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spk17: Good morning and welcome to the American Airlines Group third 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, you would need to press star then one on your telephone. If anyone should require further assistance, please press star then zero. And now, I would like to turn the conference over to your moderator, Have amidst the relations, Mr. Dan Cravens.
spk07: Thanks, Sarah, and good morning, everyone, and welcome to the American Airlines Group third quarter 2021 earnings conference call. On the call this morning, we have Doug Parker, chairman and CEO. revenue officer. Like we normally do, Doug will start the call with an overview of our quarter. before we begin,
spk06: Thank you, Dan, and thank you everyone for being with us. Good morning. So our third quarter started out very strong. Our domestic business revenue, which had climbed from 27% of our 2019 levels in March to 52% in June, jumped even more in July. It actually jumped to 64% as companies began to return to work and their employees began to return to the skies. And as a result, we at American produced a profit in the month of July. But then the Delta variant led to a rebound in pandemic fears, of course. Companies deferred return to work plans. And that domestic revenue, the domestic business revenue, fell back to 57% of 2019 in August and 47% in September. Now, I know some people find that trend discouraging, but we actually think it's encouraging. The spike in business revenue in the month of July shows that business travel does want to return. There is enormous pent-up demand. And once this pandemic's behind us, it should resume its prior rapid trajectory to recovery. And as to how that all gets reflected in the financial results, that profit in July, followed by larger losses in August and September, added up to a cumulative loss. On a GAAP basis, we actually reported a net profit of $169 million. But when we exclude net special items, we recorded a net loss of $641 million. And while we obviously don't like reporting losses, This is our smallest quarterly loss since the pandemic began in early 2020. What we're most proud of is how well the American Airlines team is performing. No one is managing through this pandemic and into the recovery better than the people of America, and it shows in the results. At a time when airlines are struggling to build back service and response to demand, no one has built back further and faster than Americans. We flew greater than 80% of our 2019 capacity in the third quarter. while our large competitors have restored only 70%. As a result, we flew 13% more seat miles in the quarter than our next closest competitor. And our team safely transported more than 48 million passengers in the quarter. Our team did this while doing an excellent job of taking care of our customers. We struggled with growth ourselves as we entered the quarter, but we responded quickly and aggressively. We ended the quarter flying by far the largest airline in the world, with the best September operational performance in America's history. That great performance by our team has led to strong customer acceptance, as evidenced by our industry-leading passenger accounts and our revenue trends. For the quarter, revenues were significantly improved over 2020 and were down 25% in the third quarter versus the same period in 2019, whereas they were down 37.5% in the second quarter on the same year-over-two-year basis. And notably, our passenger unit revenues in the quarter were down 10% versus 2019, versus 12% declines of the other large international U.S. carriers, despite our higher capacity production. On the cost front, we've reshaped our network, simplified our fleet, and built operational and cost efficiencies into the business that will serve us well for years to come. We accelerated the retirement of more than 150 older aircraft, and American continues to operate the youngest and most fuel-efficient fleet of the U.S. network carriers. And importantly, we've actioned more than $1.3 billion of permanent annual cost reductions into the business through our green flag initiative. And as we've navigated through the crisis, we've been careful to think and look long-term. We've announced a series of strategic relationships with other airlines around the world that strengthen the American network, adding additional utility to our customers and long-term value for our shareholders. The most notable of these are our Northeast Alliance with JetBlue and our West Coast International Alliance with Alaska, which we continue to implement and grow in the third quarter. Looking forward, we feel great about where America is positioned. Given the deferred business demand, and the recent rise in fuel prices, the fourth quarter will be challenging. But that's a near-term issue fighting a longer-term bullish trend. We're encouraged by the upside that exists in demand for business and international travel, and our confidence is reinforced by the incredible work the American Airlines team has done throughout this pandemic and continues to do today. And we're particularly excited about the future that lies ahead for American and our team. With that, I'll turn it over to Robert.
spk08: Thanks, Doug, and good morning, everyone. I want to start by thanking the entire American Airlines team for their efforts in the third quarter and throughout the pandemic. Our airline continues to succeed thanks to the hard work of our team. As Doug mentioned, this summer represented the largest operational ramp-up in the history of America. As we built back the operations, much like other businesses, we have managed through supply chain constraints, veteran staffing challenges, constantly changing travel restrictions, and a lot more. Through it all, we operated more flights and carried more customers than any other U.S. airline, more than tripling our daily departures from May 2020, which was a low point of our schedule. And we're pleased with where we are. American recorded our most reliable September since the merger based on completion factor, on-time departures, and on-time arrivals. We'll continue to focus on delivering a safe and reliable operation and continue to know momentum as we further scale our operation and welcome back even more customers. I also want to acknowledge the efforts of the American team in the third quarter in support of the U.S. Civil Reserve Air Fleet Program. It was a tremendous honor for America to aid in the effort to bring more than 5,000 evacuees from Afghanistan to the U.S., as well as hundreds of members of the U.S. military. That work included working with the Customs and Border Protection to open up the Philadelphia facilities as a welcoming center for foreign nationals. We're grateful to our team members throughout the airline and from all over the world who came together to support American's craft activation. As we reported this morning, our third quarter total revenue was approximately $9 billion, up $1.5 billion from the second quarter. This improvement was driven by our passenger revenue recovery, which increased by more than 20% sequentially from the second quarter on a 12% increase in available seat miles. Overall passenger revenue in the third quarter was 72% of what it was in the third quarter of 2019, which is up 13 points sequentially in the second quarter. Genetic leisure revenue has now returned to pre-pandemic levels at 98% of 2019 levels in the third quarter. As Doug described, business revenue growth stalled in the quarter and finished flat in the second quarter at around 50% of 2019 levels. Given recent booking trends, with the Delta variant society and everything we're seeing and hearing from our customers, We're planning for a robust peak travel period in the fourth quarter, and we're excited about the prospects for 2022. And here's why. We expect that domestic leisure revenues will surpass 2019 levels in the fourth quarter and continue that trend throughout 2022. Short-haul international revenues should follow that same pattern. And recent trends show that corporate bookings month-to-date have improved significantly and are accelerating like they were earlier in the year before the Delta variant and associated restrictions were imposed. Our largest corporate customers tell us they'll be returning more fully to the office and travel as we move out of 2021. And because of that, we continue to expect a full rebound of business revenue to 2019 levels on a monthly basis by the end of 2022. In speaking regularly with our top corporate customers, almost all have resumed domestic U.S. business travel to some extent. As companies return to the office and lift travel restrictions, we see continued growth in corporate travel. Industrials, healthcare, and professional services continue to lead that recovery. Long-haul international travel, particularly long-haul business travel, while the slowest to return, is starting to come back. Right now, almost two-thirds of our corporate customers are traveling internationally for at least essential business. And we expect international travel to improve significantly with easing of cross-border requirements, and we're encouraged by the recent news about the U.S. government easing international entry restrictions starting in November. Following the White House announcement, we saw an immediate increase in bookings in several of our key international markets. Overnight, we saw a 66% increase in bookings to the UK, a 40% increase to core Europe, and a 74% increase to Brazil. Clearly, there's significant pent-up demand for travel to and from the U.S., and many customers are eager to return to travel when it's permitted. Now, just focusing on the fourth quarter, we expect total revenue will recover to approximately 80% of 2019 levels, up approximately 5 points sequentially versus the third quarter, with the strongest performance in domestic and short-haul international markets. We continue to make significant strides in building the broadest global network in the industry and reconnecting with our customers. Our partnerships with JetBlue in Alaska are delivering tremendous benefits for customers and enabling new flying that otherwise wouldn't be possible. travel across our networks during the quarter thanks to these innovative partnerships. Together, American and JetBlue will operate more than 700 daily flights from New York and Boston this winter, including nearly 50 international destinations out of JFK. We also continue to create a seamless experience for our customers, including rolling out reciprocal elite benefits for Advantage and TrueBlue Mosaic members, and we expect to launch mileage redemption on JetBlue very soon. Our loyalty program continues to demonstrate its attractiveness to our customers and partners. New member acquisitions in the third quarter exceeded 2019 levels, despite the airline flying a significantly smaller schedule. As our customers continue to engage with Advantage, our co-brand cash payments were essentially fully recovered at 96% in the third quarter versus the same period in 2019. This is up from just 78% in the second quarter on the same basis. We expect this trend to continue as the network returns to a more normalized level. On the ESG front, during the quarter, American became the first North American airline to commit to developing a science-based target for reducing greenhouse gas emissions by 2035. We also agreed to purchase more carbon-neutral sustainable aviation fuel. American also became an anchor partner to Breakthrough Energy Catalyst, and we've committed to invest $100 million in a groundbreaking collaborative effort to accelerate the clean energy technologies necessary for achieving a net-zero economy by 2050. We're excited about this work and what it will mean for the future of aviation and the acceleration and adoption of critical next-generation clean technologies across all industries. So in summary, while the Delta variant has shifted the timeline for the recovery, we remain very bullish on the return of demand, and we feel great about how we're positioned thanks to the hard work and dedication of the American Airlines team. And with that, I'll turn it over to Derek.
