank you.
spk04: Thanks, Joe. I don't think it's possible to separate the the EBITDA, the advantage program from the EBITDA airline. They're inextricably linked. And you can't have one without the other. So anyway, that's what I believe. And therefore, we talk about running the airline, which is what we do every day. And again, the advantage program does indeed, is an incredibly important part of that. Our Because we do such a good job of running an airline, people want to have miles in our loyalty program. People want to have credit cards that allow them to earn miles as they spend to earn miles so that they can fly more on our airline. Those are all good things, but you can't have one without the other. And I don't think it's right to try and separate one P&L from the other.
spk12: Your next question comes from the line of Mike Linenberg with Deutsche Bank.
spk20: Good morning, everybody. I guess just maybe Robert or Doug. Robert, you talked about, you know, international lagging. You talked about, you know, transatlantic, calling out transatlantic. And yet, you know, we are seeing headlines over the last week or so about the potential opening of at least the U.S.-U.K. corridor, maybe as soon as the month of May, maybe June. Can you just give us an update on what you're hearing and whether or not we're going to see, you know, maybe unfettered access between the U.S. and U.K.? Thank you.
spk06: So we're – Mike, we're certainly hopeful, and we, you know, encourage – our government to engage with the UK. But look, this is a matter, a bilateral matter, and it's one that, you know, first has to be predicated on confidence and safety of travel. So we're encouraged and we're certainly ready when the opportunity allows it. And we know, as I said, that there's tremendous demand, both from a corporate and from a leisure perspective, to take advantage. But we're going to have to make sure that we're coordinated with all parties, governments, and government agencies to make sure that we're doing it in an appropriate manner.
spk20: Great. And then, thanks, Robert. And then just my second call, just to Vazu on JetBlue American. I mean, I know it's early. you know, any sort of quick wins with respect to flow traffic between the two of you in JFK and Boston. And then, you know, the story, I mean, certainly a lot of criticism, at least it seems in the press and from other entities out there. And yet it feels like the story that's not being told is just the number of new service. And I just think about the phase that was just launched in the last day or two. You know, the number of markets that maybe didn't exist before that now exist, like a JFK-Cali, JFK-Boise, and then the number of city pairs where you're going from one to two or two to three or three to four. For whatever reason, that story doesn't seem to be out there because I sort of view that as being, you know, enhancing competition, not taking away from it. So any sort of update that you can give with respect to that alliance? Thank you.
spk22: Yeah, hey, Mike, thanks for the question. It's a great question. And look, feel free to start the story about that because you're absolutely right. Indeed, there's AA and Jeff Lee together, the fastest-growing airlines in the whole Northeast Corridor, not just adding new services that certainly AA would have never thought possible, such And there's a lot of things, but really, the first part of your question, it's all been enabled. Really, the customers are the true voice of this because if they like it, they'll fly on it. And we've seen that so far. So March was our first month in which we turned on the co-chair. We only had about three weeks' worth of bookings. And at least for JetBlue on AA, that was only about 25 to 30 markets. But JetBlue has already become our largest global co-chair partner. That's a little bit weird because so many of our international partners are flying 5% to 10% of their schedule. But what we do draw some encouragement from is that our co-share scope is vastly smaller with JetBlue than just about any of our major partners. And as we look at these things, you know, we look at... not just the total revenue production on us, but how much of that revenue is really incremental, that is coming in higher fares than what AA is organically booking or coming in periods where the flights were light. And we're finding that somewhere between 30% and 40% of that is incremental with similar rates in Alaska. And that compares extremely favorably to our historical global alliances. So that for us, as much as anything, is an indication of exactly what you said, The customer is voting, and the customer really likes the new services, likes the service expansion that's there. And as long as that's the case, it's going to be attractive for us financially, and so we'll continue to grow and innovate and try things that would not have been possible without a partnership such as this.
spk12: Your next question comes from the line of Dwayne Finningsworth with Evercore ISI. Hey, thanks.
spk09: I appreciate it. Can you just bridge us from the current international demand commentary of kind of 20% of normal, or maybe that was a March comment, 20% of normal, and then getting to 80% from a capacity perspective this summer?
