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00:00I want to start with this forward look. Things were weaker earlier this year. You do see a real
00:05acceleration in demand heading into the fourth quarter. Where is it coming from specifically?
00:10Yeah, well, thanks for being here in Dallas-Fort Worth. You know, we're coming off the third
00:14quarter. We posted a loss this morning, but like you said, we started to see some softness in
00:19demand just given the economic uncertainty that really hit probably in February. Led to some
00:23softness in the first quarter, through the second quarter, into the first part of the third quarter.
00:27But within the third quarter, we started to see some really nice trends. July was soft. August
00:32was better than July. And then our year-over-year performance in September actually turned positive.
00:37So really happy with the unit revenue we had in September. That's continuing here in October
00:41and fourth quarter right now. We're projecting flat unit revenues. What we're really excited
00:45about, though, is our profit forecast. We about doubled it today with the guidance we provided
00:49this morning. And there's a lot of focus on the premium cabin is really driving something like
00:5450 percent of your revenue over that particular gain. I'm just wondering how much that really
00:59has been the driver or how much economy has also picked up in tandem with what you're seeing in
01:03the business side of things. It's both. Like we've said, kind of throughout this period where demand
01:09was a little bit softer, premium revenue held in there really well. Probably dipped a little bit,
01:14but held in quite well. On the lower end for lower income earners, that level of demand just really
01:20started to fall off. That has come back as well. We're also seeing supply and demand come into
01:24balance. So at this point, premium is doing better. The main cabin is doing better as well.
01:29And supply and demand is in balance, which allows us to get closer to flat unit revenue.
01:33Have you had to cut prices for economy class to really come back in terms of volumes?
01:38We did. And you saw it throughout this year. Pretty much every airline out there was posting
01:43negative unit revenue. So unit revenue is down year-over-year. That's really because of the
01:47fair environment. If you look at real fairs, they're down this year versus last year. They're
01:51down last year versus the year before that. So we haven't had the type of price and power we needed.
01:56That's starting to come into balance. And it really happens with a couple of things.
02:00One, supply and demand has to be in balance. That's happening now in the fourth quarter.
02:04We're also seeing that you have to have the right product for your customers, products that customers
02:08want to buy. We think we have those types of product with our network and the premium services
02:12that we offer. How much do you expect prices to increase?
02:14They're going to go up, hopefully in line with inflation next year, potentially more,
02:19just given how depressed the first half of 2025 was. We haven't seen real airfares grow for a while.
02:26A lot of other products have grown. Your Uber tends to go up a fair amount. Your airfares are
02:30going down right now. We need to get airfares going up again. I think that happens in 2026.
02:34One thing that American pointed out that I found to be a pretty shocking statistic was that
02:39business travel is still below where it was in 2019. Do you see it ever really returning to those
02:46levels or did Zoom fundamentally transform the backdrop?
02:51Yeah, I don't know that it ever gets back to 2019 levels just in terms of total passenger volume.
02:55But we are seeing a nice pickup in revenue. And for American right now, there's two things happening.
02:59One, business travel is picking up to some extent.
03:02And additionally, we're doing a better job getting more share of that traffic.
03:07A couple of years ago, we changed our distribution strategy. It didn't work as well as we would have
03:11liked. We've reversed that. And we're doing a really nice job right now recapturing a lot of
03:15business share. And you saw in the third quarter, our business traffic was up about 14 percent.
03:20Yeah. One thing that you said in the earnings is that American share of total business travel is
03:243 percent below where it was before that change in strategy. What are you doing to bring back that
03:32business traveler?
03:34Yeah, well, there's a lot of work happening across our commercial organization. It starts with running
03:38a great operation, with having really great customer service, the products that customers really want
03:43to have. More tactically, though, we've increased the size of our sales staff. We've been working really
03:47close with our corporate partners to make sure that their travel is coming back our way. And it's been
03:52really well received. These are companies that want to be flying American Airlines. We just have
03:56to have the product in place. And we're doing a nice job with that now.