spk07: Thanks, Robert, and good morning, everyone. Before I begin my remarks, I would also like to thank the American Airlines team for their hard work during the quarters. Their continued resilience in the face of uncertainty due to the Delta variant is commendable. This morning, we reported a third-quarter gap net profit of $169 million, or $0.25 per diluted share. Excluding net special items, we reported a net loss of $641 million, or a loss of $0.99 per share. As Doug mentioned in his remarks, this was our strongest quarter since the pandemic began. As we have discussed in the past, as we always expected, the recovery would be unpredictable, and our third quarter results reflect this. Despite the Delta variant-related volatility in demand and revenue trends that Robert discussed, our financial performance improved from the second quarter but fell short of our initial expectations that we outlined in our last earnings call. While the slowdown in demand was clearly disappointing, it is important to note that the trajectory of our results continues to be positive. In fact, even with the drop-off in bookings from the Delta variant and rising oil prices, our third quarter pre-tax earnings, excluding net special items, improved by nearly $600 million sequentially versus the second quarter. This makes it even clearer to us that the steps we are taking over the past 18 months are working. As we have navigated the pandemic, we've built back our network in a way that would keep our capacity aligned with demand while giving us the ability to be flexible as conditions change. We've also worked to keep our controllable costs down and have actioned $1.3 billion in permanent annual cost initiatives this year alone. Based on our results, it's clear these actions are paying off, as our third quarter chasm, including fuel and net special items, was up just 10.5% versus the same period in 2019, despite flying approximately 20% less capacity. On the fleet side, we moved swiftly to retire older aircraft and accelerate our fleet harmonization project. Our 737 retrofit program was completed in May. and we continue to expect our A321 aircraft to be complete by early next year, a full year ahead of our original schedule. In addition to the customer benefits of larger overhead bins, in-seat power, and streaming in-flight entertainment, these aircraft will generate more revenue and allow us to connect more customers over our network. They will also provide a unit cost tailwind as we build back our network. With respect to our wide-body aircraft, we continue to work with Boeing to finalize the timing of our delayed 787-8 deliveries that were expected to arrive in 2021. In the meantime, due to the continued uncertainty in the delivery schedule, we have proactively removed these aircraft from our winter schedule to minimize potential passenger disruption. I'd also like to note that these delays have had an impact on our fourth quarter chasm since we built the cost structure We ended the quarter with approximately $18 billion of total available liquidity, which reflects the $950 million prepayment of our spare parts term loan made in July and approximately $649 million of scheduled debt payments made during the quarter. The scheduled debt pay down unencumbered 20 Boeing 777 aircraft further our unencumbered asset base to $3.8 billion and our first lien capacity to more than $8.4 billion. As we look ahead, we feel confident we have enough liquidity to allow American to navigate the choppiness of the recovery. Because of this choppiness, we will continue to keep liquidity at elevated levels in the near to medium term with a plan to step down our target liquidity to approximately $10 to $12 billion at some point next year when we are confident the recovery has taken hold and we have returned to sustained profitability. The deleveraging of America's balance sheet remains a priority, and we are committed to significant, steady, and continuous debt reduction in the years ahead. Even with the slower-than-expected recovery observed during the third quarter, we remain on track with our target of reducing overall debt levels by $15 billion by the end of 2025. $10 billion of this will be achieved through amortization of debt and its net of new financing. Importantly, these debt reduction targets are based on a plan that assumes future deliveries are financed. Should we elect to use cash in lieu of financing aircraft, that decision would contribute to deleveraging and further accelerate the timeline to achieve these targets. Of the incremental $5 billion, nearly $1 billion has already been actioned with the prepayment of the spare parts term loan we announced on the last call. As we look ahead, we will continue to focus our efforts on prepayable represents approximately 30% of our total debt obligations. In addition to deleveraging our balance sheet, this plan will allow us to smooth our near-term maturity towers and free up high-quality collateral. Assuming this level of debt reduction and continued margin improvement, our plan is targeted to result in the best credit metrics in the history of post-merger American by the end of the four-year period. Looking to the third quarter, the delay in the return of corporate travel and rising fuel prices will put pressure on our margins relative to the third quarter. We expect our capacity to be down approximately 11 to 13 percent versus the fourth quarter of 2019. Based on current demand assumptions and capacity plans, we continue to expect a slight sequential increase in our revenues and expect total revenues to be down approximately 20 percent versus the fourth quarter of 2019. In total, we expect a pre-tax margin excluding net special items of between negative 16 and negative 18 percent. For the full year, our projected debt principal payments are expected to be $4.4 billion. This includes the $750 million payment of spare parts term loan and the $550 million prepayment of the term loan with U.S. Treasury that was completed earlier this year. We have $612 million in scheduled debt principal payments in the fourth quarter. With respect to capital expenditures, we expect full-year 2021 CapEx to remain minimal, with non-aircraft CapEx at approximately $900 million, and net aircraft CapEx, including pre-delivery payments, remaining an inflow of $900. We are still in the early stages of building our operating plans for 2022, and we'll have more to say on what our capacity and cost outlook will look like on our next earnings call. But at a high level, based on the demand trends we see today, along with the feedback from our corporate customers, we expect to slowly increase our capacity throughout the year and to have full-year capacity very near 2019 levels. This, of course, is subject to the future demand environment, and we will always retain the ability to adapt if demand conditions warrant. Lastly, I know a lot of investors are concerned about inflationary pressure in 2022 and beyond. We'll know more once we finalize our 2022 budget, but we do see pressures in fuel prices, hiring and training for both new hires and existing crews as we ramp up our operation, including on the regional side where we recently announced the pilot retention program. We are also seeing increased starting wages for certain regional groups, including vendors. Even with these pressures, our fleet simplification strategy enables higher aircraft utilization and higher average gauge, both of which will help offset some of these unit cost pressures. As I said earlier, we will share more specific details on these impacts to our cost structure as our 2022 plan on our next earnings call in January. So in conclusion, our team continues to do an amazing job of managing through the uncertainty, maintaining a strong liquidity position, and driving efficiencies throughout the organization, and we are well positioned for the future. So with that, I will open up the line for analyst questions.
