American Airlines Stock

Great. Welcome back. And kicking off airlines content at the conference. We are very happy to welcome back American Airlines with CEO, Robert Isom, and CFO, Devon May. Gentlemen, thank you so much for coming back to Laguna.

Ravi, great to see you.

Thank you. So, before we kick off, I want to say for research disclosures, please see Morgan Stanley's research disclosure website at morganstanley.com/researchdisclosures or please see our recent research. With that, Robert, plenty going on. So I don't know if you want to maybe open up with a few thoughts on what you're seeing out there?

I would. First off, thanks for having us. But I'll just start with this. A lot of stuff going on in the world, but demand remains strong. That's really great to see, and I know we're going to spend some time on it. From an American perspective, premium Global Airline, we're doing all the right things to make sure that we reinforce that purpose. And the storyline for us is still we're the airline with the greatest potential. And it really is because of the opportunities that we have ahead of us from a revenue perspective. We've talked a lot about the things that we're doing with our four pillars. Rebuilding our network. We have significantly undergrown since prior to the pandemic, our network. And this is the first year we've been able to really put all the pieces together with pilots and aircraft deliveries and gate availability. And we've done a really nice job of making sure that DFW and Charlotte, Miami, Philadelphia, Phoenix, Chicago back to where we need them to be. So I feel really great about our network.

On top of that, we've been doing everything possible to really -- to lean into improving our customer experience. And from that perspective, it's just every week, I think you've seen something coming out of American. It's not just the reconfigurations that have been in place for the last few years, anticipating this drive for premium revenue, but it's new Flagship Suites, and it's new lounge investment. And on top of that, our customers are really telling us that we're doing the right things from an NPS perspective, and there's more coming.

You've seen the announcements that we've made about high-speed WiFi, but it's not just that, now it's Starlink and a return to seat-back video. So from a customer experience perspective, really leaning into it. And that as well. You got a network, you've got an experience, and that allows us to really take advantage of the drive to premium revenues. And from that perspective, we're really pleased with what we see from not just people buying up, but also the work that we've done to restore our sales and distribution network. We're finally back to where we were a couple of years ago, and there's just upside from there.

And then the final pillar is the work that we've done from a co-brand perspective. We've seen AAdvantage enrollments at record levels. And it's a great way to lead into the first year of a new relationship with Citi, and we're hitting the mark on all those fronts. So, I don't like where fuel is today. I know we'll talk a lot about that. But you put fuel aside and the revenue performance that you've seen at American, I've never seen in my career outside of recovery after maybe the pandemic or 9/11. I've never seen a revenue environment in terms of year-over-year improvement for -- especially for American. So that bodes well for the future. As fuel stabilizes, it eventually will. I really look to us being back on track producing much improved margins, producing free cash flow. We've done a nice job of certainly strengthening our balance sheet and reducing our leverage. There's just more of that to come and much better news for our shareholders going forward.

Got it. That's a great start. Lots to unpack there, which we'll get through. Maybe we can start out with, like you said shorter-term revenue trends. 2Q earnings call, you guys guided to 16% to 19% revenue growth in 3Q, said unit revenue should be stronger year-on-year in both 3Q and 4Q than the 2Q result. How has that trend evolved since July? And how does it look like throughout the plan?

Yes. So from a revenue perspective, I feel really good about the guide. And not just -- it's not just from a revenue perspective. Our capacity guide I feel really good about how we got on that and also from a unit cost perspective, I feel good about that. What I don't feel good about is the price of fuel. There's been tremendous volatility. But I'll go back to the revenue outlook and it's broad-based strength. So, I like what I see, as I mentioned, from a corporate perspective, our indirect share is, again, now above where we had been prior to our sales and distribution issues. It's geographically international is still strong domestically, and it's front cabin and coach as well.

Got it. That's all the above. In your career kind of has -- have you ever seen [indiscernible] was all of the above, like this?

No. Again, I haven't, but we still have to deal with the price of fuel. So -- and I'll say that, I haven't seen when you really break down, it's not just crude. I think that if it were just a crude oil issue that we're dealing with right now, or $100 a barrel oil that we dealt with at various times in our history, we'd be in much better shape in terms of producing profits. But the fact of the matter is there's a crack spread on that, and that has grown by 3x. And I really haven't seen that in my career also. But I go back from a revenue perspective, yes, when you're talking about 16% to 19% year-over-year increases, I feel good about that. And I do think that, that is going to be durable. Some of that from an industry perspective, obviously, and price of fuel may have been a catalyst to drive some performance. But overall, I believe that the vast majority of that is something that we're going to be able to retain.

So, exactly my next question, which is you highlighted the four pillars of the strategy before. A lot of that was idiosyncratic American. How much of this improvement that you've seen in the yields, kind of year-to-date, do you think it's idiosyncratic to you and you sort of would have got anyway versus fuel pass-through?

Well, I go back to where we started the year. And from a unit revenue perspective, I'm really pleased with what we had seen in fourth quarter last year and the first quarter of this year. So I think that some of that strength had already been built in. It's hard to discern exactly, but I do know this, the, kind of -- we're selling too much basic economy. And I know that we've seen a 5 percentage point improvement of buy up from that perspective. In terms of our premium revenue, right, 30% of our seats are now producing 50% of our revenue. And when you talk about our four pillars and what we're doing, those 30% of seats, they're only going to grow in our fleet as the reconfigurations come on board as the new aircraft deliveries come on. So I look at it as, hey, there's a rising tide that floats all boats, but there's a chunk that American is benefiting from. And as certainly, as we take a look out into the future, those four pillars, there's so much uniqueness to American and our underperformance that provides the most upside.

Your boat is bigger than everybody else's. On that note you mentioned the sales and distribution changes that you guys have made. A related change there was corporate as well as you guys lean back into corporate. Managed corporate revenue was up 26% in 2Q, fifth consecutive quarter of double-digit growth. Are you now taking corporate share beyond what you had pre the distribution changes? Kind of, what does that outlook like?

Well, let me break down. First off, I feel great about people talking about numbers that are 26% greater year-over-year. And we're going to produce another quarter of significant gains year-over-year. So I look forward to a sixth quarter. So from a corporate perspective, yes, we've regained where we had been, and that's good news. And look, I still don't believe that we're at our full fair share. And that suggests that there's a lot more upside. Corporate for us, it's part of the whole indirect channel. And yes, we've done better. We're achieving higher than our fair share from the leisure side of the indirect channel. And I feel great about that because there's more upside. But from a corporate perspective, what we've done in terms of rebuilding, putting boots on the ground, get deals in place that are now just coming to fruition, there's real upside there. And don't forget, from a corporate yield perspective, that is almost double what we see from other channels. So, I feel great about the opportunity to do more. And that's the goal for American.

Got it. And just you mentioned a few times for obvious reasons. Is there room to push more on price given what fuel is doing, or has the industry and you guys done several rounds already earlier this year? Like, is there a plan forward if this continues?

Well, certainly, we're going to be in the game to produce the maximum amount of profitability we can over the long run. And when you take into account fuel right now, yes, we've absolutely done a great job of recapturing a tremendous amount of that expense. A lot of volatility. As we look into the fourth quarter, I think we've seen fuel prices climb by over $1 billion, and so, how quickly you can react to that. That also then comes down to all the things that we're doing, specific to American Airlines, but also from an industry perspective.

And on that front, if fuel prices remain as high as they are right now, I think that, that's going to require some adjustments in terms of our capacity planning as we take a look out in the future. But where we stand right now, we've made great trade-offs. We've seen load factors dip a little bit. But that's been -- when you're taking a look at revenue performance that we've seen in double-digit unit revenue increases, that's a trade-off we're going to make every day of the week. But as we take a look forward, I do view that what we're doing from a product perspective to grow our premium seating, what we're doing from a buy-up perspective, I think there's more room to go.

Got it. I'll come back to that in a second. But let's shift gears for a second and talk about those four pillars again. Again, you said that you have the greatest potential of any airline story in the industry. I don't want to ask the classic sell-side inning question. But where are we on each of those four pillars? And kind of how much more room do you have to push on kind of each one of them, if you can kind of give us a little bit of a forward look for the pillars?

Well, if from a customer experience perspective, I like what I see in terms of trends, NPS scores improving, people reacting very, very favorably to every new announcement. But let's face it. We've got a lot of work in the pipeline. So from a lounge perspective, you'll see more new lounge openings at American over the next couple of years than we've done it in decades. From a fleet perspective, you're starting to see the 319 configurations and 320 reconfigurations come out, 321 XLRs are just now starting to deliver.

But that will become the backbone of our transcon service coming up as well as secondary city in Europe flying. We're seeing the first of our 777-300 mods come on, and our 777-200s will be moving before you know it. So, from the perspective of, hey, the revenue performance we've seen so far, that's without premium seating by the end of the decade for us, growing by about 50%. So that is something that I think is really notable. All the improvements we're making from a product perspective, in-flight amenities. All of those things are relatively new introductions whether it's coffee or champagne or new snacks. All that is hitting right now, and I think is gaining a tremendous amount of traction. So, I view that we're in the early stages from a customer experience perspective.

But there is -- look, seat-back video is going to take a few years. We're going to have high-speed Starlink WiFi on a significant chunk of our fleet as we move out through 2027. All that early stages, but that just bodes well for the future. We've got work to do from a reliability perspective. I like this what we've done this past year in DFW, a 13-bank operation has greatly improved our ability to service customers during really tough operating conditions. And no matter the operating conditions, we'll have to be smart about it. We've grown -- I'll talk network next. We've grown, I think, to where we have a competitive network. We've always had the most comprehensive North American footprint that ties into an international capability with partners in our own organic flying that I think is second to none. But we've had some things to shore up.

So in Chicago, look, I think we feel pretty comfortable with where we're at right now. We're going to get five new gates as we move into the end of the year, that's going to really allow us to operate that schedule in a better fashion. In DCA, recovering from last year and all the disruption that came from that, DCA has returned to one of our top-performing hubs. And I feel good about the work that's being done on the ground to allow that location to perform well. Philadelphia, we've grown in significantly. Miami is the largest schedule that we've ever had. Charlotte is kind of where it's going to be for a little bit just because of airspace and ground constraints.

DFW is, I think, a place that as we bring on the new Terminal F as we bring on the new Satellite A and Satellite C, I think there's a tremendous amount of growth. And I think you know in North Texas, it's an incredible environment. We couldn't be in a better spot and have forecasting the world's largest single carrier hub as we move into 2030 and beyond.

Phoenix, we've stabilized. We've got a little bit of growth coming there. And then as you look out into Los Angeles as we move into 2028, we'll regain, I think, our ability to have the largest footprint of anybody just because of T4 and T5 reconstruction. So from a network perspective, some upside out there in terms of development in all the right places in the country. And so I'd like to underscore that. And while we'll probably not grow, we're not going to grow as much in 2027 as we did in 2026, there's a lot more that American can do over the long run. We've got a fleet that is really set up to do it.

From a premium perspective, I like what I see. We're going to have a new product out there. And so, the game of trying to segment and trying to make sure that customers have a product that they value, we're doing the right things from that perspective. And then from an AAdvantage, I mentioned record enrollments. A lot of that is driven by the free WiFi that will ultimately really turbocharge the relationship with Citi as well. So I look at that, you increase enrollments that gives you the opportunity to improve co-brand penetration. And ultimately, that translates into spend. And so where are we at from that this year, we're looking at from a co-brand perspective, we're looking at cash remuneration of about $8 billion. And as we talked about when we kicked off the deal with Citi, as we look out into 2030, that number is going to grow to over $10 billion, and we anticipate another $1.5 billion of pretax profitability. So, where are we at in all of that? I'd say a tremendous amount of upside.

That was incredibly comprehensive. Clearly, there's a lot going on, a lot more to come. And to that point, there's since your last Investor Day, a lot has changed with the industry, a lot has changed with yourselves. What does this mean in terms of financial targets, kind of just mentioned the $1.5 billion in co-brand alone. But kind of -- what kind of profitability upside do you see from these levers going forward?

Ravi, again, from where we started the year, I had anticipated...

You are going to do $1.5 billion pretax, yes.

And that was in the second -- in late -- we were approaching earnings in the second quarter. But at the beginning of the year, I had anticipated profitability considerably higher, but for fuel. So, I think that we would have shown again, but for fuel, a huge down payment on what we had talked about at that Investor Day, which was mid- to higher single-digit pretax margins and then mid-teen potentially plus EBITDA margins. I still see that in our future. Fuel's not going to be where it's at forever. On that basis, you take a look at American and you have to look out a little bit. You've got to get past fuel. Certainly, we're not valued where we should be. But I just -- I think one other important point to note, we've got the most upside from a revenue perspective. And I'd just like to underscore that, that is not going to require just a ridiculous investment from a capital perspective.

We've got a fleet that's set for the vast majority of things. Devon can speak more to this. We're pretty well set in terms of capital expenditures, and it's fairly smooth. And then as we take a look out beyond just capital expenditures, I really like what we've done from a cost management perspective. We've always had a reputation for being very efficient that's only grown. And I'll just underscore, I feel really confident about where we're going to come in, in the third quarter from a unit cost perspective. And that's going to be a hallmark. That's what we're going to be able to build on. And that's not a trait that American is going to lose.

Got it. Just on that point. It feels like something has changed with this industry where historically, there was this hyper focus on CASM-ex with good reason. Investors may have kind of got into that kind of a little bit of a hyper focused on CASM-ex as well. But with all of these revenue levers that you guys can now pull, what is the right benchmark to judge your success? Is it margin? Is it EBIT growth? Is it CASM-ex? Is it RASM kind of -- how would you package all that? Are we going to go in a world of higher-than-expected CASM-ex, but that's more than offset by RASM growth? Or how do you see that?

So I'd just say this. Look, at the end of the day, we're about growing our margins and producing profitability, okay? So plain and simple. I do know this as well. From a revenue perspective, we're making all the all the right investments. We're not capital constrained in any way. Devon and the finance team has set us up very well. You know what we've done from our balance sheet. We've improved total debt position from a high of $54 billion just a handful of years ago to $36 billion, where $35 billion is the target. So we've done the right things from that perspective. And I'd just say this revenue is our upside. That's our focus, but we're not going to lose our cost discipline. We're not. And so look, we've never been in a position where we have been undisciplined. And as I take a look going forward, we can do both.

Understood. Maybe switch gears a little bit. You kind of -- you addressed premium quite a few times, obviously, kind of a big focus area for you guys idiosyncratically. Big focus area for the industry as well, right? Again, this also feels like a little bit of a change from the industry where historically, it's been -- it was maybe a little bit of a compete with the low-cost guys in the industry 10 years ago. Now the industry is becoming more premium as a whole. Are you comfortable with the entire industry going premium? Do you think there's enough room there for, like, even the ultra-low-cost carriers introducing lounges and premium seating and such almost like a race to the top instead of a race to the bottom?

The race to the top is much better. And from a competitive positioning, bring it on. We're ready to go. And look, we have some incredible advantages, right? So the hub network, we bring to the table every day, it allows us to have the most comprehensive North American network and something that you can build on. And you know what? That scale is important. It's especially important when there's disruptions, it's even more important when you're going in and trying to sell to a corporate customer. It's not easy to develop a lounge network and reputation. But I'd say also this, the AAdvantage program, the industry's first loyalty program, the industry's largest and we offer, day in and day out, more value in that program for our customers than anyone else. And that is -- you go to whatever publication you want, and I feel really comfortable about that.

So there are some things that we have in place, we've got a great fleet, we have incredible experience operating internationally. Whether it's the biggest business markets in the world, we have the best partners. And so if you're talking Tokyo or if you're talking London, if you're talking Sydney, the biggest business markets in the world, that is always going to be a part of American. And so, yes, bring on the competition, I think it's a good thing. I don't think that the world is such that you referenced the ULCCs in 10, 15 years ago, I don't think that you can race to the bottom in terms of wages for team members.

American pays the best in the business. We have more unionized team members than anyone else. I'm incredibly proud of that. You know what, though, that ability to undercut from that perspective, I think, is really a thing of the past. I also think that from an aircraft perspective there aren't cheap aircraft out there right now. You take a look at supply chain issues and Boeing and Airbus' skyline is sold out long in the future. Well, as we operate the world's largest fleet, I feel really good about American's position with Embraer and Boeing and Airbus and there's no hesitation from my perspective that we can compete there. And I'd also say that when it comes to operating in all the best airports, look, there's barriers that you have to overcome. It's expensive to put new gates in. It's expensive to operate in some of the newly rebuilt airports. And from that perspective, American has the scale to really ensure that we can be competitive with anybody. So Yes, I kind of like the setup for the industry. And I think we have a head start and we've got the most -- we have the most opportunity ahead of us.

I wanted to follow up on the Citi relationship as well, kind of you obviously, reset that contract recently, much better economics. You kind of highlighted the $1.5 billion EBIT opportunity, $10 billion revenue target for 2030. But I think on your recent call, you also said that you saw that as one of the last remaining opportunity -- largest remaining opportunities to close the revenue gap versus peers. Is this something that just naturally evolves as you go deeper in that relationship? Or are there certain levers that you guys need to pull to maximize what you can do there on a co-brand perspective?

Well, I look at the relationship with Citi and Jane Fraser and I have sat down about this. This is tying our brands together. And so there's a constant effort to take a look at what you can be doing more. The framework of the contract, okay, is such that it's mutually beneficial for us to grow the pie. And that's a great position to be in. You've seen some things with the some of the modifications that we made in the program already with our platinum -- our Exec Platinum card. You've seen us launch a new card. We're doing things from a small and medium-sized business perspective that we haven't done before. So all of those efforts are going to ultimately lead to an expanded base of customers. And then what I really like is the flexibility of our offerings that just encourage a much, much tighter relationship in the American Airlines ecosystem.

Got it. Understood. Any questions from the audience? Can we get one here?

Just wondering, at the midpoint of the current 2026 guide, I know you had expected positive free cash flow and lower net debt despite the roughly $6 billion of incremental fuel expense. Obviously, we've seen fuel move up since then. So just wondering how you guys are thinking about the guidance ranges you've instituted since fuel has trended throughout the quarter?

Well, as Robert said earlier, for third quarter, we feel great about it. And for everything that's controllable, we feel great about it. So for third quarter, capacity production is going to come on in line. Our unit cost performance is going to be coming on very much in line. Revenue performance looks really strong right now. Fuel is not going to be that much different. July and August were really similar to our guidance numbers. It spiked up a little bit in September, but overall for the third quarter, we feel great. What's happened in the last 4 weeks, though, is fuel's run up probably $1 a gallon or something like that for the fourth quarter alone.

So we've seen a big spike in fuel that obviously wouldn't have been part of the forward guide based on the forward curve back in July. But in terms of what's controllable: so, revenue performance is in line with what our expectations are. Our cost performance is in line with what our expectations are. On the capacity side, we'll continue to adjust capacity for late in the fourth quarter here, just given what's happening in fuel. But in terms of what's controllable we feel great about it. And we look at it right now, like our revenue performance and our -- especially our unit revenue performance, less our controllable cost performance. That gap, we think, is going to be industry leading. That gap is going to be exactly where we expected it to be 3 months ago. It's just fuel is this variable right now that's moving around on us.

Any other questions? Yes, one up here.

Question on my side. Could you maybe elaborate on the recapture rate intra-U.S. versus transatlantic routes? Is it fair to say that the competitive landscape intra-U.S. is maybe softer than transatlantic? My question is more on the yield: should we expect stronger yields intra-U.S. going forward, but also transatlantic trends to be strong yield-wise? Or should we see a huge gap going forward on that?

I'll start. And that's -- from a transatlantic perspective, as I started out earlier, that's been one of our highest performing regions from an overall revenue perspective and unit revenue perspective as well. Outbound U.S. has led the way on that. I would really like to see us in a position where we're seeing inbound even approach that or better. We're not there -- we're certainly not there right now. But that, I believe, is upside to us. And just specifically London Heathrow is very strong. And I love our position and our relationship with BA and IAG. It really cements a relationship in a position where we have the industry-leading network into London, and that bodes well for the future.

Any other questions? We have 1 here.

With the $1 rise in fuel prices that you've seen versus your last guidance, is there any risk that you might need to adjust your full year guidance down? And if so, is there any risk that your free cash flow could go negative for the year?

Yes. We'll see where fuel ends up over the next handful of weeks here. But, yes, $1, every penny is worth about $10 million in a quarter. So, that's the $1 billion run-up we're seeing in the fourth quarter. The great thing is we're coming in with a stronger balance sheet or less debt than we've had in more than a decade. The company is sitting on a lot of liquidity. So, we feel really good about the positioning we have right now. We'll see where fuel ends up and we'll guide to fourth quarter when we get to earnings call.

Any other questions? And I want to go back to capacity planning for a second. Obviously, this is a minute-by-minute change of conditions out there. Are you guys changing the way you're planning capacity in like as far out as you can maybe starting the lower base? Or is there anything you can do? Or is it just a case of reacting to what's happening?

I don't think there's anything like that's new or like new science around how we capacity plan. I mean we're driving capacity for long-term earnings. And there's going to be some of this variability in the short term and there are times where you're just going to want to pull a little capacity out when we see a rise in fuel like we're seeing right now. And we'll go ahead and we'll touch up in December because of that. But it is important for us to continue to grow back the network, as Robert has talked about. Like we're looking at our fourth quarter right now, we've grown fourth quarter capacity less than anybody else versus where we were 6 or 7 years ago. So, for us to have a competitive schedule, we do have to have some of this capacity back in the market, and that's why you're seeing some growth here out in Q4. And we think that's long-term profit-generating for American.

As Robert mentioned, we look at 2027, we are probably going to grow a little less in 2027 than we would have expected to grow 3 months ago or 6 months ago. So, we're mindful of what's happening both in terms of fuel environment, how much revenue we're able to produce. And at the end of it, it's just how much profitability we're able to get out of it. But we had a lot of great people over in the capacity planning area. They partner closely with finance and operations, and we produce a schedule that's going to be great for our customers and also something that drives for short-term and long-term profitability.

Got it. Robert, you kicked off your comments with some very positive color on demand overall. Do you guys have a decent look at 4Q at this point? And how much of that is booked and kind of do you have a sense of what holiday is shaping up like?

Well, there's a lot to the fourth quarter to be booked, where are we at right now in terms of...

25%.

About 25%. But you take a look at the momentum that we're closing out the third quarter with. And that gives you a lot of optimism about what you see and conviction that trends are moving in the right direction. Fourth quarter is obviously one of our strongest quarters and especially as we close out the year. I just -- the trends I see right now are all in alignment with us closing out the year in a strong fashion. And I'll speak to this. We talked a lot about premium. But look, we've seen a nice performance from a coach perspective as well. And I think that speaks to the broader economy, which, look, yes, there's a lot of purchasing power from the higher income bands. But I think that the job market is such that whether you're a high, medium or lower income segments, there's strength right now in all of those. And I think it speaks to the job market. And so obviously, we watch just about everything we can in the future. As Devon said, we've got a schedule out there that's selling well. We make some tweaks in December. But I think we're really set up for the fourth quarter and certainly 2027 and beyond.

Great. So maybe just to bring us home here. The theme of our airlines outlook for each of the last 3 years is if next year is a normal year, it's going to be great for the airlines. So I think what's been happening is my fault because I'm going to stop writing about that in my outlook. But if 2027 is normal year, what can investors expect from American kind of as we -- as you kind of capture that potential to get back to?

So Ravi, I think I'm your case study in that, okay? I've been talking about the potential for American for some time, and it's there. And to a certain extent, I hate to say, hey, you've got to have some patience or there's delayed gratification in this business. But in the case of American Airlines, again, but for fuel, okay? And the volatility that we're experiencing, American Airlines would this year be producing one of the biggest turnarounds in terms of overall profitability of anyone.

So, as we take a look into next year, and certainly, we've got to plan on higher fuel costs for longer, and we're going to do that. But the underlying strength of American built on our four pillars, built on a cost structure that is best in the business in terms of efficiency, when we see some normalcy, those projections that we talked about from a net income margin perspective, from an EBITDA margin perspective, free cash flow and deleveraging, those are all well within our grasp. We would be experiencing those this year, but for the volatility in fuel. And that's not going to be with us forever.

Yes. So, here's hoping in next year at Laguna we're talking about how boring 2027, how nothing has happened and how amazing that is.

I will be back to celebrate that with you. And again, thanks for the time and appreciate the opportunity to talk about the upside at American.

Absolutely. Thank you, Robert.

Thank you for standing by, and welcome to American Airlines Group's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Neil Russell, Vice President, Investor Relations. Please go ahead.

Thanks, Latif. Good morning, everyone, and welcome to the American Airlines earnings conference call. On the call with prepared remarks, we have our Chief Executive Officer, Robert Isom; our Chief Commercial Officer, Nat Pieper; and our Chief Financial Officer, Devon May. In addition, we have a number of senior executives in the room this morning for the Q&A session.

After our prepared remarks, we will open the call for analyst questions, followed by questions from the media. Before we begin, please note that today's call contains forward-looking statements, including statements concerning future events, costs, 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 earlier this morning, Form 10-K for the year ended December 31, 2025, and subsequent quarterly reports on Form 10-Q. Unless otherwise specified, all references to earnings per share are on an adjusted and diluted basis. Additionally, 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 and investor presentation, each of 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 in American and for joining us this morning. With that, I'll turn the call over to our CEO, Robert Isom.

Thanks, Neil, and good morning, everyone. American delivered a quarter that shows the commercial initiatives we've implemented over the past few years are producing meaningful results. We achieved record quarterly revenue on year-over-year growth of more than 16%. Every entity we serve and every cabin we offer improved meaningfully. This outstanding broad-based revenue performance reflects the strength of our commercial strategy anchored in 4 pillars: elevate the customer experience, grow the global network, drive premium revenue and lead in loyalty.

Executing solidly on that strategy in the second quarter helped offset nearly 50% of the $2.2 billion year-over-year increase in fuel expense. We remain focused on efficiency in the second quarter and held nonfuel year-over-year unit cost growth to under 3%. We've built the airline to succeed in any environment and are pleased to report that we ended the second quarter with over $11 billion in available liquidity. Our revenue results this quarter continue to build on the momentum we've gained over the past few years with significant progress across each of our 4 pillars.

Being a premium global airline means delivering an outstanding customer experience in the air and on the ground. In the quarter, we announced or delivered enhancements on all fronts in our app, elevated food and beverage offerings, new and retrofitted aircraft and especially new and refreshed lounges. American continues to lead the industry with the most premium lounges and will further expand our lounge footprint in New York and Dallas-Fort Worth. These enhancements are further supported by stronger operational performance. Regardless of the weather or other challenges, we've implemented numerous operational improvements and equipped our customers with new capabilities to manage through disruptions.

Our global network is rooted in having the most comprehensive footprint in North America. And after years of constrained growth, we've regained share in all of our hubs and gateways by reestablishing our presence in Chicago O'Hare, growing in Philadelphia and Phoenix and flying our largest schedules ever in DFW and Miami. The work in customer experience and the return of our network has produced the intended results, winning back high-value customers and setting the stage for premium revenue growth.

Premium revenue continues to outpace non-premium, and we've been especially encouraged by our corporate revenue. All of that leads to a loyal customer base. The AAdvantage program is already the industry's largest, and we saw enrollments grow at record rates again in the second quarter. No doubt, some of that growth is due to the launch of our new co-brand relationship with Citi and the superior utility that our offerings provide our customers. They clearly like what they're seeing.

We believe the macro environment positions American well, not only for the third quarter and the remainder of this year, but also the longer term. The revenue environment remains positive for the industry as demand for air travel remains strong. Consumer spending remains resilient, underpinned by a healthy labor market and a sustained preference for travel relative to other discretionary categories. The price of air travel remains a bargain. Demand is showing up broadly across all cabins and real airfares are still lower than in 2019.

Lastly, the industry capacity setup is constructive for American Airlines. With industry supply and demand in better balance and a strategy that is delivering as promised, we're confident American has the most upside over the longer term. None of the progress we've made in the second quarter would be possible without the efforts of the American Airlines team. And I want to thank each of them for the commitment to excellence that makes American a premium global airline, one that flies more customers every year than any other airline in the world.

Looking ahead, we expect demand to remain strong and our commercial execution to keep improving through the back half of the year. Even against an expected nearly $6 billion year-over-year fuel headwind, we anticipate full year adjusted earnings to be break-even at the midpoint of our guidance range. We believe our strong revenue momentum on top of an efficient cost base will continue to drive progress over time. And as fuel prices normalize, American is poised to deliver expanded margins, sustained free cash flow, a stronger balance sheet and increased value to our shareholders. I look forward to the back half of 2026, and I'm especially excited for what we see as we look ahead to 2027 and beyond.

And with that, I'll turn it over to Nat to walk through the revenue results and the progress we've made across each of our 4 commercial pillars.

Thank you, Robert. Before I begin, I want to thank our 130,000 team members, especially our operations team for taking care of our customers during a very busy summer. Revenue growth in the quarter came in at the high end of our initial guidance with total revenue increasing 16.3% year-over-year. Revenue strength was broad-based, reflecting robust demand for our product and an improving pricing environment.

Geographically, all regions exceeded our initial expectations during the quarter. Domestic unit revenue increased nearly 11% year-over-year with Washington National, Dallas-Fort Worth and Los Angeles, the standouts. Atlantic unit revenue was up approximately 9% year-over-year, led by London. Pacific unit revenue increased 15% year-over-year with Japan performance noteworthy. And finally, Latin America unit revenue was up approximately 7% year-over-year, keyed by recovery of Mexico beach demand.

Across the Commercial division, we remain focused on executing our 4-pillar strategy. The first pillar is elevate the customer experience. In the second quarter, we saw further evidence that our customer experience commitment is resonating. Total NPS increased 5 points year-over-year. And for on-time flights, NPS improved for the 15th time in 17 months. American also achieved a 7% year-over-year improvement in the ACSI survey, one of the strongest gains in the industry.

