Summary of American Airlines (AAL) FY Conference Call - May 22, 2025 Company Overview - **Company**: American Airlines (AAL) - **Event**: FY Conference Call - **Date**: May 22, 2025 Key Points Industry and Market Environment - The airline industry has not unfolded as expected in 2025, with demand trends stabilizing but at lower levels than anticipated [3][12][20] - The industry is experiencing a decline in Revenue per Available Seat Mile (RASM), indicating a softer pricing environment [8][12] - Demand has decreased significantly due to uncertainty in the market, impacting overall performance [12][14] Financial Performance and Outlook - American Airlines has reduced total debt by $16 billion since mid-2021, improving its balance sheet significantly [4][96] - The company expects to be profitable for the full year and generate free cash flow, even amidst current uncertainties [5][67] - Long-term outlook remains positive with expectations for margin expansion and meaningful free cash flow [6][67] Capacity and Demand Management - Capacity growth for American Airlines is projected to be modest, with low single-digit increases expected [11][54] - The company is closely monitoring demand trends and adjusting capacity accordingly to align with market conditions [54][56] - There is a focus on restoring capacity in key hubs, particularly in Chicago, which is crucial for the airline's network [58][60] Revenue Management and Performance - American Airlines has outperformed peers in unit revenue, particularly in international long-haul markets [23][25] - The airline is seeing a recovery in market share, with a goal to regain its previous levels by the end of the year [32][34] - The premium cabin segment is performing well, with plans to enhance premium seating configurations in the fleet [64][66] Fleet and Capital Expenditure - The airline has a fleet plan that allows for significant growth, with a capital requirement of $3.5 billion annually [99] - American Airlines has taken delivery of new aircraft, including high-premium models, to support growth in international markets [30][99] Cost Management - The airline is managing costs effectively, with guidance for mid-single-digit Cost per Available Seat Mile (CASM) for the year [70][72] - There are ongoing efforts to improve operational efficiency and reduce costs through various initiatives [71][75] Debt Reduction and Financial Goals - American Airlines successfully reduced total debt to just under $39 billion, with a target to bring it below $35 billion by the end of 2027 [96][97] - The company aims for a BB flat credit rating, contingent on expanding earnings [97][98] Conclusion - Despite a challenging year, American Airlines remains optimistic about its long-term prospects, focusing on network enhancements, fleet growth, and financial stability [98][99]

Financial Data and Key Metrics Changes - The company reported a year-over-year increase in RASM of 1.3%, which was within initial guidance, while ASMs decreased by 4.3% year-over-year [15][22] - The company ended the quarter with a strong liquidity position, representing 42% of trailing twelve-month revenue, the strongest liquidity ratio in the industry [12][30] - CASM ex-fuel grew by 8.3% year-over-year, better than the initial guidance midpoint of 9% [34][35] Business Line Data and Key Metrics Changes - The premium segment performed exceptionally well, with premium RASM, including Mint and Even More, outperforming core RASM by high single digits [18][19] - Loyalty revenues grew by 9%, supported by new partnerships and the launch of a premium co-branded credit card [19][20] - The international flying segment showed stronger performance, with Transatlantic RASM up 28% year-over-year [16] Market Data and Key Metrics Changes - The Northeast market experienced a slowdown in demand, impacting bookings more than other regions [49][50] - Domestic markets showed weakness, while international markets, particularly in Latin America, performed relatively better [16][22] - The company observed a wider spread between peak and trough unit revenues, with peak RASM up high single digits and off-peak RASM declining double digits year-over-year [22] Company Strategy and Development Direction - The company is committed to its long-term strategy, Jet Forward, which aims to drive transformational change and achieve breakeven operating profitability [9][10] - The company is adjusting capacity to better match supply with demand, having made significant capacity cuts in response to changing booking patterns [10][14] - The focus remains on enhancing customer loyalty and brand strength, with initiatives under Jet Forward showing early signs of success [19][26] Management's