spk22: Yeah. Hey, this is Vasu. I can help with that. That A big part, when we quote international, we're quoting both our long-haul business and our short-haul international business. Of note, the way we get to 80% is that we're envisioning a long-haul business, which will come out of peak summer schedule in July, 40% of its 2019 size, but a short-haul international business, which will be north of that, something like 20% larger than the with our long-haul Latin American network being something like 80% of 2019, right? But maybe even the more colorful way to say it is that for us, long-haul is going to be a very small part of our system this summer. Our total long-haul network, transatlantic, trans-Pacific, and long-haul Latin America will roughly be about 3% to 5% capacity going into the short haul network, which for us has proven to be the most resilient part of the whole system ever since the pandemic started. No matter what the headlines have been, no matter how the markets have turned, we've always tend to find bookings rebounding fastest, soonest, and greatest in those markets. And you see that in our RASM results. We're flying the biggest schedule in short haul international and producing the
spk09: Thanks. And then just to follow up for Derek, on the net aircraft CapEx inflow of a billion, can you just tell us, you know, how much of that is sale-leaseback proceeds and how much of that is sort of PDP refunds?
spk08: Yeah, our net aircraft CapEx is about 145. So direct sale-leaseback of aircraft is about 2.7. So we have about 2.7. 2.6 of aircraft capex, and that's all financed by direct lease and sale leasebacks. And then the debt PDPs is about $850 million.
spk09: Sorry, just a small point of follow-up there. Can you give us a sense for where aircraft rent might be kind of exiting this year?
spk22: Yes.
spk08: Aircraft rent will exit, we have about 350 in the first quarter, exit around 400 in the fourth quarter.
spk12: Your next question comes from the line of Helene Becker with Cowan.
spk18: Thanks very much, Operator. Hi, guys. Thanks for the time. Hi, Helene. I have two questions. One is, You guys said that you flew more passengers than any other airline. And I know your cargo revenue was fairly strong as well. But I was looking at your revenue compared to just your absolute revenue, not your unit revenue. And it was lower than that of like delta. And I'm kind of wondering what you think accounts for the difference. And then my follow-up question is related to... Are you talking to the Biden administration about reopening borders, obviously safely, but reopening borders, you know, this summer to gain at least some summer international traffic?
spk06: I can try to take the first look. I can't. I have no idea. don't know the detail on Delta's numbers. I can tell you this, that it's not passenger revenue and it's not cargo revenues. So what is it? MRO and refinery.
spk03: Anyway, I don't know that we know exactly what it is. They do have businesses we don't have.
spk04: On the Biden administration, absolutely, Helene. As Mike had asked about the U.K.-U.S. corridor, we're heavily involved in that, given our relationship, given how large we are to the U.K. and our relationship with VA, of course. And we're in regular contact. What we, you know, support is a risk-based, data-driven approach to restoring international travel. You know, what we've seen is, you know, pre-departure travel Testing for international arrival has been in place since earlier this year. CDC recently eased the guidance for domestic travel for vaccinated persons following a lengthy study of that issue. So all these factors are worth taking into consideration as formal guidance for travel is being developed. I know the administration understands that. I know they understand the importance of international travel and restoring international travel to the economy. And we all need to go look at this in a risk-based way. No one wants to rush for certain. and no one's pushing that either. So anyway, I think it's going to happen gradually, but we're going to do it in a way that works with our government and works with other governments to ensure that it's done in a way where it's safe. No doubt there's enormous pent-up demand for it, and we see that as some other countries have relaxed their restrictions on things like quarantines. We'll keep working on it. Everyone is involved in working productively. There's certainly no sort of pushback on either side.
spk08: We all want to do this in a way that makes sense. And, Helene, the biggest difference on the revenue side is the refinery, just so you know.
spk18: That's very helpful. All right. Thanks, you guys. Have a nice day.
spk03: Thanks, Helene.
spk12: Your next question comes from the line of Hunter Kieh with Wolf Research.
spk11: Hey, thank you. Good morning, everybody. Good morning. Hey. So business travel, it's always been, obviously, a little bit more cyclical and a little riskier, but higher reward. Leisure travel tends to sort of endure and recover better. So you knew that. But as you drive out, you know, whatever, $2 billion in costs, you densify your aircraft. Is there a thought maybe – that you don't want as much of that corporate share on the other side of this and then maybe obviously i know business travel is important to you i understand that but maybe maybe like an 80 20 leisure business mix makes more sense for american longer term given your network footprint the cost savings and the seat densification and and all those other factors just around the periphery does that make sense um no i don't think so hunter again we think
spk04: Actually, we're building a network that will serve business better than any other network, and we're excited about that. So as business travel returns, we're building the airline to be there for them, and I think we'll be able to do that as well or better than anybody else.
