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 11 on your telephone. To remove yourself from the queue, you may press star 11 again. I would now like to hand the call over to Abriel Jackson, Managing Director of Investor Relations. Please go ahead.

Thank you, Lateef. 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 results our 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, cost, forecast of capacity, and fleet 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 10-K for the year ended December 31st, 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 as 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 Isom.

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 best-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 onto our first quarter performance. First quarter unit revenue was up 0.7% 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 10.5% year over year and Pacific passenger RASM was up 4.9% on 24.1% 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 0.7% 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 0.3% lower capacity. Our premium cabin RASM year over year outperformed main cabin RASM by four points in domestic and eight 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 two 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 guideposts 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 customers' 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 state-of-the-art flagship suite seats 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 American's 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 in 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 interaction 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.