American Airlines Group, Inc.

Thank you for standing by and welcome to American Airlines Group's first quarter, 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. I would now like to hand the call over to Abrail Jackson, managing director of Investor Relations. Please go ahead.

Thank you, Matisse. Good morning and welcome to the American Airlines Group first quarter, 2025 earnings conference call. On the call with prepared remarks, we have our CEO Robert Isom and our CFO Devin May. In addition to our vice chair, Steve Johnson, we have a number of our senior executives in the room this morning for the Q&A session. Robert will call with an overview of our performance. Devin will follow with details on the first quarter in addition to outlining our operating plans and outlook going forward. After our prepared remarks, we will open the call for analyst questions, followed by questions from the media. To get in as many questions as possible, please limit yourself to one question and one follow-up. Before we begin today, we must state that today's call contains forward-looking statements, including statements concerning future revenue, costs, forecast of capacity, and fleet plans. These statements represent our predictions and expectations of future events that 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 10K for the year ended December 31, 2024. In addition, we will be discussing certain non-GAAP financial measures, 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 of today's date, and we undertake no obligation to update the information subsequently. Thank you for your interest and for joining us this morning. With that, I'll turn the call over to our CEO, Robert Eisen.

Good morning, everyone. It goes without saying that we're in a challenging economic environment, which has had a significant impact on the industry. Historically, the airline industry has done well in periods of economic growth and certainty. The industry exited the fourth quarter with positive momentum, but this quickly shifted during the first quarter. The economic uncertainty in the market has pressured demand and impacted Americans' first quarter results and second quarter outlook. Given this macro environment, we're withdrawing our full year outlook. That said, if current demand trends continue, we expect to deliver a profitable year and produce positive free cash flow. At American, we have the foundational strength, resilience, team, and financial and operating flexibility to navigate the current environment. The work we have done the past several years has prepared us for times like these. We completed our fleet renewal in a very different economic environment with lower aircraft costs, lower lease and interest rates, and during a time of OEM and supply chain stability. As a result, we have low aircraft capex requirements for the remainder of the decade. We continue to employ our -in-class cost management to make the airline more efficient. Through our efforts to re-engineer the business, we now expect more than $750 million of cumulative cost savings as we exit 2025. We've utilized our free cash flow to strengthen the balance sheet, and at the end of the first quarter, we had our lowest net debt level since the end of 2015 while simultaneously taking action to smooth our debt maturity obligations going forward. This foundation allows us to focus on our 2025 priorities of running a reliable operation as we reestablish connectivity throughout our network and continue to find ways to run a more efficient airline. We're taking action to deliver on our revenue potential by enhancing our partnership with Citi, growing our Advantage Loyalty Program, progressing in our sales and distribution indirect channel recovery, and renewing our focus on customer experience to provide the best product and service for everyone who flies with American. As we move forward, we remain committed to delivering on our long-term target, growing margins, generating sustainable free cash flow, and further strengthening our balance sheet. Now, on to our first quarter performance. First quarter unit revenue was up .7% year over year, which continues to lead the industry, despite more exposure to a challenging domestic environment. We estimate the impact of American Eagle Flight 5342 reduced first quarter revenue by approximately $200 million. Long-haul international passenger RASM continued to lead the way in the first quarter. Atlantic passenger RASM was up .5% year over year, and Pacific passenger RASM was up .9% on .1% more capacity, primarily driven by strength in Japan. Short-haul Latin passenger RASM increased year over year for the first time in more than a year and remains one of the most profitable regions on an absolute basis. We continue to see strong demand for international travel from the U.S. Domestic passenger RASM was down .7% year over year in the quarter, as U.S. consumer discretionary spending, and especially consumer spending on air travel, decelerated throughout the quarter. Performance in our premium and loyalty revenues continued to show strength year over year. Premium revenue increased 3% year over year in the first quarter on .3% lower capacity. Our premium cabin RASM year over year outperformed main cabin RASM by 4 points in domestic and 8 points in international. Paid load factor in our premium cabins remained historically high and was up 2.9 points year over year. Loyalty revenues were up 5% year over year with spending on our co-branded credit cards up 8% in the quarter. We've begun laying the foundation for our expanded co-branded credit card partnership with Citi, which is set to begin in 2026, and we remain on track to achieve the long-term growth targets we outlined last year. Most importantly, customers continue to recognize the value of our loyalty program, with Advantage enrollments increasing 6% year over year. Advantage members are responsible for 76% of premium cabin revenue. American is proud to have an industry-leading travel rewards program that is frequently recognized for providing the best value for its members. Despite the headwinds in the economy and lower capacity, managed business revenue was up 8% year over year in the first quarter. We remain encouraged by the feedback we're receiving from corporate customers as we continue to engage with them to understand how best to meet their needs. We saw specific strength in the financial and professional services sectors during the quarter. Momentum in recovering revenue from indirect channels continued in the first quarter. We hit our target of reducing the gap versus our historical share to 7% in the first quarter, and we forecast to gain back another 2 points in the second quarter. We remain on track to restore our revenue share from indirect channels to historical levels as we exit this year, despite the current macroeconomic uncertainty. We started the year with a conservative growth plan, and we will continue to be mindful of our capacity deployment. The demand and the competitive environments will continue to serve as the guidepost for our future capacity plans. We'll remain nimble and take action as conditions warrant, and we have many levers at our disposal, such as reducing off-peak flying, or if circumstances require, returning leased aircraft, retiring aircraft, and deferring aircraft deliveries to efficiently reduce capacity without jeopardizing the quality of our core network. We're positioning American for sustained long-term success, and a big part of that is transforming our customer's experience and engagement with us. We've established a new customer experience organization, a centralized cohesive team that sits at the intersection of our commercial and operations organizations. This team will advocate on behalf of customers, leading the strategy and implementation of initiatives to improve every part of the customer journey, from bookings to the airport to in-flight experience to customer feedback. Last week, we announced Advantage members will receive complimentary high-speed satellite Wi-Fi beginning in January 2026, thanks to a new sponsorship with AT&T. We're excited to be able to offer free high-speed satellite Wi-Fi on more aircraft than any other carrier, and it's a great way to demonstrate that we have renewed our focus on the customer experience. American continues to have the youngest fleet of the U.S. network carriers. We're excited to debut our new -the-art flagship suite seat on our first new Boeing 787-9, and we look forward to the rollout of this product on our new Airbus A321XLR aircraft. These deliveries, along with the planned refresh of existing seats, are expected to grow Americans' lie flat and premium economy seating by approximately 50% by the end of the decade. Additionally, American has led the way in introducing premium lounges and offers more premium lounges than any other U.S. network carrier. We're committed to reinvigorating the customer experience throughout various touch points of the travel journey, and we're on track to open our newest flagship lounge in Philadelphia in May. This lounge will be our ninth premium lounge across the system with more to come. Finally, we recently announced several changes to improve our boarding process starting next month, and just this week, we introduced a new redesigned mobile app to further enhance customer interactions and self-service options. Turning now to our operation. During the first quarter, the American Airlines team demonstrated our resilience and ability to quickly recover from irregular operations. We continue to make investments to drive further enhancements to our operating reliability. Our first quarter operation was impacted by California wildfires, increased winter weather in our Sunbelt hubs, and the tragic accident of Flight 5342 on January 29th. Before moving on, I want to take a moment to acknowledge the tragedy and pay tribute to the lives lost in the accident. We're supporting the families and loved ones through our Office of Continued Care and Outreach, which we established within a week of the accident. The role and responsibilities of the office will evolve over time, but it will always be focused on ensuring we live out our purpose of caring for people on life's journey. Thank you to our team members who helped in the immediate response to the accident, those who kept the operation running while caring for our customers, and to our care team members who supported the families. We continue to work closely with the U.S. government, and we're encouraged by the collective commitment to make the U.S. aviation system even safer going forward. Now, I'll turn the call over to Devin to share more about our first quarter financial results and second quarter outlook.