spk17: Thank you. To ask a question, you would need to press star then 1 on your telephone. To withdraw your question, please press the pound key. Our first question comes from the line of Jamie Baker with J.P. Morgan. Your line is now open.
spk23: Hey, good morning, everybody. So, Doug, I think it was like three or four years ago you had a slide at our conference. It was entitled, There They Go Again. It was a list of airline behaviors that you were warning investors to keep an eye out for. It was a cool slide, actually. So two bullets on that stood out. expanding service to markets that don't touch a hub, and establishing new hubs. Could you help frame the Seattle expansion against that slide? It's not like the slide was written in stone and you carried it down from Mount Sinai or anything. I'm just having trouble reconciling it in the current environment.
spk06: Sure. I'll do it at a high level, and then Boston can chime in with more details if you'd like, Jamie. So, yeah, look, that's not a new hub is the answer. There's already a hub there. It's Alaska's, and they're our partner. And we are simply making that hub stronger by having an alliance with Alaska whereby we can do things they can't do or that they wouldn't be able to do without investment that wouldn't make sense by flying international because we have international aircraft. And they can do things that we can't do, which is feed those flights with their already existing Seattle hub. So it's not a new hub. If it were, yeah, if you see that Be concerned. Happy to note that hasn't happened since we put that there. So, anyway, that's the distinction.
spk15: Yeah, and hey, Jamie, this is Vasu. I'll add to that. Actually, we see Seattle as being really intellectually consistent with that. And for us, it's pretty simple that... We go create value for customers by being relevant and being relevant in the biggest markets. In order to go create a legitimate, valuable, and profitable international network, we need to be able to launch flights from international markets. For us, historically, in the West Coast, we've had a very, very small presence, most namely in the Pacific Northwest where we've had almost no presence. With this, which is a very creative deal, What we're doing is we're flying things like Seattle to Heathrow or Seattle to Bangalore, all of which feed off of that huge local market that Alaska has cultivated. It draws from the connectivity of the Seattle hub. And we've been really encouraged with the results, not just across the West Coast, but really across the system. code share partner, and we are seeing a huge customer benefit all up and down the West Coast. Actually, as we look at it, we are creating close to 300,000 customers are now able to experience AA or Alaska where before they had no competitive option, or they had one or two competitive options in the marketplace. And the market's responding. We've set records for advantage enrollments, but The two markets where our enrollments are growing the most are all the markets in the West Coast Partnership, everything from San Diego north to Seattle, and the other ones are New York and Boston. So we see it as actually being really consistent and a really effective and wise way to go and develop a level of network comprehensiveness that would be too impossible to do on our own.
spk23: Okay, that's really helpful. And then a follow-up, this one, a quick one on fuel, maybe for Robert or Derek. A question I repeatedly receive is why haven't managements adjusted capacity to account for $2.50 jet caro? And I know you can't speak for the industry, but for American, is there a certain period of time that you need to be convinced that higher fuel is going to be sustained? Is there just too much uncertainty that around 2022 revenue to be making capacity decisions today. Just looking for some color on how you would answer the question that I'm getting every day, and I imagine my competitors are as well. Thanks in advance.
spk06: Again, Jimmy, I'll go first. You and I have been doing this a long time. When oil prices move this quickly, it's really hard to have responses. That's what's happened here. It's run up very quickly. You know, we're already selling all the capacity that's out there. So what I know is, what I believe is, and it's been the history in our business, is if this is a new normal, you will see adjustments. You'll see adjustments in capacity, which will result in changes in price. They just don't happen that quickly. And also, it takes a while for everyone to come to the conclusion that this is real. But, you know, I don't know, 2014? 2014? It was a pretty good year in the airline business, and Brent averaged $100 a barrel. So, you know, this is, we all, this is, you know, it will adapt if this isn't normal. But right now, in the very near term, it's hard to adapt. Robert?
spk08: Doug, this will come into balance, and, you know, fuel prices run up very, very quickly. As we take a look at things, there must be an impact on capacity and pricing in the long run.
spk23: Got it. Thank you, all three of you. Take care. Thanks, Judy.
spk17: Our next question comes from the line of Connor Cunningham with MKM Partners. Your line is now open.
spk10: Hey, everyone. Thanks for the time. Hey, Connor. Hi. When listening to Delta and United's call, a huge portion of their script is about premium products and how they think there's a structural change happening. I don't think you guys mentioned much about that. I was wondering if you could just speak to how your different products are performing right now, and do you actually agree that there is structural change happening where leisure travelers are trying to book up more towards premium seats?
spk15: Yeah, hey, Connor, this is Vasu. I can start that one, and others may chime in, too. Look, we've certainly – Indeed, our premium revenue across our domestic system for much of the quarter was actually higher than what it was in 2019, which is pretty promising. But we spent a lot of time looking at this, and there's a component of it which certainly seems very promising, but it still seems early to say whether this thing is structural or not, at least in our own system. You know, we took a lot of wide bodies out of international fly, and we deployed them into domestic. We were really encouraged by what we saw, where there are a lot of customers with a lot more disposable income who would travel on leisure trips, and they would not only pay for the LifeLab product, they would pay a premium versus... other non-light products in the marketplace. And so that's certainly been an encouraging thing. But what we don't know is so much of that trip behavior also, you know, it was people leaving on a Thursday, coming back on a Monday. So we do think that with more disposable income, there will be some interest in the consumer to have more experiences, to pay more for those experiences. What we don't know is how to size the magnitude of it, because there's a lot of things that certainly, speaking for American Airlines, that we did that was very unique to the last several months. And we don't yet know how much of a structural change that is. But to the earlier point, the beauty of the airline, and this pandemic has proved it over and over again, is that we can change where the airplanes go very, very quickly. And with that, we can also change the product design pretty quickly, too. So this is something that we're looking at. It is a similar trend that we're seeing. Time will tell how structural it is, though.
spk08: Hey, Vasu, and I'll just add, hey, look, we're ready for it. We've been preparing, you know, for a long time, not just in selling the product, which Vasu's talked about, but the hard product as well. So the, you know, the fleet is ready from a cabin configuration perspective, whether that's the business class cabins or premium economy that we put in to all of our wide bodies. And then just as we look at travel recovery and ways to service, you're going to see that we're adding back amenities that will allow us to sell and bundle in different ways. So everything from our five-star service that's come back to the opening of our flagship lounges, which are best in the industry, we have a way to sell and to service every customer at every end of the spectrum in terms of demand. So we feel really good about how we're set up to whatever environment that we find ourselves in.