spk11: Okay. Thanks, Doug. And then, Derek, can you help me think about the SWB line in 22-23 as we contemplate juniority of the pilots and some of the headcount cuts on management if we assume the capacity is at or maybe slightly above 2019 levels? From a salary perspective? Yeah, like an absolute SWB, you know, not necessarily unit basis, but just an absolute salaries basis relative to where you were pre-COVID with juniority and and all that other stuff.
spk08: Yeah, I think, you know, we're going to have a significant amount of retirements as people went out. So when we talk about chasm, you know, in 2022, from a cost perspective on all of the groups, we should be down year over year from that perspective. So as we go out throughout the year, you know, we're increasing just because from a salaries perspective, we have, you know, brought everybody back. So it'll increase as we go through, the second quarter, but then we should be pretty flat as we go into the third and fourth quarter as we have already brought everybody back for the flying that is for the rest of the year. So we should be in pretty good shape as we go forward with that. You know, we all have contracts that are up, so that depends on when those negotiations happen. But on a steady state basis, we'll be pretty flat throughout the rest of the year from second all the way through the fourth quarter.
spk12: Your next question comes from the line of Jamie Baker with JP Morgan.
spk24: Hey, good morning, everybody. First one for Robert. So a question I frequently get is how quickly American can ramp up capacity in the event that an incremental market opens up. And in more stable times, you know, it kind of felt like it was about three months, you know, between something happening, you know, such as a spike in fuel and flown capacity. actually reflecting that change. Where are we today? For example, if the EU announced today that vaccinated passengers are welcome, and I'm not suggesting this is going to happen, what month would we see that additional capacity?
spk06: So, Jamie, I can start and others can chime in. First off, just in terms of market openings, just realize as well we're dealing with booking curbs, right? Much different than... much different than the domestic, where so much of the bookings occur within 30, 60 days. For some of these long-haul markets, even for business-related travel, the booking curve is much more extended. So even if markets were to reopen, so much of the actual window for purchasing for the summer has actually passed us by. So we're going to be smart about how we ramp capacity up so that we make sure that we can match a full demand profile with the aircraft. And that actually matches pretty well with the kind of timing that's required to get aircraft in position, pilots in position, and, you know, cities that have actually, you know, been mothballed, you know, in so many parts of the world, you know, back up and operating as well. So, you know, for us to actually be able to serve these markets You know, we're dealing with timelines that are in kind of the three- to six-month range. So you want to add anything to that?
spk22: The only thing I'll say is to the very specific part of your question, look, in 45 days we can go and add a market and sell it and operate it in a way that we couldn't have done before the pandemic. But to Robert's very good point, that doesn't mean that we can't. we should, or that we would. Because so much of it is, especially as markets reopen, is what's the best marginal use of the capacity that's out there? And, you know, to add the dose of quality to it is that The reality is we're, let's call it, 60% to 65% of the way through a historical booking curve for Europe. And a lot of the customers that would have gone there have already booked trips to Hawaii or Florida anyway. So the marginal value of that capacity may be a lot less than what might meet the eye, at least in the American system.
spk24: Excellent. All good points. Thanks for that. And then second question, and this is, you know, related to the second quarter guide. You know, it – feels somewhat reminiscent of last summer's strategy. And we talked back then about the low marginal cost capacity given PSP and where fuel prices were and why it made sense to fly more than your competitors. This year feels like a more calculated decision, less of a sort of grow or die decision to, I think, somewhat paraphrase what Vasu has said in the past. But the question I'm getting from investors is, whether this summer's plan is markedly different than when you basically tried something very similar last year. Any thoughts on that?
spk04: Yeah, I'll start and Robert can chime in. Yeah, it's dramatically different in that, well, first off, last summer, what we saw was what looked to be a real drop in the pandemic rates And as we saw that, we started to add back. When we got the second spike, demand fell off, and we adjusted accordingly. So, you know, all that was the right decision. It was based on that and nothing else. In this case, we have vaccines, and the rates absolutely are falling. And as a result, you see not just us doing this, but virtually every other airline. So, anyway, I get that. I don't exactly, I wouldn't concur exactly with what happened last July. Last July we saw rates falling. It shows that capacity when they spiked back up, we pulled it back. Now we're seeing vaccinations result, something which feels much more permanent. Should that not be the case, you'll see us pull back down again. We can be very flexible, and we will be. I don't think that'll be the case. Nothing about this feels even close to that. But that's the distinctions.