Thank you, Robert. This morning, American reported a first quarter gap net loss of $473 million. Excluding net special items, we reported a first quarter net loss of $386 million or an adjusted loss of 59 cents per diluted share. We produced first quarter revenue of $12.6 billion, down .2% year over year, with unit revenue up .7% year over year. First quarter unit cost, excluding fuel and net special items, was up .8% year over year. We are committed to running the airline as efficiently as possible while enhancing the customer experience. Through -in-class workforce management, efficient asset utilization, and procurement transformation, we now expect to achieve approximately $250 million of cost savings in 2025, on top of the $500 million achieved last year. We also expect an additional $100 million of working capital cash release, bringing our total improvement in working capital to approximately $550 million over the past three years. We continue to see improvements in the productivity of our team and expect mainline full-time employee accounts to stay approximately flat relative to 2024. With regard to our fleet, we expect to take delivery of 40 to 50 new aircraft this year. Based on our current expectations for new deliveries, our 2025 aircraft CAPEX, which also includes used aircraft purchases, spare engines, and net PDPs, is expected to be between $2 and $2.5 billion. And our total CAPEX is expected to be between $3 and $3.5 billion. We continue to expect moderate levels of CAPEX moving forward, with aircraft CAPEX averaging approximately $3.5 billion for the remainder of the decade. We ended the first quarter with $10.8 billion of total available liquidity, and we produced free cash flow of $1.7 billion in the quarter. During the quarter, we strategically repriced our $2.3 billion advantage-backed term loan. The repricing lowered the interest rate by nearly 300 basis points and vastly improved the amortization profile, pushing out $1.9 billion of amortization over the next three years into 2028. Additionally, we reduced total debt by $1.2 billion year-end of quarter. We now have more than $10 billion in unencumbered assets and more than $13 billion in additional first-line borrowing capacity. Our balance sheet is stronger than it has been in nearly a decade, and we remain committed to reducing our total debt to less than $35 billion by year-end 2027. For the second quarter of 2025, we expect capacity to be up 2 to 4% year over year as we continue to build back our northern hubs. We remain focused on deploying profitable capacity and being nimble in response to the demand and competitive environment. We expect second quarter revenue to be down 2% to up 1% year over year as we anticipate softness in the domestic main cabin to continue. To partially offset this, we expect long-haul international and premium bookings to outperform year over year and anticipate additional progress in recovering revenue through our indirect channels. Second quarter non-fuel unit cost is expected to be up 3 to 5% year over year, which is in line with our expectations to start the year. Nearly the entirety of our year over year Chasm X increase is driven by the collective bargaining agreements that we have ratified over the past two years. While these collective bargaining agreements have resulted in a meaningful step-up in labor costs, we are pleased that all of our largest workgroups enjoy contracts that are in line with industry-leading agreements and that we have labor cost certainty through 2027. Based on our current demand assumptions and fuel price forecast, we expect to produce second quarter earnings of approximately 50 cents to $1 per diluted share. I'll now turn the call back to Robert for closing remarks.