spk10: Okay, I appreciate it. And then just on the cost structure, I mean, investors are trying to get comfortable with the stories on the cost side for the airlines in general. So, I mean, clearly inflationary pressures, but curious if you can talk to any of the tailwinds that you might be having that happened in 2022 outside of just bringing back capacity to 2019 levels. You know, the reason why I ask is I would have thought, given some of the structural changes you had, you know, within fleet simplification and so on, that 4Q would have had a little bit more leverage to it. So any details would be helpful.
spk07: Yeah, I think, Connor, in the fourth quarter, I mean, the story, and I touched a little bit of it on here, is, you know, we built the airline to fly more in the fourth quarter, without a doubt. Two of the issues, one is the boat. So we have 787 pilots. We have crews ready to fly those aircraft. But we unfortunately had to pull them out of the schedule in the fourth quarter and the first quarter. The other thing from a capacity perspective that we're all dealing with right now is on the regional side is pilot supportability on the regional side, which will resolve itself over time. But as, you know, the main line is hiring up, on the regionals. So we're probably not flying as much regional as we would have flown. So I think from a chasm perspective, that's what drove it a little bit higher in the fourth quarter, without a doubt, versus where we had planned. So we're not flying exactly what we would have flown and where we would have gotten the cost structures there. As we go forward, the tailwinds are really, I mean, the $1.3 billion worth of, you know, going to be in there. As we look into next year, we haven't done the plan yet, so that's why it's really hard for me to give any kind of guide on a chasm for next year. We do see these inflationary hits to look at the plan for next year, and we'll do that as we dig through the process. But we'll have the tailwind of the cost coming out that we did from an efficiency standpoint and also the, number one, getting out of the aircraft types and modifying the aircraft to be
spk06: Yeah, and Connor, just because we haven't talked, we didn't spend a lot of time talking about the 1.3 billion gigs we talked about a lot, but just for others who may not have been following us closely, those are real. They're in the airline. The way we look at this is we go back and apply the 2019 schedule today and produce the same number of ASMs and save that amount. It's a combination. I mean, it's a lot of things, but the largest ones are $500 million or so in management payroll. And as Derek said, all the efficiencies you get from eliminating so many subfleets training otherwise. So those are in there as the tailwinds to offset the inflationary pressures you and Derek were talking about.
spk10: Okay. Appreciate it. Thanks, Connor.
spk17: Our next question comes from the line of Sheila Kyoglu with Jefferies. Your line is now open.
spk19: Hi. Good morning, and thank you for the time, guys. Maybe if we could talk about the transatlantic market. It's begun to open up a little bit more and maybe heading into 2022, but your passenger revenues are still down about 75%. How do you think about the cadence of that recovery?
spk15: Hey, this is Vasu. I can take that one. Look, we've been really encouraged by what we've seen over the last, let's call it three or four weeks, an international the regulatory restrictions changed, we saw a big spike in bookings in the two or three days after it, which is not that surprising. What's been more encouraging to us is that it's really sustained itself. But what we are seeing out there, what you see from us right now is a little bit of cautious optimism. In November and December, we are absolutely seeing bookings coming in at a greater rate than what we saw in 2019. A lot of that, though, is a pent-up demand effect. As we get into next year, with every passing week, we see our bookings step up more and more across Transatlantic. And so we're really encouraged by that. But the big variable will be when corporates start returning back to office. around London. So we don't anticipate as much of a business recovery in Q4, but we are seeing a really, really meaningful leisure recovery. And all the more so as British Airways builds back its connecting schedule in Heathrow, we anticipate taking an increasing amount of demand as Q4 goes along. So though you see that number in aggregate, we see that something is changing a lot from where we are in October to November to January and beyond.
spk17: Great.
spk19: Thanks a lot, Fafiq.
spk17: Our next question comes from the line of David Vernon with Bernstein. Your line is now open.
spk11: Thanks, operator, and thanks, guys, for taking the question. So, Doug and Robert, we sat down a little bit before the pandemic, and you had sort of laid out a picture where, you know, American had been lagging on some of the customer-facing information technology stuff that was kind of constraining the operation in ways like not letting you book up to a higher load factor because of the denied boarding practice the ability to kind of pay for upgrades, dynamic pricing on free flyer tickets, all that stuff, a lot of it sounded like IT-driven initiatives. And I was wondering, kind of coming out of the crisis as we start to look out over the next couple of years, is there still catch-up work you need to do to bring yourself at parity with peers in terms of the way they're monetizing capacity, or have you kind of closed that gap through this crisis?
spk18: Hey, this is Maya, and I'm proud to say that over the last several years, we really have closed the gap on a number of our technology initiatives, including some of the ones that you've rattled off, like dynamic pricing and allowing subs into higher load factors and a lot of standby on day of departure activity. So we've really used the pandemic as an opportunity to really identify those gaps and to close them. and really focused on a lot of the other things that we've been talking about that will be tailwinds for next year, like our seamless partnerships and making that a better customer experience for our customers with our West Coast and Northeast alliances.
spk11: And is there a way to frame kind of what that uplift might be in terms of load factor or sort of ancillary revenue growth? It looks like the other revenue lines are performing pretty well. But is there a way to kind of put a number around some of these things?
spk15: Hey, this is Vasu. We're in the early stages of doing that as we build next year's plan. But I'll say at least probably our top line initiative is making sure that all of these partnerships are really integrated and seamless for the customer, that a lot of the longstanding issues that have existed in co-chairing relationships really get alleviated pretty quickly. And we're pretty pleased with that. We've made a lot of progress with Alaska and JetBlue, and what we're seeing is very encouraging. To my earlier comments, we're seeing a lot of customers come in and a meaningful amount of revenue system revenue, but something which is a lot more meaningful to a New York and Boston and West Coast network, which was operating at 50% of historical level. So we do think there's a lot of uplift to the whole thing without a lot of investment further.
spk11: All right. Thanks a lot, guys.
spk17: Our next question comes from the line of Dan McKenzie with Seaport Global. Your line is now open.
spk02: Oh, hey, thanks. Good morning, guys. The first question here is just a housecleaning question from a prior question, the OASIS project. Is that included in the $1.3 billion of structural cost savings, or is that above and beyond? And then just related to that, if that had been fully implemented in 2019, how much would that have contributed to pre-tax income?
spk07: Yeah, it is included. It just added more seats on some of the aircraft, and from an operational benefit, it will help out a lot because as we swap the aircraft, they will both be in that. So it is in that because we reduced aircraft types, but it's included in that number. What it's going to do is benefit, number one, from a chasm for
spk02: Yep, understood. Okay, second question here, what is the aggregate wallet spend, say a fortune 1,000 counts in the Northeast that American can now access for the first time as a result of the Northeast Alliance? So accounts that, you know, really where you had no shot at winning, you know, pre the relationship with JetBlue versus now, you know, you walk in, you sit down with the corporate travel managers, you can actually put together a competitive network solution and And then just related to that potential aggregate spend, you know, what would American JetBlue's fair share be of that?
spk15: Hey, Dan, this is Vasu. Thanks for the question. And I appreciate what you're trying to get at, which is effectively how much more market can we access than what American could access on its own. And while I don't have specific numbers, We see it in New York historically. We might have been a 25% player, but we were competing for something which was actually like 10% to 15%. Though we had a really great product in Heathrow or in the TransCon market, we couldn't get you very effectively to Toronto. At some point, customers, especially larger accounts or power travelers, business-style customers, just stopped flying us. And now, as we see it, we have the best network between AA and JetBlue. We've gone from a world where we have... four trips a day, JFK, San Francisco, to one where we'll have, you know, 12, 13, 14 trips a day where all of our Transcom product is full flat. We've taken the 50-seat RJ out of New York altogether. So when you think about New York, it's a business travel market which is not... two or three times larger than the next biggest market, but several orders of magnitude more than that. And that's all now a market that we get to compete for.