In May, we announced plans to install Starlink, the most advanced high-speed WiFi on our fleet beginning in 2027. Connectivity is increasingly important to customers and investments like this strengthen our competitive position. Demand for premium continues to be strong. We're growing our premium capacity through new deliveries of Boeing 787-9 and Airbus A321XLR aircraft and by executing fleet retrofit programs on our 777-300s, 777-200s, A320s and A319s.

During the quarter, American increased lie-flat and premium economy capacity nearly twice as fast as main cabin capacity. These initiatives help us capture higher-margin demand while offering more premium seats than any other carrier.

Our next pillar is grow the global network. American offers the most comprehensive North American network in the industry. Our paramount focus is maximizing the performance of our hubs through targeted rational growth and optimization of our existing network. In April, we made significant changes to the bank structure at our largest hub, Dallas-Fort Worth. The rebank schedule is driving real improvements. Misconnects across the system are down nearly 25% year-over-year. Satisfaction scores are up and DFW unit revenue outperformed our system average by approximately 4 points.

We also bolstered our position in high-demand international markets in the quarter. We launched new routes this spring, including Budapest and Prague from Philadelphia and Athens from DFW. We also reinforced our industry-leading Latin America network as American became the first U.S. carrier to resume service to Venezuela with flights to both Caracas and Maracaibo. Our hearts go out to the people of Venezuela following the recent earthquakes, and we remain committed to supporting recovery efforts.

Our third pillar is drive premium revenue. Premium unit revenue increased more than 13% year-over-year, driven by strong leisure and corporate demand across all entities. Main Cabin demand was solid. Unit revenue increased nearly 9% and accelerated during the quarter. We also saw a 5-point increase in upsell rates from Basic Economy to Main Cabin for tickets sold in the second quarter, following enhancements to our product attributes. These results demonstrate the effectiveness of our initiatives in driving higher-value customer choices and stronger revenue performance.

Corporate demand remained strong in the second quarter. American's managed corporate revenue was up 26% over the prior year, marking our fifth consecutive quarter of double-digit growth. Revenue performance with small and medium businesses and TMCs also surged in the quarter.

Our final strategic pillar is lead in loyalty. The industry-leading AAdvantage program provides the best redemption value for its members. AAdvantage program enrollments increased more than 30% year-over-year during the second quarter, surpassing the record growth we achieved in the first quarter. Our biggest enrollment growth occurred in New York City, Chicago and Los Angeles, and we saw substantial international growth as well. Our exclusive Citi co-branded credit card partnership is also essential to our loyalty offering. In the second quarter, card performance remained encouraging with spend across our portfolio growing 8% year-over-year.

To close, we remain wholly focused on building a stronger airline for our customers and for our team members. We are on the right track with our 4-pillar commercial strategy. The progress we are seeing across customer experience, network, premium revenue and loyalty gives us confidence that the investments we are making today are enhancing our business and positioning us for long-term value creation.

I'll now hand it off to Devon to walk through our financial performance and outlook.

Thank you, Nat, and thanks to the entire American team for delivering another quarter of record revenue in this volatile fuel environment. In the second quarter, fuel expense increased by over $2.2 billion or 83% year-over-year. Despite that unprecedented headwind, American was able to recover nearly half of the increase with the strong revenue performance in the quarter. Since the beginning of July, expected third quarter fuel expense has increased by more than $700 million for the quarter and nearly $1.6 billion for the remainder of the year. Even in the last week, our fuel forecast has increased $230 million in the third quarter and nearly $550 million for the remainder of the year.

Based on the forward curve, as of July 21, we expect an average fuel price of approximately $3.75 per gallon in the third quarter, resulting in a $1.7 billion year-over-year increase in fuel expense in the quarter. Our third quarter capacity is now expected to be up 3% to 5% year-over-year, approximately 2 points lower at the midpoint than our original plan due to the elevated fuel prices. We will continue to evaluate capacity levels based on both fuel prices and demand trends.

We expect third quarter CASMx to increase 2.5% to 4.5% year-over-year. CASMx in the quarter is slightly elevated due to the capacity reductions we have made in response to fuel volatility. We continue to benefit from our multiyear effort to drive efficiencies throughout our business. Investments in technology, procurement and process improvements are driving higher productivity and significant savings that have allowed us to consistently outperform our peers on CASMx results.

As Nat discussed, demand and pricing trends remain strong across the network and support our expectation for third quarter revenue growth of 16% to 19% year-over-year. Unit revenue is expected to be stronger year-over-year in Q3 and Q4 than what we achieved in Q2. We expect fuel prices to remain volatile and have slightly widened our guidance ranges accordingly. For the third quarter, we are guiding to an adjusted loss per diluted share of $0.70 to $0.10, and we are adjusting our full year guidance to between a loss of $0.65 to a profit of $0.65 per diluted share.

Just 3 weeks ago, we were expecting to guide to full year pretax earnings approaching $1.5 billion, approximately 4x our 2025 pretax income. The current fuel curve has dampened our near-term expectations. But longer term, we fully expect that our revenue performance and continued cost execution will result in material margin expansion when fuel prices normalize.

Turning briefly to fleet and capital expenditures. We expect to take 48 new aircraft this year, and we continue to expect approximately $4 billion of capital expenditures. Our fleet retrofit programs remain on schedule and support our strategy to expand premium seating and improve the customer experience. During the quarter, we completed several financings that bolstered liquidity and also addressed our only meaningful maturity in 2027. We ended the quarter with $11.3 billion of liquidity. At the midpoint of our current 2026 guide, we expect to produce positive free cash flow for the year and to finish the year with lower net debt than at the start of the year. We remain committed to reducing debt, lowering interest expense and achieving our leverage objectives.

Now I will turn it back over to Robert for closing remarks.

Thanks, Devon. The 4 pillars of our commercial strategy represent more than individual initiatives. They are the foundational capabilities that we're building to better capture revenue across the business. The investments American is making are paying off in a meaningful way. We're seeing measurable revenue improvements and the progress we've made isn't driven by any one initiative, but rather by all the work that's taking place across the entire airline.

While there's much more work to do, we're seeing tangible signs of progress, and we remain confident in our ability to close the revenue gap over time while maintaining cost discipline. Because of this, we believe American remains the carrier with the most upside. We're incredibly excited about the future for our customers, team members and shareholders.

Operator, please open the line for questions.

[Operator Instructions] Our first question comes from the line of Duane Pfennigwerth of Evercore ISI.

Obviously, this fuel curve is not how anyone would have drawn up the year, acknowledging that and the underlying volatility. The #1 question we hear from investors is why isn't the low-margin producer cutting capacity? Why isn't there a greater sense of urgency? And so maybe you could just illuminate, is it input cost volatility? Is it fleet commitments? And how is that like shaping your intermediate-term views, not next quarter, but your intermediate-term views?

Thanks, Duane. There's been a tremendous amount of volatility in the fuel curve. Just 3 weeks ago, we would have been projecting a forecast that were considerably different. As Devon said in his comments, we would have expected the third quarter that would have been almost $700 million better and a full year of almost $1.5 billion better. So as we take a look, both short term and long term, we're matching our network, our capacity to the demand environment that's out there and doing what's right for American.

So we made an adjustment to the third quarter, and we did that just a few months ago. We're taking a diligent look at the fourth quarter right now, and we'll continue to focus on that. And we'll do the same as we look out into the fourth quarter. American has always been smart and quick about reacting, and we're going to do the same and follow the same as we go forward.

Appreciate that. And then just with respect to CapEx over the next couple of years, '27, '28 given the deliveries and the retrofit programs, can you just remind us of the shape of that?

Duane, yes. So for this year, as we've talked about, we'll be right around $4 billion, maybe a little bit less than $4 billion in total CapEx. It will bump up a little bit next year, but not a whole lot. What's been happening is we've had for the last couple of years, deliveries sliding out. They're starting to stack up a little bit in the back half of the decade here. I think as we get into '28 and '29, there's some smoothing that needs to happen still with our delivery. So I won't comment on that. But for next year, it's probably going to be somewhere around that $4.5 billion range.

Our next question comes from the line of Andrew Didora of Bank of America.

First question for Devon. Just sort of a medium-term kind of CASM question here. Just I guess in 2027, what labor groups do you open up for negotiations? And then if you were to continue at sort of this low to mid-single-digit capacity growth pace that you're seeing this year, I guess, what is a reasonable level of CASM growth not factoring in new labor deals?

Yes. We do have the pilot agreement that becomes amendable in August of 2027. Our pilots do get an increase in January of 2027. So that will be kind of part of our base forecast for our cost next year. What we've been saying pretty consistently is that we have a fleet plan that allows us to grow up to mid-single digits. Now how we actually grow is going to be dependent on the fuel environment, the demand environment that we're seeing out there. But the fleet plan would allow us to grow mid-single digits. And if we grew at that rate, you should expect CASMx to grow at around low single digits. If we pull the growth rate down a little bit, CASM will come up a bit. But that's just something that would happen naturally as we adjust capacity levels.

Overall, though, managing unit cost is something that we are great at. We have been working on these long-term efficiency initiatives that have allowed us to be a best-in-class producer of costs on our capacity production, and we expect to continue to do that.

And then just maybe, Nat, on transatlantic here. I think we were maybe a little bit aggressive across everybody on transatlantic kind of RASM growth in 2Q. I guess, one, I guess, what are you seeing in that market based on the booking curve, should this continue to improve? And any color that you have on other regions as we go through peak summer would be helpful.

Sure, Andrew. Thanks for the question. In the Atlantic, so much of that for us is about London and about Heathrow. And our unit revenue in London was up 20% in the quarter. We're allocating our most premium aircraft to that market, most premium market in the world, and it's a smaller airplane, but we're really seeing benefits on that front. And then across the Atlantic more broadly through the second quarter and into the third, we're seeing good results in the entity.

Our new routes are hitting our projections and our targets. We've upgauged a bunch of capacity there. It's kind of one of the irrefutable rules, at least in the business when I started, you put every wide-body airplane you have across the Atlantic in the summer, and that certainly is holding true here. So consistent with our competitors, good performance in that entity.

Quickly bouncing to the other ones. Latin America was a highlight for us in Q2. Revenue performance is pretty good from a Mexico perspective. Central America was strong as well. And we continue to add to our industry-leading Latin America franchise out of Miami. Venezuela service, we restarted and really pleased about that. And then lastly, on the Pacific, great results there, unit revenue up 15%, and that's all about Japan. That market continues to be terrific. Our joint business partner, JAL, clearly working together very nicely with them and seeing great results.

And then lastly, we've upgauged a number of our Asia routes out of DFW. And again, in this market, it's the right thing to do more premium seats and capture that demand.

Our next question comes from the line of John Godyn of Citigroup.

I wanted to just spend a second on premium and the strategy there. Obviously, a lot of competition for premium passengers, but you had a couple of data points, the 26% increase in corporate stands out where you're seeing some success there. Maybe you could just kind of elaborate on what's going on with your premium strategy over the next few quarters and as far out as you think you have anything kind of exciting.

John, it's all exciting. But yes, I think on the premium side, we are a premium global airline, and our premium traffic continues to outpace the rest of the business. Our premium revenue in the quarter was up 19%. Non-premium was 15% and our unit revenue on premium up 13%, 5 points ahead of Main Cabin. So it's nearly half of our ticketed revenue on roughly 30% of our seats. And the thing we're really excited about it is nearly 60% of our revenue comes from households making $150,000 or more.

And so that's demand that's more likely to hold up through economic uncertainty. We're making investments in premium in terms of taking new deliveries with richer configurations. We've got a number of retrofit programs on our existing fleet to continue to put more premium product in place and really capture that demand.

Second part of your question, transcending into managed corporate, as we said in the script, up 26%. And while corporate yields are terrific, we're seeing a lot of premium leisure yield as well. And that's something, again, that just makes us feel good about the sector and this segment continuing to thrive.

That was fantastic. And lead in loyalty is kind of one of the pillars. Just kind of a follow-up on my prior question, but maybe you could just elaborate there.

Sure. On the loyalty side, our program continues to be really successful. The AAdvantage program, first, biggest, and best, and our enrollments are up 32% in the quarter year-over-year. And the thing that I'm most excited about is we're seeing our biggest growth in jump ball markets, New York City, Chicago, Los Angeles, and we're also seeing international traction. Our enrollments doubled in London, for example. So that's an indicator of a thriving program and one that we're really excited to continue to build and deepen our relationships with our best customers.

Our next question comes from the line of David Vernon of Bernstein.

I want to come back to the topic of capacity in a slightly different way. So Nat, you've been in the seat now for, I guess, almost approaching a year, close to a year. And we are sitting on -- we're hearing the story that the profit is improving, you're making the investments in the premiums and the like and the clubs and the loyalty programs.

But is there anything that you can see as you're looking at the network that if you were to shape the network differently, maybe not grow it, maybe trim it in some areas that would lead to some better financial outcomes because a lot of investors are still really struggling with this idea that these changes are being made, the premium revenue is being earned, but we're still seeing such a huge gap in financial performance. And I'm just wondering if the size of the network is something that you've kind of taken a structured review of and what your thoughts are there?

David, for the record, it's been 9 months, although we need something like dog years in the airline industry, I think. It's been really fun, though, looking at from a network perspective and figuring out the arenas in which we can compete effectively and deliver outsized performance in the arenas we're not going to be so strong. You can't fight in every battle. And I think our first priority, and we've been consistent with this, is really going to recapture market share in our hubs.

Pre-pandemic, American had 3, 4, 5, 6, 7 percentage points of more local share in Phoenix, in Philadelphia, in Miami. And so our primary focus from a network perspective is to go recapture that. And logically, it makes sense. Those are our best customers, folks that are deepest elite penetration. They've likely got the credit card. You're going to generate outsized yield there. And so really focused but disciplined on hub performance and really optimizing because we can use the facilities that we have there as well. But we've been doing some tweaking as you would expect.

DFW 13 Bank, we've talked about that went in in April. We've shifted some of our LaGuardia strategy more to focus on local customers and seeing good results there with local share. And then I'd say on the international side, again, through my lens of, I guess, still newness, I mentioned Latin America on the previous question. And I think that is an asset that American has that is unique and that we need to continue to invest there and be smart about it. London, I talked about in terms of premium traffic, it fits the investments that we're making, and we've got a terrific joint business partner in British Airways there.

And then lastly, I'd say the other thing I'm looking at is can we get more value out of our joint businesses internationally, ways that we can expand our global presence. We're going to grow internationally, as we've talked about, but there's also ways to improve your financial performance and deepen your presence, and that's really doing things effectively with your partners. The last thing I would say is that American is going to be rational. We know that from a capacity perspective, direct correlation to revenue performance. We understand all of that. And really, it's being selective in competing in the markets in which we think we can win.

Okay. I guess I'm not hearing a lot of -- you've seen some areas that are in maybe some of the smaller regional markets or something like that where maybe it doesn't make sense to deploy the capital. I guess I'm just wondering, if you looked at it on a truly replacement cost basis, right, does it make sense to be as big as you are? Or could you maybe trim the network free up some capital to further accelerate some of the balance sheet repair?

No, good question. And I think, again, we've got 9, 10 hubs, right? We've got hubs that really have local market presence. We've got hubs that really connecting flows and then some that are hybrids. Charlotte is a market that we have optimized and done some trimming there and reallocated capacity from that perspective. We've got hubs up and down the Northeast, as you know. And so there's some allocation and reoptimization going on there. So it isn't just a throw everything against the wall and let's see how it sticks together. We're being very targeted with what we're doing, and we're selectively cutting as well.

Our next question comes from the line of Jamie Baker of JPMorgan Securities.

So, Robert, we've discussed in the past a few times the American thesis that disparate labor costs lie at the root of your margin deficit to Delta and United. But we've recently seen some pretty significant harmonization on flight attendants and mechanics at the competition. But I'm not seeing the sort of relative margin improvement at American that perhaps you were anticipating.

So I'm reluctant to beat the dead horse, but is it still the American perspective that the competition is sort of living on borrowed labor cost time for lack of a better term? Or has there been any evolution in how you're thinking about this, particularly with several working groups becoming amendable next year?

Jamie, thanks. Let's just be clear. We have a number of things that we're working on to address the margin gap. And we've -- as you know, we've been putting considerable attention to improving our balance sheet, and that will reduce interest expense over time. And I'm really pleased that, that's in a better position than it's been since 2016. You mentioned from a cost perspective, labor cost is -- compensation and benefits is just part of that. I'm really pleased, and you can see it in our performance, industry-leading unit cost performance. And you know what, that's with market-based wages, top of the industry wages that are already baked in across the board. We have labor cost certainty.

Yes, other airlines will remain nameless. While they may have negotiated contracts, they haven't put them in place. And if those contracts were in place or if they had been adjusted, you would see, I think, meaningfully, meaningful closure in this past quarter. That said, our focus -- okay. We know we're going to be great at cost management. We know that we're going to continue to improve our balance sheet. Our focus is from a commercial perspective and generating more revenue. And that commercial focus is on our 4 pillars, and it's all about customer experience, which you've seen the investments that we're making. And that's included in our cost forecast.

In terms of our network, we have to have a network that is competitive where our customers want to fly. You know the constraints that we dealt with. We're not being -- certainly, we're being mindful of the industry and capacity as a whole, but we've got to be competitive in places that have been historically part of our network. Premium revenue, you see the impact from that perspective, both from a corporate perspective and overall premium yields. And look, the Citi deal is now just kicking in. So the upside for American is still there. Yes, labor costs are one component. But the real upside for American is from revenue production. And you know what, others are going to have cost inflation issues. I feel really comfortable about where we're headed.

Okay. That's helpful. And that's actually a good segue into the second question, probably for Nat. I've been thinking about premium capacity and how individual aircraft, basically wide-bodies are configured. And obviously, there are a lot of gyrations in that regard at American at the moment. But from a high level, it looks to me like you're largely targeting fairly similar wide-body LOPA as those of Delta and United.

I guess my first question is whether you agree with that conclusion? And if you do, I'm curious how you arrived at those LOPA considering not all industry hubs are created equal. Obviously, you're bulled up on premium, everybody is. But your share of some of the strongest local international markets is a little bit lighter than competitors. So I guess the question is whether it's possible you might be adding too much premium capacity. Any thoughts?

Jamie, we always expect fun questions from you, and that one clearly qualifies. I think you and I could probably debate this for the next 45 minutes, and we'll spare anybody listening for us doing that. But I think the name of the game in this is optimally matching aircraft size and characteristics to the markets that they fly. A lesson that I learned a long time ago when combining the Northwest and Delta fleets and matching planes to routes, and it's still true today. But you've obviously got to balance that with operational complexity. We can't have a different config on every one of our 1,600 airplanes.

And so your premise, if I understand it correctly, is that hubs with less local demand call for less rich configs. And at American, we've got 3 sets of hubs. We've got hubs that large local demand. We've got hubs that are connecting monsters like DFW and Charlotte, and we've got hybrids, Philadelphia, Phoenix and Miami. And if you look at today's market, strong demand for premium products exist everywhere, whether that's in local markets, whether it's connecting flow.

And one of the things I think about with that is the preponderance of credit cards, the dispersion of loyal customers outside of hubs because of credit card penetration, that validates more premium traffic creates premium demand, and those folks are going to fly through all of our hubs, whether they're local or whether they're connecting. So there's always going to be markets like London, New York, the most premium market in the world, ultra-premium config. And that's what we've done, as you can see, with our 787-Bs because it's matching the best product we have to the highest yielding market.

But whether it's United, whether it's Delta, whether it's American, the game is going to be matching optimally aircraft config to market. And I feel really comfortable with where we are in the consideration set. We're a premier global airline. We've got premium demand, and there's no reason we shouldn't have as rich, if not richer configs than our competitors.

Our next question comes from the line of Ravi Shanker of Morgan Stanley.

Robert, you ended your prepared remarks by saying that you are excited for 2027 and beyond. Not sure if you're planning to have an Investor Day or something later this year, but can you just like fill us in on kind of what specifically excites you about '27 and beyond?

Absolutely, Ravi. So, look, as we said a little bit earlier, if we reported earnings just a few weeks ago, our forecast for the remainder of the year would have been potentially to produce results that were 4x better than last year. We're just getting started. As a baseline, I know that our cost performance is something that we're incredibly proud of and that will be maintained. I know that our balance sheet is going to continue to improve. We anticipate producing free cash flow even in this year where fuel costs are up for us are anticipated to be up by over $6 billion. It's just incredible amount of progress we've made.

But these 4 pillars, every one is designed to drive revenue performance. You're starting to see the signs of it. It's not a linear progression. We've had a number of good quarters of pickup versus OA. And as we take a look out into the third quarter, we anticipate better TRASM performance. And as we move out into the fourth quarter, we see similarly strong TRASM performance. That's what I see continuing on out into 2027. That's what gets me excited. And if you take a look at where American and how we're valued today, when fuel prices normalize, American is going to be the best investment out there.

Understood. That's helpful. Maybe as a follow-up, how do you think about passing through jet fuel pricing now and, let's say, the second round of increases? Does jet fuel need to top the prior high watermark of, I think it was like $5.25 or something? Or will intermediate inflation like we're seeing right now also draw another round of price increases from you guys?

Ravi, I'll just start with this. First off, in terms of generating revenue, we've got to give our customers something that they value and consistent with our 4 pillars from a customer experience perspective and a network that they appreciate and really driving our premium product, we're intent on doing that. That said, we have to make sure that our capacity is sized for the demand that's out there. And so when we talk about offsetting fuel price increases, it's a combination of giving our customers something that they want to -- that they really value, driving revenue performance overall, but then also being mindful of the capacity that's in the marketplace and what we can achieve.

And so as we move on, I'm confident that we'll get that balance right and be able to return to profitability really at any fuel pricing. I've mentioned earlier today that I've been in the business a long time. And I remember back in 2013, 2014, when oil prices for an extended period of time were over $100 a barrel -- when crude prices were over $100 a barrel. The industry and the airlines that I was part of, we found ways to be profitable. And that's the same type of attitude that we take into this. American is well poised to operate in an environment of volatility. We're set up for this. And I look forward to being able to attack the problem as we go forward.

Our next question comes from the line of Savi Syth of Raymond James.

Just maybe in simplistic terms, I was curious, if you look at the next 12 to 18 months, just how much faster will your kind of premium seat grow versus Main Cabin? And just any general thoughts on if the opportunities for greater international growth or domestic or if that should kind of continue to be balanced over the kind of the medium time horizon?

Savi, thanks for the question. So this year, our premium seat growth is 5% and our non-premium seats are growing 3%, just to give you a perspective. And we expect that to accelerate as we move forward. We've got 2 domestic retrofit programs going right now on the A320s and the A319s. Those are just starting to roll out and getting great feedback from our customers with that. So increasing the number of first-class seats domestically as well as premium leisure. And then on the international side, 777 modifications going as well. So you're going to see greater premium seat preponderance from American moving forward. And again, following the revenue trend that's strong as well as that's the arena in which we compete.

All of the pieces of the strategy fit together, whether it's having premium product, it's corporate sales, it's having the network where people want to fly, customer experience, all of the 4 pillars. And this is a core part of getting our product out there that customers want to buy. So that, in essence, is both covering the domestic and the international.

Got it. So just -- that's really helpful color. Just on the domestic versus international, any thoughts on kind of what opportunity is one area of faster growth in any of the entities or just continuing to kind of grow similar to what you've seen recently?

Savi, one of the things that we pride ourselves on is being a premium global airline. But it's rooted in our hubs and what we do in this vast footprint in North America. That's how we take advantage of international opportunities. So as we take a look forward, I would anticipate that there's a balance just as we've always had. We're going to match our international traffic up along with our relationship with our joint business partners to what our domestic hubs can support.

Our next question comes from the line of Michael Goldie of BMO Capital Markets.

Can you further expand on the international strategy and how you're thinking longer term about adding more of your own equipment versus working with partners as well as entering new markets versus adding depth and then the timeline for maturation of new routes?

I'll start, Michael, thanks. And Nat, you can fill in. Again, I'll go back. Look, we're a premium global airline. We're proud of what we do. It all stems from this footprint that we have in North America and our hubs that are really in the position where economic growth and population growth is headed. As we take a look out internationally, our hubs are absolutely poised to serve the biggest business markets in the world.

And so our joint business partners, they just so happen to be at London Heathrow and in Tokyo and in Sydney. And for us, we want to take advantage of those opportunities first and then be really smart about how we grow the operation, utilizing a fleet that I think is incredibly adaptable. So whether it's the 321XLRs, which can provide a lot of utility to secondary cities in Europe or in South America out of JFK and Charlotte and DFW or what Nat spoke of earlier these 787-9s, flagship suites, the reconfigurations of 777-300s, we will be -- the 777-200s and ultimately, the 787-8s will be reconfigured as well. All of those enable us to fly to not only the biggest business markets, but secondary cities as well and match incredibly well to the catchment basins that our hub provides.

You hit most of it. I think the only thing I would add is if you think about the facilities, Michael, that we've got coming online with DFW and the terminal expansions here and what that's going to give us an opportunity to just increase domestic traffic to feed international routes. And then the other one I'm excited about is Los Angeles. That facility, obviously under construction, be ready to go in 2028. But American's history in Los Angeles is incredibly proud. And once we've got that facility in place, we'll have more gates than any other U.S. airline, and we're really excited to grow that.

And then quickly, if you can, how much of today's revenue now comes from outside the Main Cabin? And if you can't provide an exact figure, can you give us a framework of how that mix has shifted from 2019 to today over the longer arc?

Sure. Absolutely. About half of our revenue today -- ticketed revenue today is premium on about 30% of our seats. So it's something that's grown over time, and we'll continue to see that grow as we expand it. And that's not only a business class, but obviously Main Cabin Extra and our Premium Economy as well. So it's healthy, and that's why we're investing because we think that's continuing to feed American's strategy to be the premier global airline based in the U.S.

Our next question comes from the line of Michael Linenberg of Deutsche Bank.

Nat, just 2 questions to you. Obviously, Dallas had a very strong performance. You called out the unit revenue outperformance 4 points versus the system. You also mentioned D.C. and L.A. as being standouts. And so as we sort of think through your other hubs, which were the laggards? It would suggest that Dallas was nicely profitable, but conversely, several hubs underperformed and lost money. I don't know if you could give a ranking. Which hubs are the works in progress that were pulling down the numbers?

Michael, I'd start with something my father had said to me: we love all of our hubs, just some more than others. But I think, look, we start with it as every hub we have has a strategic purpose for what we're trying to do. Previous quarters, obviously, very well publicized on what's been going on in Chicago. Chicago is strategically important to American, and we'll continue to perform there. I think what we have is, as I said earlier to one of the questions, we've got a really good mix of hubs with strong local demand. We've got sub hubs that are terrifically set up for connecting traffic and then ones that have a nice balance.

And the key here for American is trying to really coordinate all of that and optimize it. And that's been one of the things that I've really enjoyed in my tenure so far and excited about how we can enhance that going forward.

Okay. And then just second, again to you, Nat, on commercial. The co-spend or the co-brand spend up 8%, fairly consistent with what we've seen over the last few quarters. I mean that's a good number. But it does lag your peers, which have been in the double-digit territory. And I'm just -- I'm curious, is that an engagement issue? Is it a demographic issue? Maybe it's a basing issue, but it has lagged. And I realize that you've sort of reinvigorated the card under the Citi deal. Anything that you can comment on it?

I think -- listen, I think the calculus behind the Citi deal was to get American to really catch and be in the ballpark with where our peers are. And it's a 10-year agreement. We're in the first part of it, obviously, and learning how to work together. And we're really excited about it. The math still maintains where we were. We just need to make sure we've got that joint business aligned so that we've got the same incentives and we're working in the same direction. But I'm still excited about it. It's early stage.

Our next question comes from the line of Catherine O'Brien of Goldman Sachs.

Maybe one for Devon to start off. You noted you raised some incremental capital in the quarter and this year's key maturity is now taken care of. Has the fuel volatility this year changed the calculus on how much liquidity you want to have on hand over the short term? And then longer term, how does it impact -- I think you've got like a medium-term goal of getting to around 3 turns of leverage. Any thoughts there?

We were in the market in the second quarter for some incremental financings. It wasn't a huge amount, but we did want to bolster liquidity here in the near term. So we did a little over $1 billion, around $1.3 billion of incremental financings in Q2. We'll continue to watch fuel volatility and decide if we want to go into the capital markets to raise anything else. But we haven't changed the target. And then longer term around liquidity -- or sorry, around the balance sheet, it's still the same goals that we've had for several years here. We want to get inside $35 billion of total debt. We want to have net debt well inside of $30 billion. And we'd like to get it to a BB credit rating.

To get there, we have to have net debt to EBITDA inside of 3 turns. To do that, we need some margin expansion. And like Robert has been talking about and Nat has been talking about, we think we're focused on all the right things commercially to drive that margin expansion. It might be pushed out to the right a little bit, but we think we are going to achieve these balance sheet goals here over time.

Okay. Great. And then we're keeping you busy on this call, Nat, but one for you. You talked about some merchandising changes that have boosted Basic Economy upsell. Could you just give us a little more color on what that entailed? And over the next 12 months or so, are there other merchandising efforts you're considering? And if yes, how meaningful could those be from a revenue uplift perspective? Just thought that was interesting on the 5 points increase upsell.

Catie, we offer a pretty broad range today of tailored products from all ends of the travel spectrum, folks looking for more value-oriented trips to truly premium experiences. And as you would expect, we're always evaluating our product offering, our merchandising strategy really to help drive higher-value customer choices and you're doing it because you want to improve the revenue performance. As you mentioned and as we called out, we've seen really good success with our Basic Economy upsell and excited at the traction we've seen there and a number of other initiatives we've got in play. We've also got an instant upgrade program that has generated some nice results, too.

So we see a lot more potential here in all classes of service. We see that spanning not only in Main Cabin but also potentially into premium as well. We're just continuing to study it. We know we've got a really good premium product. We're focused on improving that. There's strong demand for it. And so we're always evaluating ways to merchandise it and sell to customers to meet their preferences.