Thank you, Devin. The travel industry is a critical engine for the U.S. economy, generating $1.3 trillion in direct spending in the U.S. and supporting one in every 11 U.S. jobs. With increased global travel to the U.S. comes increased spending and investment in economic growth. Airlines are a big part of that equation, and American is proud to be the largest employer of U.S. workers among them. Anything that spurs demand for travel, both domestically and abroad, is something we will support. This starts with making America a welcoming destination for international travelers, especially in advance of major events like FIFA World Cup 26, of which we're a sponsor, and later the 2028 Olympic Games in Los Angeles. This means expanding visa free travel, lowering visa processing times, and expediting the deployment of new technologies to make travel more seamless and secure. And of course, ensuring the growth and long-term health of the travel industry in the U.S. will require us to address critical infrastructure issues, the most pressing of which is ATC modernization. American is committed to working with the administration, regulators, and the rest of the industry to meet each of these challenges. At American, we're resilient by design. The underlying strength of our business and balance sheet and our ability to remain nimble and adjust to the environment gives us confidence in our ability to navigate the path forward. We remain focused on delivering on our commitments and producing results for the airline and for our shareholders. Operator, you may now open the line for analyst questions.

As a reminder, to ask a question, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. To allow everyone the opportunity to participate, you will be limited to one question and one follow-up. Please stand by while we compile

the Q&A roster. Our first question comes

from the line of David Scott Vernon of Bernstein. Please go ahead, David.

Hey, good morning, guys. Robert, so I guess the first question I have for you is the earnings release and materials didn't make much mention around sort of capacity moderation given the weakness that we're seeing in demand. Can you talk about kind of how you're thinking about sizing the network as we get through the second half of the year? I mean, clearly with the financial leverage in the business, I'm sure this is something you guys are looking at. I'd just like to hear from you kind of what you're thinking about on the capacity front as we look at 2-H.

Thanks, David. Appreciate the question. What we've done is obviously pulled our guidance. We more or less have our capacity plan set for the summer. We plan on flying that. You saw in our second quarter guide, -4% growth. As we look beyond that, there's a lot of uncertainty. I think our view as we go forward is we're going to be nimble and quick to react. We're going to have a lot of uncertainty about size capacity to demand. But I'll tell you right now, we have a negative bias to all capacity as we go forward. We'll know more as time develops in the next several weeks, month, and we'll have more to talk about on future earnings calls.

All right. Maybe just as a follow-up, as you think about the corporate share recovery, is that coming in at the yield you would have expected to be coming in, or is there a little bit of reinvestment required in terms of recapturing some of that business share?

Yeah, thanks for the question. This is Steve. It's coming in just as we expected. And as Robert said in his opening remarks, we're on track to recover share by the end of the year.

Thank you. Our next question comes from the line of Sabi of Raymond James. Please go ahead, Sabi.

Thank you. Good morning, everyone. I know you mentioned it sounds like in 2Q you're expecting kind of international and premium to continue leading the way, but I was curious if you can provide a little bit more color across the four entities on how you, what's in guidance in terms of performance there?

Sure. Thanks, Sabi. It's across the entities. We're seeing strength through the summer, really in each one. Obviously, with the uncertainty and just the booking curve visibility beyond the summer is a little unclear right now, but we're seeing really, you know, very good strength in our Heathrow and European operation, strength in the North Pacific, strength in the South Pacific, you know, South America, South America. But it is doing pretty well in Argentina is kind of the star of the show down there right now. And I'd also just don't want to finish the answer without mentioning that, you know, we're still continuing. We have a very significant international operation in its short haul in the Caribbean, Mexico, Central America, and that's performing pretty well.

I appreciate that. And if I could on the domestic side, are you expecting much of a deceleration or, you know, what's the trend in the QQ there?

Domestically, we remain strong in, as we described in the opening remarks, our premium bookings are terrific. Our bookings through indirect channels are solid. Our business bookings are solid. What we're seeing, though, like the other airlines, is really significant weakness in the demand that books through our indirect channels, which is, you know, I think we believe is mostly our most price sensitive customers, our customers for whom travel is most discretionary. And, you know, that's that's where the issue is. You know, we'd like to think that that's demand that's not been lost, but demand that's on the sidelines, waiting to understand which direction the economy is going to go. But nevertheless, at the moment, that we're seeing weakness in those in those cohorts.