spk08: And when we get to compete for it, we see a New York whose RASMs, instead of underperforming the system by 10% to 15%, can perform in line with the system. Okay. Hey, Dan, I just want to go back and just add one more point. Regarding the fleet harmonization project, which we're almost done with We only have, I think, 60 of the 321s that are remaining. It will be complete by the first quarter. You know, Derek mentioned that in the $1.3 billion, so much of the savings, you know, in terms of actual commonality and what we can take out in terms of reduction of fleet sizes and being able to operate the airline more efficiently, that's included in the $1.3 billion. What's not, though, is, you know, look, we are adding seats. So, you know, at very, very low, you know, marginal cost. So you're going from 160 seats on the set of threes up to 172, and then on average adding a few seats to the 321s as well. That's, you know, a benefit that will be seen in run rates going forward.
spk02: And that actually was my question. From a revenue perspective, yeah. Yeah, the incremental revenue that you gained. That was actually my question. That's what I was trying to get at. But thanks for the time, you guys.
spk17: Thanks, Sam. Our next question comes from the line of Stephen Trent with Citi. Your line is now open.
spk03: Good morning, gentlemen, and thanks for taking my question. I just had a quick one looking at your investment. So you guys committed to invest in JetSmart and Goal in South America. You, of course, have this tie-up with JetBlue in the United States. When you think about other international corridors, do you see any opportunities for similar kinds of tie-ups, for example, you know, outside of the One World Alliance?
spk15: Hey, this is Vasu, Steve, and I can start on that one. Look, we... ultimately what we want to do is create the most comprehensive network for our customers. And whether it is a co-chair, an investment, a joint venture, whatever it is, we don't see them as ends in themselves. Those are just simply means. And in many parts of the world, we would love to be able to do it all just organically with American Airlines metal. That's not always possible for regulatory or other reasons. And so based on that, we may employ different mechanics, whether it And so it'll change out there. But for us, the true north is creating the most comprehensive global network. And we see that. Whether it's, you know, we've seen the benefits of it for consumers in the northeast, in the west coast, as we look at South America. is carry them within South America. And so we're always on the lookout for partners that can help us do that and create more value for the customer. How we go and put these partnerships together is a sort of second-order issue.
spk03: I appreciate it, Vasu. And just one very quick follow-up. How are you guys thinking longer term about your pipeline of pilots and when you think about, you know, retirement in the next five to seven years and what have you?
spk08: So Steven, I'll take that one. Look, pilot profession has never been a better time to get into it. And what I'll tell you is, you know, we will attract people to the profession. given the kind of starting salaries that we're offering right now, and then ultimately what pilots, you know, top out at. So I do see this as ultimately an economic issue that will be solved. You've seen us do some things recently with regional pilots to make sure that they stay in position and progress onto American Airlines, and we'll continue to monitor that. Over time, just as we saw a few years back, this will be brought into balance just simply based on economics. People will want to come into the profession.
spk03: Okay, I appreciate that. Thank you for the time. Thank you.
spk17: Our next question comes from the line of Chris Dathalopoulos with Susquehanna. Your line is now open.
spk09: Thank you, and thanks for taking my question. Good morning. So on headcount, you know, how should we think about FTEs in 2022 and, if possible, 2023? Just Could you run your network at or above 2019 capacity on fewer FTEs relative to 2019?
spk07: Yeah, I think, I mean, we have... taking out a significant amount of headcount out of the company. That's mostly what the $1.3 billion of cost reductions, permanent cost reductions are. As Doug alluded to, 500 of that is management headcount. 600 of it is productivity at the other areas throughout the company. So Yes, we will run. I don't have a number for the 2022 plan because we haven't put that together yet, but that is the significant portion of what the $1.3 billion worth of permanent cost reductions are. It's mostly in the headcount and the personnel side of things at American Airlines.
spk09: Okay, and the second question, on the corporate side, so you mentioned a full recovery by year-end 2022. Just curious what the mix of users is here. I know you mentioned industrials, healthcare, and I think one other group, but are your surveys showing a mix similar to pre-pandemic travel, or is it shifted? And is your outlook contemplating the same type of travel, meaning both in user type and frequency? Thanks.
spk15: Hey, this is Bob, too, and I can help. a rebound across all of them because at this point all industry verticals are improving. They're just at different points in the improvement curve. And more critically and more importantly to your question, what we see is that even in sectors where travel is less bad, the rate of progress we're seeing is mirroring those sectors where travel is higher. relatively more return. So we do think we have some real confidence that, indeed, corporate travel is likely to come back. As Doug and Robert mentioned earlier in their remarks, there is an immense amount of pent-up demand, and we find that once people start to travel, they continue to do so. Very importantly, though, for us and our system, we have a lot of A lot of our business style demand is small and medium-sized business, really across the southeast and the southwest. And already, I mean, we're seeing on a traffic basis that is very well recovered. On a revenue basis, that will start to recover as people come back and pay us more and fly us more, frankly.
spk08: Okay, Vasu. I'll add this. Allison Taylor just held our Corporate Customer Advisory Board meeting down in Miami yesterday. I was able to attend as well for a part of it. And that brings together our top 50 corporate customers and those that are responsible for procurement of travel at those companies. And I was really pleased to hear, you know, just over and over again about, look, we have to get back to the office. And once we get back to the office, you know, travel is going to come. So it's not surprising that the industrials and healthcare and pharmaceuticals are leading us right now. They're back in the office. You know, they've got to, you know, take care of us and put food on the table. So that's happening. What's going to come next is, you know, some of the other, you know, banking and financial services, entertainment. You know, as those get back into the office in the start of the new year, they're going to come back to just as we're seeing in some of these other sectors.
spk06: And just a question, Doug, to just data around Also, what Robert just told you, I talked about how in July we were up to 64% of our 2019 levels in terms of business revenue. There's a big difference between large companies, those that we have on corporate discount programs, and our small and medium business. In that 64%, the large corporates are at 35% on a year-over-two-year basis, and the small and medium business is at 83%. People that are back at work are traveling. When the large corporates get back to work, they'll travel. It's less about sectors, more about people just getting comfortable bringing people back to the office. Those companies that don't have large headquarters and large HR departments are out flying because they need to across all sectors. Those companies that are larger organizations and need to worry about those things more aren't yet back. They were starting to come back. They'll get up into those same ranges. That's where business wants to be.
spk09: Great call. Thank you.
spk06: Thanks.
spk17: Our next question comes from the line of Helene Becker with Cowan. Your line is now open.
spk22: Thanks for that, Dr. Ritter. Hi, everybody. I hope you are all doing well. We are, Helene.
spk00: How are you?
spk22: I'm okay. I guess I'll see you tomorrow night. And, by the way, congratulations. Thank you. So here's my question really for Derek. Interest expense, I think, in the third quarter was $476 million, I want to say. Can you just talk about debt pay down and the cadence of that and how it's going to look over the next couple of years in that context of you going from $15 billion, I think you said in the press release, $15 billion of debt pay down by 2025?