03:59The product has to do with the plane. I know that that's something that you've been very focused on.
04:02You said that there are 50 deliveries of new planes, new jets that you're on track to acquire this
04:09year. 59, I believe, next year. I'm just wondering, do you foresee that number going up, that actually
04:15you could, because there is this acceleration of production from Boeing, increase some of that delivery?
04:20Yeah. You know, it's interesting. We look back, and what we've been doing for the past couple of
04:25years is put in a bit of a buffer. So if the manufacturer said they were going to deliver
04:28on a certain day, we'd put a buffer in that before we actually put it into schedule, just so we weren't
04:33out there disrupting customers if that airplane ended up coming late. Given how well they've been
04:38doing lately, we don't put a buffer in there anymore. We expect Boeing and Airbus to deliver on time.
04:42They're doing a really nice job of that now. And so as we look out to next year, we expect them to
04:47deliver on time. I don't think it changes our capital profile or the number of airplanes we
04:50have, because we pulled that buffer out about six months ago. There is this feeling right now of how
04:55do you weigh the investment in new planes and upping some of the quality that people have when
05:02you talk about the optionality versus paying down debt versus creating an even bigger buffer. Should
05:07there be more turmoil in the economy? How are you weighing that? You know, a lot of our fleet
05:11decisions are really long-term decisions. We have the youngest fleet in the industry right
05:16now. We have a fantastic product across our fleet, but you have to make the right investments
05:20for customers. So we'll continue taking new airplanes. We will continue to invest in our
05:24fleet. And then after that, we'll use our free cash flow. So after we've made these right
05:29investments in the business and taking care of our team members, then we'll use free cash flow
05:32on the balance sheet. And that's what we've been doing for the past several years. We made a ton of
05:36progress on the balance sheet. We were at $54 billion of total debt and kind of peak levels
05:41of COVID. We brought that down to $36.8 billion at the end of the third quarter. We have a target
05:47here in the next year and a half or so of getting that inside of $35 billion. And we're well on our
05:52way there. One thing that people have talked about going forward is just what you see with respect to
05:58the government shutdown and some of that uncertainty. A lot of airlines have said that so far they haven't
06:02seen it. Is that something that you would agree with? Yeah, I would agree with that. You know,
06:08two areas. One on revenue. There's not much of a revenue impact. There's something there,
06:12but it's definitely less than a million dollars a day. The next thing you look at is the operation.
06:17Is anything happening with the operation? And so far, while there may have been a couple of flare-ups
06:20here and there, for the most part, we have been running a fantastic operation in the month of
06:24October. And, you know, really credit to all of the government employees who support the aviation
06:29infrastructure. They're coming to work every day, keeping everything secure and safe.
06:33We appreciate that. We expect Congress will get back to it and reopen government here.
06:37Just the reason why we love talking to the airlines, and in particular you, is because you have the
06:42best barometer, real-time barometer, of the consumer in America at a time where there's a government
06:46shutdown and we are not getting any of the real-time data. What other airlines have said is that there
06:51has been a reacceleration in the economy from what they can see with respect to consumer demand.
06:55Would you agree with that? Is it pretty much across the board a reacceleration, or is there
07:00something funky about what you're seeing in terms of the type of demand, the types of consumers that
07:05are traveling? Well, we're seeing really nice demand right now. And for sure, if you look back
07:12kind of first half of the year, right up until that first week of July, demand looked pretty soft.
07:18But then there was this reacceleration as there was a little bit more certainty in the economy.
07:21And to the point earlier, there was a bit of a bifurcation in demand. Higher-end, higher-income
07:26consumers continue to spend. Lower-income consumers backed off of travel a little bit. What we're
07:31seeing right now is really nice trends from the higher-end consumer, a lot of premium traffic
07:35coming in. And then at the lower end, that traffic is coming back really nicely as well.
07:39So you also see a reacceleration? Absolutely, yeah.
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