Thank you. Our next question comes from the line of Scott group of Wolf Research. Please go ahead,

Scott. Hey, thanks. So just to follow up there, that that subset of the business that you're talking about, that's, I guess, maybe domestic main cabin or indirect. What percentage of the of the total business is that? And if international is. Saying it sounds like international is positive, you know, correct me if I'm wrong, like are we think is this business down? Is this a high down, high single digit kind of rasm right now on this more domestic main cabin part of the business?

But domestic main cabin is weak, and that's what's driving. I think the the overall demand numbers that you're seeing in the weakness in the in the in the reports. Right. I think I'd say mid to high single digit weakness in those groups, particularly over the course of the summer is what we're looking at.

OK, and then I guess, are we seeing any signs of that stabilize or is it continuing to get worse? And then maybe just like bigger picture, you know, a year ago in Q2, you guys underperformed on Rasm and we heard about while we lost a lot of corporate. We're now getting the corporate back. Why aren't we seeing the Rasm benefit of that? At least relative to some of the others. It's

got that. Just let me let me start with this, which is, hey, look, there's a tremendous amount of uncertainty in the environment. When we take a look at fourth quarter, tremendous amount of momentum. You go into the first quarter, January kind of came in where we had anticipated February look kind of kind of solid. But really, March and then continue into April, you know, change considerably. So we're cautious about what we're looking at in terms of of forecast for the second quarter because there is so much uncertainty. And it's why we pulled our guide beyond that. So as we take a look and as Steve mentioned, premiums doing well, international seems to be holding up well. We're winning back our sales from a sales and distribution perspective. We just don't have a lot of clarity what goes beyond that. And even as we take a look in to the summer, what we know right now, we're telling you the best what we know. And, you know, we're going to have to see how things play out.

Thank you. Our next question comes from the line of Connor Cunningham of Mellius Research. Please go ahead, Connor. Hi, everyone. Thank you.

Just going back to the U.S. domestic market, I realize this is a short term question and I hate to ask it. But can you talk about how you've changed your revenue management systems? Are you doing what Delta and United are doing essentially in opening up basic economy earlier? And the question, the reason why I ask that is like the industry in general has a lot more seats to sell in June versus April. So are you seeing incremental discounting into a month like that relative to the month of April in general?

Thank you. Sure. Thanks for the question. I don't have specifics about how Delta and United have set up, but we believe that we are properly set up for a summer that is, you know, along the lines that I just described a moment ago where there's significant weakness in our main cabin demand, significant weakness among our most discretionary travelers. So our inventory systems and our pricing is set up to accommodate that, to capture all of the demand that is available under the existing circumstances. And obviously, those are levers that we can pull and tweak and manage very carefully on a real time basis. We're monitoring the system, the situation, you know, very carefully make changes every day. But I think right now our our setup is where it needs to be. OK.

OK. And then, you know, United spent a lot of time on their call talking about share shift in Chicago. And, you know, I'm just trying to understand from your corporate travel expectation as you exit this year, like, can you talk about the importance of rebuilding New York and Chicago in general and how that correlates to this getting back the corporate share that you lost from the distribution changes in general?

Thank you. Sure. Sure. A big complicated question, but let me try to unpack it first. First, if United is gaining share in Chicago, they're gaining it from somebody other than us. So let's start there. But and might as well just stick with Chicago. I mean, it's a huge market. It's a huge business market. It's our third largest hub. It's a really key part of our network. It has been profitable in the past, even as a shared hub. And, you know, we've been part of Chicago for ninety nine years. We have a really loyal customer base there. We have significant advantage penetration, significant co-brand penetration. We've received a really positive reception from our corporate clients as we've pivoted on sales and distribution. Chicago's really important to them. And our presence there is really important to our business with them. Geographically, Chicago's important. It's where we it's how we take care of and connect to and provide service to our customers in the upper Midwest in the Great Lakes region. It's how we connect passengers across the northern tier of the United States. And I can also say that so far, the Chicago show far we have increased our share in Chicago and the overall performance is, I think, going exactly in accordance with our plans. New York is New York is likewise a very important part of our network. Very large market, a market that has always accommodated several airlines. We in New York, we have a large customer and large and loyal customer base, significant advantage penetration, significant co-brand penetration. And we're we're excited about the evolving position that we're that we're creating in New York. LaGuardia will be the largest, I think, operation that we've had in history. We've optimized it. We think for our New York customers, we've optimized it for our hubs and spokes, and we've optimized it to maximize the halo effect that New York has. At JFK, we've created a really competitive one world hub at T8 in at the airport there. And together with LaGuardia, we and together with our JB partners, we now serve a hundred markets out of New York. We have a really significant franchise in the transcontinental market, really significant franchise in London Heathrow, the biggest travel market in the world, I think. And we operate out of really out of two really great facilities in New York with terrific lounge products, terrific retail. Indeed, we're re-imagining the retail at JFK. And I'm told there's going to be 60 new stores and restaurants there as that work is completed. So we're evolving in New York. We're adapting in New York. We're obviously constrained in New York by slots, but we're, I think, really happy with the position we have there.

Thank you. Our next question comes from the line of Jamie Baker of JP Morgan Securities. Please go ahead, Jamie.