Comments on Operating Environment and Future Outlook - Management noted that the current macroeconomic environment remains unpredictable, leading to a cautious approach in reaffirming full-year guidance [6][7] - The company is leveraging past experiences from the 2008 financial crisis and the COVID-19 pandemic to navigate current challenges [7][10] - Management expressed optimism about the resilience of the premium segment and loyalty program, which are expected to provide stability amid economic uncertainty [24][26] Other Important Information - The company has deferred $3 billion in capital expenditures, pushing out A321neo deliveries to the 2030s to focus on returning to profitability [12][30] - The company is actively exploring adjustments to its fleet plan to preserve cash and enhance operational flexibility [32][33] Q&A Session Summary Question: When did the change in booking patterns start and what adjustments were made? - Management noted that booking slowdowns were observed in January, leading to aggressive capacity cuts in February and March [43][45] Question: Is the slowdown in demand specific to certain geographies? - Management indicated that the Northeast region is experiencing a more pronounced slowdown compared to other areas, impacting capacity strategy [49][50] Question: Can you provide a range for second-half capacity outcomes? - Management refrained from providing specific guidance but indicated that capacity would be measurably down from initial expectations [55][56] Question: What benefits are expected from the domestic partnership? - Management highlighted that the partnership would enhance network opportunities for TrueBlue points, improving customer utility [58][59] Question: What is the status of the Pratt and Whitney compensation situation? - Management reported that there are currently 10 aircraft on the ground, with improvements noted in operational performance, but compensation discussions remain fluid [78][81] Question: Will there be new market entries this year? - Management confirmed that multiple new routes are expected to be announced later in the year [83] Question: What is the outlook for the spread between premium and core RASM? - Management expects continued growth in premium RASM, with hopes that core RASM will also improve, maintaining the spread [87][88] Question: How is VFR demand performing in Latin America? - Management reported that VFR traffic remains stable, with no significant drops observed in key markets [93]

Core Viewpoint - Alaska Air Group, Inc. reported a first-quarter 2025 loss of 77 cents per share, which was wider than the Zacks Consensus Estimate of a loss of 72 cents, but an improvement from a loss of 92 cents per share in the same quarter last year [1][3] Financial Performance - Operating revenues for the quarter were $3.14 billion, missing the Zacks Consensus Estimate of $3.16 billion, but representing a 41% year-over-year increase, with passenger revenues making up 89.5% of the total and increasing by 40% due to strong air-travel demand [1][2] - Passenger revenues totaled $2.81 billion, while cargo and other revenues grew 91% year-over-year to $122 million, and loyalty program revenues increased by 26% to $207 million [2] - Total operating expenses rose 39% to $3.33 billion, with economic fuel prices per gallon decreasing by 15.3% to $2.61 [6] Operational Metrics - Revenue per available seat mile (RASM) increased by 1.9% to 14.79 cents, and yield rose by 1.8% to 16.28 cents [4] - Consolidated traffic, measured in revenue passenger miles, grew by 37.8% to 17.25 billion, while capacity increased by 38% to 21.21 billion, leading to a slight decrease in load factor to 81.3% from 81.4% [5] Liquidity and Capital Structure - As of March 31, 2025, the company had $1.04 billion in cash and cash equivalents, down from $1.20 billion at the end of the previous quarter, and long-term debt decreased to $4.29 billion from $4.49 billion [7] - The debt-to-capitalization ratio stood at 58% at the end of the reported quarter, and the company repurchased 1.8 million shares for nearly $107 million during the first quarter [7] Future Outlook - The company anticipates a revenue impact of nearly 6 percentage points in the second quarter due to recent demand softness, with maximum cost pressure expected in the same period [8] - Adjusted earnings per share for the first quarter of 2025 are projected to be between $1.15 and $1.65, significantly lower than the Zacks Consensus Estimate of $2.52 [9] - Available seat miles are expected to increase by 2% to 3% in the second quarter of 2025 compared to the same period in 2024, while RASM is expected to remain flat to down low single digits [9]