spk22: And, Jamie, I would just add one thing to that. Building off of Robert's comments in the section, but, you know, what you see out there in our schedule is actually really indicative of where the airline is going. You know, 85% of our capacity this summer will be deployed in domestic, almost 95% of it between domestic and short-haul international. And as you look at it, for the last three quarters of the pandemic, though we've flown relatively more capacity, we've also produced competitors have. But critically, when you look out there this summer, where the capacity is going is really important. What we call the big four of Dallas, Fort Worth, Charlotte, Phoenix, Miami are roughly 65% to 70% of our system capacity. And to put a little more color on it, in the first quarter, while our system produced a prasm that was maybe 15% to 20% larger than what our percent range, too. So a lot of what you see out there is actually, there's some opportunism in there about flying Saturday-only trips or leisure-heavy trips or things like that. A lot of it is, or as Robert said in his open remarks, orienting the capacity of this network to markets where we can produce outsized value to customers and therefore outsized rousings to the airlines.
spk12: Your next question comes from the line of Dan McKenzie with Seaport Global.
spk14: A couple questions here. Regarding the plan to prepay $8 to $10 billion in debt through natural amortization, does that include or exclude the plan to use surplus free cash flow to prepay debt? And the reason I'm asking is it just seems like America could pay down substantially more than $10 billion over the coming five years. And if that's correct, I'm just wondering if you'd be willing to provide sort of a bigger picture number of what that could ultimately look like.
spk08: Yeah, it does not include anything extra. That's just what we have in amortization going forward. We're not ready to say, but I agree with your premise that our liquidity is sitting at $19.5 billion at the end of the quarter. We're going to go through the process of figuring out where we need our liquidity in the short term and where we need it in the long term. And it doesn't need to be at $19.5 billion. But as we said, until we see you know, sustainable cash production, we're going to hold the cash where we're at and keep our cash levels higher than we need. We will then use that to go do that. So as I said, we have a lot of prepayable debt. So once we're ready, we will go down that process and be able to delever more than the $8 to $10 billion. But I just wanted to make sure that that $8 to $10 billion number, everybody knows it's going to happen. It aircraft that uh you know unsecured things that are going to come due over the next few years but you're right dan it's it's it it can be a bigger number it's just we we want to wait till we get through everything and we're comfortable to move forward understood okay thanks um vasu a fleet that is 10 percent smaller so you know call it 10 percent less flying um
spk14: I'm wondering if you can provide some insight on the overhang to margins, say, in 2019, you know, with that portion of the fleet. And, you know, the reason I'm asking this question is just, you know, based on what American has done on the cost side, based on what you're doing on the revenue side, it just seems like normalized earnings in this next cycle are going to be higher than they were in the last cycle. And I'm just wondering if you guys would agree with that, or what do we need to keep in mind? Okay.
spk22: Yeah, some others can speak to what our earnings profile might look like, but you are on to something, that we have made this airline materially more efficient through the pandemic year. You know, this summer we'll be almost 150 airplanes down, but in the schedule we'll only be about 80 or 85 airplanes down. So all of that delta... that went away in superior gauge economics, superior utilization, wherever we had it. So if you went back half 2019, we could fly roughly that same airline with materially fewer jets, and the network would be oriented a lot more to places where we could produce an outsized RASA. The whole point that the earlier remarks about the green flag plan is to deliver an airline that can outperform in the future. And we think we've done that, but the proof will be when we do.
spk12: Our next question comes from the line of Savvy Sight with Raymond James.
spk19: Hey, good morning, everybody. I wonder if you could talk about how you're thinking about the cadence of capacity for as you kind of move away from the summer and kind of, I know there's a lot of uncertainty, but right now a lot of the demand is being driven by leisure, but should we expect them at this level of capacity or better as we move into the fourth quarter?
spk06: Look, we're going to be incredibly flexible as we go forward. I mean, we've given a lot of detail as to what we intend to fly this summer. If things progress as we hope, with vaccinations increasing and then hopefully international markets opening up. And based on what we're hearing from our corporate customers in coming back to work, back into the office, and setting meetings and events, you know, we're optimistic, but it really is dependent on the continued containment of COVID and people getting back to business.
