American Airlines Group, Inc.

Good morning and welcome to the American Airlines Group First Quarter 2022 Earnings Conference Call. Today's call is being recorded. At this time, all lines are in a listen-only mode. Following the presentations, we will conduct a question and answer session. To ask a question during this session, you'll need to press star 1 on your telephone keypad. And now, I'd like to turn the conference over to your moderator, Head of Investor Relations, Mr. Scott Long.

Thank you, Kathryn. Good morning, everyone, and welcome to the American Airlines Group first quarter 2022 earnings conference call. On the call this morning, we have our CEO, Robert Isom, and our CFO, Derek Kerr. Also on the call for the Q&A session are David Seymour, Basu Raja, and a number of other senior executives. Robert will start the call this morning with an overview of the first quarter and our priorities for the year. Derek will follow with the details on the quarter and our operating plans and outlook going forward. analyst questions, followed by questions from the media. To get in as many questions as possible, click one with yourself to one question and a follow-up. Now, before we begin today, I must state that today's call contains forward-looking statements, including statements concerning future revenues, costs, forecasts of capacity, and food plans. These statements represent our predictions and expectations of future events, but numerous risks and uncertainties could cause actual results to differ from those projected. Information about some of these risks and uncertainties can be found in our earnings press release that was issued this morning, as well as our Form 10Q for the quarter, ended March 31, 2022. In addition, we'll be discussing several non-GAAP financial measures this morning, which exclude the impact of unusual items. A reconciliation of those numbers to the GAAP financial measures is included in the earnings press release, which can be found in the investor relations section of our website. A webcast of this call will also be archived on our website. The information we are giving you on the call this morning is as of today's date, and we undertake no obligation to update the information subsequently. Thank you for your interest and for joining this morning. And with that, I'll turn the call over to our CEO, Robert Isom. Thanks, Scott.

And good morning, everyone. Thank you for joining us today. We're going to keep our comments brief this morning. I'm a strong believer that results speak louder than words, and I'm confident in the results the American Airlines team will produce. I want to start by thanking our team. Day in and day out, they're on the front lines, taking care of our customers no matter what comes our way. And we've certainly seen a lot come our way over the past two years. The American Airlines team has worked hard to position us well for the recovery by simplifying our fleet, modernizing our facilities, fine-tuning our network, developing new partnerships, rolling out new tools for our customers and team, and hiring thousands of new team members. All that while flying the largest airline in the world. I'm excited to see their work pay off for all of our constituents, our customers certainly, the communities we serve, our team, and notably our shareholders. It's an honor for me to have the trust of our team and to succeed Doug Parker as CEO and to begin in this position as the industry rebounds and our company returns to profitability. I'm extremely grateful for the opportunity. It's a fantastic time for the industry and for American Airlines in particular. For the year ahead, We're resolute in achieving two key goals above all else, running a reliable operation and returning to profitability. Our team is up to the challenge, and we've already seen a lot of great progress. So let's talk about financials first. This morning, America reported a first quarter gap net loss of $1.6 billion. Excluding net special items, we reported a net loss of $1.5 billion for the quarter. Despite the quarterly loss and a difficult January and February due to the effects of Omicron, March results were markedly different. In March, we saw what's possible with surging demand brought on by reduced infection rates, relaxed restrictions, and tremendous pent-up demand for people to travel. Despite a sizable increase in the cost of fuel during March, American achieved our first monthly net profit, excluding special items, since July of 2021. Demand is as strong as we've ever seen it. America produced revenues of $8.9 billion in the first quarter, including industry-leading passenger revenues of $7.8 billion. Domestic leisure travel continued to lead the way, far surpassing 2019 levels of traffic and revenue in the month of March. In addition, we saw strong quarter-over-quarter improvement in corporate and government travel, with revenue for this segment as a percentage of 2019 increasing 27 percentage points from January to March. System business demand is now about 80% recovered, with small to medium business revenue approaching a full recovery and corporate revenue now around 50% recovered. Corporate bookings are the highest that they've been since the onset of the pandemic, and we expect that to continue as more companies reopen their offices. We anticipate overall business revenue to be around 90% recovered in the second quarter. And finally... Demand for international travel also picked up considerably during the quarter as travel restrictions were lifted in certain parts of the world. Long-haul international revenue was around 50% recovered in the first quarter and around 60% recovered in March. So there's still a lot of revenue upside as business and international travel continue to return. The American team has done an incredible job of setting up the airline to take advantage of the rebound, orienting our network to where our customers want to fly, establishing partnerships in more challenging areas, and making sure efficiency is top of mind. As a result, we're very optimistic about the continued recovery and expect to be profitable in the second quarter based on current demand trends and fuel price forecast. Turning to reliability, American ended 2021 with our strongest operating performance in the company's history. We committed to maintaining that momentum in the first quarter, and we did. Despite two difficult winter storms in Dallas-Fort Worth, the team delivered a solid operating performance in the first quarter, leading the industry in on-time departures and finishing a close second in on-time arrivals. And they did so while flying a considerably larger schedule than our next largest competitor. More importantly, for the month of March, amid peak spring break demand and high load factors, we delivered our best ever combined March completion factor. Our operation in DFW and Charlotte, our two largest hubs, met or exceeded our expectations and delivered their best on-time performance and completion factor in years. As a result of our team's hard work, our likelihood to recommend scores continue to track in line with plan and are near the top of our post-merger performance. Running a reliable operation this summer will be critical to the continued recovery, and we have taken numerous steps to ensure we are well prepared to deliver for our customers. Our summer planning began last year as demand returned, and we haven't slowed down. American has 12,000 more team members in place to support the operation this summer than in the summer of 2021. We've already welcomed more than 600 new pilots this year, exceeding our goal, and we'll continue to aggressively recruit, hire, and train across all departments to develop the best pipeline of talent in the industry. We're ready for the summer, and we have sized the airline for the resources we have available. Again, we've sized the airline for the resources that we have available. We've also made targeted investments in people, technology, and resources that are yielding promising results for our team members and customers. So before I hand it over to Derek... I want to say that I'm really excited about the future of our industry and the future of American Airlines. There's still a lot of revenue upside going forward given industry revenues are still off from their historical relationship to GDP, barriers to demand are falling, and business and international trends are promising. There are also certain industry constraints on growth in the near term, notably related to pilot and aircraft supply. And at American, we have completed a $1.3 billion cost reduction program and our unit cost performance will improve throughout the year as utilization approaches historic levels. No airline is better positioned to operate in this environment than American Airlines because of our fleet, our network, and everything our team has accomplished over the past two years. And with that, I'll turn it over to Derek.