Hey, good morning, everybody. First one for Devin. So, you know, you're obviously not buying back stock at the moment, which is a good thing. But curious how we should think about your approach to minimum liquidity and capex

if

operating cash flow deteriorates from here. So which which bucket or buckets, plural of collateral would you consider easiest to tap given where market yields are right now?

Yeah, well, I'll just start by saying I really like the position we're in. You know, we ended the first quarter with ten point eight billion dollars of liquidity. We have made a ton of progress on the balance sheet. We've reduced total debt by 15 billion dollars from peak levels back in mid-2021. We have ten billion dollars of unencumbered assets. We have 13 billion dollars of first lane capacity. You know, we have really high quality first lane capacity that's out there as well, whether it's, you know, slot gates routes or advantage backed. We feel really good about where we're at right now. And, you know, we'll see what we end up doing with it if we do really get into a downside scenario. But we're in a great position.

OK, and then following on Connor's question, and it wouldn't be an American earnings call, I suppose, if I didn't ask about one of your hubs. But looking at Chicago, it seems that a pretty material portion of the capacity restoration is really early in the morning or pretty late at night. Can you comment on how RASM, you know, sort of at the edges of the workday, however you define that, compares to that of, I don't know, daylight hours for lack of a better term, although I suppose that's not a good term for the summer. But you get the idea.

Sure, Jamie. I mean, as you grow markets, particularly hub markets, you grow them by adding banks. And so we've added banks at the beginning of the day and the end of the day. There's obviously those are those are going to be weaker than in the heart of the day. But it's cheaper to add those by just improving your asset utilization. Also, it's important to know that the first flight of the day and the last flight of the day is really important. And so as we think about where we want to end up in Chicago, that's a big step. And, you know, ultimately, those we expect that those banks will improve performance as we have the opportunity to fly them and have our customers get more remember American and those will be better. And so that's really important part of our local traffic offering for our Chicagoans is the banks of the first part of the day and the banks of the last part of the day. So, yeah, that's that's what we had always planned and what you would have expected to

see. Thank you. Our next question comes from the line of Duane Finnegan worth of ever core isi. Your line is open to Wayne.

Hey, thanks. Appreciate the time. Just just on the corporate share recapture. It's hard to find that in your guidance and understand it's a dynamic backdrop for sure. But, you know, what would be offsetting the share recapture if you're winning back corporates from a margin and from a, I guess, implied, you know, Rasm perspective?

Thanks. I think that you're not seeing it because it's overwhelmed by the weakness in our main cabin demand.

And Steve, I'd add to that our government businesses is falling off considerably as well. So that would add to it as well.

Okay. And then apologies. I really don't want to ask another Chicago question, but I'll but I'll venture down the path again. Again, it might be hard to parse in this backdrop, but can you contrast, you know, presumably some of this was about taking pressure off of a market like Charlotte versus the investment that you're making in a market like Chicago. So can you just, you know, help us size, you know, the relative benefit in Charlotte from a Rasm and margin perspective versus, you know, the relative investment in Chicago? And I guess when are we done? What ending are we in of that rebuild in Chicago? Thank you.

Baseball question again. Well, what ending are we in the rebuild of Chicago? It's right now like maybe the fourth ending, I think is about right. Fourth or fifth inning, something like that. And our strategy to grow Chicago didn't have anything to do with our strategy in Charlotte. You know, Chicago was a place that is a place that we have been very successful in the past. We took down our Chicago operation during the pandemic. As we grew our operation after the pandemic, we deployed our assets in the places where demand was the strongest first. Chicago just, you know, was slower to rebound. But now we're focused on rebuilding the position that we've traditionally had in Chicago. We understand that we'll probably always be second place in Chicago, but that's been, you know, a very effective means to serve our customers, profitable and a position that we like a lot. So that's what we're focused on is rebuilding Chicago because Chicago is a really important part of our network. In Charlotte, you know, our strategy there is to continue to be as large in Charlotte as we can operate. It's a very efficient, very geographically well-placed hub, very low cost for purposes of connecting. But we are close to capacity at that airport. And so we're just not in a position at least right now to grow it any further.

Thank you. Our next question comes from the line of Catherine O'Brien of Goldman Sachs. Please go ahead, Catherine.

Hey, good morning, everyone. Thanks so much for the time. Maybe just one more on the two-queue revenue guidance, if you'll allow it. Steve, I think you were talking about you're expecting to see momentum in international through the summer. That's looking strong, offsetting some of that mean cabin. So I guess underlying your revenue guidance, are you expecting each international geography to see Prasm improve relative to its one-queue performance and the de-sell is all domestic, or have I got that scrambled?

I think what we are seeing is solid performance in the long-haul international markets that is improved year over year. It's hard to, I think, to compare second quarter performance to first quarter performance just because the demand is so different. But I would just say sequentially strong, still positive. If what you're asking is the year over year growth in the second quarter as good as the year over year growth in the first quarter, I'd say decelerating a little bit, but still strong and again fueled by really strong premium demand, really strong demand for the premium cabins.

Thanks. And maybe one for Devin. You guys understandably pulled for your EPS and this very uncertain backdrop and there's downside bias to your capacity outlook. But if you wind up growing low single digits, as was your plan back in January, are you still thinking Chasm would be up mid-singles? Or with the incremental cost savings you highlighted earlier, could you do better than that? Thanks for the time.