Thank you. Ladies and gentlemen, at this time, we will be taking media questions. [Operator Instructions] Our first question from the media comes from Alison Sider of Wall Street Journal.

Yes, curious kind of what you're seeing now that Southwest is doing seat assignments and extra legroom and they've said that's really attracting a lot of corporate customers. If you're kind of seeing them be a stronger competitor for those customers or if you're seeing kind of any of your typical customers towards Southwest?

What I see, Ali, is our corporate performance is really strong. As we mentioned, managed up 26%. Our small and medium business product AAdvantage business is up 42%. Our TMC business is up 19%, great partnerships with Amex GBT and BCD. So we're obviously focused on share. We track so many metrics. But in terms of our corporate performance and American, in essence, we're taking share. We're not losing it.

Our next question comes from the line of Leslie Josephs of CNBC.

Could you tell us what percentage of your fuel is coming from the Gulf and what percentage is coming from other locations that might be more expensive? And what did you do in the quarter? What are you doing now and going forward that might be a little bit creative in terms of your fuel supply? Is there anything that you can do? And any details on that front, whether it's with your fleet, with capacity, with your route network and your actual supply chain?

Leslie, we're around 65% supplied from the Gulf. There's some movement that we can do here and there to try to minimize price. I'd just say we have a fantastic fuel procurement team that does everything possible to ensure that we're getting the lowest price possible. In terms of like just volume of burn, I think our operations team does an outstanding job ensuring that we're carrying the right amount of fuel, managing fuel burn as effectively as possible, things like single engine taxi.

Longer term, you're right, the bigger levers are just how much capacity you want to produce in this environment. As we have talked about throughout the call, that's something that we've historically been really sharp on. We've made adjustments here in the third quarter, and we'll continue to make adjustments as we head into Q4.

And do you know where the most expensive fuel is in your network, either domestically or internationally?

It's probably on the West Coast and certain international destinations. We can probably get you a little bit more detail offline, if you want.

I would now like to turn the conference back to Robert Isom for closing remarks. Sir?

Thanks, Latif. As we look ahead, we're encouraged by the progress we're making and the momentum we're seeing across the business. We still have a lot of work to do, but we're focused on executing on our plan, taking care of our customers and delivering results.

The future for American is bright. We've got a great team, a clear strategy and significant opportunities ahead of us. And our focus remains on execution and creating long-term value for our customers, team and shareholders.

So thanks again for joining us, and we'll get back to work.

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

Good morning, and thank you for joining us at the 2026 Annual Meeting of Stockholders of American Airlines Group, Inc. I'm Greg Smith, Chairman of the Board. The meeting is now called to order.

Joining me today are members of the executive team and the Board of Directors, including our CEO, Robert Isom. We will start with some housekeeping items and then move to the official business of the meeting. After the conclusion of the formal business, we will answer your questions.

I would now like to introduce Tony Richmond, our Chief Legal Officer, who will serve as Secretary for this meeting. Tony?

Thanks, Greg. I will first go over a few housekeeping matters. Today's virtual meeting is a live webcast. You will find the agenda and rules of conduct through the meeting page. A representative of our Inspector of Election is in attendance and has confirmed that a quorum is present.

The polls opened for voting today at 9:00 a.m. Central Time. If you wish to vote at this meeting, you may do so by returning to the page you used to enter the meeting and clicking Vote. Stockholders who have sent in a proxy or voted via telephone or Internet and do not want to change their vote, do not need to take any further action.

Stockholders may ask questions in the designated field on the meeting page during the meeting. [Operator Instructions] We will respond to questions later in the meeting. We will consolidate our responses where we have received multiple questions on a given topic and answers to any relevant questions not addressed will be posted on our Investor Relations website following the meeting.

The Board established April 13, 2026, as the record date for determining stockholders entitled to vote at this meeting. An affidavit has been delivered attesting to the fact that the notice of the meeting was mailed commencing on April 27, 2026, to all stockholders as of the record date.

We have 7 proposals at the meeting: one, the election of 12 directors; two, the ratification of the appointment of KPMG LLP as the company's independent registered public accounting firm for 2026; three, an advisory vote to approve the compensation of the company's named executive officers as disclosed in the proxy statement; four, a proposal to amend our restated certificate of incorporation to limit the liability of our officers as permitted by Delaware law; five, a proposal to approve the amended and restated 2023 incentive award plan; six, a stockholder proposal regarding the ability of stockholders to act by written consent, if properly presented; and seven, a stockholder proposal regarding cumulative voting for director elections, if properly presented.

Each proposal is described in detail in our 2026 proxy statement, including the Board's recommendation for each proposal. No other matters will be considered.

I would now like to introduce our director nominees who are in attendance at today's meeting: Adriane Brown, John Cahill, Mary Dillon, Katy Farmer, Matt Hart, Robert Isom, Sue Kronick, Marty Nesbitt, Vicente Reynal, Greg Smith, Doug Steenland and Howard Ungerleider. Also joining this meeting is Randy Green from KPMG, the company's auditor, who is available to respond to appropriate questions.

The next item of business is a stockholder proposal from John Chevedden. We will now hear from Mr. Chevedden to present the proposal.

Hello. This is John Chevedden. Proposal 6, shareholder right to act by written consent. Shareholders request that the Board of Directors take the necessary steps to permit written consent by the shareholders entitled to cast the minimum number of votes that would be necessary to authorize an action at a meeting at which all shareholders entitled to vote thereon were present and voting without an unnecessary restriction based on length of stock ownership or method by which shareholders hold their shares.

This includes shareholder ability to initiate any appropriate topic for written consent. This includes that any associated request for a record date shall have the lowest allowable figure. This includes that written consent does not include a solicitation clause mandating a certain percent of shares be solicited unless legally required.

Shareholders acting by written consent and calling for a special shareholder meeting are 2 means that shareholders of a company can use to put forth their proposal on a timely basis without waiting for the Annual Shareholder Meeting. According to state law, American Airlines shareholders can have the right to act by written consent and the right to call for a special shareholder meeting. Both rights allow shareholders to take action between annual meetings.

Shame on American Airlines for suggesting that the shareholders limit themselves to 1 shareholder right when American Airlines shareholders are entitled to 2 shareholder rights under state law. American Airlines shareholders are best served when they have both rights. Written consent is a shareholder right that requires the formal backing of American Airlines majority based on all shares outstanding. This majority support requirement in reality is much more than majority support because it is not economically possible to contact a significant percent of American Airlines shares to get their formal backing. Thus, for an issue to still get majority support based on all shares outstanding under written consent, it could easily need more than 60% support from the American Airlines shares that are economically possible to reach.

How can American Airlines be opposed to a 60% majority? Being opposed to this proposal means being opposed to decisions by a 60% majority of American Airlines shareholders. Please be in favor of 60% majority decisions and vote for a shareholder right to act by written consent, Proposal 6.

Thank you, Mr. Chevedden. The company's response to your proposal can be found in our proxy statement.

The next item of business is a stockholder proposal from the National Legal and Policy Center. We will now hear from Paul Chesser from the NLPC to present the proposal. Mr. Chesser provided the company the following prerecorded remarks.

I'm Paul Chesser of National Legal and Policy Center, speaking in support of Proposal 7, which asks the Board to adopt cumulative voting in the election of directors. This is a modest reform with a simple purpose, to give shareholders a stronger voice in who represents them on the Board.

The case for it begins with performance. Over the past 5 years, an investment in this company has lost value, while the broader market has nearly doubled. The company was dropped from the S&P 500. And just last month, American Airlines reported another quarterly loss even as its largest competitors performed better. These results matter to the people at this meeting and the investors they represent. Yet through the same period, executive and director pay has remained substantial. And the company's largest employee groups have voiced an extraordinary loss of confidence in current leadership.

When a Board presides over results like these without real change, shareholders are entitled to ask whether they are well represented. This reform offers an answer. It does not hand control to any single group. A majority of shares still elects a majority of directors. What it does is let shareholders who hold a minority position to pool their votes and elect at least one director who reflects their concerns. That is not a radical idea. It is a basic principle of accountability.

A Board that knows shareholders can elect a voice of their own is a Board that pays closer attention. For these reasons, I urge my fellow shareholders to vote for Proposal 7. Thank you.

Thank you, Mr. Chesser. The company's response to your proposal can be found in our proxy statement.

The time is now 9:08 Central Time, and the polls are now closed. The Inspector of Election has advised that a majority of votes previously cast have been voted for all of the director nominees listed in Proposal 1 and for Proposals 2, 3 and 5. The Inspector of Election has advised further that the required approval threshold for proposals 4, 6 and 7 has not been met. We will announce final results in a Form 8-K filing with the SEC.

Thank you, Tony. This concludes the formal portion of our meeting, and our stockholders' meeting is now adjourned. We would now like to share a brief update on the business and answer your questions.

I will now turn it back to Tony and then to Robert.

Thanks, Greg. I want to note that as with most presentations, the following discussion will include forward-looking statements, and the company's actual results may differ materially from those discussed here. Additional information regarding factors that could cause such a difference can be found in the company's 2025 annual report on Form 10-K and our most recent quarterly report on Form 10-Q.

I would now like to ask American's CEO, Robert Isom, to share a brief update on the business. Robert?

Thanks, Tony, and good morning, everyone. It's a pleasure to be here with you today. I want to thank the American Airlines team for its strong execution over the past year and particularly as we begin the busy summer travel season. We remain focused on running a reliable operation while advancing our commercial strategy to elevate the customer experience, grow our global network, drive premium revenue and lead in loyalty.

Demand for our product remains strong, supported by continued investments in our fleet, onboard experience and digital capabilities. As we build on our recent momentum, we're taking disciplined actions to manage near-term cost pressures, particularly fuel expense and position American to deliver sustainable growth and long-term value.

Thank you, Robert. Now we would like to address several stockholder questions. Please note that only questions germane to the meeting will be addressed. Any relevant questions we don't answer during the meeting will be posted on our Investor Relations website.

Question one. Robert, our first question is about stock price performance and profit margins. American stock price hasn't moved much in recent years. And based on the latest guidance for 2026, the company is expected to be slightly profitable for the year, which is similar to the company's 2025 results. Do you expect to still be able to expand profit margins?

Our stock price isn't where we want it to be. And frankly, it's not where it should be given the strength of our value proposition relative to the rest of the sector. The most important action we can take to improve our stock performance, both this year and over the long term is to strengthen our financial performance, particularly our margins.

At the start of the year, the midpoint of our guidance implied earnings of approximately $2.20 per share, equating to roughly $2 billion in pretax earnings, nearly $7 billion of EBITDAR and more than $2 billion of free cash flow. At current valuation multiples, that level of performance would suggest a stock price of around $20 per share. And absent the sharp increase in fuel costs, we believe we would have exceeded that midpoint as our revenue performance, driven by our commercial initiatives have outperformed initial expectations.

That said, the rapid rise in jet fuel prices is materially impacting 2026 earnings, which are now expected to be roughly flat relative to 2025 despite an increase in fuel expense of more than $5 billion year-over-year. Importantly, our strong revenue performance has enabled us to offset much of this increase in fuel expense. That strength is being driven by our focus on our 4 commercial pillars: elevating the customer experience, expanding our global network, growing premium revenue and leading in loyalty.

Looking ahead, I'm even more confident in our margin expansion potential than I was at the start of the year. As fuel prices normalize and we continue delivering strong top line performance, we expect meaningful margin improvement in 2027 and beyond and in turn, improved share price performance. And over the long run, we're confident this translates into significant upside for our shareholders.

The next question is on the topic of M&A activity. There has been a lot of discussion about M&A in the airline industry recently. What are your views about the potential for M&A for American?

American Airlines today is the product of several significant mergers. And this management team has deep experience both evaluating and executing on M&A. That said, as we look at potential opportunities, our focus is always grounded in what creates value for our stockholders, customers, team members and other stakeholders. At the same time, we have to be realistic about the regulatory and legal environment. Any potential transaction must be viewed through the lens of what is achievable from an antitrust standpoint.

As it relates to recent statements made around a potential combination with United, we did the work to understand what might be legally feasible and engage with regulators across multiple levels of government. The consistent feedback from the administration to state attorneys general and across the entire political spectrum is that such a transaction would be a nonstarter.

The greatest and quickest path to creating value for American and its shareholders is by us executing on our plan to improve profitability. The progress we've made over the past year shows us that the plan is working, and we'll see significant improvement once fuel stabilizes. American has a long history of being aggressive and creative in forming partnerships that are strategically sound, achievable within legal and regulatory environments and that bring benefits to our customers, team and shareholders. It's how you create a 100-year-old brand. We continue to take that same approach today and well into the future where it makes sense.

We now have a question related to the operation. How does American ensure operational reliability, transparent communications and quick recovery from irregular operations?

Operational reliability is a core component within our commercial initiative to elevate the customer experience. We've made meaningful investments in both our operation and digital capabilities to improve performance and better support customers and team members when disruptions occur. This includes enhancements to American's mobile app that provide real-time updates and seamless self-service options for our customers. We're also making structural improvements to the operation by building more time into our schedules. These changes are improving completion rates and helping us to recover more effectively when disruptions do occur.

Finally, we're seeing meaningful benefits from targeted network changes. At DFW, our largest hub, the introduction of a 13-bank schedule has reduced delays, misconnects and gate changes. Given the scale of DFW within our system, these improvements are driving a broader positive impact across the network. We're also seeing significant benefits from the schedule changes we made this year in Philadelphia, our primary gateway to Europe, that allowed us to significantly increase long-haul North Atlantic capacity.

Next, a question about long-term investments. What long-term investments is the company making to improve the business?

We've been making several long-term investments to improve the business. One good example is the work we're doing right now to shape the future of our wide-body fleet. We currently have an RFP in the market and are actively engaging with both Airbus and Boeing as we evaluate our next order for wide-body aircraft.

This builds on the disciplined fleet strategy we've established over the past several years. In 2024, we set up our narrow-body and regional fleet plans for well into the next decade with an order of 260 aircraft and options for another 193 aircraft. We currently have 19 wide-body aircraft on order with options for 28 more. But given the long lead times associated with wide-body deliveries and expected Boeing 777 retirements in the 2030s, now is the right time to define what comes next as we continue to expand and modernize our internationally capable fleet.

Apart from the fleet, we continue to invest in our airport facilities, our product and our team. We have major terminal projects underway in Dallas-Fort Worth, Los Angeles and Miami. And we're also expanding our Admirals Club and Flagship Lounge footprint across the system. And we're focused on expanding our premium offerings throughout the travel journey, and we're investing in the team member experience to ensure our team has the technology and tools they need to serve our customers.

These investments are designed to drive margin improvement and are aligned with our 4 commercial pillars of elevating the customer experience, growing our global network, driving premium revenue and leading in loyalty.

Thank you, Robert. That concludes the Q&A section of the meeting.

And thanks, Tony. Before we close, the Board and I would like to take a moment to acknowledge one of our directors, Denise O'Leary, who will be retiring from the Board at the conclusion of this meeting. Denise has been an integral part of the Board for many years, helping to guide the company through mergers and other pivotal moments. American has benefited from her extensive experience as an investor and public company director, along with thoughtful perspective shaped by many years of leadership across a wide range of industries, including aviation. On behalf of the entire Board, I'd like to express our thanks to Denise for her many years of dedicated service, thoughtful counsel and steadfast commitment to the company.

And as I said in my earlier comments, we feel very good about how American is positioned. As fuel prices normalize, we're set up to deliver meaningful margin expansion. At the same time, we're actively driving structural improvements across the business, driven by our 4 pillars: enhancing the customer experience, growing our global network, driving premium revenue and leading in loyalty. These initiatives are already translating into stronger revenue performance. And that, in turn, will mean significant free cash flow generation creating the flexibility to reinvest, strengthen the balance sheet and enhance long-term shareholder returns/ Taken together, that means significant upside for American Airlines.

I'd like to thank our stockholders for attending today. We appreciate your continued support and the confidence you've placed in our Board and the team. The meeting is now closed.

Okay. I think we are on. All right. Thank you, everyone, for joining us. My name is David Vernon. I cover airfreight/surface transportation, U.S. Airlines. We are pleased to have American Airlines with us today. Robert Isom, CEO; Devin May, the CFO; and Neil Russell from Investor Relations are with us today.

So you guys should know the drill by now. If you have questions, you want to get up into the queue here for Pigeonhole, you can do it electronically. I'll try to work those into the conversation. We are delighted to have you back for the conference here. Thank you very much for the support.

Anything you want to kick off with in terms of prepared remarks? Do you want to just dig right into the Q&A?

Well, David, I just -- thank you for having us here, right? A lot going on in the industry today. But I'd just like to start with this. American is set up really well for the future. We kicked off the first quarter and produced year-over-year revenue performance of up 10%, 11%, really felt confident about where the year is headed, especially from a revenue perspective.

Look, oil prices, fuel prices are up considerably. First quarter, $400 million. Without that, we would have been profitable -- expected profitability, returned to solid profitability for the year. And -- but for fuel prices that we're now estimating at $4 billion to $5 billion for the year, we would have been solidly profitable.

Now, what that suggests for us is, look, we're doing the right things. Revenue production, we're anticipating revenue for the second quarter to be up 15% year-over-year and to be in an environment where fuel prices have really spiked that much and still be looking at a year where we can repeat the profitability that we had last year. I feel really good about where we stand because I know that oil prices aren't going to be at these levels for the long term.

Okay. So as you think about the state of the business today against that $4 billion oil shock, I think coming into this year, we were looking for something in that $2.50-ish, $3 range for EPS. We're here -- we're kind of looking flat year-over-year based on your updated guidance. No changes to that, I'm assuming today?

Not making any changes, no.

Okay. Just wanted to make sure we're clear on that. But as you think about that kind of pushing the recovery year to 2027, right? Is that the right thing for investors to be doing? Is it the wrong thing to investors? How do you think about this year being a temporary blip versus something that maybe doesn't recover as quickly if oil does come down?

Well, again, I'm really confident that the recovery that we put in place is hinged on our revenue performance. And that's been just through dogged determination on pursuing our 4 pillars: elevating customer experience, growing our network, driving premium revenue and then leading in loyalty. All of those are really having an impact. If you take a look at the first quarter with revenues up 10%, 11% year-over-year, we only grew 3%. That suggests 7% unit revenue growth. We're anticipating 15% growth for the second quarter on capacity growth of about 5%. So 10% unit revenue growth. That is playing well.

For American, I like what I see in terms of how we're doing versus competition, 5 out of the last 6 quarters American in terms of unit revenue performance beating our network peers. What we're doing is working. And you're right, oil price shock, we're enduring it. We're expecting to repeat the profitability we had last year. But when that evens out, American is set to really perform. And I anticipate that happening.

Okay. When you talked about those 4 pillars that you stepped into the CEO role and laid out in terms of your multiyear plan, which of those do you think the market is still underwriting the least?

All of them.

All of them?

Yes. No. I mean, American...

Okay, the least, least.

No. But what -- David, what I'll say is American has tremendous upside. And the upside comes from, look, we haven't performed that well the last couple of years from a comparative basis for a number of reasons. But I feel great that each one of these pillars is addressing something that was potentially considered a weakness, and in many cases, taking advantage of investments and initiatives that we've had in place that are just coming to fruition now.

So you put all these together, and I anticipate that we're going to be back on track with the margin commitments that we made several years ago. Nobody is giving us the credit right now for the potential of returning EBITDA margins into the mid- to high teens. Nobody is giving us credit right now for producing pretax margins in the high single digits. That's what's on the horizon for us. And it's because of the work that we've done in each of these strategic pillars that, that is really taking root. Our customers are responding to it well. And you put the commercial revenue benefits on top of -- look, just there's an ethic at American Airlines of producing really efficient capacity, that means good things into the future.

Okay. So as we dig into that a little bit, right? You mentioned these investments you're making that are just coming into fruition. Maybe across a couple of the pillars, could you kind of dig into the 2 or 3 things that you're most proud of?

So -- I'd love to. From a customer experience perspective, let me start there because this is work that has been going on for years. You don't just go out and order new aircraft today and have them show up next week. The 787-9s with the Flagship Suite, okay? Those were ordered prior to the pandemic. And through a lot of work and a lot of working with our friends at Boeing and seat manufacturers, we finally have the 787-9Ps delivering. 12 is coming later this year. We have 321XLRs that are delivering also with Flagship Suite.

We're seeing the benefit of our 777-300 reconfigurations with a much richer premium cabin. At the same time, on our narrow-bodies, some of our older aircraft are also getting the full benefit of a retrofit, the 319s and the 320s. On top of that hard product that we're putting out in the marketplace, there is absolutely a driver for premium revenue. We've done the same thing from a facilities perspective.

So you look at what we've done and what we have coming up from a premium lounge perspective, there's almost an announcement made every few months from that perspective, we were the first to have premium lounges out in the marketplace, and we're still the leader from that perspective. But at the airports as well, whether it's the modernization that's going on in DFW, what's going to happen out in Los Angeles by 2028, a new regional terminal in Miami. Across our network, we're making sure that we have a product that's ready to go.

And on top of that, some of the softer elements, whether it's new coffee partnership with Lavazza or champagne with Bollinger. All of those things are really appealing to our customers. So from a customer experience perspective, absolutely love what we're doing, love where we're headed to. And you need to do that because ultimately, to drive premium revenue, really take advantage of the network that we have out there, you have to have something that the customers -- that really appeal to customers.

Okay. So hard product investments. What else?

So hard product investments. What I'd say as well, in this environment, we have to be reliable. And from that standpoint at American, we've taken a tremendous amount of this history and redesigned our network and our schedule to make sure that we can be as reliable as possible. You've heard things about the rebanking at DFW, a 13-bank operation that spreads the operation out or in Philadelphia with a new 7-bank operation. We've taken a surgical look at how we allocate flight times.

On top of that, we're putting technology into play anywhere there is an optimization problem that goes along with disruptions. And what we're doing is ultimately giving our customers more confidence that when they fly American, they're going to get where they want to go. And if there is a disruption, we're going to make sure that they have the tools, they have the knowledge as well to get where they want to go and back on track. So hard product, reliability is really fantastic.

And then, on top of all that, you've got to be able to go to market. And the market side of things and selling, whether it's redesign of our basic economy fares, the buy-up that we're seeing from driving premium revenue or what we've done in re-pivoting and really changing the way that we serve the travel management companies and manage corporate traffic, all of those things have really performed well. And for us, because they're all coming to the marketplace right now, this is upside. It's upside for American. It's going to drive margins. And ultimately, driving margins is going to allow us to produce free cash flow. Free cash flow allows us to improve the balance sheet, improving the balance sheet is good for everybody.

Okay. So American Airlines just turned 100. Congratulations. Happy birthday. As you frame the next decade, what do you think is your one sentence definition of what American Airlines is going to be. I've asked you this a couple of times over the years as you've been supportive of our conference. Like what is American Airlines? Where do you want to be in the marketplace? What isn't it relative to the Delta positioning or the United positioning?

Right. Well, I'm just -- I'm going to start with this. We're a premium global airline with the most comprehensive network in North America. We get you more people in the U.S. to where they want to go than anybody else. But there's a lot more to the story, okay? I'm not going to let anybody just say, hey, American is a one sentence answer to that. That network that provides the most comprehensive coverage, it also allows us to be the best partner to any of the other airlines that we do business with.

We've pioneered the joint businesses with IAG and BA and with JAL and with Qantas. We get people to where they want to go. And if you take a look at our network, it's also where the demographics are moving to. From an economic perspective and from a population perspective, you take a look at where we're at. We're in Florida. We're in Texas. We're in the Carolinas. We're in Arizona. American is in the heart of where real economic activity is happening. And on top of that, we still have great presence in places like Chicago and New York and Los Angeles.

So a lot that goes into everything, but I want to underscore it all with this, at American, we've never lost sight that we are a business that cares for people on life's journey. I have a great team behind us that serve 600,000-plus customers a day. And I'm really proud of what they've done and how they're setting us up for the next 10 years.

Okay. So let's dig into a little bit around some topics around demand and consumer health, right? So the consumer signal right now is at best mixed, right? You've got a pretty K-shaped economy where the lower end is got to be feeling the pinch of the pump. The premium end is still continuing to travel, at least based on all the data that we're seeing. As you look through your booking curve, yield mix, what are you seeing across high-end leisure, middle income, basic? Where is the strength? Where is the weakness? Give us a cross-section of your demand outlook right now.

Okay. So we're about 80% booked in the second quarter. So I can give you views on that. We're no different than the other network carriers in terms of where our customers come from. We have the same percentage of high earners and the mix throughout the entire population of travelers. What I would tell you is I feel great about demand overall, okay? No doubt, there is a K-shaped aspect to demand right now, but it is clear that no matter what end of the spectrum you're at, people want to travel. People want experiences. People want better service.

And so yes, top economic earners are -- in terms of overall growth are outpacing the growth that you see for mid and lower tier, okay? But they're all up. And for us, different than last year, where -- let's face it, supply-demand balance domestically was more difficult. It's more positive environment for international. Where demand is coming from now, it speaks to our strengths.

We have a very, very strong and the most comprehensive network in North America. It's centered on our domestic network. We're seeing really strong demand locally that complements what's going on from an international perspective. Other color that we can give, London Heathrow is doing really, really well, even in comparison to strength around Europe. Asia is doing well, centered on Japan. Again, a strength of ours. So we see strength across the board. And as we talked, the other aspects of business, whether it's premium leisure, that's doing incredibly well; corporate travel, up 13%; managed corporate, 13% year-over-year, and again, strong domestic demand.

And are you seeing any sort of response across the spectrum around sort of buy-ups maybe changing a little bit? I'm sort of interested in this idea that you've got this ability for customers to buy up and in the worst market, maybe there's also a trade across. Are you seeing some of that as well? I mean, are you seeing potentially corporate saying, hey, the first-class seat across to Europe is way too expensive to fly a premium economy or...

Well, first off, our premium economy and our business class product are absolutely the best performing of anything that we sell right now. Premium traffic overall still leads leisure traffic. But I feel great about that. And from a buy-up perspective, some of the things that we have done, whether it's more at the basic end of things, quite frankly, giving people a reason to aspire for more and doing it in a way that people find great value, that's working really well. So the redesign of our basic economy product.

What I'll also say is that we've given people more choice, obviously, through our app so that if corporate policy says premium economy across the Atlantic is all you can get, we've given customers a way that they can easily buy into a business class cabin as well. And we're seeing great traction from that perspective. So I think technology has really allowed us to put an offering in front of customers that works with their corporate plans, works with their own desires. And across the board, it's absolutely one of the big drivers of American's performance.

And just to maybe kind of follow up on that, as you think about the technology and that in-app buy-up experience, that's something where I know just from my own experience, maybe a couple of years ago, it seemed like you guys were kind of far behind in terms of like giving away the upgrades instead of asking to get paid for them. Are you feeling like you've kind of closed that gap relative to the peers in the last couple of years?

Absolutely. We've gone through a couple of phases of redesign. Most recently, it definitely does a better job of laying out what's available and why there's benefit to potentially paying some more. And customers, we're getting great feedback, great traction. Whatever the criticisms were for our app in the past, we've certainly closed those gaps. And I really like what I see going forward. It even comes down to things that I think are going to be -- prove pretty sticky as we go forward.

We have the ability to offer customers now to pre-purchase bags, check baggage. And we offer that at a discount, and customers are availing themselves of that. We have much better technology in terms of making sure customers know where those bags are along their journey. Anything that we can do to give our customers the ability to see what we have to sell and then also understand how they can control the process as they work through their travel experience, all that is an opportunity for us.

Okay. So looking at the broader marketplace, again, Spirit's liquidation pulled some capacity out of the domestic market. Is there anything you've seen in your basic economy demand that recognizes that? Or like how do you -- how is that exit having an impact on your business?

Well, you mentioned basic economy, but I'd suggest that in a supply and demand environment, where there's possibly more capacity than demand last year, this has been a good thing. And for American, let's face it. We competed with Spirit across the board. We service 70 of the 72 airports that they serve. I think we competed on 67 of the markets they serve. So there's absolutely an impact. But realize this, though, at the time of their liquidation, they're only 1.5% of the marketplace. So we saw an immediate blip up in terms of basic economy fare purchasing. But we saw across the board improvement in all those places that we compete directly.

And while there may have been a lower end of that, that benefited initially, it's evened out. And I think one of the things that we have to take into account is that those Spirit customers, when they are able to avail themselves of product like Americans, they see the benefit of some of the other offerings that we make. And it's hard to tell. You can't parse out exactly who is a Spirit customer and who wasn't. But what we see now is just a return to the spread of demand that we had, had before. And nothing really noticeable other than we continue to see strength in those places we competed directly with Spirit. I think that, that bodes well for American in the long run.

Okay. And I think you guys have mentioned that your recovery from the corporate sales kind of step back.

Yes.

That's over with. We don't even talk about that anymore.

No, I'd like to talk about it because I think it's -- we definitely needed to make a pivot. This TMCs managed corporate business is a really important place for us to be able to play, especially with the kind of product that we have. So our intent was when we adjusted our focus was to regain the share that we had lost. And fortunately, over the last couple of years, we've been able to do that, but there's upside to it. The upside to it is that the mix of buying in the TMC and corporate channel has changed. There's more premium leisure that buys through those.

And again, the reason we're so focused on it is that, that channel represents from a yield basis probably double what a normal leisure fare would be. So we're going to be a strong player in it. Overall, the volume of passengers prior to the pandemic to where we're at now is still down probably about 20%, but it's been -- we've made up for that much, much more in terms of...

The volume in managed corporate is still 20% lower than it was...

Probably about 20% lower. But the yields that we've seen on that business more than make up, more than make up for it, still really, really strong. So for American, the next steps are, hey, whatever share we had, there's much, much more upside. And the things that we have been able to do is to get out there with the TMCs. And initially, we'd set up some shorter-term contracts. We had to rebuild some and regain some trust. We've done that, fortunately.