spk07: Yeah, well, I can give you what our scheduled debt paydowns are over the next few years. So, you know, we said we're going to pay down $4.4 billion this year. Next year is $2.5 billion. The year after that, I would just say it's around $3 to $3.5 billion each year as you But we do plan, just as I talked about on the call, we do plan on financing aircraft in this environment going forward. So the net debt will be a little bit different than that. So the $10 billion will come off. let's just call it $2 billion a year over the next five years, that will reduce that. What we do on the other five, we had talked about $1 billion already went in 2021, so we did the pay down of the spare parts loan. We also, because of the recovery, It slowed a little bit. You know, we are going to hold on to cash and hold on to cash where we're at today. Once we feel we're comfortable with that, I think we will quickly use the excess cash to pay off most of the remaining $4 billion. It just depends on where our cash balance is. It depends on how it will grow over time. but I would expect it to be sooner than later. As long as the recovery happens, business comes back, and the earnings are there to do that. So the prepayment would be up front. The debt pay down over time, the $10 billion, will be over, ratably over time. I don't think we have any big, huge debt payments. There's a $750 million one-in-20 Nothing huge going forward. So I would look at it that way is pretty ratably the $10 billion over the next four years. And then we would try to attack the other $4 billion as soon as we feel comfortable. at 18 today. So we would most likely do it early. Or as I said in the comments, we could use cash to pay for aircraft and just not add the debt instead of paying off any prepayable debt. So that's the plan that we have today.
spk22: Okay, that's very helpful. Thank you. And then on the 787s, I think those were going to be leased in aircraft from VOC Aviation. Are you Does the delays change any of the financing arrangements for those aircraft?
spk07: No, it does not change the financing of the aircraft. Still leased in.
spk22: Okay, perfect. Thank you.
spk17: Our next question comes from a line of Duane Finnigworth with Evercore ISI. Your line is now open.
spk20: Hey, good morning. Question for Doug. I thought it was interesting in the prepared comments that more capacity versus peers and more revenue versus peers was called out. Is that the main goal of the company at this point, more revenue, or do relative margins matter? And to what extent is profitability a priority for the board at all? or does it not even come up in conversations given how high liquidity is? What is the board trying to solve for?
spk06: For relative margins, Dwight, and we feel really good about that. The reason I talk so much about the absolute growth at this point in time is because we're all working to add back capacity and to get to where we can meet the demand that we know is coming. So we're really proud of what the team has done to get back more capacity than others, to take care of more customers than others, and to do so – you know, obviously safely and efficiently, and to do so in a way that has us running a really great operation right now. But, of course, that's not the goal of the company. It's just simply to be larger. The goal of the company is to maximize shareholder value over the long term. And the way we'll do that is producing returns. And what we feel very good about is our ability, as we come out of this, to improve our relative margins, certainly versus, well, I think probably versus everybody, as you compare them back to 2019 or other years.
spk20: And just a quick housekeeping, and I appreciate you taking the questions. Just looking into the fourth quarter, do you expect the operating cash burn to be larger than the $1.7 billion burn in 3Q? And I'm not sure if you have the calc, but can you speak to the daily cash burn estimate? Are we going to head back to there? Thanks for taking the questions. Go ahead.
spk06: No, please.
spk07: No, I was going to say we're not heading back there. The fourth quarter is a seasonally you do burn cash in the fourth quarter.
spk20: But I go back through every fourth quarter since you guys merged, and there's no negative operating cash burn. Understand revenue is depressed, fuel is a little bit higher, but operating cash flow is typically positive in the fourth quarter.
spk06: I don't know that we know the operating cash flow, but the seasonality does, in profitable years, has cash declining. We're exceptionally comfortable with where the cash is. That operational cash flow will track with the earnings estimate that they're getting. Thank you for taking the questions. Thank you, John.
spk17: Our next question comes from the line of Andrew DeDora with Bank of America. Your line is now open.
spk12: Hi. Good morning, everyone. So as American keeps ramping up capacity maybe a little bit quicker than your network peers and with your vaccine mandate upcoming, just curious, are you planning your network or staffing any differently into peak holiday season, and how do you think about the operational risks around that?
spk08: Hey, Andrew. It's Robert. We're getting ready for the holiday season. We expect a lot of passengers, tremendous pent-up demand, especially as vaccinations take hold and infection rates decline. And we're going to be ready. You know, look, we have to get ready for the holidays always. And, you know, this year we're doing our best to make sure that we have the right people in the right places at the right times. And that's the effort, and we're taking the appropriate steps. You know, precautions were necessary, but we're flying a full schedule as we go into the holidays and looking forward to it.
spk15: Hey, Andrew, this is Vasu. One important thing to note, just to clarify on your question also, is the absolute ASM production of American Airlines From where we have been, being able to go and get these big pools of demand that have been out there and geographies that are really favorable to us has really worked out. But as things shape up, what we are very much managing to is the relative profitability of the airline. So just to clarify that. So that gets lost in the year-over-year versus 2019 comparisons.
spk12: That's a fair point. Thank you. Then just second, maybe to ask the fuel question a little bit differently. I think I know the answer to this, but, you know, over the past year, year plus, did you ever consider introducing a hedging policy? And do you think that this is an option you could rethink going forward? Thanks.
spk06: Yeah, Andrew, you've never seen that. We've been quite happy, you know, being unhedged now for however many years it's been. Sorry, what? 2008, Derek told me that we stopped hedging. And that feels right to us. What we find is, what I said, is over time the industry adjusts and what generally happens is we end up paying a premium for the hedge without much benefit at all. So anyway, like I said, I don't want to say we won't ever do it, but it's not something we've begun to look at in this run-up, I can tell you that. So we prefer, actually, we think we have a regional economic hedge in terms of what happens with fuel prices and the economy as well. So all those things come together and have us telling you not right now.
spk12: Got it. Thank you.
spk17: Our next question comes from the line of Mike Lindenberg with Deutsche Bank. Your line is now open.
spk16: Oh, yeah. Hey, good morning, everyone. Hey, Derek, you talked about the delayed 787s as providing or creating a bit of a chasm headwind in the fourth quarter. Can you just remind us how many airplanes, how many incremental 7-8s were you supposed to have in the 4Q, and how many percentage points of headwind is that, just roughly?
spk07: Well, it depends on when we were thinking, but earlier we were supposed to have all 13 in, And if you go back to the last quarter, we probably had six of them built into the schedule, you know, six ASMs. It's probably a point of ASMs that we had to take out of the schedule. So that's really what's driving a lot of this. And then, as I said, the regional, we have had a pull down in ASMs from a regional perspective just to ability, which we're getting all under control right now. But both of those have caused, you know, a reduction in ASMs that we would have flown in the fourth quarter, primarily driven by the 788s.
spk16: Okay. And then just my second question, and this is either, you know, Doug or Robert. Can you be willing to share with us where you stand on vaccinations across your employee work group? And then just any thoughts on the testing, which it seems like every carrier is going to have exemption issues and they're going to have to test. And we're hearing that the costs are high. They're not. You don't have guidance from the government. Is it a meaningful, you know, cost headwind that we have to worry about? Or, you know, anything that you can share on that topic would be great. Thanks.