I think if our capacity ends up being largely in line with where we started the year, our costs are also going to be largely in line with where we started the year. I'd just say we're best in the business at managing costs in the next both year term and also driving efficiencies over the long term that are good for our customers, also good for our team members. That was built into our plan for this year. So while there may be some trimming around the edges, I think we have all of the right plans in place to run a really effective and efficient business this year. On the other side, if we do pull capacity, I think we're going to be really effective in managing costs out as well.

Thank you. Our next question comes from the line of Stephen Trent of Citi. Please go ahead, Stephen.

Good morning, everybody. Thanks for taking my question. First, I was kind of curious when we think about 2026, I know it seems like an eternity from now, but looking at sort of the World Cup event on the horizon, would you guys expect any flux -a-vis what we saw in the transatlantic for the Paris Olympics last year, or do you guys have a relative advantage versus other pairs because of a high US point of sale? Thank you.

Hey, Stephen, thanks. No, we're really proud to be a sponsor along with our partner Qatar. It's the largest sporting event in the world, and it's unique in that it is spread out across the United States, Canada, and Mexico, and American is the strongest carrier in all of the host cities, or in the vast majority of the host cities. So we're really, really proud to be the title sponsor. I tell you, this is an event that's very different than the Olympics. It's all concentrated in one city, all at one time, that actually in some cases can diminish the demand over a period of time. And this is one in which we see tremendous interest in travel, in spending time, and we don't believe it will have an impact on the other business that goes into these cities, namely because it's spread out and because it will be something that is such a focus. So, tremendously excited. Americans are glad to be at the top of that, and it's just another indication of us building for the future.

Okay, Super Robert, really appreciate that. And just as a quick follow up to that, could you sort of refresh my memory approximately, where is the percentage of US point of sale for your international?

About 75% of our international is sold as the US point of sale.

Thank you. Our next question comes from the line of Ravi Shankar of Morgan Stanley. Your line is open, Ravi.

Great. Thanks, morning, everyone. Just to follow up on the normalization of share in indirect distribution and corporate, how macrosensitive or agnostic is that share recovery?

That's a really good question. It is share, first of all, so it's not absolute numbers. But we're, you know, at this period of uncertainty, we're seeing that share build very nicely. And we're not hearing anecdotally about reduced travel. Our business travel is up overall, as Robert said in his opening remarks. So, you know, it remains, right now, it doesn't seem to be macrosensitive. I suppose it remains to be seen. But right now, business traffic seems strong. Our share is growing. We're getting a lot of positive feedback with respect to our new sales and distribution efforts. So fingers crossed, it's going in the right direction and, you know, really positive part of our revenue effort at this point in time.

That's helpful. And maybe as a follow up, apologies if I missed this, but can you talk about Book of Way following the tragic accident and whether or not that has normalized since?

I can. Look, the Flight 5342, as I said in my remarks, it had an impact in the first quarter, had a material impact in the first quarter. But that's largely been something that is unique to that quarter. And as we take a look to the future, we don't anticipate any impact.

Thank you. Our next question comes from Michael Lindenberg of Deutsche Bank. Please go ahead, Michael.

Oh, yeah. Hey, good morning, everyone. Hey, I just want to go back with Steve. You talked about, you know, corporate, you know, trending up or being up. I mean, if we look at managed business revenue, that was up 8% in the March quarter. Based on what you're seeing now and the fact that you also have a fairly easy comp because of, you know, the sort of distribution strategy from a year ago and the fact that you are gaining back share, is that increase, should we expect that increase to be higher in the June quarter? That managed business revenue will be better than up 8% given kind of the underlying kind of factors that I just mentioned?

Thanks. As I look out, what I expect is that we're going to continue to grow our share in the second quarter. Remember, again, as I said a moment ago, that share, not absolute. So I'd say, you know, as long as the economy continues to support business traffic, we're going to continue to grow business traffic in the second quarter. Okay, great. And we should grow it faster than the other airlines because of our distribution efforts.

Okay, great. And then just a second question here. Obviously, it seems like there's a lot of movement around with respect to the real estate in Chicago. If we think about your gate position today and where we are, you know, over the next, you know, call it six months or so as gates are reallocated, where are you on a net basis on a, you know, I mean, I think it's been reported that you lose gates, but then there's the offset or there's the opportunity to use common use gates. So on a net basis, what happens to your gate position in Chicago? Are you down or are you flat? Any color there?

Thank you. Sure. Yeah, thanks. I mean, first off, as I think you saw, we disagree with the airports in the city of Chicago's determination on that and we're appealing that decision that would have gates be reallocated during 2025. That said, it's going to take a while to sort that out, I expect. And, you know, to the extent that it's not sorted out by October when the new regime would go into place, I think we're in, we feel like we're in good shape. Remember, we're growing Chicago back and I expect that we will be able to accommodate our growth in Chicago all the way until the next summer with the gate footprint that we have. But we also expect that gate, that growth in Chicago will put us in a really good position to benefit from the reallocation of gates that's going to take place again next February and March.