And now what we're seeing is just incredible demand for American to be out there and a willingness to negotiate contracts that are longer term in length that come with, quite frankly, greater share commitments. And we're really pleased with it. Now, we're also really smart. We can't get back into a practice of overpaying for that share. We won't do that. But it's really a smart thing for us to be a player, a big player. I really like what I see.

Can you help us calibrate that 20% relative to pre-pandemic? Is that consistent with your view of how the market has changed? Or have you lost share in that corporate channel?

No, absolutely not. No. Whenever we speak to regaining our share, it's share. So I'm very...

Okay. But in absolute terms, the market has shifted away.

Fine. But the interesting thing there, though, is while prior to the pandemic, TMCs managed corporates, but really, it's corporates business versus premium leisure that would have been more of a 50-50 split. Now, that premium leisure is more like 65%, okay, 35%. And so for us, it fits -- again, fits very well with the product that we have out there in the marketplace. It fits very well with how we go to market. And that's a trend that I think speaks to the resiliency of premium traffic and our ability to continue to manage yields in a really positive fashion.

Okay. And turning to the $4 billion of incremental fuel that you're paying for and absorbing this year, right? Because I think if anybody would put $4 billion of incremental revenue into the model, you would have been way above your $2.50 to $3. But can you walk us through kind of where that's coming from? Obviously, part of it is just straight fare hikes, part of that is going to be bags, part of that's going to be -- you've got more premium seats than you had before, so you've got some mix in there, which -- if you think about that $4 billion, like how much of it is due to the better product you have in the marketplace, just the mix change versus the other components of it? Is there a way to think about that bridge? I think -- because the question I get asked a lot is, okay, unit revenue is up mid-teens, but when unit revenue goes down mid-teens, like you're going to be back in the same place.

Okay. So David, on that, I just want to -- I want to start with this. And again, it's hard to split it out because I think that they're all leading in loyalty brings customers back. The new Citi deal...

You got the Citi deal that's carved out a piece of it. You've got products...

The new Citi deal's product drive for premium revenue has been something that has been technology-enabled. Our network restoration, okay, has been about rebuilding in places like Philadelphia and Chicago that we had left a little bit untended over the last few years. So there's a combination of all that. But I think the important thing to recognize is that if you go look at the first quarter, before the fuel spike had really taken place, right, we were already looking at really super unit revenue performance, okay?

Even take a look into the second quarter, where -- look, we're 80% booked, and you can slap a percentage on what we see so far in terms of fuel price recovery in the quarter. But don't forget, a lot of that was booked as we were going through the early stages of the shock. And that first quarter revenues up 10%, 11%. Second quarter, still on track for up 15%. I'm not saying we keep all of it, okay? But I really do think the kind of things that we had done that were already beginning to take root in the first quarter, okay, are going to continue through. So you're right, increased bag fees, those are going to be pretty sticky.

Now, let's face it. It's not just fuel that has been a cost pressure, okay? There's been cost pressure in many other areas. American has done an incredible job of being the most efficient producer of capacity. I'm really pleased that we have labor contracts in place that we're not actively negotiating, really anything sizable right now. And what you've seen is really stress from on the ULCC business model, you've seen everybody trying to jump into the premium game.

I think the industry as a whole realizes that, look, to make a margin, there has to be something done differently. So for us, having made the investments, being a premium global airline and having so much coming to market, I think we're suited very well to retain quite a bit of what we've seen. And so that gives me a great confidence that not only would have we delivered what we had anticipated in the first quarter when we started early off, but that we would have beaten that. And so again, as I look out into 2027 and beyond, I do think American Airlines is a carrier that will be able to produce pretax margins in the mid- to high single digits and produce EBITDA margins in the mid- to high teens. That's what's in our future.

Okay. And the $65,000 question here is, though, like how much of this fare spike are you going to be able to hold on to? So if you were going to talk to me or to an investor about conceptually what are the building blocks that would allow you to hold on to more of that than somebody else, which then allows you to have that better earnings leverage, like obviously, some of it is going to come from the maturation of Citi. What are the other Legos in there?

We had more to catch up than others, okay? And so yes, our sales and distribution strategy is going to be a player. Our ability to segment and to drive premium revenues through buy-up is absolutely going to be a portion of that. We're also really making great use of our network. Our network, we've reestablished our presence in Chicago. Philadelphia is really doing very well. Miami, same thing, doing very well. Phoenix is doing very well, complementing our DFW and Charlotte hubs.

And on top of that, last year, in the wake of 5342 and all the trouble with government shutdowns, DCA was not a fantastic performing hub for us. I've seen the return of all that. That is all here to stay. So I have great confidence of what we saw in that first quarter, where our unit revenue is up 7% without the impact of fuel spike. I have great confidence that what we're seeing in the second quarter, where we anticipate year-over-year revenue growth of 15% on 5% capacity growth, I anticipate that much of that is something that we will retain. 5 out of the last 6 quarters, American has outperformed in terms of year-over-year performance, our network peers. That's what's in store for American, and it's based on those 4 pillars.

And do you think that the retention level on this is going to be better American than is going to be industry-leading or no?

Well, I'd just point to, again, first and second quarter, I see that trend continuing.

Okay. Spirit's exit is probably the biggest structural change we've seen in a while. You've been in the business for a long time. So I'd love to get your perspective on this. I think, as an outside analyst looking in, the growth of supply in basic economy, just having too many basic seats for sale, that seem kind of evident. When you -- operating within the business, are you surprised that the ULCC model has come under so much pressure from fare segmentation? Or is this something that you had expected was going to be happening? Because it does seem like this is a permanent kind of change in industry performance.

Well, I think it goes back to the investment we made at American in developing a basic economy product and doing it in a way that could really compete effectively, at the same time making best use of our network, making really good use of our loyalty initiatives, making great use of just our scale. And so today, we find ourselves in a position where customers want to be able to avail themselves of every range of the product. They want a carrier that can get them anywhere that they want to go in the class of service. They want a carrier that has partnerships that allow a great experience as well.

We offer all of that. And what you see from a ULCC perspective is everybody is trying to get in the game and whether it's -- everybody is trying to manage up to offer a product. But I think it's just so hard. When you think about the network that we have, the lounge network that we have, the product that we have, the partnerships that we have and still being able to offer a basic economy product, I think that, that just bodes really well for us.

But some other things are out there, too, David. Let's face it. Aircraft aren't cheap, okay? People need to be paid a decent wage, okay? And those kind of cost -- it's not easy to pick up gates in really desirable places to fly. Those kind of issues from a cost perspective, we're eventually going to catch up with the ULCCs. But on top of that, in that we can compete and their customers would rather be flying American Airlines and rather be in our loyalty network, the world's largest, that all bodes well for us. So I am not out here declaring ULCCs are dead.

But what I can say is the advantage that American has is really beneficial as we take a look where the marketplace is headed. I like what I see in terms of demand trends. I think that people will continue to spend on experiences. I think that demographics suggest that our network is in the right place. When you take a look at where people are in terms of their tastes, they want to take care of themselves. All that bodes well for us.

Okay. And I guess as you think about from a network perspective, right, you guys had been down the path towards the Northeast Alliance with JetBlue that got unwound. Where do you see opportunities to improve the network?

Sure. Well, first off, we've done some really innovative things over the years. The NEA, which I think was wrongfully struck down, it benefited us. I know it benefited JetBlue. We've been able to do something out on the West Coast with Alaska. American has been really smart about the relationships that we pursued. It's always been with super quality players. I love Oneworld right now. I'm still the chair of Oneworld. But Oneworld has enabled us to develop these joint businesses with the premier carriers in the leading business markets around the world.

So American, while every network, every airline has their strengths and weaknesses, ours just wouldn't trade for the world. As I mentioned before, we have such strength, where economic development is happening, where population is moving within the United States across the Sunbelt, Phoenix and DFW and Charlotte and Miami, all that bodes really well. We've got a great position in DCA. What we have in New York, while it may not be as large as others, we have a fantastic relationship through BA that allows us to be able to serve London, Heathrow, more than anybody else.

We have a position in Los Angeles that today is very strong. But as we get to the completion of the Los Angeles construction by 2028 by the Olympics, American will be back again in terms of a gate position that allows us to have a larger footprint than anyone. So from a network perspective, everybody has their strengths and weaknesses. But what I see, our relationship with Alaska, American is going to have the largest position in Los Angeles. What we do in Phoenix is fantastic. Miami is going to continue to grow with the new regional terminal that's being built out. DFW will continue to grow. It will be the largest single carrier hub in the world over the next 3 to 5 years with the construction of Terminal F.

Philadelphia is being restored as a fantastic hub to all cities in Europe, especially secondary cities. Our fleet plan matches up really well with that. And in New York, we've got a great position in LaGuardia. And in JFK, we've done a nice job of making T8 a Oneworld and a great -- the new concessions, if you haven't been through there yet, combined with our world-class lounges, it's a great customer experience. So I feel great about it. In any places that we sense an opportunity, we've been creative in the past, and we'll do so again.

Okay. As you think about the investments you're making right now on the commercial side, what's got you most excited over the next couple of years? Is it the hard product in the fleet? Or is there additional stuff that's in the works, whether it's merchandising through the app or anything you're providing on board?

It's -- again, our vision, again, is a premier global airline. And with that comes an understanding that every element of our product really needs to hold its own. And from that perspective, we've been skating to where the puck is headed for a number of years. And so I'm just going to start with, I really like what -- where our fleet is. From a hard product perspective, I think that you're going to see more Flagship Suites. You're going to see premium seating growing at twice the rate of main cabin seating. You're going to see nearly a 50% growth of lie-flat seats coming up, which is over the next 3 years.

All that's really exciting because I know that that's where customers' tastes are, and it also fits with our ability to sell to customers. But that product in the sky, it has to be matched up with a product on the ground as well. And from that perspective, what we're doing with all the local communities in developing airports, I'm super proud of. All that puts us in a position where we can take advantage of work that we've been doing for years and not only that, but take advantage of it in a way that it doesn't require an inordinate future capital spending.

So for American, we don't have retirements planned over the next 5 years. We've already baked in the cost of all these airport improvements. And what that suggests is we're in the right places. We've got the right product offering. From a commercial perspective, we're going to outperform from a revenue production perspective, match that up with the most efficient capacity producer in the business. It's upside for our customers and for our shareholders.

As you think about some of those investments, whether it's on the commercial side, satellite is in there as well, right? Obviously, that's got a little bit of a cost component to it. I'm sure rebanking DFW wasn't cheap, right? So you're adding a little bit of buffer into that capacity. How do you think about the cost drag of that as we come out to the other side, maybe claiming a share of that, that revenue upside that we've had here? Or is that stuff that you would have expected to have been absorbed in normal pricing anyway?

Okay. So just from a product and amenities perspective, so whether it's satellite WiFi, we made a decision years ago that we're going to be the leader in satellite WiFi. And we set out not only to deploy satellite WiFi on our narrow-body fleet, but to also do that from a regional aircraft perspective. And I'm really proud to say that American offers more satellite WiFi connectivity across our network than anyone. That continues, though.

We know that we have to be really smart about where we go, and we have to offer a product that customers know and value. And that's why I love what we've done with Starlink. I know that Starlink is going to be a great partner. They have a product that's out in the marketplace right now, really doing a nice job. And given American Airlines, it's -- look, there's a lot of desire to associate with solid brands. And you can assume that we do really well in terms of how we are able to get those services and price those services.

And what I'd tell you just on that alone, I don't -- it's nothing material just from a product upgrade. Whatever else we've invested in, we've been smart about it. It's baked into our planning. And when it comes to reliability, I just underscore this that the most efficient way to run an airline is by being as reliable as you possibly can be. It means that you're retaining more revenue. It means that you're paying less in terms of customer inconvenience and doing things to make up for disappointment.

And so what we've seen so far with the 13-bank is no degradation in revenue performance because I think also customers recognize the value in having a more reliable schedule and are willing to pay for that as well. So we haven't seen any type of degradation there. And anything that goes forward, just think of the offsets, misconnected customers, mishandled baggage, anything in terms of irregular operations recovery, the more that we can do to retain customers, to make sure that our team members aren't disrupted, to make sure that our aircraft are in the right position, it benefits us in the long run.

Okay. So as you think about the trajectory for unit cost inflation kind of coming out of this crisis, and if you are going to be a higher service, more sort of brand experience, is it right to think that there's a little bit more inflation in the business? Or is it going to be the same sort of...

Look, we've built our network, again, with no retirements that any new aircraft deliveries can be put to growth. We're going to be smart about this. So as I take a look over the long run from a capital expense, from an operating expense, I really like what we've done. We're already -- in terms of compensation and benefits, we're already top of the industry. We're set with our fleet. We operate in some airports that really are -- offer great economics in terms of cost per enplanement, underscore a place like Charlotte, for example. The communities that we serve understand that's important for really large connecting complexes.

So I think that we're going to continue to be the cost leader in terms of efficiency of production of capacity. I think it's something that based on the way that we've built our airline, based on where we'll have to deploy capital, I think it's sustainable. And it's something that we're going to be really attentive to. But let me tell you why I think also that it's grounded in the work that we've done.

The reason we're as efficient as we are right now is because we've gone on 2 years 2 phases of reengineering the business. That's the way we branded the work that's produced over $1 billion in operating expense savings and produced another $1 billion of working capital that's been freed up.

The next stage of that is really putting an AI lens. And so as we look at reengineering the business, part 3, okay, it's going to be with that mindset. And whether it's offering our customers a better product, giving them more control or helping us optimize how we do work, I think that there's tremendous opportunity to use that same process that we've put the company through the last couple of years to execute and to deliver even more.

Okay. If we think about the balance sheet and capital allocation going forward, obviously, you guys have gotten debt below $35 billion on adjusted -- on a net basis faster than maybe you had hoped or at least on plan. How do you think about the next couple of years in respect to debt? I mean, obviously, we're in a crisis right now. You've got a lot of operating resource drag. Is there a potential that you might have to kind of lean into some of those unencumbered assets to get through this current fuel crisis? And then, as you kind of get to the other side of that, when you get to a better rating, what should investors be expecting from a cash flow and capital return perspective?

Okay. Well, I think you can tell from what we've done over the last few years. You take a step back, and height of the pandemic, $54 billion of total debt. It's a remarkable story to be able to say that today with $35 billion of total debt and that expectation to kind of end the year that way, it's a remarkable story to tell that we've been able to bring down debt that much. And it's a tribute to our team.

Earnings have not been fantastic the last year or so. And we've done that through being smart about how we spend, being really determined in terms of being efficient. And our focus going forward is continuing to whittle that down even further. It feels great to be where -- the best total debt level that we've had in over a decade, but we're not stopping there. When we get to those pretax margins of mid- to high single digits, you can bet that, that margin performance is going to result in real free cash flow, real free cash flow that I think will be different than others in the industry because we have the youngest fleet, because we've made the investments in our fleet and because even with the reconfigurations that we're doing and the deliveries that we have, we don't have retirements over the next 5 years.

So our ability to actually grow from this base that we're at right now, we can certainly match where demand is, and we'll be smart about how we deploy it. But ultimately, that means American is going to continue to improve our leverage story. We have a BB-flat target that is something I think that we will hit over the next few years. That puts us in a really great spot. And then, we'll have to talk about what happens beyond that.

Okay. So we're coming up to the end here. I usually like to give you a chance to make the bull case, tell an investor who's maybe looking at the industry today. Why American is the right place to allocate that incremental dollar investment?

There's more upside at American than any other carrier. We've weathered a tremendous amount of challenges over the last few years. I love where the demand environment is today, really encouraged by what I see from a domestic perspective. And American is focused on our 4 pillars. Those 4 pillars of elevating customer experience, really taking advantage of our network and the growth that remains. And looking at that network as being the most comprehensive, the best positioned in -- of any carrier, it puts us in a really enviable position.

We're able to match up that customer experience and that network with a drive to premium revenue, having a hard product that is really well configured for segmentation for our customers. We're bringing technology to use and then wrapping that all into the industry's leading loyalty program. Everybody wants an AAdvantage mile. They know that they're going to get more for it. And the ecosystem has only been improved by what we've done with the launch of the Citi deal, which we're seeing acquisitions and spend hit the targets that we had established. We're off to a really fast start.

Ultimately, that's going to lead to margin improvement. It's going to lead to free cash flow production, leverage reduction and an investor story that especially as this fuel spike evens out, it plays well for American. And I'd just like to thank not only our customers, but also our team members. We've got a fantastic group of 130,000 team members that are out there every day. We're set up better this summer than we have ever been. We're going to have difficulties with weather and whatnot, but I can guarantee you this that our team members are set on getting people to where they want to go, find value in what they pay us and really do a nice job for our customers.

So David, thank you for having me out here.

Thanks for joining us, and thank you for supporting the conference. Enjoy the rest of your day.

Thank you for standing by, and welcome to American Airlines Group's First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Neil Russell, Vice President, Investor Relations. Please go ahead.

Thanks, Latif. Good morning, everyone, and welcome to the American Airlines Earnings Conference Call.

On the call with prepared remarks, we have our CEO, Robert Isom; and our CFO, Devon May. In addition, we have a number of senior executives in the room this morning for the Q&A session.

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 1 question and 1 follow-up.

Before we begin, please note that today's call contains forward-looking statements, including statements concerning future events, costs, 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 earlier this morning, form 10-K for the year ended December 31, 2025, and subsequent quarterly reports on Form 10-Q. Unless otherwise specified, all references to earnings per share are on an adjusted and diluted basis.

Additionally, 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 and investor presentation each of which can be found in the Investor Relations section of our website.

A webcast of this call will be archived on our website. The information we're 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 in American and for joining us this morning.

With that, I'll turn the call over to our CEO, Robert Isom.

Thanks, Neil, and good morning, everyone. I'd like to start my comments this morning by saying that American continues to make significant progress on our objectives to deliver for our investors. American Airlines is a premium global airline that is positioned to win for the long term. Our focus on delivering on our revenue potential this year is guided by our 4 pillars. Elevating our customer experience, growing our global network, driving premium revenue and leading in loyalty. We're seeing the benefits of our multiyear commercial initiatives come through in our revenue performance.

Demand for American's product continues to grow, and during the quarter, we recorded the 9 highest revenue intake weeks in our history. First quarter revenue grew 10.8%, and we expect this demand strength to continue, as we anticipate the second quarter will deliver revenue growth of approximately 15%. The first quarter also included a few challenges including a $320 million revenue impact from winter storms and a $400 million increase in fuel expense versus the forward curve in January. Even with those headwinds, our pretax margin improved approximately 2 points year-over-year.

I'm proud of how our team has managed the business through these disruptions with a focus on safety and delivering a world-class customer experience. Thank you to the American Airlines team for your resilience and continued commitment to excellence. It's this dedication that makes American the premium global airline that our customers trust.

Moving forward, we're working to take the appropriate actions to drive revenue to offset the increases in fuel costs. Assuming the current forward fuel curve, we expect to be profitable in 2026. Devon will provide an update on our second quarter and full year outlook in a few minutes, but I'd like to quickly summarize the progress that we've made on our 4 pillars and my perspective on how these initiatives will come to drive American forward.

Our first pillar, Elevating Our Customer Experience, is centered on delivering a consistent and premium experience across every step of the travel journey. We're increasing the number of premium seats across our fleet through new deliveries and fleet retrofit. In the first quarter, lie flat and premium economy seats grew more than twice as fast as main cabin seats. American's flagship suite offers customers a luxurious flying experience, and we're expanding this product across our international capable fleet. The flagship suite has delivered leading Net Promoter Scores since its introduction.

We're also investing in the customer experience, both on the ground and in the air. American offers the industry's leading large network with new flagship lounges planned for Miami and Charlotte, bringing our total to 10 premium lounges, the most of any airline. We're investing in new and expanded Admirals Club lounges across our network and have announced 12 new or refreshed lounges over the past year, and there's more to come.

We're enhancing our onboard experience through upgrade of food and beverage offerings and luxury onboard items, including bedding and duvets and our Centennial themed products such as amenity kits and sleepwear. Connectivity in-flight is critical to the customer journey. Today, AAdvantage members enjoy complementary high-speed satellite WiFi sponsored by AT&T on more aircraft than any other carrier globally. Finally, reliability and disruption management are among the most important drivers of customer satisfaction. We're making intentional investments in our schedule and technology to deliver more on-time arrivals, fewer misconnections and a smoother travel experience. Our largest investment started earlier this month in the form of a new 13 bank structure at DFW. We expect the new structure will support an even more reliable operation as approximately 1/3 of our aircraft touch DFW every day.

Since the rebanking, we've seen improvements in customer connection rates and NPS scores. The DFW operation running smoothly is critical to the success of our entire system, and we anticipate this structure will help to enable effective future growth at our largest and most impactful hub. All of this will result in improved customer satisfaction scores and an even more reliable operation.

Our second pillar is Growing Our Global Network. American is a premium global airline with the most comprehensive North American network in the industry. In 2026, we're prioritizing growth in hubs where we can improve both our local share and hub profitability as we efficiently utilize existing infrastructure, particularly in Philadelphia, Miami and Phoenix. Later this year, we also expect to add flights at DFW to take advantage of new gate expansions at Terminal A and Terminal C.

We'll, of course, adjust our growth rate depending on factors, including demand and fuel price. However, our long-term network objectives stay the same. Finally, we're grateful to Secretary Duffy, Administrator Bedford, and their leadership teams for acting swiftly to minimize flight disruptions at Chicago O'Hare during the upcoming summer travel season. We expect to operate 500 flights per day this summer and look forward to continuing to grow local share, deepening loyalty and increasing co-brand credit card acquisitions.

We're excited about our strategic growth opportunities in future years. We have hubs in some of the fastest-growing economic regions in the country and construction projects are underway to enable growth. We expect our operation at DFW to become the largest single airline hub in the world once the new Terminal F is operational in 2027.

During the quarter, we also announced plans to further invest in Miami by redeveloping Concourse D, which we expect to enhance operations, elevate the customer experience and improve regional and international travel. And in 2028, upon completion of our investments in Terminals 4 and 5 at LAX, we'll have a significantly expanded operation with the newest facility offering a modern convenient customer experience.

We remain on track to increase our international capable fleet to approximately 200 aircraft by the end of the decade and plan to continue to grow alongside our joint business and One World Partners. We're launching new service to destinations such as Budapest and Prague as well as to Caracas and Maracaibo where American will be the first U.S. airline to reconnect service to Venezuela in 7 years.

Our third pillar is driving premium revenue. We continue to deepen the relationships we have with our corporate and agency partners and are capturing greater share among high-value customers. Our customer base skews higher end, and our customers have shown that they're willing to spend more for an improved travel experience. We're focused on improving our revenue mix through better segmentation and redefining our fair products.

We've already seen the impact of these efforts in our premium cabins, with paid load factors in business and premium economy at the highest levels in our history, up approximately 10 points versus 2019. This reflects both strong demand and improved commercial execution and it highlights the opportunity we see across the premium segment. We also think there's significant opportunity in upselling in the main cabin.

Last year, we began sharpening the differentiation between Basic Economy and Main Cabin and that strategy is working. These targeted changes have led to increased demand for our extra legroom product, Main-Cabin Extra.

Loyalty is our fourth and final pillar, American invented airline loyalty and today, the AAdvantage program is the largest airline loyalty program in the world. We offer more value per mile, countless ways to earn and redeem miles and more engagement opportunities for AAdvantage members. During the quarter, we redesigned the loyalty experience in our mobile app, enhancing the AAdvantage activity screen to improve performance, clarity and engagement. These efforts, combined with the introduction of free WiFi produced record AAdvantage enrollments in the first quarter, up 25% year-over-year led by customers in New York, Chicago and Los Angeles.

Our new co-branded card partnership with Citi plays a critical role in our loyalty strategy and offers our customers the most straightforward and seamless path to status in the industry. This partnership has significant upside as it is designed to drive long-term growth in credit card acquisitions, spend and member engagement. The first quarter got off to a fast start with card acquisition setting all-time records while spend on our co-branded cards increased 9% year-over-year.

Now I'll turn the call over to Devon to share more about our first quarter financial results and outlook for the second quarter and full year.

Thank you, Robert. Excluding net special items, American reported a first quarter adjusted loss per diluted share of $0.40. While the increase in jet fuel prices kept this from being a profitable quarter, we were able to improve our pretax margin by nearly 2 points year-over-year. Revenue performance in the quarter exceeded our initial expectations. Total revenue grew 10.8% year-over-year, reflecting strong demand for our product and the continued returns of our multiyear commercial initiatives.

Premium demand continued to perform well throughout the quarter, with year-over-year premium unit revenue growth, 7 points higher than Main Cabin extending the momentum we saw last year and underscoring the strength of both our premium customer base and the products we offer. At the same time, we saw a meaningful improvement in main cabin revenue performance following the economic uncertainty that affected last year's results. This strength was further supported by continued momentum in managed corporate revenue, which increased 13% year-over-year.

Domestic year-over-year PRASM increased 6.6% in the quarter, and we expect domestic year-over-year performance to accelerate in the second quarter. Our international entities exceeded our initial expectations. Atlantic unit revenue was up 16.7% year-over-year, with London up 25%. Pacific unit revenue increased 7.8% year-over-year. Finally, unit revenue in Latin America was slightly negative, but excluding Mexico, performance was nicely positive in the quarter. Our unit cost, excluding net special items, fuel and profit sharing, was up 5.2% year-over-year.

The severe winter storms lowered our Q1 capacity production, which pressured CASM ex by approximately 2 points. As we previously discussed, additional cost pressure came from staffing the operation in advance of the upcoming summer season. We are continuing to see the results of our multiyear effort to reengineer the business and expect over $200 million of incremental savings from these efforts in 2026, bringing our total annual operating savings to approximately $1 billion since this initiative was launched. This transformation leverages procurement excellence, technology investments and process improvements to improve the customer and team member experience while driving a more efficient business.

Looking ahead to the second quarter. Demand across all cabins and entities remains robust. We expect domestic unit revenue to grow more than 10% in the second quarter. Internationally, we expect all entities to deliver positive unit revenue performance led by continued strength in the Atlantic region, which we expect to be up high single digits.

Our capacity for the second quarter is about 1 point below our initial plans as we have suspended flying to Tel Aviv and Doha, have reduced planned capacity in Chicago and have further decreased some other marginal flying in the face of higher fuel. Further reductions in the very near term don't make economic sense given the current demand environment as we enter our summer peak. But as we move beyond the summer peak, we will be sharp with capacity in light of the current fuel environment.

We expect second quarter revenue to be up between 13.5% and 16.5% year-over-year. driven primarily by continued improvements in the domestic entity, growth in corporate customer volumes and our ability to recapture elevated fuel costs. Second quarter CASM ex is anticipated to be up 2% to 4% year-over-year, slightly elevated due to the close-in reductions in capacity.

Based on the forward fuel curve from April 20, and we expect a fuel price of approximately $4 per gallon in the quarter. With this second quarter guidance, we expect to deliver adjusted earnings per diluted share of between a loss of $0.20 and a profit of $0.20. We are also updating our full year outlook to reflect our current revenue expectations and the forward fuel curve. The midpoint of the full year earnings guidance is $0.35 per share, approximately flat to 2025 despite jet fuel prices increasing fuel expense by over $4 billion year-over-year.

Turning now to our fleet and capital expenditures. We now expect delivery of 49 new aircraft this year, down from our initial estimate of 55 aircraft, reducing CapEx by nearly $300 million. Our deliveries this year include the 12 Boeing 787-9 aircraft in our premium configuration and the continued expansion of our Airbus A321XLR fleet. Based on these deliveries, we now expect total capital expenditures to be approximately $4 billion.

We ended the first quarter with nearly $11 billion in total available liquidity, and we have more than $27 billion in unencumbered assets and first lien borrowing capacity. We continue to make significant progress on our financial priorities, ending the quarter with total debt of $34.7 billion, a reduction of $1.8 billion in the quarter. This is the first time our total debt has been below $35 billion since mid-2015. The improvements we have made on the balance sheet provides significant flexibility as we navigate the current environment and reflect the disciplined approach we've taken to capital allocation.

I'll now hand over the call to Robert for closing remarks.

Thanks, Devon. We officially celebrated our 100th anniversary this month, a remarkable milestone that reflects a legacy of innovation, resilience and caring for people on life's journey. American is positioned to win by delivering sustainable growth and creating long-term value for shareholders, team members and customers. Our focus remains on executing our commercial initiatives while managing cost efficiently to deliver results and expand our margins.

There's tremendous upside ahead for American from elevating our customer experience and growing our global network to driving premium revenue and leading and loyalty, we're executing on the strategy and initiatives that will drive value and shape our next 100 years as a premium global airline.

Operator, please open the line for questions.

[Operator Instructions] Our first question comes from the line of Catie O'Brien of Goldman Sachs.

Maybe just a higher-level industry one first. Obviously, I understand that the recent fare increases are driven by the spike in jet fuel. But I think it's interesting that there's been no demand impact as of yet, unless you're seeing something different, which please correct me. But even before the spike in fuel, there was quite a bit of pricing momentum. Do you think something has changed structurally in the industry, whether there's been a shift towards better pricing discipline over the last several months? Is it competition? Are product change's playing a role? I just would love to hear your take.

Catie, thanks for the question. I have our Chief Commercial Officer, Nat Pieper here with me to help that as well. I'll just start with this. I think that travel is a good deal. If you take a look at pricing today on real terms versus where we were almost a decade ago, we're just catching up to where we were. So I think people realize that. And then on top of that, we've given them good reason to actually want to spend more. There's been a drive to a premium product. American has been a big part of that. And I think that what you're seeing is recognition that travel is still a good deal. There's an experience-based consumer dynamic going on in the industry, and we benefit from that.

We've got a great product out there, a great network and feel really good about demand as we go forward into the future.

Catie, it's Nat. Thanks for the question. I think the thing that -- a couple of things that are interesting. Number one, is there a long-term resetting in terms of consumer spending hierarchy. There's a lot -- we all remember revenge travel from COVID and people got tired of buying TVs and wanted to go see the world. And I think some of that has continued and extended. For us, a lot of -- we've had 9 weeks so far in the first quarter that were a company record setting from a revenue intake perspective, prior to any of the hostilities in the Middle East that drove fuel where it is.