spk08: Hey, I'll start. It's Robert. Look, the vast majority of our team members are vaccinated. And, you know, we're working through the process. We set a November 24th deadline for vaccination or accommodation request to be provided. We don't expect anybody to leave American Airlines. And certainly they're going to be, you know, out there helping us during the holidays. So no issues there. We don't know what exactly, you know, an accommodation would look like for, you know, the minimal number of people that actually, you know, apply for that. But it's likely to be some combination of masking, self-declaration, and testing. And that testing we don't know the details of. So we're working through that. And, you know, as time goes on, we'll be able to fill you in.
spk06: Yeah, thanks, Robert. And Mike, look, I certainly wouldn't be adding any cost into your forecast for this. So to the extent there will be testing going on, it would be for those who have chosen still not to be vaccinated, that have a religious or medical exemption, and that we are accommodating while they're still at work. I don't suspect that will be an extremely high percentage of the employees, and I can't I can't even imagine that that's a material cost to test those individuals. Maybe OSHA standards once a week. So I don't know where we'll end up. We're working through the accommodation process with our unions. But, yeah, that's, I don't know. As a person I've heard this cost issue, I would do everything I could to try and let you know not to worry about that piece. As to the, as to the, again, just to follow, just to reinforce what Robert said, and I think it was part a little bit of Andrew's questions, you know, the Certainly when this was first announced, I think there were concerns about what it was going to mean for airlines and TSA and others. We've all gotten extremely comfortable with that. I was happy to see yesterday the comments from the White House, from Jeff Zients, about federal agencies, which of course includes the TSA, and about how the goal of this is to get everybody vaccinated, not to punish anyone, and They're going to have people, you know, if people have religious or medical exemptions, they'll be accommodated and they'll be able to work. So that's the thing I think you're going to hear from all the airlines. We're all well prepared to meet all federal mandates and meet all the customers that are coming to the holidays.
spk16: Very good. Thanks, guys. Thanks, Mike.
spk17: Thank you. We will now take questions from the media. If you are with the media and would like to ask a question, please press star then one on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from the line of Allison Slider with Wall Street Journal. Your line is now open.
spk14: Thank you so much. Hi. I'm a vaccine question. I'm just curious. You know, I know you've talked a lot about the exemptions, but I'm just curious what sort of planning or strategizing you guys might be doing, you know, if there does end up being some portion of the workforce that just doesn't get vaccinated or has to be terminated or something like that, you know, is there kind of a plan B or a backup plan for how you'd handle that?
spk06: Well, again, well, first off, let's start with what we know we know, which is, again, the vast majority of employees are already vaccinated. We're seeing that rise every day. as the mandate's been put in place. So we're highly confident by the time we get to November 24th, certainly by December 8th, when the mandate comes in place, we're going to be down to a very small number of people, if any, that are either not vaccinated or don't have a valid medical or religious exemption. So I understand your question as well. That's not true. But first off, I don't think that's going to be the case. And we know that based on the data we're But, however, again, so that's where I think the answer is. But even in the case that that happens, we'll continue to work with those employees that have chosen to get to that point. Again, I think it's going to be a really small number, but whatever that number is, we'll continue to work to accommodate those employees and make sure that they continue, that we're working together, again, as necessary. What government employees will be doing the same with ours. So we have that flexibility but I don't think we're going to do that.
spk08: And I guess... I just add that, you know, of course we're working with the team and we're working with our labor unions as well to get everybody, you know, vaccinated right now. So you see that we continue to provide an incentive for team members. to get vaccinated turn in record of their cards. And we're working with the entire team to collect that information as we speak. And fortunately, you know, every day, you know, we see good signs that word is getting out and people are turning in vaccination status or accommodation requests. And as Doug said, we're really confident that we'll be in great shape as we come into the holidays.
spk14: Got it. And, I mean, your pilots have been saying that sort of the whole debate and controversy is becoming a distraction and leading to some potential safety issues. You know, are you seeing that in your data at all?
spk08: Well, look, we have an obligation to make sure that, you know, we're focused on flying. And so any type of distraction, whether it's vaccine or anything else, you know, we want to jump on. And, you know, to that end, again, we're working closely with our labor units to make sure that we're on top of anything that is potentially a safety concern. But, you know, we're flying the schedule, flying it very well, and flying it incredibly safely. You know, we set very, very high standards, not just for the industry, but especially for American Airlines.
spk14: Okay, thanks.
spk08: Good job.
spk17: Our next question comes from the line of Leslie Joseph with CNBC. Your line is now open. Hi, everyone.
spk13: Hi. So I'm just trying to square this idea that you don't expect any employees to leave American Airlines, but this week you told them again that they could be terminated if they don't comply with the mandate, either getting vaccinated or the exemption. And then how come the exemption or the mandate doesn't apply to your wholly owned subsidiaries because they fly those government contracts
spk08: Hey, Leslie, I'll just start. First off, look, we have an executive order, and so there's not a lot of debate or argument. We're trying to find the best ways to comply. And so all efforts are making sure that our team members get vaccinated. And to that end, as we've said, we're seeing the kind of results that we want. anybody leave American. And through getting vaccinated, which we're making, you know, very available and easy for folks to get done, you know, or those that, the small number that apply for accommodations, you know, we will continue to work with people to encourage them to make sure that they take care of themselves. And we're working cooperatively with our labor unions as well. different agreements that we have to follow in accordance with our collective bargaining agreements to make sure that, you know, we're doing everything possible to make sure that people stay with American. We're looking through that and we're committed to taking care of our team.
spk06: Okay, Leslie, in a second. First of all, and again, just a distinction, I think, Leslie, between where early on in this process, there was concern about not having enough people and where you're seeing everyone get now. I think there was a view that those, at least at some airlines or at TSA or other places, those who could not get vaccinated or chose not to get vaccinated would be on unpaid leave or something like that. That's not where we're going. So that's what gives us the comfort. We do know there will be some people at American Airlines who have reasons they can't get vaccinated. They will have exemption But when they have exemptions, we're going to work to accommodate them so that they also can do their jobs. If anything, between a few weeks ago to now where you're hearing extreme comfort around our ability to do it versus where we might have been when we first heard this, that's the distinction. And the exact same distinction, by the way, as I said, that we heard yesterday from the administration about TSA and other agencies. So that's what gives us the comfort. That's what we think we're not going to see anyone leaving American, I don't think anyone's going to want to leave American because they can't get vaccinated, because either they just, they choose not to get vaccinated or they don't have a religious or medical incentive. On the subsidiaries, you know, just like every other airline, the regional carriers are not subject to the mandate. I mean, they have to work through that themselves. to see whether or not they deem themselves federal contractors. But to the extent they're not, they're not subject to the mandate. They will be subject to the OSHA requirement when it's effective for airlines, for companies that have 100 or more employees. So at that point, they will need to respond accordingly. But there isn't... I certainly don't think, you know, between America and Delta United, none of the regional carriers that any of us use are working toward a vaccine mandate at this point because they've concluded they're not covered by the mandate.
spk13: Okay, and then for the exemptions, do you expect to approve all of them? Oh, no, of course not.
spk06: Again, what I believe is What I really believe is we're going to get, you know, whatever the exemption is going to be a small percentage of the total workforce. Everyone needs to get vaccinated. But certainly there are religious and medical exemptions, and to the extent people have valid religious and medical exemptions, we're not going to put them on unpaid leave. We're going to make accommodations for them, as we should, so that they can continue to work.
