AAG(AAL) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported an adjusted pretax profit of $869 million for Q2 2025, with earnings per share of $0.95, which is at the high end of the guidance provided earlier [6][20] - Total revenue for Q2 was $14.4 billion, reflecting a year-over-year increase of 0.4% [20] - The operating margin for Q2 was approximately 8%, with an EBITDAR margin of 14.2%, a decline of 1.5% year-over-year [20][21] - Free cash flow for Q2 was $791 million, contributing to a total of $2.5 billion in the first half of the year [22] Business Line Data and Key Metrics Changes - Long-haul international PRASM increased by 5% for Atlantic routes and approximately 1% for Pacific routes, while domestic unit revenue decreased by approximately 6% year-over-year [8][9] - Managed business revenue grew by 10% year-over-year, outperforming broader industry growth [10] - Active Advantage members increased by 7% year-to-date, with premium cabin unit revenue performing four points better than the main cabin [11] Market Data and Key Metrics Changes - Domestic unit revenue is expected to remain lower year-over-year in Q3, with July anticipated to be the low point [9][24] - The company expects capacity to increase by 2% to 3% year-over-year in Q3, with domestic capacity up approximately 5% during the July peak [24] Company Strategy and Development Direction - The company is focused on enhancing customer experience, operational excellence, and driving efficiencies [7][12] - Plans to expand premium seating and improve the customer experience through new lounge openings and enhanced in-flight services [13][15] - The company aims to restore its historical share of indirect channel revenue by the end of 2025, which could represent $1.5 billion in revenue [60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term initiatives and the ability to recover from current challenges, including weather disruptions and operational issues [26][27] - The company anticipates sequential improvement in revenue performance as demand strengthens in the latter half of the year [24][41] Other Important Information - The company raised $1 billion through a loyalty term loan financing, reducing net debt to $29 billion, the lowest level since Q3 2015 [22] - The company is on track to take delivery of 50 new aircraft this year, with total CapEx expected to be between $3.5 billion and $4 billion [23] Q&A Session Summary Question: Percentage of American flights operating at a loss - Management stated that they do not base operations on competitors' perceptions and highlighted their strong hub and spoke network [32][34] Question: Domestic performance outlook for Q3 - Management indicated that July would be challenging, but they expect sequential improvement in August and September [40][41] Question: Capacity and unit costs outlook - Management confirmed that unit costs are expected to remain in line with previous guidance, with a focus on efficiency initiatives [49][50] Question: Indirect revenue share recovery - Management confirmed plans to restore indirect channel share by the end of 2025, which could lead to significant revenue increases [60] Question: Customer experience improvements - Management emphasized measuring improvements through Net Promoter Scores and revenue performance, with ongoing investments in premium services [83][86]