So there's something going on there from a long-term spending perspective. And then as Robert referenced, we think the American offering is really resonating with consumers as well. The investments we've made in customer experience, our network and focusing on local market share, which are our highest yield yielding customers, and then lastly, on the loyalty side. And then there's also a piece of it with getting the right product into the right hands of the right people at the right price, delivering value to consumers. Part of it's bundling, part of it is segmenting and we're making good progress on that. So I think that's a component as well.

That's great. Really helpful. Maybe just for my second question, can you walk us through the assumptions behind your full year revenue outlook? Is there a fuel recapture expectation there? Are you assuming demand is steady or improved, where there's ultimately some demand elasticity? Just really trying to understand the puts and takes and how they may or may not be different at either end of the per share guidance.

Sure. Certainly, the second quarter revenue estimation for us, plus 15% is an eye-popping number, and we feel good about it. I'll start with, we booked 65% of the second quarter. And it obviously is a strong performance based on the trends that we're seeing in our hubs, a lot of the American specific pieces that are in place. We did incorporate, as you would expect, some fuel recapture in the plan. When we built our plan at the outset, we had significant margin expansion due to a lot of American specific improvements that I referenced earlier and as Robert talked about in our 4 pillars.

And obviously, since we shared that plan, fuel has risen an incremental $4 billion of fuel expense for American in the year. Historically, airlines recover that additional fuel expense, either by increasing revenue or by reducing marginal capacity. And we've been encouraged so far by the pace with which revenue has been recaptured and obviously, if fuel continues through the third quarter into the fourth quarter, we're going to see some more broad industry capacity reductions. But as we thought -- we think about it and what we've incorporated in second quarter, roughly 40% to 50% of fuel recapture and we would expect that to grow through the balance of the year, 75% to 85% in Q3 and then ultimately in Q4, if fuel is still at the level with capacity reductions. I think our recapture rate would be in the 90s.

Our next question comes from the line of Scott Group of Wolfe Research.

So we've seen some more material capacity reductions from others. I think you guys are not -- I think you'll lead the industry on capacity growth in Q2. How are you thinking about capacity in the back half of the year now that you've got more time to plan for a higher fuel price environment? And just to sort of be clear on sort of the answer that last question, is there an assumption in the guide that RASM growth accelerates further in the back half of the year, I guess, in third quarter as we get a full quarter of this higher fare environment?

Scott, it's Devon. I'll just start on the capacity discussion. I think Nat's answer on our expectations for fuel recapture effectively already answer your question on RASM that we do expect higher yields going forward as we pass through more of the higher fuel expense. But on capacity for the second quarter, we have planned for slightly higher capacity than what we're putting out there right now. So a couple of months ago, we were at about 6% for Q2. Since that time, we've reduced some line in obvious places like Tel Aviv and Doha. We've also pulled back a little bit domestically with some marginal flying as well as some reductions in Chicago.

I'd just say, if you look back at our capacity, we have tended to be very conservative with capacity growth for the past, I don't know, half a decade or so. But you just look at the last couple of years, in 2024, we found ourselves in an oversupply environment and we quickly pulled capacity out in the back half of the year. In 2025, we had a handful of different demand shocks. We did the same thing. And we'll do the same thing here. We're going to keep a close eye on fuel and demand over the next 4 to 6 weeks as we are planning for the off-peak period in August, September and beyond, and we'll make capacity adjustments accordingly.

Okay. And then maybe secondly, Robert, I've asked this to some of the others, but I'll ask you as well. Historically, when fuel prices eventually normalize, the industry sort of gives back a bunch of the pricing increases that it's gotten. Is there any reason to think it can be different this time and we can hold on to more of this higher price?

Scott, two things. First off, as Nat alluded to, we had already seen a lot of traction in our efforts in the first quarter before any run-up in fuel prices. On top of that, I really am confident in the initiatives that we're pursuing, whether it's from a customer experience perspective, our network, the initiatives we have to drive premium revenue and loyalty, those are going to pay off. We're giving people good reason to want to engage with American more fully and to spend. And I do view that as a good sign for us.

And I just go back to the first quarter, 10.8% revenue improvement, and that includes a really big hit for the worst storms in terms of impact to our operation with Fern and Gianna that we've ever seen in our history. And as we look to the second quarter, as Nat said, a lot of that is on the books. We're anticipating 15% growth I'm bullish on what that means for our business.

Our next question comes from the line of Brandon Oglenski of Barclays.

Robert, I'll probably just pose one question about kind of two parts here for you. It's been about 2 years now since you guys made a pretty sizable pivot and then repivoted back on your commercial business travel strategy. So can you tell us where you are in that journey I think you guys said you were fully recaptured on share at the end of last year. But what is next on corporate and business strategy at American? And then secondarily, I think you were hinting at this earlier, but how are you thinking incrementally about upselling or getting incremental rebranded fares on your premium products and maybe within that corporate strategy as well?

Thanks, Brandon. I'm going to let Nat help me out with this. But I'll say that, look, we did pivot and I'm really pleased with what the team has been able to do over the last year. We fully engaged in the marketplace. We've deployed our sales team everywhere and they have accomplished the objectives that we set out to achieve. We've recaptured the share that we've lost. We've gained a little bit since then, and we're going to continue to be very active at improving from there. Nat?

Brandon, just some numbers to back up the evidence that Robert sees. Managed corporate revenue for us is up 13% year-over-year and our unmanaged business, small and medium enterprises, our advantaged business product is up 28% per year. And obviously, really exceptional yields on both of those products. Further example, our TMC performance is up 11%, thanks to our partnerships with Amex GBT, with BCD and their support of American. I look at all of those results, along with the feedback that we're getting, one of the wonderful things when you make a distribution change is that everybody gives you feedback, a lot of it loud, a lot of it, maybe you don't want to hear.

But over time, as that feedback has moderated and become more productive, we're getting good sense that what we're offering and what we're putting on the shelf is resonating with our network, with our customer experience, the loyalty program and delivering value to guests. And so all of those things yes, we feel good about recovering the share that we had lost, but we see runway there as well. And it's a core part of the positive American revenue story that you're seeing and that we see for the rest of the year.

Our next question comes from the line of Ravi Shanker of Morgan Stanley.

Can you unpack the FAA decision in Chicago a little bit more? Kind of how does that compare versus your expectations? And what do we think about the incremental steps from here?

Sure. Ravi, thanks for the question. Look, American has been serving Chicago for 100 years. It was our very first flight flown by Charles Lindberg included Chicago. And we are going to be in Chicago for another 100 years. So we had flown about 500 flights a day out of Chicago prior to the pandemic, and it's taken us some time to build back up to that. We're going to be able to fly 500 flights as a result of the initiatives that have been put in place to address over flying. And so I want to, first off, give a shout out to the DoT and FAA, Secretary Duffy and Administrator Bedford, got in front of what would have been a real issue in Chicago.

Chicago O'Hare would have likely been in a delay program from the very first flight of the day if something hadn't been done. So I'm pleased, first off, that we're going to avoid an issue of having too much flying in Chicago for the aerospace and ground capacity. And that's good news, not just for American Airlines. It's good news for the entire industry. So real complements to the administration, Secretary Duffy, and Administrator, Bedford for that.

And in terms of what we end up with, again, we're going to fly what we had hoped to fly, 500 departures. That will allow us to continue to build in Chicago with our customers. And our product is resonating. And whether it's local passenger growth, our business passenger growth, AAdvantage enrollments, our co-branded credit card enrollments, all of those are meeting and exceeding our expectations. So no one's going to kick us out of Chicago. That's something that everybody is going to have to get used to, including our biggest competitor. We're going to be roommates and roommates for a long, long time.

Understood. Very clear. And maybe as a follow-up, Robert, kind of there's been a lot of industry speculation about M&A and such. But can you address that directly, if you can, in addition to what you guys put out over the weekend? But also, I just love your views on what do you think are the -- is the ideal industry structure over time. I think you put in the press release that you think some things needed to change. So what might those things be?

Well, I'll just start out with this and again, on the heels of the Chicago question. Look, we're going to be roommates, and we're not getting married. And so I want to stress this that the idea of the two largest airlines in the world getting together, that is something that we've viewed as being anticompetitive. And obviously, everybody that has weighed in suggests the same thing, bad for customers, bad for the industry. And then ultimately, that would be bad for American Airlines.

In regard to consolidation in the industry, we're focused on American Airlines. We're focused on delivering on our core initiatives. And part of that is building out our network. We already have the most comprehensive network in North America. That allows us to really pursue opportunities organically internationally and then also with our partners, some of which are part of OneWorld, others that are part of OneWorld and also joint businesses. All those are accretive to American Airlines. And we really look to continue to focusing on all those partnerships, whether those be domestic or international.

Now of course, if there are opportunities from a consolidation perspective or if there's assets that become available in the marketplace, American has a long history of being aggressive. We've got a lot of experience. And whether it is the potential for M&A or the work that we've done to pioneer partnerships, we're going to be on the forefront of that.

Our next question comes from the line of Jamie Baker of JPMorgan.

So probably for Nat, you know this question about yield stickiness when fuel prices recede as sort of become a conference call stable this season. It came up yesterday on the United call. And I found the commentary there to be interesting. Basically, the suggestion was that historically marketing and government affairs had some degree of influence over pricing decisions. It was not unilaterally left up to revenue management. So that's my question for American. First, do you sort of agree with that broader premise, but more importantly, do you think the industry and/or American specifically, has evolved to a point where maybe going forward, pricing and revenue management exerts wields more influence than in the past? Any thoughts there? I realize it's not quite coming in the form of a question, but I'm trying.

Jamie, thanks for the question. I guess I'll start with just praising my colleague, Nat, who has government affairs responsibility here. I think he has 0 appetite at American to dabble in revenue management. I saw the transcript and frankly, interesting just from a team perspective and kind of the organizational structure that we have here, pretty well aligned and revenue management is one of those functions core to the airline, core to the assets and experience that American has.

So I think we are emphasizing it tremendously. We are investing resources, we're investing people on top of our very experienced people that are here. And I think as technology evolves, and Jamie, we referenced it a little bit, we call it the revenue growth program within American, but that's kind of a sound bite on really being able to effectively segment and bundle one's products, getting the right product into people's hands at the right price. And I think the capabilities that we have and really across the industry are just going to continue to evolve in a positive way at a number of different price points, but ultimately, the goal is to maximize revenue across the enterprise.

Okay. Interesting. And second, probably for Robert, the news that you might look to pursue more of an NEA type relationship with Alaska and -- well, actually, maybe that's not the way to convey it. But my question relates to pilots. My understanding is that the current scope allows for codesharing with international partners, but not the type of Alaska while long-haul flying that they've started adding post merger. I'm just trying to understand what scope impediments might stand between you and a potentially closer relationship with Alaska? And maybe the answer is not black and white, and I get that as well. Any thoughts there?

Thanks, Jamie. I'll just start with this. We've been working with Alaska for well over a decade. And I remember working with Ben Minicucci to talk about sponsoring them to come into the OneWorld relationship, which we successfully executed, and I think it's been a terrific enhancement to Alaska and has enabled OneWorld and their customers greater access to travel just about anywhere people want to go. We were able to also do great things with the West Coast International Alliance, which has been hugely beneficial, doing things that benefit our consumers, things that we really couldn't have done on our own.

And I feel good about where our relationship is and what happens next. The Alaska team is fiercely independent, a very, very successful airline and we are the same. As we go forward, we'll make sure that anything that we do complies with our scope clauses and we're going to make sure that we really take care of our customers and do what's right for both companies and our customers. Now I'll leave it at that.

Our next question comes from the line of Conor Cunningham of Melius Research.

Just maybe a point of clarity before I get into another question. Just on the yield progression throughout the year, I just want to make sure that I understand. Is it that you assume that yields will essentially be flat from here to get to your recapture target by the end of the , i.e., you don't need additional fare increases to get to that 90-plus percent come fourth quarter?

Yes. I think that roughly in line, that's right. We don't need enormous increases to hit our targets as it works through because it balances with the recapture assumptions.

Right. So cupful forward curve comes down, you're currently exposed at the higher fares. Okay. Makes sense. All right. And then, Devon, maybe on the cost side, just clearly, some challenges in 1Q given whether I think everyone had those problems as well. But your 2Q guide is actually pretty good and then it seems like the setup for the second half is also in a pretty good standing. So if you could just give some puts and takes that you see moving throughout the year, just on cost, I think that would be helpful. Again, I think it sticks out relative to a lot of what we're hearing so far.

Sure. Well, it's been a long-term effort on driving efficiencies in the business. It's something we've been at for 3 years. You don't see it every single year because some of these initiatives are long-term in nature. We've had a handful of new CBAs that have driven some cost pressure. But we're seeing it this year. If it weren't for the storms in the first quarter, our cost performance would have been really nice, up 2% to 4% in the second quarter feels pretty good. Obviously, it has been a little bit lower had we flown the entirety of our schedule.

The back half of the year, we're set up well. We're going to see pressure in some areas that end up being good pressure, things like selling expense. But our unit cost is going to be dependent on how much capacity we produce. So if we produce a similar amount of capacity to what we're doing here in the second quarter, I would expect unit cost to be in the low single digits. If we pull back on capacity, given the higher fuel, we're going to see some cost pressure there. But we do a nice job getting out of any sort of volume-related costs. We'll continue to do that, and we'll continue to focus on driving an efficient business.

Our next question comes from the line of Tom Fitzgerald of TD Cowen.

Just curious within the loyalty program, what geographies you're seeing the most -- the strongest performance in terms of sign-ups? And then if that kind of within that question, if that $1.2 billion of other revenue, if that's kind of a good run rate for that line item moving forward?

It's Nat. I'll take the first one and then, Devon, the second piece of it. First, just from a resonating perspective, from a volume, as you would expect, it would be in our hubs. But what's exciting about loyalty enrollments is the penetration of our top 3 markets are New York, Los Angeles and Chicago. So places that incredibly competitive hubs for us but also for our competitors. So again, further evidence that the loyalty program, the biggest, the best and it continues to resonate with guests.

Sure. And yes, just on other revenue or the marketing component of it. We did see an increase. It's pretty meaningful year-over-year quarter-over-quarter just versus the fourth quarter was up something less than 10%. But like we've been saying as remuneration grows, we expect that line item to grow as well. I would expect less volatility in that line item than what we've had from quarter-to-quarter in the past. And it's probably going to be somewhere around $1 billion a quarter for 2026.

Tom, I just want to underscore one stat. While Chicago, New York and L.A. lead, overall, the loyalty growth -- our loyalty enrollments are up 25% year-over-year.

That's all great color. I really appreciate that. And then kind of a similar bucket, just on the corporate recapture, Curious what verticals you're seeing the most momentum and maybe other places where there's still room to recover versus the last couple of years?

Well, the 3 verticals we've seen the most uptake in are banking, health care and pharma and industrials, and that's both domestically and internationally. So encouraged by that performance and really across all verticals, I think there's still opportunity there. But those are the big 3 we're seeing right now.

Our next question comes from the line of Michael Goldie of BMO Capital Markets.

You've rebanked DFW and now Philadelphia. Can you talk about the operational benefits you expect to get from this? And what other initiatives you're undertaking on the operations front?

Michael, thank you. So 1 of the biggest parts of our elevating customer experience initiative is to improve our reliability, the biggest investments that we're making. So the rebanking of DFW, it really smooths out the operation throughout the entire day. There's never a period during the day where we come close to exceeding the operational capacity of the hub. And from what we've seen so far is just really strengthening our operational reliability. But then it's when it's stressed, say, throw a thunderstorm in which we've had our ability to recover is so much quicker.

Over the -- our centennial celebration. I was at in DFW talking to our team went to the control center and asked folks, okay, well, can you -- do you sense something's different. And for the most part, people said, you just don't see as many people running from gate to gate. And so it's an improvement in operation. It takes the stress level down considerably for our customers. but also for our team members as well.

And then I know Net could comment on this. But the good thing that we're seeing as well is that revenue is holding and increasing 2 points to that. One is that we just don't have as many misconnect. Second is that we haven't really extended connect times by that much. And so we really haven't seen people book away. So we're retaining more revenue. It's a better customer experience. NPS scores are higher. So we're taking that of course.

And those results are very, very promising. And we've expanded it and we'll be expanding it to Philadelphia and taking a look at the potential in other parts of our network as well, and we'd expect similar results. ultimately higher NPS scores, lower misconnections, greater retention of revenue. But that's not all. We've certainly taken a look at our schedule to make sure that we've buffered appropriately in terms of travel times outside of connect times in the hubs. And that, I believe, is paying off.

And as well, we're making good use of contractual changes that have happened, especially with our flight attendants, where we've increased boarding times. And so all of that has come to fruition. The airline as a whole, regional mainline, we're in good shape and ready for the summer. So thanks for the question.

And then as my follow-up, when you think of industry consolidation, which everyone seems to be in agreement on. If M&A is difficult to pass, do you think airlines will increasingly look domestically for partnerships as another avenue?

Well, I appreciate the question. The biggest issue out there today is, again, the largest airlines in the world get together and do something. And the answer to that is it's anticompetitive. So whatever happens next, we look to make sure that anything that we do strengthens our network and in many cases, partnerships are the best way to do that. In other cases, it's just organic growth. And so what you'll see from us this year, included in our growth plan, is to really strengthen our hub in Phoenix, make sure that Miami is fully built out. We've got a lot of work going on in Chicago as noted in Philadelphia as well.

it really is the most comprehensive network in North America. And we're -- we've been pioneers in terms of building partners, building relationships. And we've got a tremendous amount of experience here with M&A, should that ever come about. And so I feel really good about where we stand. And as dynamics change and the fortunes of other carriers change, we'll be ready.

Our next question comes from the line of John Godyn of Citigroup.

This is Max for John. I just wanted to follow up on the fuel pass-through commentary and getting to a recapture rate in the 90s by the end of the year. If we can maybe get a little bit of geographic color kind of how pass-throughs are evolving internationally versus in the domestic market. Maybe a little bit of color would be helpful.

Okay. I'll start, just give you the quick entity run through around the world and then come back to the other question. I think just first, domestically, 65% of Americans capacity, as Robert just said, we got the best network in North America, and it's resonating. Unit revenue up 7% in the quarter, and we saw it increase sequentially up into March for double digits.

And then as mentioned earlier, the second quarter booked, and we're seeing further acceleration as it goes through in Q1, stellar performance in Philadelphia and LaGuardia as we strategically are shifting to deepen our schedule, improving our service to big markets and really generating higher yields that way. Pleased with the improvement in D.C. as well. And then in the second quarter, DFW full implementation of the 13 bank structure and Los Angeles, as that operation straightens out a little bit, we're starting to see traction there as well.

In the Atlantic, 15% roughly of our capacity depending on season, it's our best-performing international entity. Our quarterly RASM, 17%, March was north of 20%. And in the second quarter, as we grow a bit, we'll still see high single digits in unit revenue performance. Heathrow, the stalwart, RASM 25% in the first quarter. not rocket science, our strategy there. We're putting our best most premium airplane into the world's most premium market, and we'll continue that through the summer.

British Airways is a terrific partner for us in Heathrow. And obviously, the IAG Group across the transatlantic as well. Rest of Europe remains strong. We've got 4 new routes coming online here in May, two out of Philadelphia to Prague and Budapest, 2 out of Dallas to Athens and Zurich and bookings there look terrific. Latin America, roughly 15% and mixed bag with breakeven RASM on the quarter, short-haul international challenge due to the events in Mexico, but that's starting to turn positive as we get to May into June bookings.

And in the deep South, that's been strong. Brazil was the stalwart there. And then in 2Q, as we grow Argentina, we'll see better revenue performance in that. And then the other highlight for Latin America for American, we're excited to restart a Venezuela service next week. We'll be the first U.S. carrier to do that, and it just further enhances our industry-leading Latin American operation out of Miami.

Lastly, in the Pacific roughly 5% of our capacity, 8% unit revenue growth in the first quarter, a little bit higher expectation in the second quarter. And again, the shift of our 2 big markets. In the first quarter, Oceania performance was great. It will stay decent in the second quarter, but Japan really becomes a stalwart as we fold into May into June. And no coincidence. We've got 2 terrific joint business partners in each of those arenas, Qantas in Australia and Japan Airlines across the Pacific.

So a good story around the entities. It's a terrific demand environment, both for the domestic and the international.

Great. That was great color. And kind of as my follow-up, every airline has a bit of a different philosophy guiding its capacity decision. Can you help us understand what yours is if the macro situation continues? And you revisit second half capacity growth plans. Are you managing to margin neutrality and ROIC target or any other targets kind of got in this decision?

Yes. We touched on capacity earlier. I'd just say we're always going to be sharp on capacity. When we had a supply issue in 2024, we pulled capacity pretty quickly. In '25, we had different demand shocks, we pulled capacity to get supply more in line with demand as well. This year, we have this fuel increase. And we are going to do what's needed on capacity to make sure that we are passing on as much of that fuel increase to customers as possible. So we'll be watching for the next 4 to 6 weeks before we have to make some capacity decisions for August and September, and we'll adjust accordingly.

Ladies and gentlemen, at this time, the Q&A queue is open to two media questions. [Operator Instructions] Our first question comes from the line of Alison Sider of Wall Street Journal.

Curious what you guys are seeing for World Cup bookings, and those are coming in as you'd hoped or if there's any kind of concerns about people not wanting to travel to the U.S.?

Allie, the World Cup event, actually, we're really excited about that. I personally am super excited. Just any event with a ball and a scoreboard is worth it but the globalization and with that event really means thrilled to be the official North American airline of the FIFA World Cup and something we can work on with Qatar Airways as well. We've got the best network in North America to get global fans where they want to go, huge loyalty benefits for us here as well.

And we're really excited to see it. It's a great event because it's not focused geographically on one city like the Olympics, but you get the entire North America region with matches in Canada and Mexico, in addition to double-digit cities in the U.S. So really excited about the event and not seeing book away at this time.

Our next question comes from the line of Leslie Josephs of CNBC.

My question is about demand with fares going up. Is it that you're seeing the same or growing number of bookings at a higher rate or fewer people booking, but the -- they appear to be willing to pay more to fly? And then my second question is about VFR travel. Whether you're seeing any change in that this year?

Leslie, thanks. Just in terms of demand, we've always been really sharp in terms of managing our load factors. And we see our loads keeping pace with the capacity adds and so that would suggest that we're seeing the real benefit in yields right now. And then from a VFR perspective, I don't have a lot of detail on that. But I'd tell you that we've held pretty true to where we have been historically. And I'd just tell you that VFR traffic, I'm really excited about what Nat mentioned with our return to Venezuela. My guess is that that's going to be a real factor in the development of that marketplace.

Our next question comes from the line of Rajesh Singh of Reuters.

Robert, can you comment on reports of talks with Alaska to join your transatlantic and transpacific joint ventures? And how far those discussions have progressed and what scope you were considering?

Thanks for the question. We've got a great relationship with Alaska. We really look forward to building on a history that's dated back a long time, not just a OneWorld when we brought sponsored Alaska into OneWorld, but then develop the WCIA. And as their business has changed and ours has too. We look for opportunities going forward. I know that they've been fiercely independent, but at the same time, we have been able to cooperate for the good of consumers on a number of fronts, and we look forward to doing more with Alaska going forward.

And Robert, if I can just squeeze in one more question. You said that if there are any consolidation opportunities in looking at that. Is there anything out there that in you and you think that might be the best fit for American?

So a question regarding consolidation. Again, I appreciate that we're always on the lookout for opportunities, but right now, nothing to report. And American has long experienced in terms of making sure that we take care of our customers, our network, our company, and we've been really creative over the years in being able to do that, whether it was back -- the creation of today's American Airlines back in 2013, in the combination of U.S. Airways and American all the way to things that have worked really well like our relationship with Alaska and the WCIA or our joint businesses with IAG and JAL. And we'll continue to be creative and do what's right for our company and our customers.

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 thanks, everybody, for listening in today. We're really encouraged by our revenue growth in the first quarter, anticipated growth in the second quarter. It's all due to what we're focused on, elevating our customer experience, growing our global network, driving premium revenue and leading in loyalty. We have a fantastic team. I'd just like to thank them for everything that they do. And I'm very encouraged by what we're projecting for the year with fuel prices up by over $4 billion, we're still anticipating to be able to produce a profit here. It gives testament to what we will be able to do when those fuel prices moderate in the future.

So thank you for listening in, and we're going to get back to work.

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

All right, folks. Moving right along to our second track this morning. I'm very pleased to turn the stage over to the C-suite from American Airlines. Obviously, moving down the road, we're very delighted that Robert Isom, CEO, would join us today. Devon May to his left. And Nat Pieper, I think many of you know, but I think this is the first time -- well, it has to be the first time as an American employee that you've taken the stage at our event. It's great to see you again, long history. Why don't I turn it over to Neil Russell, who runs Investor Relations for the opening remarks, and then we'll take it from there.

Well, good morning, everyone. Thank you so much for joining here in the room and for all of you on the webcast as well. As Jamie said, Neil Russell with the Investor Relations team. Before I toss it over to Robert for the presentation, just a quick reminder for everyone. Today's presentation does contain some non-GAAP figures. Reconciliations to those non-GAAP figures are included in the presentation and on our website. And additionally, any forward-looking projections that we'll talk about today do have risk factors associated with those, and those risk factors are articulated in our 10-K, which can also be found on the website.

So with that out of the way, I'm pleased to turn it over to our CEO, Robert Isom.

Thanks, Neil, and good morning, everyone. Jamie, Mark, thanks for having us here. All right. I'm going to start right off the bat.

Demand for our product is strong. And our revenue performance is improving at a rate greater than we had originally anticipated, and we're increasing our first quarter guide to now expecting more than 10% growth, and that's a record year-over-year for us. And if you put that in real numbers, that's $1.3 billion more revenue year-over-year approximately at this point. The fundamentals are moving in the right direction. 8 of our top 10 days of revenue bookings, 8 of our top 10 revenue weeks in our company history have been in this quarter. And the quarter that we're seeing this strong momentum, it's really translated into very nice unit revenue performance.

In March, we're expecting greater than 10% unit revenue performance. And we see that strength continuing on into April and May as well. A few things about this growth. There continues to be very, very strong demand for our premium products, and we're seeing main cabin strength as well. And that's where we have a tremendous amount of our network, and it's over the long run, that domestic network is a strategic advantage. And our commercial initiatives are driving these results. We're seeing the full impact of restoration of our sales and distribution. We're seeing that 2026 will be a year where we can really build momentum and build back share. We're fortunately in the midst of the launch of our new contract with Citibank for our co-branded credit card, and that foundation was laid in 2025, but we're seeing the impacts now. And that's the headline. The revenue growth for American in the first quarter is incredibly strong, and we see that progressing as we move throughout the year.

Now we're in an environment where there's a lot of volatility with fuel. And fuel prices have increased rapidly over the last few weeks. It's only been 7 weeks since we were reporting earnings. And what we've seen since that time is about $400 million of impact in terms of our first quarter expense. So how we look at this, that rapid increase, if it's short term in duration, there's absolutely an impact to the first quarter in terms of profitability and likely an impact in the second quarter as well. But we're going to make sure that we do the right things to react to that. And if this is a longer-term duration phenomenon, we know that there will be the appropriate steps taken to ensure that we drive revenue performance to offset. We're certainly going to be nimble in terms of capacity to make sure that supply and demand stay in balance.

And then I'd just like to note this as well that we'll certainly take actions. But no matter how long this takes, American is built for times like this. Over the last few years, we've done everything possible to make sure that we're prepared from a liquidity perspective with $10 billion of liquidity here as we end the first quarter. Our total debt is now at a 10-year low. And we have a tremendous amount of unencumbered assets to service collateral if we ever needed to do some borrowing.

So I feel really good about where American stands from a revenue perspective. We're certainly exceeding our expectations, and that's going to continue on as we progress through the year. We're set up for times like this in terms of volatility. And that -- as far as that mean it goes for the first quarter, we've reported this morning that on a number of factors, that we are really progressing from a revenue perspective. ASMs are down a little bit since we produced our guide in the first quarter, and that's largely due to the Winter Storm Gianna, which impacted our Charlotte hub for a couple of days, almost shut it down. That, of course, then leads to a little bit higher CASM-ex. And as I mentioned before, about a $400 million increase in overall fuel expense. But even with that, all of that, we're going to end up within our guide, albeit towards the lower end. And I'd like to note as well that with all of that going on, if -- but for the run-up in fuel, we would have produced a profitable first quarter.

So that's it for guide. And what I'd like to talk to you about next is what's driving the performance that we see. Certainly, there's market conditions that are favorable, but it's also unique to American Airlines as well and the work that we're doing. And the focus that we have for 2026 is really laid out in 4 pillars. We're positioning American to win in the long run. And it starts with elevating our customer experience and delivering a consistent, elevated experience every day, and it's across every step of our travel journey. Every interaction that we have with our customers and with our teams is designed to make sure that we are delivering a product and a service that our customers enjoy and react very favorably to.

Next pillar, growing our global network. And much of this is just about restoring our position to where we had been prior to the pandemic. But we have a great position within North America. We have the strongest network domestically, and we intend to grow that and get it stronger so that customers can use our network to get them anywhere they want to go with our partners literally anywhere in the world. On top of that, driving premium revenue performance will continue to be a focus, the third pillar. And then finally, leading in loyalty.

And I'd like to talk about all that in more detail. So priority #1, elevating our customer experience. It means on the ground and in the air, the airport experience. We've done work to improve the check-in process. We've done work to make sure that our lounges are the best in the business. You've heard recently about our 10th flagship lounge announcement in Charlotte, and we have new Admirals Clubs that are being opened in Austin, Miami, Charlotte and Chicago as well. New amenities in-flight with champagne offerings, a new coffee relationship with Lavazza, elevated food offerings and our in-flight experience really centered around having the best premium product, our new Flagship Suites, setting the standard for luxury in the industry are really showing results. And on top of that, making sure our customers have what they need to do their business in flight. So we will be the airline that establishes satellite WiFi across our network, both mainline and regional aircraft, sponsored by AT&T, and we're really pleased with what we're seeing from that.