spk08: For those that don't receive approval for those exemptions, we fully expect them to get vaccinated. Right.
spk13: Got it. Thank you.
spk08: Thanks, Leslie.
spk17: Our next question comes from the line of David Koenig with Associated Press. Your line is now open.
spk04: Hi, David. Good morning. Good morning, Doug. I have two follow-up questions, but I'll try and be quick. First, sticking with the vaccination theme, United and Delta put numbers out there, and why can't you tell us how many or what percentage of your employees are vaccinated. And secondly, and this goes back to something that came up a couple times on the analyst section, about flying a fourth quarter schedule that's pretty close to 2019 levels and how you're going to do that with your current head count. Why shouldn't passengers expect to see the same kind of disruptions that you had over the summer?
spk08: Look, David, I'll take that. Look, we're – We have done a tremendous job of making sure that we're set to fly the schedule. As we've said in our comments, we flew most reliable in September in our company's history. And that's the kind of performance that you can expect from American going forward. We did a tremendous ramp up to get to where we were during the summer. And oh, by the way, as Basu mentioned in some of his comments, the kind of schedule we're going to fly around the holidays is actually no larger than what we had flown during the summer. And all we've done since that time has been able to add more resource, to make sure our partners are better positioned, and that we're better equipped to handle whatever may come our way. So we feel really confident on that point. In regard to... And I would add to that, Robert.
spk07: But, David, the hiring we're doing now is for the summer of next year. So we're very confident that... asking in the next year, though. In the next summer, again, at that point, though, we're grabbing up that.
spk06: Again, the disruption we had in June was due to us just not having as many pods through the training process as we'd expected. We've rectified that issue, and we're going to make sure that we have, as we expand, that we have the right number of employees. So that's not an issue at all. I see your first question. Yeah, I guess those two airlines have released their numbers. Our number is still, you know, moving every day as more and more people are getting vaccinated. In the case of both, one of them put in place, you know, a unilateral mandate for their team, so they're through with that. The other one put in place a requirement that if you're not vaccinated, you're going to pay more for your medical benefits, and it's already in place, so but I don't think any other airlines have talked about exactly where they are, probably for the same reason we have, which is we had a voluntary program in place, and now we have a mandate in place, and that number continues to grow, and what we know is by the time we get to November 24th, we're going to be where the others are, which is virtually everyone vaccinated, those that aren't, will have valid medical or religious exemptions, and we'll be flying our airline, taking care of all our customers.
spk17: Thank you. Our next question comes from the line of Dawn Gilverson with USA Today. Your line is now open.
spk01: Hi. Good morning. Of course, another vaccine mandate holiday travel question. Specifically, Scott Kirby, which you're no doubt aware of, yesterday had some pretty strong comments, you know, predicting a holiday travel meltdown for everyone, of course, but United. But I wondered, you know, he's saying even if, say, you do have to go to testing for some of these people that, you know, he said if there's a weather melt, if you think a weather meltdown is something, what do you see as these people test positive last minute and a flurry of last minute flight cancellations? So in short, he's predicting, you know, he says buyer beware for people. How do you specifically respond to that? And my second question is, who's approving these exemptions? Is that just the company? or does the government play a role in that too? Thank you very much for any color.
spk06: Don, again, I didn't see Scott's comments, but anyway, if that's what he said, it's not right, of course, for all the reasons we just said. But, you know, we're well prepared for all the reasons I've already said, don't need to restate them. Highly confident that we're going to have everybody we need to fly the schedule. Whatever the accommodation process is, I expect, again, for it not to be a large percentage of the airline, and it certainly won't be a process that will be cumbersome on the operation. Again, we're still wondering what the accommodation process will be with our unions, and it will be some combination of testing and masks and social distancing and things like that, as it should be, to make sure everyone's safe. But we do need to accommodate those who have valid medical or religious exemptions. And again, I go back to at least the OSHA requirement is weekly testing. So I'm not saying that's where we'll end up, but it's certainly going to be something like hourly testing. So we don't anticipate any sort of operational impact. We anticipate having all the people we need We may have started some of this by being concerned, like I said, when it first came out because we didn't have this kind of direction. We're not remotely concerned now. As to who approves the exemptions, I think that's the employer's duty to approve the exemptions.
spk08: We already have a process in place and have to deal with accommodation requests already. And all companies do because
spk06: because of disability. I'm sorry, Robert, go ahead. Yeah. So anyway, it's the same process, just bigger now.
spk01: Thank you very much.
spk06: Thanks, Tom.
spk17: Our next question comes from the line of Justin Beckman with Bloomberg. Your line is now open.
spk05: Hi, thanks for the time today. I wanted to ask about the DOJ lawsuit regarding your relationship with JetBlue in the Northeast. Are there any discussions going on with the government about that lawsuit in terms of any type of concessions or changes to that agreement, or is this a case where it's kind of all or nothing in your view?
spk06: Yeah, absolutely not. They've sued us, and we're going to go win the lawsuit They're wrong. This is highly beneficial to consumers, and we're perplexed as to why they filed this lawsuit. It's their prerogative, and same in court.
spk05: Okay. Doug, did you say that the discussions were ongoing at the time, and they still are, or they're not going on?
spk06: I said they're not going on. They're I don't know if lawyers are talking to lawyers or anything like that, but I can tell you for certain the company is not interested in any sort of talks about settling this. We feel extremely good about our case. I think it's better every day as we continue to expand and provide more service to customers.
spk05: Great. Thank you.
spk17: Our final question comes from the line of Kyle Arnold with Dallas Morning News. Your line is not open.
spk21: Thank you. Hey, are you adjusting your staffing levels, you know, at the same levels that you've done in previous years when you look forward to the holiday season? I know some other airlines have said that they, you know, essentially have to put more workers on the line and have more workers out there as they come out of this pandemic. How are you approaching staffing over the next couple months?
spk08: We're getting ready for the holidays just as we always do. Look, we've done a remarkable job. I want to give a shout-out to our team. You know, American Airlines, in terms of, you know, real reliability, you know, arriving on time and completion factor, you know, we're not at the top of the industry, but I'll tell you what, you know, we're beating, you know, our other network competitors, you know, and doing a real nice job. of managing through the pandemic. So really pleased with that. And that same kind of attitude goes into, you know, how we look forward to the holidays. And we'll be ready for them and make sure that we have staff in place and make sure that customers have a very nice experience.
spk21: But you're not adding extra staff or adjusting staffing levels upwards? Oh, so just specifically, we always do.
spk08: You know, you have to get ready for things like de-icing, you know, wayfinding in the airports, managing security, TSA security lines. Load factors will be higher. So, you know, we always have a provision to make sure that we have, you know, staffing at the gates to accommodate. And as Derek mentioned as well, you know, we're doing hiring throughout the the business, and that includes, you know, places like our reservations offices as well. So all of that is being bolstered from where we are today. And, again, those kind of things that we would have done in the past we'll be ready for and looking forward to the holidays.
spk21: Thanks, Robert.
spk17: This concludes today's question and answer session. I will now turn the call back to Mr. Doug Parker for closing remarks.
spk06: All right. Thank you all very much. We appreciate your interest. Any other questions, please let Investor Relations or Corporate Communications know. Thanks for your time.
spk17: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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