Thank you. Our next question comes from the line of Andrew Dodora of Bank of America. Please go ahead, Andrew.

Hi, good morning, everyone. Most of my questions around certainly 2Q have been asked and answered. But just one question from me for Devin. On the sub $35 billion of debt by the end of 2027, just curious what you are assuming for liquidity over that timeframe, as I know you have a lot of debt coming due over the next few years. So just curious how you how you're thinking about liquidity. Thank you.

Sure. I'll just start by saying we are committed to reducing total debt to under $35 billion at the end of 2027. And structurally, we're set up really well to do that. We've talked about our limited capex requirements over that period. So it gives us the potential for a lot of free cash flow. When we think about liquidity, you know, right now we're holding $10.8 billion. We've talked that over time as we continue to improve the balance sheet, we would expect our levels of liquidity to come down slightly. During this uncertain time, we're going to continue to hold right around this $10 billion mark, but that is likely to change over time as we expand margins and improve the balance sheet.

That's all I had. Thank you. Thank you. Our next question comes

from the line of Tom Fitzgerald of TD Cohen. Your question, please, Tom.

Hi, everyone. Thanks so much for the time. I'm just kind of curious on corporate generally, both, you know, large managed managed accounts and the small and medium sized enterprises. If there's any pockets of green shoots or any sectors that are demand is looking a little more resilient than some of the sectors like autos or agriculture that we hear about in the news.

Thanks for the question. We are not seeing any real pullback in business travel at this point across the board. That may come later if the economy continues to deteriorate, but right now it all looks pretty vibrant. We may have a better position in terms of improvement because of our sales and distribution recovery efforts, but right now business travel looks good across the board.

Okay, that's really helpful. And then just, you know, going back to the topic about, you know, international travel and cross border flows. What have your conversations been like, you know, with your government relations team or your contacts in DC about conveying the importance of smooth cross border flows to policymakers? Thanks again for the time.

Now, I appreciate the question. Travel is incredibly important to the U.S. And I think people are aware that almost one in 11 jobs is tied to travel. $1.3 trillion of direct spending, $2.9 trillion of overall spending and related outside of direct. This is an incredibly important sector to our economy. And we have to make this something that is, you know, the cornerstone of infrastructure. And that starts with not only doing the work we can domestically, but also making the country a welcoming place. And as we work with the administration, just overall reducing concerns about certainty, we're also getting ready for, you know, where we should be. And that means making sure visa wait times are very, very limited. That means that we open up to travel without visa opportunities. That means that we work with the administration on safe and secure so that when you come to one of our ports that it's easy to get into and you feel like it's a process that's not cumbersome. And then ultimately, we look to the future of making sure that the industry as a whole can continue to grow. That's the long term plan. And from that perspective, we're working with the administration on air traffic control reform, which is likely the biggest limiter to growth in the industry as we look at, you know, over several years.

Thank you. Ladies and gentlemen, at this time, the Q and a session is open for media questions as reminder to ask a question. Please press star one one on your telephone to remove yourself from the queue. You may press star one one again. You will be limited to one question and one follow up. We are open for media questions. Our first question comes from the line of Alison cider of Wall Street Journal. Your line is open. Alison.

Hi, thanks so much. I guess just want to ask a broad question on the economy and just curious in Robert like to what are you expecting? If you expect the US economy to sort of tip into a recession and kind of what are you watching or keeping an eye on to gauge whether that's happening?

Hey, Ali, thanks. Right now, there's uncertainty in the marketplace. I know we've heard that that over and over again, but it's no different in our planning process than it is for, you know, a domestic leisure passenger. You know, right now we don't know what is going to happen. That means that we're taking a, you know, a very cautious, even a negative approach to, you know, growth as we as we take a look out to the rest of the year. What does that mean? It means that we don't hire as much. It means that we don't bring out as many planes potentially. It means, you know, the reduction in overall economic activity. Same thing for, you know, the customer that's planning a vacation. Nobody, nobody really relishes uncertainty when they're talking about what you could do on a vacation and spend hard earned dollars. So I think that that is an overhang, but it's one that I know that the administration is aware of and wants to get back on track as soon as possible. And I think that that's a very important point. I think that that's a very important point. I think that that's a very important point. And I think that that's a very important point. I think that that's a very important point. I think that that's a very important point. And I think that that's a very important point. I think that that's a very important point. I think that that's a very important point. And in a financing environment that was much more favorable as well. So we're ready for that. And on the other end, on the other side, travel always comes back and we're ready for that. The investments that we're making. You heard some of what we talked about in terms of building back our network. But on top of that, it's also with a focus on customer experience. A customer experience is everything from new flagship suites to a Philadelphia flagship lounge and free Wi-Fi coming with through partnership with AT&T. But on top of that, it's also with a focus on customer experience. A customer experience is everything from new flagship suites to a Philadelphia flagship lounge and free Wi-Fi coming with through partnership with AT&T. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go. And we're ready to go.

Thanks very

much. And we appreciate it. Communite like it's been really, same seen for specialist active professionals. of Bloomberg News. Your line is open, Mary.