And it's not just about product, whether it's hard product on the planes or the service and amenities we offer, it's also about making sure that American runs the most reliable schedule possible. And we know that there's nothing more important to our customers than having a flight that gets them to where they want to go on time. And as we take a look at all the turbulence that's in the industry right now, we're making sure that we're set to deliver no matter what comes our way. So we're making investments in our schedule, making sure that we can recover quickly. And so in regard to adding appropriate buffers within our network and flight times, that's part of our plan in 2026, and that's in place.

Our biggest hub, Dallas-Fort Worth, we're making sure that, that's built as well for resilience. So we're rebanking that operation, and we're putting in place a structure that will help recover no matter what comes our way. We're doing the same thing in Philadelphia. And especially for our connecting customers, this means really good things.

And on top of that, we're making sure that our customers and our team members have the tools that they need to both help our customers get to where they want to go, change itineraries in the event that they need to and ultimately recover well from disruptions. And so whether it's transparent notifications and better information, much more self-service capability from a mobile app perspective or for our team members and having tools that tell them when customers are disrupted and how they can best help. All of these efforts, hard product, soft product, amenities and especially focus on reliability is going to lead to greater customer satisfaction and also higher Net Promoter Scores.

So customer experience, priority 1. Priority 2, growing back our global network. And from that perspective, the focus is really making sure that we take full advantage of this outstanding network that we've built. 8 out of our top hubs are in the 10 largest metropolitan regions in the United States, the greatest economic growth, the greatest population growth, we're where people want to travel. And I'll just point out that Dallas-Fort Worth really the center of Texas and the heart of a $2.7 trillion Texas economy, it shows no sign of slowing down in terms of growth. And we're going to make sure that we're capable of serving customers no matter where they want to go.

In Dallas-Fort Worth, we're making really tremendous investments with a new Terminal F that will be built, come online about 2030. And we're making major enhancements to both Terminal C and Terminal A with new peers that are coming on this year. And once completed, DFW will be the largest single carrier hub in the world, and that's over the next few years. As well, in 2026, we're making investments in growth in Phoenix. You heard recently about Miami, where we've launched a new regional terminal that will be done over the next few years. In Philadelphia, there will be growth this coming year. And notably, in Chicago, we're reestablishing our network to where it had been prior to the pandemic.

Now it takes a fleet, of course, to support all that. And fortunately, we have a fleet that's built to do just that. We have no retirements that are planned over the short run. We have a fantastic order book that is very flexible, and we anticipate being really able to meet our international and premium demand with the growth of our international fleet, 200 additional aircraft by the end of the decade, and we have options to grow beyond that as well.

And I'd like to note that it's not just new aircraft deliveries, 787-9s and 321XLRs and also new narrow-bodies across the fleet. It's also that we're reconfiguring just about every aircraft that isn't new. So whether it's the 777-300, the 777-200s, the 319s, 320s, all of those will be touched over the next few years and add to not only a higher level of premium content, more premium seating, more international lie-flat seats, but also a coach experience that will really benefit our customers. I think it's important to note that American's lie-flat seats are expected to grow by 50% by the end of the decade, really servicing customers.

Now I'll move on now. So if you have a customer experience and you have a network that customers enjoy, you have the opportunity to really make sure that they get a product that they will benefit from as well. So that leads us to premium revenue, our priority #3. And we have a network. We have a fleet that's built to serve premium customers. I mentioned that we have fully restored our historical indirect channel share as we've moved through 2025. And good things are on the horizon in 2026 as we look to expand that share even further. Customers are reacting favorably to our product offering. Business and premium economy paid load factor is up 10 percentage points over 2019. And we're seeing customers buy up from our basic economy product as well. We've seen growth over the last year by 5 percentage points in terms of level of buy-up. And we're also seeing success in higher Main Cabin Extra seats that are being sold through product bundles. So really pleased with what we've seen from a revenue management perspective, a product offering perspective, and customers are reacting to that very well.

Now if you have a customer experience and a network and a product offering that customers want, you have a chance to build loyalty. And from that perspective, American has always been the leader with our AAdvantage program, and we intend to capitalize on that and make it even better. So I'll start with this. There's no doubt about it that the value of a mile on American gets you farther than anyone else. And that's something that we intend to keep an advantage on. We're also looking for ways to really expand redemption and making it literally countless ways that you can use an AAdvantage Mile. So whether it's redeemed miles for gift cards, experiences such as our relationship as the FIFA World Cup U.S. North American sponsor. Those are opportunities where we can continue to expand. And we expect -- and what we've seen so far is that our loyalty enrollments have increased to record levels. They've expanded even greater than where we were in '25, which were record levels as well.

And to just further note, this new Citi relationship, our single co-branded credit card program, that launched January 1, and we love what we're seeing. We've had the highest level ever of co-brand acquisitions for the first 2 months of the year. We're on track to meet the goals that we had set for ourselves. And ultimately, that's to increase pretax income by $1.5 billion as we reach, and that's over 2024 as we reach the end of the decade. So highest loyalty enrollments, highest co-brand acquisitions that we've ever seen. And all that is putting us in a great spot.

So those 4 priorities: customer experience, network, premium revenue, loyalty. That all leads to margin expansion. We're really pleased with the commercial initiatives that we've launched. They've got great traction. These have been initiatives that have been in work for a number of years and they're starting to pay off right now. Add to that, our industry-leading cost performance. We've always been the most efficient at delivering capacity. And we intend to continue to capitalize on that as well. We've had a reengineering the business effort that has produced about $1 billion of savings since 2023. And now we have full visibility really into our expense projections as we go into the future. We have labor cost certainty, contracts in place for the next couple of years. And we intend to make sure that we really do all we can to benefit from having everybody aligned and pushing in the same direction.

So expanded margins from a commercial perspective, continued focus on efficiency from a cost perspective, that is going to lead to greater margins, free cash flow, the ability to continue to reduce our leverage and our hopes are that free cash flow produced from all of this work will benefit the balance sheet and ultimately get us to credit ratings of BB flat. Revenue, margins, free cash flow, improved balance sheet. This plan is working, and this plan is delivering, and we're confident that all of that will deliver for our investors going forward.

So Jamie, with that, open up to questions.

All right. folks go for it. We have a question in the back. Yes.

Just wondering about the new revenue guidance. Like presumably, that's inclusive of having lost some revenue due to weather-related events, but still netting out positively. Can you just kind of break out like what is -- if you had like an x amount increase from underlying demand, call it, but had to give why of that up due to weather or other disruptions. Like what is x and what is y that gets you to that 10-ish percent?

Well, let me just start with this. The 10.5%, that includes the weather impacts. And no doubt, when we're doing earnings 7 weeks ago, we were in the midst of standing in Dallas-Fort Worth, which was shut down for 3 or 4 days almost. And we captured in our guide at that time the majority of what we saw from Fern. But that was followed up with another storm, Gianna, which uniquely impacted American. We had our second largest hub, Charlotte, that were shut down for a couple of days.

Now the first storm, Fern, we had said probably an impact of about $200 million. So I think that our numbers would have been $200 million greater on top of that. Gianna is baked into the guide that we have. Really pleased with being able to report that total revenues are growing by 10%, and that's with all of those difficulties built in.

Robert, you did a good job laying out the margin drivers in the business, but I want to ask about the franchise from a somewhat different perspective. Delta for years has talked about the moats that they believe exist around their business I think it was about 2 years ago on one of the United earnings call, they used the M word, moats for the very first time. I'm curious -- and that's not really been part of the American narrative in the past, which is fine. So I'll put you on the spot. What sort of moats do you think differentiate the American franchise from that of your competitors? And do you see opportunity to establish more moats going forward as the industry continues to evolve?

Okay. Jamie, let me start with this. We're a premium global airline. Really pleased with that. Our biggest strength is really what we do in North America and how we leverage that around the world. Nobody has a network like we do. Nobody has a network that is positioned where economic growth, population growth is going to happen. We're really pleased with that. That's strength number one. And we leverage that with all of our partners. All our partners want access, and we're able to not only provide that, but also access other networks. We have the most desirable North American network hands down.

On top of that, we've done a great job of making sure that we have a fleet to support that. And not only that, but a fleet in a world where supply chains are still very difficult, right? We've put down the right investments years ago to really be in a position where that can pay off right now where premium traffic is growing at considerable rates. I'm pleased with what we've done so far. But really, again, we're going to be in a position where our fleet is going to be able to support that. And at the end of the day, we have this loyalty program. Customers want to fly American. They want to use our loyalty, they want to use our loyalty currency. And those things are all going to add up to a tremendous amount of strength.

Great confidence that we will restore profitability this year. Great confidence that we will be able to expand margins as we go forward, and that's beneficial to our customers, our team and our investors as well.

And as a follow-up on the fleet, so 237 international aircraft by the end of the decade. I mean, this is kind of a broad generalization. But when I think about Delta's international expansion, it's mostly been 2 large cities and towards partner hubs. When I think about United, and again, this is a generalization, but United has taken a more unique approach. You've got your splits, your NUCs, your [indiscernible], that sort of thing. You're pretty heavily indexed to Heathrow already. How do we think about the international network evolving between now and the end of the decade, if those are sort of the 2 schools of thought in that regard?

Well, I'll start, and Nat can assist here. I think we have the best partner network of anyone. And the reason I say that is because we are in the business -- the biggest business markets in the world. And so whether it's London Heathrow and London or in Narita and Haneda with Tokyo or our relationship with Qantas to Sydney. We're in the places that people will want to go that's going to provide strength for the long run. And I think that, that will continue to be something that we can really depend on.

Now that said, I'm really excited, and Nat can expand on this. I'm really excited about what our domestic hubs are capable of doing as well. And of course, Philadelphia and Charlotte, they're not the largest metro regions in the country, but we have both equipment and a product that I think is going to allow us to use those to do exactly as we had hoped, make sure that we're in some secondary cities in Europe, making sure that we can fully take advantage of the demand that wants to come into the United States.

Yes. Jamie, I'd answer your question. We're going to play in both markets. I think first, just -- our joint business portfolio is great. Qantas in Oceania, JAL obviously in Tokyo, and then Cathay partnership in Hong Kong, et cetera, very positive. Our Atlantic joint business partners are terrific as well. You mentioned Heathrow, absolutely. Iberia opportunities over Madrid, tremendous. And if you look at where European growth is coming, where folks from the U.S. want to fly, it's Southern Europe. And so there's a lot of opportunity there.

I then think in terms of dots on the map around the globe, the A321XLR is terrific for us out of Philadelphia. We announced a Porto flight that will start next year. We're going to Prague this year out of Philly, just to give you an example on that, JFK, Edinburgh, we started. So those 2 East Coast hubs with the XLR give us some opportunity there as well.

And then lastly, to Robert's point on the domestic hubs being the foundation for all of that. We're building local market share back in our hubs where post-pandemic needed to sort through aircraft shortages, et cetera. But in our next 2 or 3 years, growing back Philadelphia to where historically it's been, Phoenix, Miami, core places that all of the pieces of the strategy fit together, you've got loyalty traction there. You've got credit card penetration there. Those people are loyal to American. They generate premium yield, being able to get them anywhere around the globe they want to go is core to our strategy.

Devon, you and Clemens, your Treasurer, you had what I would sort of characterize as maybe a blocking and tackling plan for 2026 to finance aircraft, maybe a EETC or regular way financing. In light of what's gone on in the past couple of weeks, have you altered your plan at all? How long does this need to continue until you think about, well, maybe we need to sort of tweak that capital plan for this year. You still have a lot of liquidity, but you've paid down a lot of debt. You've got a lot of unencumbered assets. But we're getting a lot of questions about what does American need to do to raise capital to bridge the gap here?

Yes. Well, the environment has changed, to your point, but I'd just start by saying that's why we have so much liquidity. We're going to end the quarter with over $10 billion of liquidity. Unencumbered assets and first lien capacity are something north of $25 billion right now. So if elevated fuel continues. And if something different happens in the demand environment than what we're seeing today, then perhaps we'll go to the market to raise some incremental liquidity, but we're in a great spot now. The balance sheet is stronger today than it's been in over a decade. So less total debt today than we had in the end of 2015, less net debt today than we had at the end of 2015.

So we like where the balance sheet is at. We have a ton of different ways we can raise capital if needed. But let's just keep in mind, this has been a pretty short-term shock. It's 3 weeks into it. We have an impact in the first quarter. There'll be some level of impact in the second quarter, but we're going to give it some time before we change anything.

And then, Robert, there's obviously been a lot of labor noise. A lot of it's been some posturing because of elections and labor leaders and so forth. But there does seem to be some underlying angst, if you will. Wondering what your goal is for the rest of this year in terms of how to maybe improve the tone coming out of labor? And how does it fit into rebuilding the corporate indirect channel and everything you've been trying to do with the product and so forth and your Q scores, how it all fits together?

So Mark, look, our team members, our labor leaders, they want the same things that we do and that we need to deliver on. They want a product that they can be proud of. They want an on-time airline. They want to be taken care of. And on all those fronts, that's exactly what we're set to do. And I hold all of us accountable to making sure that we deliver in that frame. And we'll do everything we can to make sure that our team is brought along and really helps in that process. No doubt about it. It helps when we're all pulling in the same direction. Clearly, customers are responding to our product offering, and it's only going to be better as we really build momentum and get everybody moving in the right direction.

But it starts with leadership. It starts with making sure that we deliver on the fundamentals, that we deliver a reliable operation, something that they can depend on, something that they can really write home about that they're proud of. And we're set to make sure that we bring everybody along on it.

[indiscernible] premium demands, that matches out with the [ 13% ] spot increase with premium and if -- in ideal [indiscernible] outside of operation would be constrain, would you [indiscernible].

Yes, I'll take that. Great question. I think encouraged on both fronts, actually. So on the first part, premium demand is strong. It's a lot of the reason we're making the investments that we are, both on the international fleet, our 787 premium configuration in the 9s and flying those airplanes to our most premium market, Heathrow, logically makes sense. We're seeing great yields from that perspective. Domestically, premium continues to enhance both in our domestic first-class product as well as our premium economy, even Main Cabin Extra featuring extra leg room, seeing good yield performance on those. Also indicative of the modifications we're making into our existing airplanes, 319s and 320s, domestic aircraft, adding additional first-class seats, additional premium economy seats there as well. So good traction on that front. We're encouraged about it.

The counter to it, which is also encouraging is we're seeing main cabin demand and economy traffic improve March, April unit revenue in the back part of the airplane has been really strong, in fact, even potentially outpacing premium as we move forward as we see bookings going to Q2. So I like that a lot because that tells me the product we're putting on the shelf, customer experience, our network is in hand with that revenue, we're getting the right products in the right places, whether it's via technology, whether it's corporate indirect share, where folks want to fly American. Whatever we're selling, people are interested in buying whatever experience they're seeking, whether it's premium or it's non-premium traffic.

Robert, we saw some headlines coming out yesterday in terms of the proposed Chicago caps. I know that, that's not fully baked just yet. Could you comment on the progress that you're making? And more importantly, can you assure us that the negotiated solution won't skew in either yours -- I mean, I'm sure you'd love it to skew in your favor. But for purposes of fairness, we're assuming that the reductions are similar between United and American. Can you assure us of that? Just an update on Chicago would be helpful, particularly the conversations with...

Look, on two fronts, I'll handle the first, and then I'll hand it to Devon for the second. First, I applaud the DOT and FAA for stepping in. I'm very -- I'm grateful of Secretary Duffy, Administrator Bedford, where we were headed in Chicago due to the reckless scheduling of our competitor, okay, was going to be gridlock, plain and simple. American Airlines has had one intention, which is just getting back to a level of flying that we had done back in 2019. We added a modest amount of flying year-over-year. I'm really hopeful and confident that what the DOT and FAA are doing will be fair and will produce a schedule that ultimately, all of our customers can benefit from. It doesn't help anyone to have Chicago in a position not only where it can't operate, but it impacts the entire country.

And again, I'll just say this, American has been flying in Chicago for 100 years. Our very first flight was -- had Chicago as one of the legs, flown by Charles Lindbergh. American is not leaving Chicago, no matter what anybody says. And to that end, I'll have Devon speak a little bit about really how we see financial results there. Devon?

Sure. I'll maybe take you back to some old managerial accounting and activity-based cost and systems. But American Airlines, along with every other airline and probably most companies when they're looking at the profitability of a different product or a different factory, whatever it might be, it's going to be looked at a handful of different levels. The first is how is your profitability against the direct operating costs associated with operating for us that hub or that flight. All of our hubs are profitable at that level. That's a decision-making level.

Next is it covering the actual assets that are allocated to that hub. So in our case, it's largely is it covering the cost of ownership. Not really a pure ROIC type review, but like a P&L type review inclusive of ownership. It does include costs that maybe are fixed or a little bit more fixed in the near term. So things like calendar-based maintenance expense, sorry, airport rent expense, which, in many cases, is fixed over a longer term. So you slide some of that into a fixed category. But in our case, when you account for some of these fixed costs, all of our hubs are profitable on an after ownership basis. That's another decision-making tool.

The last one isn't a decision-making metric at all, but it's just there for interest. It's there because people understand what pretax margin looks like. The way we run an activity-based costing system is effectively, it takes it down to a pretax level. And it's because that's a metric that people understand. Some companies might use more of an EBIT level for us, it's a pretax level. All of that does, it allocates overhead. So it's not necessarily that a hub or a market is driving overhead. It's an overhead allocation. You can use it to rank hubs. You can use it because people understand the metric, but it's not a decision-making tool.

So in a year like 2025, we have some hubs that don't make money on a pretax basis. We have some hubs that make money on a pretax basis. But it's not something that we're basing or making decisions on because when we look at it on versus direct operating costs or direct operating costs, inclusive of ownership, everything contributes positively to the system.

Just one other note that flight profitability systems don't take into account is the entire network effect. If you cancel a flight out of a spoke station or if you shrink a hub, in our case, we had a smaller hub in Chicago for many years, you have less of a customer proposition in the spoke station. As you grow it back, your customer proposition in that spoke station becomes better. That's what we're seeing in Chicago right now.

The last thing that these profitability systems don't include is the impact to your co-brand program. If you're much smaller in a city, it's not necessarily a good thing for your co-brand program. It's not reflective directly in most of your hub profitability. But it's something that we look at when we're looking through just at a really detailed level, what does a hub or what does a flight do for the profitability of the network. So we look at it at a lot of different levels. Every company does the same thing. All of our hubs contribute positively to our system profitability right now. But that's the way we look at flight profit, and that's how we think about it at a flight level or a hub level.

Excellent. Nat, Devon and Robert, thank you very much. Really appreciate it.

Thank you for standing by, and welcome to American Airlines Group Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions]

I would now like to hand the call over to Neil Russell, Vice President, Investor Relations. Please go ahead.

Thanks, Latif, and good morning, everyone. Welcome to the American Airlines Group Earnings Conference Call. On the call with prepared remarks, we have our CEO, Robert Isom; and our CFO, Devon May. In addition, we have a number of senior executives in the room this morning for the Q&A session. After our prepared remarks, we will open the call for analyst questions, followed by questions from the media. [Operator Instructions]

Before we begin, please note that today's call contains forward-looking statements, including statements concerning future events costs, 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 earlier this morning, Form 10-K for the year ended December 31, 2024 and subsequent quarterly reports on Form 10-Q.

Unless otherwise specified, all references to earnings per share are on an adjusted and diluted basis. Additionally, 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 and investor presentation, each of 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 in American and for joining us this morning. With that, I'll turn the call over to our CEO, Robert Isom.

Good morning, everyone. As we close out 2025, I'm extremely proud of the hard work and perseverance of the American Airlines team throughout the fourth quarter and the full year. Thank you to each of you. Your commitment to excellence is what makes American the premium global airline our customers trust. Thank you for navigating 2025 with resilience and for taking care of our customers throughout the holiday period.

And I especially want to recognize the tremendous efforts of our team this past weekend and this week as we work through Winter Storm Fern, ensuring our customers and team members remain safe during this challenging weather event. The impact of the storm is as significant as we've ever seen at American. Ice and freezing rain have significantly reduced operations especially at DFW and Charlotte, our largest hubs, for multiple days. Over the past 4 days, we've had to cancel more than 9,000 flights, making this the largest weather-related operational disruption in our history. We expect at least 2 more days of elevated cancellations before returning to normal operations later this week.

While 2025 wasn't the year anyone in the industry thought it would be and no matter the unique challenges American faced, we did the hard work to build a solid foundation for our future. Our balance sheet is the strongest it's been in years. On the labor front, over the last 30 months, we've successfully negotiated ratified agreements with our pilots, flight attendants, mechanics, fleet service agents, passenger service agents, reservations agents and more recently, our flight crew training instructor and simulator pilot groups. Our fleet is in excellent shape. Thanks to the significant investments we've made we have low capital requirements and no required aircraft retirements for the foreseeable future. Over the next few years, we will continue to expand our international fleet and premium seating through new deliveries and retrofit programs. Additionally, we fully restored our historical sales and distribution indirect share with our focus now on further growth in 2026 and beyond.

Now we turn to the page to a new year and a momentous chapter in our history as we celebrate American Centennial. I'm excited about the opportunities that lie ahead for American as we begin to see the benefits of our work in 2026. Our strategy to deliver on America's revenue potential centers on 4 key areas: delivering a consistent elevated customer experience, maximizing the power of our network and fleet, building partnerships that deepen loyalty and lifetime value and continuing to advance our sales, distribution and revenue management efforts. While this has been a multiyear effort, 2026 will be the year these efforts start to bear fruit. We're off to a fast start based on the booking trends we've observed in January, all-time records for the first 3 weeks of the year.

Starting with our first focus area, delivering a consistent elevated customer experience. We strive to create an experience that customers value and that our team members are proud to deliver. In the fourth quarter of 2025, our Net Promoter Score for on-time customers was the highest in our company's history and is expected to see even more improvement in 2026. We continue to invest in the customer experience in premium products and services that differentiate American. Our new flagship suite product sets the industry standard of luxury for long-haul travel and has delivered leading customer satisfaction scores since it's in [indiscernible]. We're expanding this product across our international capable fleet including on the new Boeing 787-9, the new Airbus 321XLRs, and the retrofit of our existing 777 aircraft.

We're proud to offer the industry's leading lodge network including the most premium lounges. We opened our newest flagship lounge in Philadelphia last year, and we also announced plans to bring new flagship lounges to Miami and Charlotte. We're also making significant investments to our Admirals Club lounges, including the renovation of our Concourse D lounge at DCA and the introduction of provisions by Admirals Club at Charlotte, a first-of-its-kind lounge concept for travelers that are on-the-go. We are also enhancing the onboard experience with the introduction of mattress pads for added comfort, upgraded food and beverage offerings and other thoughtful touches throughout the journey.

Rolling out this month, Advantage members will enjoy complementary high-speed satellite WiFi on our narrow-body aircraft, dual-class regional jets and our new premium Boeing 787-9 sponsored by AT&T, reinforcing connectivity as a core aspect of the customer journey and a benefit that our members value. The early feedback shows increased satisfaction, especially among younger generations. American will offer more free, high-speed satellite WiFi on more aircraft and more flights than any other carrier in the world. We also know that reliability and disruption management are key drivers of customer satisfaction and revenue production and we're [indiscernible] to improve our reliability.

First, we're transforming the way we operate at DFW to prepare for future growth at our largest and most profitable hub. Moving to a new 13 bank structure is designed to increase customer connection opportunities, reduced air traffic delays and allow for quicker recovery during irregular operations, all while providing more on-time arrival certainty to our 100,000 customers traveling through DFW each day. Importantly, we expect this change will open the door to future expansion in a market with significant economic and population growth. Coming years, we'll see the completion of a new Terminal F along with further enhancements in gate expansion at 2 other terminals. Once completed, American will operate the largest single carrier hub in the world at DFW.

We're also investing in our schedules and in technology to ensure more on-time arrivals, fewer misconnections and a smoother travel experience. We're bolstering our ability to get customers in their bags to where they're going on time, and we expect these changes will have a meaningful impact on customer satisfaction scores. Our second focus area is maximizing the power of our network and fleet. We're a premium global airline with the strongest network in the U.S., the most important aviation market in the world. Eight of our hubs are located in the 10 largest metropolitan areas in the U.S. We're maximizing the power of our network, global reach of our partners to connect more people to more places than any other airline. Our current domestic growth plans for 2026 are focused on scaling hubs where we can grow our local share and fully utilize existing infrastructure, particularly in Philadelphia, Miami and Phoenix.

We'll also be rounding out our schedule in Chicago. Improved schedules, combined with product enhancements are helping us win local high-value customers. Our fleet order book has a diverse mix of aircraft size and operational capabilities. This provides the opportunity to grow our hubs, invest in our local markets and expand servers globally. Our international offerings in 2026 will include new routes to premier destinations like Budapest and Prague and growth with our international joint business in oneworld partners. We remain on track to increase our international capable fleet from 139 today to 200 aircraft by the end of the decade.

We expect continued improvement in premium unit revenue, supported by growing demand and increased premium product availability. With our current order book, and the announced reconfigurations in our 777-200, 777-300, A319 and A320 fleet will deliver significant premium seat growth over the coming years, nearly twice the rate of main cabin seats. Our lie flat seats are expected to increase by over 50% by 2030. Building partnerships that unlock loyalty and lifetime value is the third area of our focus. American invented Airline loyalty and the Advantage program continues to lead the industry. We offer more value per mile countless ways to earn and redeem mouse and more ways to engage with Advantage members, including complementary WiFi that started this month. Advantage enrollments increased 7% year-over-year, marking our greatest number of annual enrollments with Chicago leading the way, up nearly 20% year-over-year.

2025 marked a record year for our co-branded credit card program with spending on our cards up 8% year-over-year. This momentum sets the stage for our exclusive 10-year co-branded credit card partnership with Citi, which went into effect on January 1. In the fourth quarter, we successfully transitioned in-flight and airport acquisition channels from Barclays to Citi, and our focus in 2026 now shifts to card conversions. The Citi partnership gives our customers the most straightforward and seamless path to status in the industry. With the Citi co-branded credit card, members earn loyalty points for every dollar spent, creating more benefits for customers to engage with American. Our partnership with Citi is designed to drive long-term growth in credit card acquisitions and spend and the upside is significant. These efforts, combined with the strength of our AAdvantage program will deepen engagement enhance customer loyalty and deliver meaningful long-term value to American.

Lastly, we remain focused on [indiscernible] of our sales, distribution and revenue management efforts. As we closed the year, we had restored our indirect channel share, an important milestone, but not the end of our initiative. As we move into 2026, we will continue to deepen the relationships that we built with our corporate and agency partners and capture greater share among high-value corporate travelers and premium leisure customers. Across the commercial organization, we see significant opportunities by sharpening our fair product architecture and continuing to improve our revenue management processes and technology. In the fourth quarter, we made changes to our Basic Economy product to drive clear segmentation while still offering a better basic product than any of our competitors. Throughout the year, we will continue evaluating our premium offerings, particularly our extra legroom product, which is a compelling option for corporate customers. And finally, we will continue innovating our commercial systems through the deployment of best-in-class technology solutions.

And lastly, I want to acknowledge that this week marks the 1-year anniversary of the tragic accident of Flight 5342. We remain committed to supporting everyone affected by that tragedy through our office of continued care and outreach, and I want to commend our team for handling this difficult situation in an exemplary way.

Devon will now share more about our financial results and the 2026 outlook.

Thank you, Robert. Excluding net special items, American reported fourth quarter adjusted earnings per share of $0.16 and full year adjusted earnings per share of $0.36. These results came in below our guidance, primarily due to the prolonged government shutdown, which impacted revenue by approximately $325 million. The impact of the government shutdown was largely concentrated in the domestic entity, where American has the largest exposure, especially our hub at DCA and its relative weighting towards government-related traffic. This disruption was temporary, but it impacted revenue in November and December.

Following softer-than-expected bookings late in the fourth quarter, bookings strengthened meaningfully in January. System-wide revenue intakes for the first 3 weeks of 2026 are up double digits year-over-year. Premium continued to outperform Main Cabin throughout the quarter, a trend that has remained consistent all year, underscoring the strength of the premium customer and demand for the premium products we offer. Our fourth quarter year-over-year Premium unit revenue outpaced Main Cabin by 7 points. We continue to see strength in our indirect channels with managed corporate revenue up 12% year-over-year, which has strengthened further so far in 2026. Looking ahead, we expect Premium unit revenue momentum to remain strong in 2026 but also expect Main Cabin to deliver strong year-over-year improvement, assuming a stable macroeconomic backdrop.

Year-over-year unit revenue for the domestic entity had inflected positive in September and remained positive before the impact of the government shutdown. Excluding the government shutdown, year-over-year domestic unit revenue would have been positive for the quarter. Our international entities performed in line with the guidance we provided in October. Atlantic unit revenue was up 4% year-over-year, and it was our most profitable region during the quarter as seasonal demand trends and demand for our premium offerings continued to strengthen in the fourth quarter. Once again, unit revenues in Latin America remained under pressure during the quarter. We expect this to be a continued headwind for the first half of 2026.

As we have said in the past, American's presence in the region, the premium services we offer and the scale we have in Miami and our other Southern hubs allow for profitable results in this environment and a continued long-term competitive advantage. And finally, Pacific unit revenue was slightly down year-over-year but showed sequential improvement from the third quarter, supported by strength in the premium cabins.