spk04: Thank you. I'll say something and The schedule we have built is designed for the current leisure-based travel. That's why we have 777s flying around the United States. They're not made to do that. It's not going to be happening a year from now. So as international markets open up, that's where those aircraft will quickly be deployed. But again, we're going to wait for the demand to come back before we deploy the aircraft there. But right now, I think the team's doing a really nice job of deploying airplanes where the existing demand is.
spk19: Agreed. And then if I might just follow up on partly your response to Hunter's question, just how much of kind of the 2Q costs are related to kind of getting capacity back online versus, you know, actually the capacity can be produced in the quarter? I'm just wondering how much is in the number today that might wind down as you kind of increase capacity going ahead?
spk08: There's really not. I mean, we don't have a lot of costs built into the second quarter Most of the aircraft have been ready to go. We will have higher costs, but the higher costs in the second quarter are really due to volume-driven costs. So, you know, our maintenance costs will be up because our power by the hour costs will be up and things like that. But there's no, you know, built-in cost to retrain. There's no big built-in cost to get the fleet back up because the fleet is ready to go. Our team's done a and having them ready. We didn't mothball any aircraft. We didn't put them in the desert. We don't have to bring them back and spend a lot of money on engine costs and anything like that. So there's not a lot, I would say, in the second quarter to build the airline back up other than volume.
spk12: Your next question comes from the line of David Vernon with Bernstein.
spk05: Hey, good morning, guys. Robert, I've asked you maybe could you help us understand – The cadence of sort of leisure fairs, what I'm trying to get at is where we are today in sort of 1Q on a sort of like-for-like distance neutral basis for fairs versus kind of a pre-crisis level, and then how the fair environment is changing as we move into the summer months. Obviously, we're adding a bunch of capacity, a bunch of demands coming in. I'm just trying to get a sense for how the revenue management systems are working in terms of setting fairs over the expecting to see in sort of 2Q, 3Q.
spk06: Hey, Vasu can help me with the real specifics. I'll just say this, though, to kick it off, which is, you know, being able to leverage yields is dependent on having, you know, base bookings. And from that perspective, as I said in my remarks, you know, fortunately we're seeing not only bookings but real load factors that actually allow for, you know, some optimism about where pricing is going. So, Vasu?
spk22: Yeah, that's right, David. We have seen an inflection point with yield, which is for us maybe the thing that we most draw on in terms of encouragement. To put some context to it, when we came into the first quarter of this year, our selling fares were roughly half of what they were a year ago. That is for out into the summer, there's something like 90% of where they were a year ago. And indeed, in our leisure markets, and by leisure to be really specific here, we count that as short-haul international and also all the obvious domestic markets, Vegas, Orlando, Florida, things like that. Our seat capacity there is up about 25%, but there our yields are about 95% to 100%. And so that, for us, as much as anything, is really key because we are at a place now, if you'll notice the commentary, we're not spending a lot of time talking about bookings because in our system, engineering bookings is not the issue anymore. So much of it is about getting yields back and getting RASMs back, especially in our domestic system. As big as we are historically in our network and the way we're shaping it this summer, domestic RASM is key to our success. and given what's happening with traffic, yield is super important. So we are doing all we can to go and yield out wherever we see it.
spk05: So just to clarify, were you referring to 95% of 2020 levels or 2019 levels? 2019 levels, sorry.
spk22: All my comments is after 2019. I apologize.
spk05: All right. Thank you. Yeah, that was slightly frightening. Just as maybe a follow-up, Derek, You mentioned before managing the airline to a little bit lower level of leverage. How do you think about talking to your board about the financial liability risk when you've got all these unencumbered assets? I think one of the things that maybe surprised a lot of us is that there were a lot of assets that you could tap into for debt and credit. How do you think about managing or measuring that or maybe communicating that to the market going forward? so that we maybe have some visibility into additional liquidity that you could tap outside of like the traditional kind of debt to EBITDA metric, just given the fungibility of the assets that are in the network, particularly if you buy down more aircraft with cash.
spk08: Yeah, I think, number one, we're not looking for more liquidity. So that's the good news now is, you know, I come in every day and not have to go look for liquidity. But we will keep everybody up to date on the unencumbered assets. And as we look forward, you know, and if we have excess cash, we're going to manage it properly to figure out what is the best thing to pay down as we move forward. So we are going to have conversations with the board on liability management that we're going to discuss, you know, what are we going to do over the next, you know, year or two years, that if we have excess cash, what do we pay off and what's the best things to unencumber as we move forward. In today's environment, You know, our unencumbered assets are $3.7 billion. They grow every time we pay off aircraft and WTCs. We have the first lien capacity of about $7 billion. So we have the ability to do more, but the good news is, you know, we're not looking to do more right now as we go forward. So I think the key is, as we move forward, what is the liquidity levels we need to be at? What are the ratios we want to be at as we move forward? and how do we best do that over the time period with any excess cash that we have above the amount that we need. And so we'll be having those discussions over the next, you know, every board meeting, and we'll be discussing that with our board for a period of time as we move forward through this recovery.