Thank you. I wanted to ask if you could address the issue of tariffs, whether you plan to pay the tariffs on any Airbus deliveries and the impact that you expect from tariffs both on aircraft and on parts. And then secondly, you just mentioned Robert, manpower in this uncertain environment. I'm wondering if you've already frozen hiring for the

I appreciate the question. So first off, aircraft cost too much already. I don't want to pay any more for aircraft. It doesn't make sense. And certainly, you know, we're pulling guidance. Certainly, this is not something we would intend to absorb. And I'll tell you, it's not something that I would expect our customers to welcome. So we've got to work on this. We fortunately don't have any near term deliveries. We have deliveries at the end of the year that would be potentially subject to tariffs, the 321 XLRs that are built over in Europe. But I would tell you, we've got to do some work before then. And from an overall perspective, I would tell you there's good reason to do something in regard to aviation, civil aviation. Because since 1979, we've operated under a tariff regime that has been zero for zero. No tariffs in and no tariffs, you know, purchasing out. That's worked very well for civil aviation. And by that, I mean everything from, you know, aircraft to engines and to parts as well. That framework has led to an industry, a sector that has produced the largest level of exports, the largest level of surplus of any industry. And so I know that that's where we want to end up. Now, there may be changes to that framework, but the end result has to be that the U.S. is a powerhouse and continues to be incredibly strong from an aviation perspective. We're part of that. You know, we're going to continue to be able to optimally operate these aircraft. And I anticipate in working with the administration that we're going to end up with a framework that really does ensure that aviation in the U.S. is competitive. Now, in regard to questions about our people, you know, right now we are And so we're getting ready for that. As we take a look into the fall, it's generally not a time where we do a lot of hiring. But we're very focused on that right now. We don't quite know exactly where we'll end up in capacity at the end of the year. And that's certainly coloring our views of 2026 as well. So stay tuned on that. Right now, you know, we're taking a very cautious approach and we're going to be nimble depending on what we see in the environment.

Thank you. Our next question comes from the line of Leslie Joseph of CNBC. Please go ahead, Leslie.

Hi, everyone. Thanks for taking my questions. Just wondering if you were seeing any gained market share in the Dallas area since your competitor announced bag fees and some of the other policy changes, that there's any kind of detail on the take up rate of status matches and things like that. And then broadly on domestic demand, directionally, is it getting worse? Is it getting better? And are there any geographies that you're seeing or doing worse or better? I'm seeing seven, eight hundred dollar tickets to New York, L.A. in the summer and then a hundred dollar tickets to Florida. So kind of curious if you could break down where you're seeing the weakness in the main cabin.

Thanks. Leslie, hi. Thanks. It's Steve. First on the DFW question, we have a great product in DFW. It's our largest hub with fantastic penetration for our frequent flyer program, fantastic number of co-brand card holders. We're going to operate the largest operation at DFW in history this summer. So we're really well positioned to compete. We've competed with Southwest, you know, through thick and thin over the last 40 years, very successfully. We recognize that they've made a very significant change in their business model. We saw that they reported some good numbers yesterday, but we're prepared to compete with them. And DFW is our favorite place to compete with them. With respect to demand, I just reiterate what I said earlier, is that what we're seeing is strength in the premium cabin, strength in Long Haul International, strength in bookings through indirect travel agencies and pretty significant weakness in the part of our business that is, that's very sensitive to economic conditions, that is super price sensitive or that is for whom travel is really discretionary. That tends to be the main cabin and that is weak and the other airlines have identified that it's a source of weakness for them. And in those circumstances, you do see prices that are lower. You do see some of the sales prices that you quoted. I think that's going to continue to be the case until we understand where, you know, which direction the economy is going and we remove some of this uncertainty and some of that demand comes off the sidelines.

This concludes the Q&A portion of the call. I would now like to turn the conference back to Robert Isom for closing remarks. Sir.

Thanks, Latif. And hey, Steve, thanks for the response on that. In regards to DFW, I'll just also note that we continue to invest. And I think there's going to be some really exciting, cool news coming up in the next week or so regarding Americans position at DFW and look forward to talking more about that. I'll close with this. Uncertainty is what we're living with now. It is something I know that the country wants to move beyond. And I know that everybody is working to that end. No matter the environment, America is well positioned from a prolonged period of uncertainty. We're ready for it. As I said before, we have a balance sheet, exemplary cost management, a fleet that is ready and incredibly flexible, a team that is experienced to handle whatever may come our way. Over the long run, travel comes back. People want to travel and American is well prepared for that as well. We have a renewed focus on customer experience. You will see American investing in our premium product. We do believe no matter the economic environment that customers will want to be treated better. They will want services and amenities that they're certainly willing to pay for. American is committed to being a leader on that front. We've got a great network, a great fleet, an incredible set of partners. And over the long run, I know that our priorities of operating with excellence, of ensuring that we treat our customers right, working to expand our industry leading loyalty program and partnering with Citi, delivering on our full revenue potential and continuing to re-engineer the business. It will enable us to get back to growing margins, delivering free cash flow and strengthening our balance sheet so American is ready for whatever may come long into the future. So thank you and I appreciate the time.

This concludes today's conference call. Thank you for participating. You may now disconnect.