Looking to Q1, we expect domestic unit revenue to get back on trend and be nicely positive for the quarter, driven by both strength in Premium and Main Cabin demand. We expect international unit revenue performance will be mixed with continued strong transatlantic performance and flattish unit revenue in the Latin America and Pacific entities. As Robert mentioned earlier, American is continuing to invest in expanding our premium offerings across the customer journey. We are already recognized among the U.S. network carriers for having the highest rated and most consistent products across our long-haul fleet, and we expect to expand that product further in 2026 with 10 additional A321XLR deliveries and the full utilization of our 11 premium Boeing 787-9s. Additionally, our Boeing 777-300 retrofit has started and customers will enjoy a 20% increase in premium seats as the retrofitted aircraft roll out this year and next. These efforts will continue in future years with retrofits on the Boeing 777-200, the A319 and the A320 fleet. With these investments in our existing fleet, along with our new deliveries, we expect our premium seat growth will outpace our nonpremium offerings each year for the remainder of the decade.

Now on to our earnings outlook for 2026. Our guidance today reflects our preliminary estimate of Winter Storm Fern. Our guidance always includes a completion factor assumption for winter weather. But as Robert mentioned earlier, the impact of this storm is unlike anything we have ever experienced. For the first quarter, capacity is projected to be up 3% to 5% year-over-year as we maximize the value of our network through stronger schedules in many of our hub cities. This is inclusive of approximately 1.5 points impact from Winter Storm Fern. Our 2026 capacity plan includes significant growth in Philadelphia, Miami and Phoenix as we take advantage of near-term opportunities and utilize existing facilities. Our growth for the year is expected to be evenly balanced across domestic and international entities.

We expect first quarter revenue to be up between 7% and 10% year-over-year, driven by improvements in the domestic entity from expected growth in corporate passenger volumes and as demand continues to recover as we lap the challenges experienced in the first quarter of 2025. This includes an estimated revenue impact of between $150 million to $200 million from the ongoing Winter Storm Fern. First quarter CASMx fuel, [ ex profit ] sharing and net special items is anticipated to be up between 3% and 5% as we absorb the flight attendant boarding pay an additional benefit that went into effect in the second quarter of 2025 and as we staff ahead of the summer to support peak growth. The CASMx impact from Winter Storm Fern is approximately 1.5 points. We remain confident in our ability to deliver the most efficient capacity in the industry as we continue our multiyear effort to reengineer the business. This transformation leverages technology and streamline processes to enable an improved customer and team member experience while driving a more efficient business.

These efficiencies enable our mainline work groups to operate at their highest productivity levels partially mitigating the impact of contractual labor rate increases and other inflationary pressures.

In 2026, we expect an additional $250 million of savings from these efforts versus 2025, bringing our cumulative operating savings to nearly $1 billion since 2023 and total working capital improvements of nearly $900 million, meeting the expectations set at the start of the program. With this first quarter guidance, inclusive of the impact of Winter Storm Fern, we expect to deliver an adjusted loss per diluted share of between $0.10 and $0.50. The guidance range for the quarter is slightly wider than what we traditionally used as we continue to evaluate the impact of this extraordinary weather event. For the full year, we expect adjusted earnings per diluted share of approximately $1.70 to $2.70.

Lastly, turning to CapEx and the balance sheet. In 2026, we expect to take delivery of 55 new aircraft. Based on our current expectations, our 2026 total capital expenditures are expected to be between $4 billion and $4.5 billion, consistent with our prior guidance. Based on these earnings and capital projections, we anticipate free cash flow generation of more than $2 billion for the full year. We continue to make significant progress in strengthening our balance sheet. At the start of 2025, we committed to reducing total debt by approximately $4 billion to less than $35 billion by the end of 2027. During 2025, we reduced total debt by $2.1 billion, bringing our total debt to $36.5 billion. At the midpoint of our EPS and CapEx guidance, we would hit our 2027 goal to have total debt below $35 billion, a year ahead of schedule in 2026. And with over $2 billion of free cash flow this year, we expect that by year-end, we will have our lowest level of net debt since the end of 2014.

I'll now hand the call back to Robert for closing remarks.

Thanks, Devon. This year marks our 100th anniversary. A remarkable milestone that reflects a legacy of innovation, resilience and caring for people on life's journey. We've been innovators since the beginning. We invented the first reservation system in the first revenue management system, the first airport lounge and the first airline loyalty program, which continues to lead the industry today. From our humble beginnings as a mail carrier between Chicago and St. Louis, today, American Airlines is a premium global airline that connects more of the U.S. to the world powered by a proud team of over 130,000 aviation professionals unmatched in talent and spirit with a proven ability to adapt, innovate and always strive for better.

I've been in this business for a long time, and I'm incredibly excited about what lies ahead for American. The foundation we built in 2025, combined with our go-forward strategy, positions us to deliver sustainable growth and create long-term value for our customers, team members and shareholders. American's tagline for our Centennial year is forever [ Ford ]. It embodies all the things that we've accomplished over the past 100 years and all the opportunities in front of us. From elevating the travel experience and strengthening our network to unlocking loyalty and driving efficiency, we're executing on the strategy and initiatives that will drive value and shape our next 100 years as a premium global airline.

Thank you for your interest in American Airlines. And operator, you may now open the line for questions.

[Operator Instructions] Our first question comes from the line of Conor Cunningham of Melius Research.

I was hoping we could talk about the hub structure a little bit. You have a bunch of fresh eyes looking at it right now. And clearly, there's a lot of questions about what's happening in Chicago. So was hoping you could talk about how you view profitability by hub and then where you see the most upside from your hub standpoint in 2026 and beyond.

Thanks, Conor. And I'll just dive right into Chicago. We've been flying to Chicago for 100 years. And was where our first flight took place in fact, and it's going to be part of our system for the next 100 years.

When we look at Chicago, it's strategically important. It is something that we're going to grow back to where we were prior to pandemic to 500 flights. We feel that's rounding it out. That gets us to where we think that we need to be. And I'm really pleased with what I see from the results so far. Local customer mix is up 20%, loyalty acquisitions up 20%, co-branded credit card acquisitions up 20%. So we're making sure that we're doing best for our customers. And when it comes to Chicago, we would expect that it returns to the average profitability of our hub network. It's going to be our third largest hub, and we're going to keep it work taking care of our customers and making sure that it performs as best as it possibly can.

Awesome. And then maybe we could talk a little bit about just the cost trajectory in 2026. I think I mean, you quantified what you expect for 1Q just from the storms, and that's helpful. But just -- it seems like 1Q is going to be our high watermark. Just how you think about the shape of the cost curve in '26 would be helpful.

Thanks for the question. The construct we've given in the past is that at around mid-single-digit capacity for this year, we would expect our unit cost to be low single-digit growth. And that's what we would have experienced here in the first quarter. We expect the unit cost growth in that 2% to 3% range prior to Winter Storm Fern. So that's where we'll be for the year. I think quarter-to-quarter, it might move a little bit up or down depending on what's ending with the timing of certain maintenance events. But if we end up at mid-single-digit capacity, I would expect low single-digit CASM. As always, though, we'll be flexible with capacity depending on the demand and competitive environment we find ourselves in.

Our next question comes from the line of Catie O'Brien of Goldman Sachs.

So maybe just on the premium growth rate. I know you've shared that premium seat growth rate will be double Main Cabin seats at the end of this decade. And I think you've previously noted that's driven by 20% Premium C growth and 50% lie-flat growth through 2030. I'm just wondering, what does that look like in 2026, how much fee growth is driven by Premium? How quickly are you growing those lie-flat seeds? And how does this factor into your full year revenue outlook? Is there a mix shift benefit included? And how should we think about that?

Thanks, Catie. I'm going to hand that off to Nat Pieper, our Chief Commercial Officer.

Catie, on the Premium side, our Premium performance in Q4 '25, premium RASM was superior to nonpremium by 7 points, both domestically and internationally, very strong. And as we look forward into '26 by entity, you'll continue to see our premium mix improve. We're taking delivery of A321XLRs or 787-9 [ pre-configuration, ]pre-standing for premium, and we'll continue to deploy more premium seats into international markets. By entity, just quickly, if you think on the transatlantic side, demand there continues to be really strong across both products. All parts of our business, Heathrow, Rest of Europe, et cetera, and our joint business partners seeing similar things, premium holding up well in the Pacific as well as in our Deep South Latin market, too. So you're going to continue to see richness. We see a lot of depth in the premium market, and we're really excited about Americans product evolving, the customer experience investments we're making, all tuned to that premium traveler.

Great, Nat. Maybe just one for Devon. You pulled forward your debt reduction target by a year, once again, now expected to be less than $35 billion by the end of this year instead of $27 million. I think when I asked you in my conference last December, you said you'd contemplate what the right medium-term or longer-term leverage target would be once you got to under $35 billion. I know we're not there quite yet, but with the target approaching. How are you thinking about the balance sheet? And when the potential buybacks are to figure the calculus again?

Catie, listen, we are really pleased with the progress we've made on the balance sheet, not just over the last year, but really over the past 3 or 4 years. And we talk about the priorities, they remain the same. We focus first on taking care of our customers and making the right investments there, taking care of our team members and then any investments we need to make back in the business. And then beyond that, any free cash flow that we're producing, we are putting into the balance sheet. And that's what's allowed us to achieve this goal and achieve this goal a year early.

But we still have a lot of work to do before we shift our focus to any sort of shareholder remuneration. We need to get inside of 3x net debt-to-EBITDA. That was our longer-term stated goal. We want to get to a BB flat credit rating. So some work to do still on the ratings and metrics side, but really happy with the progress we've made so far.

Our next question comes from the line of John Godyn of Citi.

I wanted to ask a little bit about full year guidance. I think the narrative that we've heard from other airlines so far is that the year has started out very strong, and we've seen what people have interpreted as a conservative guidance in light of that. It sounds like you guys see similar trends based on how things have started the year. I just was hoping to kind of dialogue about how you would characterize your full year guidance and areas where you think there may be some conservatism, if that's how you see it at all?

John, maybe I'll just start with the first quarter, which I think is really a 50-50 forecast at this point. We've attempted to capture the impact of Winter Storm Fern, but we'll know more about that impact over the next week or so, which is why we provided a little bit wider range here in Q1. Say, for the full year, though, probably similar comments to what we've heard from others. I think if bookings continue at their current pace, this guide could prove to be conservative. But we'll see how the year plays out. Right now, we're a month in, and we're comfortable with this range.

Got it. And if I could just follow up on a little bit of the Chicago commentary earlier, completely appreciate your perspective on Chicago. One of the data points that was put out there by one of your competitors was the fact that you guys are potentially losing significant amounts of money in Chicago. I know you typically don't talk about hub level profitability, but I just wanted to give you a chance to kind of address that if there's anything to address there.

Thanks, John. Look, we're growing back to Chicago. Pleased with what we see so far. As I said, customer action has been great. And we fully expect that Chicago return to the profitability levels that had been at prior to the pandemic. And I'd just say this, we're doing all the right things from that perspective. But we're -- look, we're mindful of how we're positioned. And quite frankly, I wouldn't be out there bragging about profitability in a hub when 80% of your team members make a lot less than the market rate. So we're doing right by our team members. We're doing right by our customers, and we're certainly doing right by the community in Chicago, too. They welcome this kind of service. And the customers in Chicago, I can tell you, benefit from competition. So we're pleased with what we're doing, and we're playing our game, and we're going to make sure that we deliver for our customers.

Our next question comes from the line of Jamie Baker of JPMorgan Securities.

So question -- another question on the full year guide. Last year, American contributed about 4% of the total big 3 pretax profit pool. Based on your disclosures today and if we just kind of use consensus for Delta and United, that 4% goes to about 12% in 2026. So I get that you may not necessarily think in these relative terms. But when we think of that improvement, how much do you attribute to the macro? And how much is idiosyncratic to American? And so obviously, the Citi deal is a contributor. Is there any way you could parse that implied percentage of big 3 improvement? That would be helpful.

Thanks, Jamie. Well, I just -- I'd say this, that obviously, some of it is due to a macro environment that is positive. Clearly, we see spend, especially for domestic coming back more into sync. And that definitely benefits American. But all the things that we're doing, as Nat mentioned, in terms of premium traffic our strategy, I think, is paying off, too. So I don't know if it's 50-50 or 70-30, but it's a combination of both. And again, I'm pleased with the strategy we have. We're going to be a really efficient producer of ASMs going forward. And from a profitability perspective, the only other thing I'd just add is, yes, we expect to be a greater proportion of total industry profitability. And again, we have labor cost certainty. That's built into our numbers.

Yes. Okay. And then very quickly on the firm calculus, that $150 million to $200 million revenue impact. Can I confirm that, that is net of recapture or -- well, actually, let me ask it differently. Of the lost revenue in the past week, how much do you forecast you recapture later in the quarter? Or are you just assuming that the totality of that revenue is gone for the foreseeable future?

Jamie, I'll start. Devon could help me out on this, too. Look, we're still in the midst of assessing where things stand. We're at 9,000 [ cans ], it's going to probably be more than that. So that's a couple of days of operation for the entire quarter. And so the impact has been certainly that people didn't want to travel to some of the places that are iced in and we don't see a lot of that coming back. And the other thing is there's been a freeze on some level of bookings during this period as well. So as we take a look at it, I like what I see in February and March in terms of the bookings that we've seen. As we really round out January, I just -- I think a lot of that is probably a foregone revenue and the fact that we've got a perishable product in terms of some people want to fly to some places on certain days.

Our next question comes from the line of Michael Linenberg of Deutsche Bank.

Yes. I wanted to just get back to Dallas. And as you think about building that into the largest airline hub, actually single airline hub in the world. When I look at this last year, and I look at your op stats, it's been a tough year, but it does seem like that Dallas has had more than its fair share of bad weather. And I'm not here to sort of predict what I think weather is going to be like in Texas over the next few years. But you do have knock-on effects as that hub builds out. As you think about building that out, does that at all factor in your calculus and how it can impact the entire system, maybe whether there just being so much of your system being driven by the Dallas operation?

Thanks for that question. I'd just say that Winter Storm Fern, it is something that is relatively unprecedented. I don't -- I won't say that it's never happened before. But we get this kind of storm once every 5 to 10 years in DFW. And having been here for over 10 years, that's been my experience. We recover as quickly as we can. But over the long term, fastest growing -- one of the fastest-growing metro regions in the country. And the product that we're putting out is fantastic. As we think about growing though, reliability is key. So one of the things that we're doing this coming year is reassessing how we bank our operation and pulling down the peaks quite a bit. So you'll see us convert to a 13 bank operation, yet still have a presence in local markets that's equal to the biggest banks, anybody else flies.

At the same time, we're making sure that our facilities can keep up with that. You've heard about the new DFW Terminal F, which is just progressing at a great rate. But we'll be opening up a new satellite on Terminal C later this year and also on Terminal A. So we're going to make sure that we have the facilities, the schedule that works for it. And then the final piece is we're working on aerospace as well. So we're always going to have to take care of irregular operations events, and we'll sow out here, don't worry about that. And the Mother Nature has a way of hitting everybody equally over time. But I really like what we're doing in terms of making sure that we're as reliable as possible. And then also, we're going to continue to invest in making sure that our irregular operations recovery is the best in the business.

Okay. And then just a follow-up on the Dallas. As you build that out, sort of where -- and maybe this is for Nat, as well, just where the Connect versus local split is today? And as you add, you build that up, where does that -- what does that evolve to? How does that shift, if at all?

Thanks, Mike. I think the mix actually stays pretty similar. We're going to be more -- create more utility for local customers with different alternatives. But I think the way we manage Dallas, as it goes to 1,000 departures eventually is the cornerstone of our network. And you hit the nail on the head in asking the question. I look at it as trying to maximize revenue for American across our entire system. And having an operationally reliable DFW, the engine behind everything we have in the domestic U.S., it really becomes a no-brainer. So we're really excited about the potential and the enhanced utility for local DFW customers.

Our next question comes from the line of Scott Group of Wolfe Research.

So can you just help us think about overall capacity growth for the year? And then, I guess, with what I think you'll say is something north of GDP, like what's the confidence in sustaining strong RASM throughout the year with more elevated capacity? And I don't know, maybe just help us think about like how much the credit card -- the new credit card helps on RASM this year.

Scott, yes, for capacity for the year, we didn't give a guide to, but I would expect for the first quarter, as we said, it's going to be up in the 3% to 5% range. Ideally, we would have been a little higher than that. I would expect a similar level of capacity growth right through the summer peak. And then as we always do, coming out of that summer peak, we'll adjust capacity depend on the competitive and demand environment that we're seeing.

But if it holds and kind of our expectations hold, we'll probably have capacity for the full year around mid-single digits. We like the opportunities we have. We've talked a lot about growth opportunities in Philadelphia, Miami, Phoenix, along with rounding out our schedules in Chicago. And we do think, even with this level of growth, we'll have a supportive environment for positive unit revenue throughout the year.

Scott, I'll take -- just one quick note on the loyalty side, too, part of your question. As the Advantage program continues to grow, enrollments are growing extremely rapidly for us. and advantage members of the lion's share of our premium revenue, the lion's share of our flown revenue. And as we continue to grow that program, it just then generates loyalty to American, and that's going to translate into higher unit revenue as well.

Just a quick follow-up. So like when you guys announced the new card and gave us like a multiyear like earnings contribution from that, is there a reason to think '26 is -- is that a linear growth in '26? Or is there any front-end motive in any way?

No, I'd say it's pretty linear. It's never going to be perfectly linear, both in terms of remuneration that we get. Sometimes it will come in a little chunky depending on different bonuses that might be there and also just in the impact of the P&L. It won't be perfectly linear, but it will be fairly linear over the next 5 years.

next question comes from the line of Christopher Stathoulopoulos of Susquehanna Financial Group.

On ORD, I heard a target of -- I think it was 500 flights. So where does that fit? And assuming that -- I'm not sure if that's for this year or next, but how should we think about that within the context of the midpoint of the guide? And then at 500, does that put you back at profitability for that hub?

I'll just comment again. We anticipate getting back between 500 and 550 flights that will happen this summer. And we are on track in meeting the goals that we had established for ourselves. And again, Chicago is strategically important. And at the end of the day, it's going to help system -- overall system profitability, but we fully expect that Chicago will return to its position as one of our mid-level profitability hubs.

Okay. And then on the $1 billion [indiscernible] realized, if you could talk about opportunities going forward. I think in the past, you've spoken about technology and -- or AI in benefiting areas such as MRO and procurement. Maybe if you could expand on that in other potential areas?

Yes. This is something we've been at for over 3 years now, just really trying to reengineer our business for efficiency and making investments that drive productivity and a better customer experience. I'll say no major change. Obviously, we'll lean into the latest technologies like AI and the opportunities it brings both areas like tech ops and reservations. A lot of the work though just continues to be streamlining processes and making regular way technology investments that drive improvements across our labor line, with productivity improvements, that are improvements for our customers.

We also focus heavily on procurement, where we think we build the best procurement team in the world that's driving really significant savings as well as working capital improvements. So this is a continuation of a year's long effort. It's a mindset for the company. It's an area that Robert and I get to meet on with leaders across the company every month. We think we're best in class and well-focused there.

Our next question comes from the line of Savi Syth of Raymond James.

I wonder if you can talk a little bit about operations. Clearly, Fern is just not lie out here, but some of the investments that you're making in DFW, when do you expect to see that? And in Chicago, not necessarily -- there seems to be a lot of flights being added just industry-wide in Chicago. And just any thoughts on kind of how that operation might impact, but really looking at it at a high level, but also wondering if the level of flying in Chicago is a concern?

So I'll just start with DFW again. We have this facilities project that is going on that's been in the works for some time right now, new Terminal F, which is going to be Americans terminal. New satellites on Terminals A and C, those are progressing really well. I think that they're going to be really spectacular from a customer experience perspective and enable DFW to get to over 1,000 departures and we're really pleased with that work.

And regarding Chicago, again, I'll just say that we're flying to the places that our customers want to go and it warrants rounding the schedule back out to between 500 and 550 flights and really look forward to putting forth a great product this summer. We've done it before. We'll do it again. And that's what I have to say on that front. I can't really speak to what others are doing.

I guess, Robert, my question is coming from operations. I have no doubt that there's appetite in Chicago for American to kind of come back there in a big way. I'm just kind of curious about, one, like the changes you're making at DFW, how you expect that to improve operations throughout the year, like when we will see the biggest benefit? And two, is kind of the level of operations that are going to happen in Chicago this summer, not just American if there's a concern in terms of if the airport can handle that?

Well, Savi, in terms of what we're doing in DFW, it's not only the facilities were [indiscernible], but it's technology we're bringing to bear. So whether that's making sure that we have the appropriate solutions to disruptions during the summer. With Smart Gating and Connect Assist, we have new block time targets, which means that we've assessed how we're building things at all into bank schedule. We really think that, that's going to show performance throughout the entire year, but I would expect a notable benefit during the summer.

And for Chicago, look, this is a lot of growth for us, again, but it's only getting back to where we were. So we're putting a tremendous amount of time and effort to making sure that we're ready and that all of our partners are ready to go as well. So we've got all eyes on it and ready for the growth that we have planned for Chicago this summer.

Our next question comes from the line of Atul Maheswari of UBS.

I also have a question on the full year guidance. It sounds like -- to get to the midpoint of the range, you're not necessarily assuming current booking strengths to persist. A, could you confirm that? And then b, to achieve the high end of the range, would you need the current demand to continue at these levels? Or would that drive even more upside over and above the high end of the range?

Yes, I think you're interpreting our comments correctly that we've seen really strong bookings in the first part of the year. If bookings continue at this level, we would probably be a lot closer to the high end of the guide. We haven't built that in for the entire year to come in above the high end, it would probably require some acceleration of what we're seeing right now.

Got it. That's helpful. And then as my follow-up, as you look out over the next few years, what do you think is a sustainable long-term margin rate for American either with respect to EBITDA margin or the pretax margin, whatever you want to pick? And relative to where you land in FY '26, what are the key drivers that get you to that long-term sustainable margin rate?

Well, what we're working on is this. We're going to continue to be the most efficient producer of capacity in the business. And I feel great about what we're doing. And Devon highlighted some of the things that we've embarked on with reengineering the business. But our focus right now is delivering on our revenue potential, and that's going to push margins, we believe, the most.

So it starts with delivering a customer -- a consistent elevated customer experience. You've heard us talk about a lot of things we're doing, whether it's from a facilities perspective, reconfigurations of our fleet, the new flagship suites and flagship lounges. Everything that we do for our customers is being looked at in a way to enhance that. On top of that, we have a network that is getting back to scale and size. And I feel that where we're flying is where people want to go, and we're going to make sure that we maximize the power of that network and it's powered by the youngest fleet that's out there.

You know about the work that we're doing with Citi with the relaunch of our co-branded credit card relationship. Feel great about the advantaged loyalty program and that being the best in the business. And then ultimately, we're going to sell and market our product and make sure that we stay on top of our share and our ability to really drive performance through sales, marketing and revenue management. All that combines to put us in a position where we anticipate margin growth. I think that, that then fuels free cash flow production, a stronger balance sheet and getting really American back on track with where we had hoped we'd be a couple of years back. So that's what I expect and I appreciate the opportunity to expand on.

Our next question comes from the line of Duane Pfennigwerth of Evercore ISI.

I just wanted to ask you about your window into government travel. Obviously, there was a fair bit of noise in the fourth quarter, and we have some noise, at least in the last week from Mother Nature, but are you seeing signs of stabilization or growth in the government segment as we begin to comp really severe [ DOJ ] impacts last year?

Okay. I'll handle that. Look, what I can -- I can tell you is that we -- our government traffic in the fourth quarter was down about 50% and that's largely driven by the government shutdown. As we move in to the first quarter, it's just too soon to see how that's going to come back. But we've built into our forecast, assumption that we'll have to be out there and working hard to win back government business. But over time, I would anticipate that the government traffic returns Washington is always going to be really important. And I do believe that our Washington National hub does something for customers that no other airport can really do. And when the government travel comes back, we're going to be best positioned to take advantage of it. So I look over the long run, is that being upside to us.

And then just on premium, I don't know if there's any way to frame it on a relative basis, premium as a percent of total seats where you are today versus your network peers and as you look at like the growth you're lining up over the next few years, where does that go to?

I think, Duane, it's Nat. I think from a network peer perspective, not deep into that, I can speak though on the American side, not only taking delivery of aircraft but mod programs that we've got going on with our A319s, our A320s, 100-plus airplanes in those buckets and then longer-term 777 modifications, both the 200 and the 300 fleet. So clearly enhancing the premium product and the offering that we have out there, premium economy continues to be very successful for us, too.

Duane, in terms of just real numbers, 30% growth as we take a look in premium seating out towards the end of the decade and 50% growth from a lie-flat international perspective as we move out towards the end of the decade. And in terms of overall premium revenues, I don't think we're a lot different than our competitors. We see about 50% of our revenue being driven by premium offerings. And that's something that, again, we've got a product lineup and a strategy that is really directed at meeting those customers' needs.

And the other piece to it as well is just a recovery on the sales and distribution side, which drives premium revenue as well, getting back to our indirect share, which we mentioned in the script. And then just having a more reliable better customer experience, more reliable operation suited to that specific segment, we expect to continue to participate actively and grow that share.

Ladies and gentlemen, at this time, the floor is open for media questions. [Operator Instructions]

Our first question comes from the line of Niraj Chokshi of New York Times.

I was just wondering if on the topic of Fern, can you guys help us understand why is American so disproportionately affected? Just looking today like United Delta Southwest had very few cancellations and American has about 750 so far.

Thanks for the question. I can tell you from having spent the night on campus here that the DFW area is a little bit different. And let's face it, DFW is big in our operation, almost 1/3 of our team members reside in the area. Conditions here are still a skating rink. And I'm super proud of what our team has done in terms of getting the operation back. We're trying our best to make sure that we cancel in front and do that in a way that gives customers the most advanced notice.

But there's no mistaken. DFW is still in the sick of it, and we've got to saw out a little bit today. I do think that the sun is going to come out and roads will improve quite a bit, so our team members can get back in place. But this firm, it hit not just DFW, but it hits Charlotte and then went up the coast. So it hit our system, 5 out of our 9 largest operations all at the same time. I believe that we've got a couple more days of digging out. I want to apologize to our customers certainly doing everything we can to make sure that they are taken care of.

And then the last thing is our team. They're the ones who are fighting the elements, trying to make it in. And there's no hiding. Again, it's an ice shrink out there in DFW, and it's safety, safety, safe. So from the perspective of canceling flights, it's done for the purposes of making sure that we don't put anybody in harm's way. We'll work out of this. We're the best in the business at this and we'll be back on track as we get towards the end of the week.

Ladies and gentlemen, 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 I'd just like to say thanks for dialing in. We know who we are. We're a premium global airline. We're out there every day. Even in these ridiculous weather conditions, caring for people on life's journey.

We have a focused plan this coming year to deliver on our revenue potential. And it starts with making sure we have a fantastic customer experience. We're going to maximize the power of our network and just love the areas that we're going to be growing this year. We have a loyalty proposition that's second to none, and relationship with Citi is really going to kick start value production this year. And we're going to keep up the momentum in terms of selling our product effectively, making sure that we regain and hold our share with our most -- all of our customers.

And at the end of the day, we have a fantastic team. We do a great job of producing an efficient level of capacity and making sure that we're taking care of our customers. So I appreciate the interest and look forward to delivering for our customers and our shareholders.

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

We are now live. All right. Good morning, everyone. Thank you for joining us. This is Bernstein's Fourth Annual Industrials Insights Forum. We appreciate you having here -- joining us here this morning. We also appreciate American Airlines, Robert Isom; Devon May, CFO; Nat Pieper, and the team are here with us to go through a bit of a fireside chat. We're going to start off with a couple of prepared remarks, and then we will dig right into the Q&A. So first of all, thank you guys very much for coming out. I appreciate you joining us for the event. Why don't you go ahead and take us out?

Thanks, David, and good morning, everybody. It's great to be here. I love the opportunity to talk about American. There is a lot going on. It's been an eventful year as I think everybody knows. But I'm really pleased, no matter what was thrown at us this year, American and our team really did a great job of managing through. And while we were focused on dealing with issues at the time, I can tell you that we never stopped building the foundation for the future.

So as I take a look at everything that we lost in 2025, look, we did an exceptional job, started the year with Flight 5342 and we kind of ended the year with the government shutdown. But in between all of that, the hard work, look, we have labor contracts in place. We have past certainty with our frontline team members all the way up to 2027, 2028. First time in my career that I've had the benefit of not having a big labor contract issues staring us straight in the face.

Our balance sheet. We've done tremendous work despite all of the issues that have happened this year, we have been able to continue to pull debt down. Going back to the height of the pandemic and $54 billion total debt. And then we hit our first target of getting below $37 billion, and we're on our way to $35 billion which is, I think, remarkable in this type of environment. On top of that, I'd just love what we have from a fleet perspective. Boeing and Airbus finally started to deliver taking our 787-9Ps, 737s are coming off the line now. We've been hampered for a number of years. And don't forget, it was just a year ago, that we have finally gotten our regional fleet fully back restored. At one time, we had over 250 aircraft we didn't fly right at the pandemic. So I feel great that we're finally able to deploy the equipment. And everything that's not being delivered new, we've got so many different modification programs going on for refreshment of the fleet. I'm just super excited about it.

And Dave, that conference not to too long ago, we talked about missteps in sales and distribution, right? Super pleased with the team. The organization we put together as we exit this year, we're going to be recovered from where we were before the sales and distribution missteps. Can't wait to get the run rate benefit of that. As we take a look into 2026. So that hard work against a backdrop of a really tough year.

I've got incredible excitement about what comes next because that next is really where I think we can really start putting some points on the board. So I start with this Citi deal and everything that we're doing from a loyalty perspective with our Advantage program, while it's taken some time to negotiate that deal or we've announced it a while back, January 2026 is when it starts. And I feel great that we're on track to produce the results that we've talked a lot about. Having that fleet in place, having the wafer contracts in place. It puts them in a position as well to really get back to attending to our network.

As we take a look at this coming year, that network is already in very good shape and we've done some growth in Chicago and Philadelphia. If that's going to be augmented as we look in middle year in places like Miami and Phoenix. And it's not building a lot of new gates, okay, but taking advantage of infrastructure that we already have in place. So feel great about on. With all the new products, we have opportunities to merchandise that we take advantage of technology investments that we've been making along the way.