spk12: Your next question comes from the line of Miles Walton with UBS.
spk02: Thank you, Maureen. I was wondering, to clarify, on the no longer looking to raise liquidity, would you also be comfortable saying that you have no interest at this point accelerating the leverage with additional equity? And then maybe if you can just give us a bit of color on the walk from 17.3 to 19.5 and the PSP contribution in there, and if that's as simple as sort of a billion-dollar underlying cash burn offsetting the PSP. Thanks. I'll
spk04: And I think I can do the second one, but we'll see. Derek might be able to do it better. So anyway, on the first point, yeah, when we say we're not looking to raise financing, we're not looking to raise financing, and that includes equity. And as Derek said, we know that we have, just through our normal amortization schedule, $8 to $10 billion of debt going down over the next five years. And as was noted by Dan McKenzie, we will have the ability to do a good bit more than that so long as... That's how we would choose to delever over time. And then, again, I'll try to show a quick sign, because I'm already talking, but Derek can probably do it better. I think what you're asking is, if you have the PSP payments and you look at our cash, you actually see that it's not up as much as the PSP. The reason for that is seasonality of... First off, the seasonality of... of sales is not as strong in the second quarter as the first. And the debt payments are larger in the second than the first. But even if you exclude debt payments, we're still cash positive in the second quarter excluding debt payments on that forecast. That's interesting. That's interesting. Thanks, Derek. So that's where we're at in seasonality. I'll use this to get on my little soapbox. This is why, by the way, there are gap principles. You know, it's because cash flow has a lot of seasonality in it. So there was a real reason at some point when we were talking about cash burn, cash burn, cash burn, because the market had real interest in where people's cash flows were and how much cash they were burning. We're all well past that. And if we keep talking about cash burn, we're going to keep confusing people because there's huge seasonality in cash in airlines. There's huge seasonality in debt payments. and when all of us were making large profits, we'd still have quarters where we had declines in cash. So that's why you go back to gap principles that include things like accruals and smoothing and matching principles so that you can keep yourself actually know what's going on in the airline. So anyway, that's my little soapbox. I'm glad we're going to stop talking about cash burn and get back to talking about earnings. But anyway, that's the reason, so thanks for asking.
spk12: Your next question comes from the line of Stephen Trent with Citi.
spk25: Good morning, everybody, and thanks very much for taking my question. Most were answered, but I was just curious what you guys are seeing, if you could give a little more color. I think you mentioned that you're going to hire some pilots later this year. Any color with respect to what this could mean from a headcount perspective, and is American planning to apply any ESG-type filters on the hiring as some of your competitors have telegraphed. They want to diversify their base.
spk06: So, yeah, look, it's great news that we're looking at hiring pilots later this year, and it's due to a number of factors, most notably that we've had significant retirements over the past few years. So, This is going to put us in position to fly and be flexible wherever we need to be. From bringing pilots on, though, we're incredibly excited about the work that we've been doing, both at the mainline airline and within our regional airlines as well. We also have been marching down the path to ensure that those that are coming into our regional airlines are wholly owned and also our mainline airlines. really represent, you know, the face of the country, most notably ensuring that we have more women and people of color that are taking the ranks of this, of the pilot ranks. And so you'll see, you know, that we have a program that now has over 350 people in it. That's just going to grow in the future. And as we look forward, we anticipate getting a substantial number of our total pilots brought in through that program. So very excited about where we're headed. And that program is by and large designed to bring in, again, people of color and females into the pilot ranks. Okay.
spk25: Very helpful. Appreciate the color. Thank you. Sure.
spk12: This completes our analyst portion of the Q&A. We will now move to media questions. If you have a question at this time, please press star, then the number one on your touchtone telephone. If your question has been answered and you wish to remove yourself from the queue, please press the pound key. Your first question comes from the line of Allison Snyder with Wall Street Journal.
spk15: Yeah, I was wondering if you could talk a little bit about the latest issue with the 737 MAX and whether that creates any challenges for you all in kind of rebuilding confidence in the plane that something else has come up after all the vetting that happened failed to find the latest problem.
spk06: Sorry, hey, Allie, it's Robert. Look, I am really pleased with Boeing and the industry. You know, we coalesce around safety. And so with the MAX and with any aircraft, it's just critically important that we take the right steps when there's any, you know, potential concerns. And in the case of the 737 MAX and, you know, these, at least for us, these 18 aircraft, You know, we have a pretty good idea of exactly what the issue is and the remedies that need to be attended to. So the work that we're doing is with both Boeing and the FAA. We're waiting on service bullets to be developed, airworthiness directives to be dropped, and then getting the work done in those aircraft back up in the air. We hope that that's just in a matter of weeks and not longer. In terms of the impact on our schedule, look, we've been flying the MAX now for four months back and incredibly successfully. Passenger reaction has been really that they like the product, they like the aircraft. And as we take a look going forward, even with 18 aircraft out of service right now, there is virtually no impact to our schedule. We've been able to use other aircraft to fund the needs for the airline. So overall, I think we've, as an industry, with Boeing and certainly with the FAA, we've made all the right moves, and I have great confidence that this aircraft is going to be in the skies and the safest and most reliable for years to come.
spk15: Thanks. I mean, have you seen any increase in book away, you know, on the MAXs that are still flying? Like, is there any sign that customers have any elevated concerns? Not at all. Thank you.
spk12: Your next question comes from the line of Leslie Joseph with CNBC.
spk03: Hi, Leslie. Hi.
spk16: You mentioned that bookings were picking up. Of course, it looks like a much stronger summer than last year. What are your projections for after summer vacation season starts to wane? Do you expect a lot of that leisure demand to go away? And do you think there's going to be enough business demand to replace it?
spk22: Hey, Leslie, this is Vasu. Thanks for the question. Look, it remains to be seen. throughout this pandemic, it's always difficult to forecast or prognosticate that far out. And those things are recovering. That difficulty remains. So it remains to be seen. As Robert and Doug mentioned earlier, though, for us, the real lever is our capacity. And if things change, we can change with it. And over the last year, we have any number of tools and techniques to go and make the airline pretty nimble in responding to it. So trees fall as it gets closer.
spk16: Okay, and then the bookings that you have so far, are you seeing that they drop off after August or July, or is there any one point where you see kind of a slowdown?
spk22: We're seeing pretty consistent bookings growth throughout areas. Indeed, where bookings are falling, it is But we see continued strong bookings as we go out there. We just want to make sure they're coming in. That's there to make the airline sustainable.
spk12: Your next question comes from the line of Mary Schlingenstein with Bloomberg News.
spk17: Hi, Mary. How are you? Great. I want to ask first real quick, if I can go back to Allison's question on the MAX. I wanted to see if you have any information or can comment on on if there's a frustration level on the fact that you haven't yet gotten a service bulletin on that repair, which originally the talk was that those repairs would be fairly simple and straightforward, but now it's been weeks and you don't have anything yet from Boeing.
spk04: Not at all. That's the FAA's job, and they do it well, and we work really well with them. As Robert said, we all call us around safety, and that's part of the process. We're not the least bit frustrated.
spk17: Okay, thank you. And if I can also ask, Vasu, if you could talk a little bit about the wide bodies domestically and what planes you're flying where domestically?
spk22: Yeah, Mary, I could talk a little bit about it. But really the biggest story on the wide body is just how, frankly, how dynamic the airline has gotten in managing capacity around this. Okay, easy to do in the world of scheduling. It's a lot harder to actually deliver it for our customers and do so reliably and in a way that they like. And so through the pandemic, as international demand has fallen, sometimes even as close to 45 or 60 days from departure, we've been taking out international flights. But as we've seen strong bookings, say Miami or what have you, we've been putting those wide bodies in there. So a big part of it is very dynamic, and it changes a lot. What we're most encouraged about is wherever we've seen them, indeed we've been able to deliver it on short notice and earlier comments in a way our customers like. Our customer satisfaction scores have indeed never been higher. The only real method beyond that to where the white bodies go this summer is And also our big Sunbelt market, especially in Miami. So we're now in a place where Miami to New York is all on wide bodies, Miami to Los Angeles all on wide bodies, Miami to Boston largely on wide bodies too. So we don't anticipate very many material changes versus what you see in the schedule, but if things change in international, that's a real lever for us. The marginal capacity of that is probably better spent at domestic right now than what it is in most of all.
spk17: Great. Thank you very much.
spk12: Your next question comes from the line of David Koenig with the Associated Press.
spk23: Thank you. Good morning, folks. I guess this is for Vasu. I wanted to follow up on what you were saying to David Vernon on fares. The 90 percent, as you approach this summer, the 90 percent of 2019 levels Is that due in any part to more business travelers, or is it pretty much just that you can get higher fares from leisure travelers? And then to follow up on that, is that pretty much leisure fares across your system, domestic and short haul, international?
spk22: Hey, thanks for the question. And look, to be clear, 90% of the book yields we're taking right now, there could be any number of factors that impact what they actually come in at once the summer is all said and done. But, yes, it is primarily driven by leisure demand growth. We are seeing signs of business growth, but it is, you know, it's coming off of a small base and it's still a pretty small part of our system total. So most of the yield growth we're seeing is from the leisure travel segment. And, frankly, a lot of what yield growth is there is just because we're seeing a where, frankly, the demand for seats is greater than supply of seats. And so that's what produces higher yields.
spk23: And that's pretty much system-wide?
spk22: No, it's not. Our system is really uneven. It's much more heavily concentrated among our domestic leisure and short-haul international markets. Okay. Thanks.
spk12: Your next question comes from the line of Don Gilbertson with USA Today.
spk03: Hey, Don.
spk01: Hey, good morning. I wanted to ask a question for you, Vasu. The State Department earlier this week raised travel alerts to their highest level for most countries. I'm wondering if you have seen or expect to see any impact on bookings, and if not, why not?
spk22: Hey, John, good to hear from you. I'll start and others can add, but it remains to be seen in the last, whatever, it's been 48 hours, maybe 96 hours since it's happened. It's been too early to tell what's going on and what its impact to bookings might be. If indeed there is one, we have ample tools to be able to adjust the airline. It should have come to pass. But then also the last thing I'll add to it is For us, for my earlier comments, the way we've configured the airline this summer is very much to make it resilient to just these kinds of changes where 85% of our capacity is in the domestic system in large part because we realize that the recovery is not just going to be choppy from a demand perspective, but choppy from a market opening perspective as well. And so by building the plan like that, it's something that we can deliver upon for our team and our customers and create a lot more resilience as the world recovers.
spk01: Thank you.
spk12: Your next question comes from the line of Kyle Arnold with Dallas Morning News. Well, Kyle.
spk21: Good morning, guys. Appreciate it. Yeah, I know you have some plans and you announced the plans to start hiring some pilots. Do you guys have any – will there be any need going into the year for other employee groups, flight attendants or, you know, ground workers or gate agents?
spk06: The answer to that is yes. And you'll see that throughout our network. And it's, you know, especially from a passenger service team member or, you know, those folks that work on the fleet side of things. We're going to have needs throughout the network, but it's really – just based on location needs more than anything else. And too soon to say anything about where we stand with our flight attendants, but I can tell you that I anticipate that there will be a need there as well.
spk04: Yeah, so many of our flight attendants took this opportunity to take leaves that what we're doing rather than hiring new flight attendants is bringing flight attendants back from leave earlier than their leave would have extended. If we can do that, we'll need to hire, but we're not there yet.
spk10: Thanks.
spk12: Your next question comes from the line of Edward Russell with Skyft.
spk10: Hi. Thank you for taking my question. Robert, could you tell me a bit more about how many aircraft America needs to reactivate to fly all of its fleet this summer, and what types are still needing to be reactivated?
spk06: No, we have aircraft that are ready to go. Of course, as Derek mentioned in his comments, we're accelerating our reconfiguration programs, our harmonization programs on the 737 and A321. So we'll have some aircraft that are caught up in that. But the way to look at our fleet is that they're all out there and maybe not utilized as much as they will be. But we feel great about the work that our maintenance team has done to keep everything ready to fly when necessary.
spk10: So just to follow up, you don't have any aircraft temporarily stored anymore at this point? Is that the way to characterize it? Correct. Yeah. Okay. Thank you.
spk12: And at this time, I would now like to turn the conference back to Doug Parker for closing remarks. Fantastic.
spk04: Thanks, sir. If you're interested in hearing further questions, please let us know.
spk12: Ladies and gentlemen, this concludes today's conference. Thank you for participating. Have a wonderful day. You may all disconnect.
Disclaimer