And then I'll put a wrapper around that. American, we are a premium global airline. We have the best network of anyone in the most lucrative travel market in the U.S. But we're going to put that to work even better as we continue to pay down from a customer experience perspective. We announced earlier this year a new organization that's centrally located and focused on delivering. And there seems to be an announcement that we're making everyday whether it's flagship lounges or Atmos Clubs, free WiFi, AT&T partnerships, I'm super excited about what's coming from that perspective.

And then -- and I think it's a value multiplier on all the other initiatives. Underlying all of that, there is no one that produces capacity more efficiently. And we're not going to lose that trace. So as we look forward, super excited about 2026, we'll start out 2025 with a lot of optimism. We looked into the fourth quarter with a lot of optimism. And I have great confidence that the consumer wants to find and we're going to have a product that they're going to want to buy.

So I definitely want to dig into the lot of that. A lot of the issues that you brought up in terms of what's next. But maybe if we were to start and think about government shutdown framing what that impact is kind of near term. One of your peers had called out maybe a $200 million sort of pretax profit headwind from the government shutdown. Can you give us a sense for how to think about the right way to assess the impact on American's performance in the fourth quarter from...

Well, our third quarter earnings wasn't -- it seems like it's years ago, but it wasn't not long ago. But what we said at the time is that in the early stages of the government shutdown that we were impacted by less than $1 million a day. And as we took a look into October, things were going fairly well. what we saw as everybody else in the industry did, there was tremendous disruption and a lot of book away, not book away, but a lot of customers that weren't booking that impacted the later stages November and especially when we got into the period of actually having imposed reactions in schedule.

So we've got a big operation we've got government traffic. We've got a DCA exposure as well. We're still sizing that all up. It's a sizable impact. But what I will tell you is that we are very pleased as we've gotten through the shutdown and restoring our network. We're very pleased with the rebound in bookings as we take a look at into 2026. And what we see as we go out into 2026, is that we're exactly on track to where we had thought would be. So we're doing more assessing in terms of the government shutdown. We have more to talk about as we get into full year earnings, and we can talk in January.

Anything else you want to add?

Okay. So as you think about maybe I know it's early to talk about plans and stuff like that, but if you think about the growth aspirations your have for the network kind of looking forward. Obviously, some of that's kind of demand oriented. But if you think about where we are in the economy and so nothing changes, what's the right kind of range of ASM growth to be thinking about for the next couple of years?

I'll start with just the fleet. And we're in this great spot right now with where we're at through all the work we did in the teens when we did a massive fleet renewal program. We're now at this point where we have no required retirements because our average fleet age is so young, and we just don't have any aircraft that are at that higher age, end of the spectrum. So through this decade, we don't have any required retirements, which means every delivery we have, we are able to grow with that. And so with $3 billion to $3.5 billion of aircraft CapEx a year, we can grow the airline by somewhere around 5% each year. So some years, it will be a little over 5%, some years a little less. But on average, with the fleet we have coming in, we can grow up to 5%.

But that's going to be dependent on the bunch of things. It's going to be dependent on the competitive environment we're in, demand, demand for our products specifically. We've got a lot of flexibility with how we're going to end up growing the airline, but that's kind of what we're able to do. We can grow at 5% or more if we choose to do so, we can grow more in line with wherever demand ends up if it is something less than that.

So we love the flexibility we have with the fleet today. In terms of the network, as Robert talked about earlier, this year was a big year of growth for Chicago. We're pleased with what's happened there. A lot of growth in Philadelphia, which has done extremely well for us. We look out to 2026. We have growth opportunities across the hub. It's just when it comes in.

But in 2026 we feel, it's a good for growth for Miami and Phoenix, as Robert mentioned. We think over the long term, all of our hubs have good growth opportunities, just somewhat dependent on facilities and some timing.

And just to be clear as far as kind of that being able to grow 5% you're still going to be monitoring around what, the market is going to absorb as opposed to saying, hey, we're going to grow 5%.

It was for the bookends. Like what we've done in the past. We're pretty flexible with capacity. When we see different demand trends we're able to act pretty quickly too. We saw it in 2024, where the industry got oversupplied in the first half of the year. American was pretty quick to adjust to that, and we pulled down capacity pretty meaningfully in the back half of the year. This year, we had all the economic uncertainty and a bit of a demand shock in the first half of the year. And same type of thing, we're able to get some capacity out in the back half of the third quarter. We feel we've rightsized our fourth quarter operation for recent demand trends. So our bookends, yes, we can do 5% or 6% if we want to, with the fleet we have, we'll be very mindful of economic growth and demand specifically for our products.

Okay. And then within the footprint, you mentioned sort of Philadelphia and Miami and some of the hubs. Is that really where the growth is going to be centered or is it going to be also in more battleground areas like L.A., Chicago.

We've done a great job early on in making sure that DFW and Charlotte are fully utilized. And we had some fleet constraints, but as Devon has mentioned, and as I said earlier, those have eased up and we have the opportunity. So Chicago is obviously a battleground and the growth that we have planned going from 485 departures to over 500 in 2026. We're just getting back to where we were prior to the pandemic. And the same actually holds true in places like Phoenix and Philadelphia as well. Miami will see a sizable growth as well. But that's a place that, look, we do very, very well and have great confidence that, that capacity is going to be profitably deployed.

Network in all respects is in really good shape. And I like the fact that a lot of the growth that we anticipate is really just putting some of our hubs back to size as they were.

Okay. And as you think about that framework of bookends of growth, Devon, in 0% to 5% for ASMs, what's a range of CASM ex that folks should be thinking about, given that we have some certainty on the labor cost side, can you help us as analysts kind of think about at the low end it would be here, at the high end to be here?

Yes. I got asked that question last week as well, and we seem to get that a lot from different investors. But at that higher end, so if we did end up growing around 5%, it's hard to get a rule of thumb that works for every airline because to Robert's point earlier, not every airline has certainty around labor cost. So some airlines are going to be faced with more cost pressures on that side of things. Overall, I think we just do an exceptional job in terms of how we deliver capacity. We did a nice job just managing cost, I'll say, for 8 or 10 years after the merger.

Since coming out of COVID, we started a program that we call reengineering the business, which is really just trying to drive efficiencies throughout the business by investing in technology by improving processes. We thought there was $1 billion of opportunity there. So far, we've achieved about $750 million. We think there's more to come. Over the long term, it can drive more and more efficiencies with further technology investment. But back to your question on 5% growth, I think for American, I think it is fair to say that mid-single-digit capacity, we should have low single-digit unit cost production.

If capacity comes down a little bit, I think you'd expect a little higher unit cost pressure, and if capacity goes up a little bit from that point, it should perform a little better CASM ex fuel ex profit sharing. But overall, I think we do fantastic job just driving efficiency. It' something that's a mindset across our business. We've talked a lot about everything we've done in terms of how we invest in every bit of salary and benefit line. We are looking at it from the day we hire, to how we bring people on, to how they're trained, manpower planning, modeling, they have a regular operations, what are the right tools so we can drive more efficiency.

So it ends up being better for our team members, better for our customers. On that line, I think we did just a fantastic job. You've seen we've grown the airline by 5% or 6% over the past couple of years, we have grown headcount by 1%. I think you should expect to see that trend continue where our capacity growth is going to far outstrip our headcount growth.

Okay. And is there a little bit of gauge benefit in there as well with the new aircraft coming in? Like how do I think about that?

If you look at our order book right now, all the narrowbodies are coming at the higher end of gauge. So we're going to take, on the Airbus side, nothing but A321s. So we'll take both the neos at 190-some seats. We'll have XLRs that are coming in closer to 250 seats. But generally speaking, it's the largest gauging narrowbodies. This year is kind of an interesting year. We'll take our last 15 or so MAX 8s. We'll have a break from Boeing narrowbodies in 2027 before we start taking delivery of the MAX 10s. So all of our deliveries from 2028 and beyond on the Boeing side for narrowbodies are going to be the largest gauge there as well. So we will continue to see some gauge benefit over time. We're not retiring anything. So it won't be as extreme as it's been in some years, but we will continue to get some gauge benefit.

Okay. So maybe kind of stepping back and looking at the industry. One of the things that I've seen that's been fascinating in the call it, 10 years now, I've been covering the airlines. You're seeing a real bifurcation, I think, in the industry. It's moving away from a commodity sort of industry where low-cost, low-price wins to something more where airlines are trying to really engage on the premium product side. I wanted to ask you, Robert, where do you view your positioning in the industry today, right? As far as kind of -- you mentioned before you're premium airline, there are other airlines that are also premium airlines that maybe have a little bit of a different margin profile. Like how do you view kind of where you are? What's working? And what could be better and your sort of assessment of where America is today on that drive to really kind of harvest the premium part of this market.

Right. So it's been a great dynamic. And fortunately, from a premium perspective, this isn't something that is new to American. American way back, develop loyalty programs. The Advantage program is the largest and among any carrier and we offer the most value to customers, just about every metric. We're the first airline to put in place lounges. And we're currently the carrier that has the most of what you would consider ultra premium lounges among the network carriers. We've always had a great product in business class and when we've had first class, the same thing.

So you never -- American's roots are in serving the premium customer. But as we go forward, it's more than just a business product. The great thing that we see now is that sure, the business travelers, the road warriors want all the premium services, but we see a great mix of more leisure customers that want to buy up into that cabin. And we've got to take advantage of that dynamic, and we are. So when you take a look at -- start with fleet, we put that down years ago to be ready for this dynamic that's happening right now. So you'll see our lie-flat seat growth, okay, for the real international long haul grow by 50% over the next few years. Our premium seats are growing by 30% over the next few years. So we're ready for this dynamic. We're making huge investments in terms of lounges. The relationship with Citi is going to further spur demand for that.

And if you take a look at what we're doing from a customer experience perspective, we're making sure that we have all the in-flight amenities that are ready to go as well. And again, when you have the fleet, when you have the ground facilities, when you have your people ready to serve in a fashion, you can take advantage of a new champagne offering, a new coffee offering, new amenities in terms of mattress pads and pajamas on flights. So I like where we're at because I believe a lot of this is upside. And when you take a look at something like our flagship suite, which I just flew coming back from London over the weekend, that we're absolutely positively at the top. I'll put that product up against anybody that wants to come. And so our effort right now is making sure that we get out there and we deliver. All the pieces are in place, and that's the exciting opportunity for 2026.

We're not a carrier that's out there talking about free WiFi, and we don't have satellite WiFi installed on aircraft. We will have satellite WiFi on all of our plus 50-seat regional jets and every other aircraft that we have. We're not a carrier that's talking about new aircraft that are delivering 3, 4 years from now. We've got our 321 XLRs. There's going to be an event tomorrow that you'll see us kicking off on that. And we've got our flagship suites that are being put on those new deliveries or on the retrofits that we've got.

So I like where we're at. And at the same time, David, you just -- we also have to understand that we have a full range of product that we have to offer, and we've got to appeal to the budget mining customer as well. And from that perspective, the effort is really making sure that the travel is seamless and that there are no problems. And so there's a tremendous investment that we're making right now on making sure that when things do go awry from a travel perspective, that we make sure our customer is taken care of before they have to think about it. And that's where the investment is growing right now.

So from an overall financial picture, right? I love what we see, premium traffic is now 50% of our revenues and growing. I love what's happening there. We're going to take care of the budget mining customer as well. And another thing that I just throw out is the last few years, there's been a little bit more margin in international travel than there has been domestic. Fortunately, we're in a position now where we can actually start playing a little bit bigger game in that international side of the market as well. Now that said, domestically, I think that there is tremendous opportunity for improvement. That's where supply and demand, I think, is coming back into more in balance. And right now, I think American is going to be the winner in that category when things really shake out.

Is it -- I mean there's a perception, I think, amongst some investors that maybe you're not as well positioned in that premium side and that maybe explains some of the margin gap relative to peers. Do you think that's accurate, not accurate? Like what is the investment community missing when we're...

I think it's something that we have to work on. Because that story of a product that we have that I know is competitive on every level and the investments that we're making, we're going to do a better job of making sure that that's packaged that the investor community knows about it, but more importantly, that our customer feels all the benefits of that. And again, I'll just start with, I have great confidence in the underpinnings of our loyalty program, already being the largest and also, I think, perceived as the most valuable. That's a great hook into anything we want to deliver because getting our message out to customers is not hard. We've got a huge base out there. That are going to be really excited about the offerings that we have.

Okay. And then as you think about like the hard product side of it, obviously, a number of years ago, with the Oasis layout, you guys moved away from seatback entertainment right? Is that something that you're going to go back and now try to change? Or do you feel like that's the right product to be putting out in the market. Like one of the examples that gets brought up to me is, American is not necessarily there. They don't have the same kind of seatback entertainment, I'm trying to get a sense for kind of how you view this stuff?

We're going to put seatback entertainment where it counts. And I'd start with this is that seatback entertainment is table stakes for flying internationally and whether it's the 321s, XLRs or any of our wide-body aircraft, we're going to make sure that we have the best in the business. And where we don't, we're going to make sure that we have the best in terms of connectivity and the offerings for in-flight entertainment for people to use on their own devices that's something that we constantly monitor. And if we ever get to a point where we think that that's something that would drive a lot of value we rethink it. But where we're at right now, I like with what we've got coming on our deliveries, and I like what we've got in our fleet right now.

Okay. So you did mention earlier that you've started a kind of a customer experience initiative and obviously, you've got a new Head of Commercial, who has joined us today. When you think about the priorities you're setting for the team and going after this premium margin opportunity, right? What are the kind of KPIs you're setting out there for them in terms of whether it's closing an experience gap, whether it's the surveys that come out from various parties like help us understand kind of what the -- what success for those teams?

Well, I'll just start with 2 simple things. And we look at this in every respect, every level, every segmentation. But I'll just start with this. It's about producing more revenue and it's about delivering to our customers a better experience, one that they will say that it's worth the extra revenue. So the kind of things that I take a look at our unit revenues and NPS scores. We want to see that what we're delivering is really meeting the needs of our customers. Break that down further. I can take you through all the pain points.

I'll tell you right off what customers want is a reliable service. They want a clean aircraft. They want bags delivered on time, and they want to show up on time. And when they don't, and this is where we have a huge opportunity to use technology. When they don't, they want to make sure that they know that they're taken care of. They're taking care of in a way that puts them back on time, values their time and potentially even compensates them for any type of disruption. So a tremendous amount of work there. But then it's things like connectivity. Do you have WiFi that works? Do you have a food product offering? And when you get into the premium type services, do you have a business class seat that is up to par. And on all those fronts, where we're not already in the game with something that is what I would consider favorable, we're going to be there in a very short period of time.

Okay. And maybe as you think about the margin gap on some of these premium experiences, right? You mentioned lie-flat is going to be 50% growth, premium -- international premium economy is going to be 30% growth. Can you give us a sense for kind of like the relative margin profiles of those premium products?

I don't know that we'll give that detail. I will say...

I know it's higher.

I know it's higher. That's not [indiscernible].

It's something that we measure on flights every single day. We look at cabin profitability for every flight that we offer. And it's wide-bodies and narrow-bodies. And what we see across the board is, yes, our premium cabins have higher profitability right now than our main cabin. That's different than it was for us in the industry a decade or so ago. But to Robert's point, that's why we started planning differently 5, 6, 7, 8 years ago for what this fleet is going to look like going forward. So the A321XLR is going to be a fantastic airplane for that more square footage is going to be dedicated to premium cabins. It's the same thing for the 789s. We're doing a lot of reconfiguration programs right now, both the narrow-body and wide-body. So we'll be reconfiguring the entire 777-300 fleet, the 777-200 fleet for more premium. We're doing similar efforts on our narrow-body fleet, so the 319s and 320s will both be higher premium than they are today.

So we do see it as a margin opportunity. It's not something publicly quantified yet, but we look at it with every reconfiguration program we do. The reason we're making this investment is because it drives a positive NPV and positive earnings.

Okay. And as you think about the -- sort of going back to that question around the priorities for the commercial team, right? You mentioned unit revenue. What about profitability? Like how are you thinking about the profitability of the airline kind of relative to peers, right? There's a lot of commentary that says 2 airlines contribute 50% of the profit pool. And I just -- I'm not -- just a perspective on it.

Perspective is this is that when you take a look at margin differential, we can put 100% more of the difference in terms of revenue performance, and that's the upside. And again, there -- we've had some headwinds this past year, which we don't need to go into things like 5342 and things like international domestic balance. But the kind of things that I pointed out, whether it's the Citi deal, the merchandising that we're doing, network and making good use of our fleet, customer experience, all of that is designed to improve our unit revenue performance.

And the only other thing I'll note is that, Devon, you may have more to say about it. But from a margin gap perspective versus some of the others, look, we do have our labor deals done, okay? I feel great about it. Our team is taken care of. We have confidence that our team is going to be out there focused on caring for customers for the next few years and not worrying about, am I going to get a competitive contract?

We know we're focused on the right areas. Both pre-COVID we look at relative margins all the time. We look at relative margins on an EBITDAR basis. I think everybody knows we have a different balance sheet than our competitors or than our large premium global carrier competitors today. But we're going to continue to repair that over time. But for today, you have to look at it on EBITDAR because we're going to have different interest expense. We're going to have different aircraft rent expense as we made different financing decisions over the years. So we look at relative EBITDAR margin versus our competitors. And on that front, during the teens, we were generally about the same margin versus United on the EBITDAR level.

Generally, we had a slight gap to Delta over that period. We came out of COVID in 2023. We had the exact same EBITDA margin as United. We had a slight gap to Delta. Maybe it was about the same as Delta if you included the third-party business. In 2024, that changed. And we know why it changed in 2024. It was largely related to sales and distribution. That's an area where we've made a ton of progress this year, and we expect that we will continue to close the gap going forward. We knew we had a huge opportunity with Citi, and we thought we were at a disadvantage versus our peers. That's going to be a huge tailwind for us going forward.

This year, Robert's right, domestic versus international impacted us. We think that's going to be a tailwind for us going forward. So there's a lot of things that we think are going to work very much in our favor as we look out. We acknowledge there's a gap today. The other big part of it, obviously, is where we are at with our labor contracts. We've got them all in place. At least one of our competitors doesn't. That drives a margin differential this year. It's not something that's sustainable though. So it's something that we think will close that gap going forward. But mostly, it's tailwinds for us. We think there's real opportunities to close that gap as we look out into 2026. and we expect to make progress on that next year.

All right. So you mentioned WiFi a couple of times. And I understand you're rolling satellite across the fleet. What about the idea of a Starlink or a low earth satellite kind of network.

All those options are on the table. Right now, again, we're going to take advantage of what we have in our fleet. And again, on the 787-9Ps, we have a Viasat product installed. And I can tell you, I was able to stream a lot of the college football happenings over the weekend in flight across the Atlantic. So it's a product that we continue to make refinements to and improvements to. But the good news is that especially with all these reconfigurations that we're doing, we have the opportunity to make sure that we've got the best in the business. And we'll look at -- there's -- it's not just Starlink, there are other opportunities for low earth satellites as well.

So we'll take a look at those and make sure that we're competitive in the moment, okay? And not just talking about something that you'll have in 3, 4 years. So again, for American, when we say for AAdvantage members, free satellite WiFi, we're talking about our domestic narrow-body fleet, anything that -- any of our wide-bodies that have the Viasat product installed on it, our narrow-body aircraft, but for the 50 seaters that we have flying around. And that is as we get into January, that's the product. It's not, oh, you get on a plane and you're not equipped.

Okay. So one of the questions I got from the audience here, as you think about from an experience perspective, right, AI, large language models becoming a lot more prevalent in the way I think consumers are thinking about booking as well as some of the Internet intermediaries are kind of dabbling around the stuff. How are you guys thinking about integrating those tools into the front end? And what kind of revenue opportunity does that kind of present? How do you think about that as a revenue opportunity?

Well, I'll just start with how we're looking at it from a corporate perspective, and it's new technology and application across the entire company. But I look at it as a tool. And it's something that is available to every organization and every team member. So the first places that we've really put AI to use is on optimizations and making better decisions for how we run the airline. So you'll see that our disruption handling, whether it's crews or aircraft or maintenance requirements, all of those we're benefiting from being able to put the airline back together in a way that we hadn't been able to do before. And with 1,700 aircraft, it's a really, really complex problem.

But this is something from an operations perspective, I think, is going to be a competitive advantage in the long run because whether you're a 1,700 aircraft airline or you're a 200 aircraft airline, you need that technology. And we've got the ability to spread that kind of cost out over a much larger base. When we take a look at opportunities for our customers, it starts then with making sure that our customers are accommodated when there's any disruption in a way that is tailored to their needs. And so we're bringing that to bear on any type of disruption management at a customer level as well.

When you get into how can we use AI and related technologies from a customer perspective and even -- we've started with an inspiration tool -- so look, tell us, I want to take a weekend vacation, some place here or there, whatever, we can come back with a tailored offering, and we're doing that today. As we go forward, this is not about what you hear in some other forums about, hey, I'm going to find a way to trick that. For us, it's about making sure that we're offering our customers something that they want. It's about creating awareness and then great utility in terms of using the product as well.

So what we've done from a corporate perspective is we've set up every organization with some efforts to train and to educate. And then through Devon, what he mentioned, our reengineering the business efforts, just about every organization we're putting through a screen to say, hey, where can we bring this technology to bear. I mentioned some of the things we're doing already, but I anticipate that, that is going to be something that benefits the reengineering the business effort from a revenue and a cost perspective as we look at latter stages of 2026 and beyond.

And do you think that technology could be transformative in a way in terms of what channel some of the leisure customers being booked? Do you think you see an opportunity to maybe accelerate the pace of direct bookings? Or do you see this as potentially an area where Google or whoever comes up with a late special sauce that then pushes it a little bit in a different direction?

You know what we're going to work with our partners, okay, to come up with the best solutions. Certainly, my learnings over the last few years is that we need every customer. And wherever they want to go, we got to make sure that they have the best offering and the latest in terms of what American puts on the table. So whether it's travel -- the agency world, whether it's from a direct perspective, I don't care. We're going to make sure that everyone has the ability to use American's products and services in a way that they can figure out how it's beneficial to them. So there's -- let's face it. This is going to be hugely beneficial to the consumer. No ifs or buts about it. There's going to be more information, more offerings, more ability to tailor -- and again, how you want to purchase that, whether it's directly from American or any one of our other partners, we're going to make sure that our partners are as well equipped as we are.

Okay. One area that I didn't hear come out was revenue management and pricing. How do you think about AI in the world of sort of the commercial sort of market manager level.

Well, I'll just start with that. And that was in my -- it was in my opening comments that I think one of the big opportunities we have is in merchandising. And that technology is something that we can bring to bear in terms of being able to offer different products and services to customers at price points that they want to buy. And so taking advantage of the new configurations of aircraft and whether it's premium seating or any type of other amenity, we're going to make sure that we have the ability for cash, miles, different services bundled in different ways that customers see it and have an ability to really choose for themselves what's best for them.

Okay. So you mentioned the Citi partnership in your opening remarks. I was just wondering if there's anything that's special or unique about that relationship relative to some of the other co-brand agreements? And maybe you can talk a little bit about what that is.

Well, first off, I'd just say the opportunity ahead of us is huge. I know that Citi and the way that they're organized and the effort that they're putting into consumer credit and the whole credit -- co-branded credit card business, I feel like we have the absolute best partner that you can imagine. I think it's incredibly important to Citi and clearly, it's important to us. Don't forget, with the AAdvantage program, this is a way that customers can not only tie themselves more tightly to Citi or to American, but this is a way that they can redeem and really fulfill their desire to go and travel. And that means booking seats.

So as we take a look, we've been behind. But what I see with Citi right now is being able to take advantage of their -- some portions of their proprietary portfolio and giving the opportunity to exchange miles into the AAdvantage program. I see the opportunity for that ecosystem to grow and find utility that is even beyond just booking feet.

So the prospects for this ultimately are more loyalty, more utility for our customers. And then ultimately, what we -- the picture that we painted as cash remuneration gets to about $10 billion as we progress the decade, it's going to be a material boost to our P&L, another $1.5 billion.

And as you think about that, I think you guys have sketched out sort of 10% annual growth in remuneration of that over the next couple of years as we're getting closer to it, as you're seeing some of the changes in the structure of the program, any thoughts on that number going up downside right left?

No, no changes in the expectation. We still expect it to grow around 10% a year. It won't happen like that every year. Some years, there's going to be bonuses that come in at different rates. Some years are coming ahead on remuneration, some years are coming a little behind. It won't always translate directly to the P&L. There's going to be some revenue recognition component of it. But over time, we do expect to grow it by about 10% a year. And as Robert said, over time, we expect our EBIT improvement to be about $1.5 billion versus where we were in 2024. So $1.5 billion versus 2024. And that's maybe not perfectly linearly, but close to it, $300 million each year up to that [ $1.5 billion ].

So we spent all of 2025 getting ready for this launch. And just I would tell you, I like what I see in terms of getting ready for January. I think we're on track.

All right. So you mentioned earlier, you've been a little bit behind in international because of some of the delays on the 787s. Where do you see the best opportunity to deploy those aircraft in terms of maybe catching up -- for your network, what are your priorities in terms of international growth?

It's not just 787s. It's the 321 as well. And I just -- I think that our -- Philadelphia has been hamstrung by -- prior to the pandemic, we had 757s and 767s. We made this -- what I believe was a smart move to really take advantage during the pandemic and make the fleet super efficient. It's it will be beneficial over the long run to have one flavor of wide-bodies where pilots when they bid it, they can fly whatever you have. And it will be beneficial to have our 321s that are integrated into our domestic fleet as well.

But where we look to leverage that right now is [indiscernible] of Philadelphia, that's a great East Coast hub, secondary cities in Europe. We certainly have the opportunity there. Maybe as you take a look down to Miami and DFW have short-haul Latin that is capable. And on the widebodies, we want to make sure that, first, we take care of the franchise type opportunities, which are JFK to London Heathrow or DFW to London Heathrow. You're going to see us have the most premium product in those places. But ultimately, every one of our hubs will benefit from this. And you'll see that we've got some new destinations coming out of Chicago for next year out of JFK and especially Philadelphia. I feel really good about that, but it will be spread throughout the network.

Okay. And when we talked earlier about the ASM growth envelope, we be thinking international maybe being at the higher end versus domestic in the next couple of years? Like how do we think about?

It probably outpaces over the next 5 years anyways, just given that growth in the fleet. As Robert mentioned, we probably have 135-ish long-haul capable aircraft today. We have 20 more 787s on order. We have the remainder, so call it another 35 or so XLRs on order. But in addition to that, we have option positions for 25 or 30 787s. We have varying flexibility on the A321, so we can move from neos to XLRs as we see fit over the years. So a lot of flexibility to grow international at an even faster rate. But even where it sits today, we'll be growing from 135 long-haul capable to somewhere around 200 long-haul capable by the end of the decade, which means ASM is probably growing a little bit faster rate on the long-haul side versus where we're at for short-haul international.

I'll just tie this one up, which is we have a great partnership network, okay, the joint business that we have with IAG, Pacific joint business with JAL and our Qantas joint business and a really strong relationship with Qatar. You'll see us take advantage of where we can find most -- to the greatest benefit out of our hubs like Philadelphia, secondary cities. But then out of the other hubs, you'll see us take advantage of those network partners as well. So for American, it's really important to have feet on both ends of those long hauls. And with that partnership network, I think we're in a really good position.

Okay. And I think during 3Q, CapEx for next year was kind of ranged 4, 4.5. That's still kind of...

That's what we expect.

All right. And then maybe on the balance sheet side, right? Obviously, the repair and the debt paydown has been significant, but you still have a lot more leverage, a lot younger fleet. I'd like to get your perspective, Devon, on how comfortable are investors in understanding that fleet versus leverage issue? Because in my conversations, there's a lot of discussion around, well, just the gross leverage is so high. It's hard for people to kind of make that...

Yes. Like I just always go back to the progress we've made. We were sitting here in mid-2021 with $54 billion of total debt. And at that point, we put out this near-term goal that we would reduce debt by $15 billion by the end of 2025. We achieved that goal at the end of 2024. So we had total debt inside of $39 billion at the end of last year. We went out with another target that said we'd be inside of $35 billion by the end of 2027. We're about halfway to that target right now, but still fully expect we'll be inside of $35 billion by the end of 2027.

We're at our lowest debt and net debt positions that we've been in since 2015, 2016 time frame. The issue for us right now is we need to get earnings to a better spot. We really want to get -- our debt is fine. We want to get leverage ratios to the right spot. We need to continue to improve earnings. And that's where we're focused pretty heavily. We think we're going to get margin expansion next year. We'd expect it again the year after that. The goal as we approach $35 billion in total debt is that net debt is going to be well inside of $30 billion. Net debt to EBITDA should be approaching that 3x. And at that point, we should be a couple of notches higher on our credit rating than we are today. We have an objective to get to a BB credit rating in the near term. We're probably a couple of years away from that.

And then we can talk more about, what are the next steps after that. But we've made a ton of progress. We've got some goals in mind for the next couple of years. It was a big question from investors 2 or 3 years ago. It's less of a question today. At this point, it's just going to take time. We've talked about where CapEx is at. That does set us up really well for free cash flow production, $4 billion, $4.5 billion in total CapEx. We're just in a different spot than our peers are right now. And it's because we don't have replacement aircraft CapEx because of how young the fleet is. So we're set up for the potential of really strong free cash flow, which we're going to put towards continuing to strengthen the balance sheet.

And how have you guys kind of discussed with the Board what that level of net debt to EBITDA is as a target perspective, right? Some of your peers are talking about trying to get gross leverage down to 1x. Like are you -- I mean that's obviously...

It takes time and free cash. And for us, we think we're set up really well on the free cash side. So we've set this next goal. We'll come out with a longer-term goal as we continue to approach this $35 billion target and our 3x net debt-to-EBITDAR target. We're probably a couple of years off of that, and then we'll set another goal on the balance sheet side.

Okay. We'll come in here towards the end. But I guess I think when you think about the overall sort of capital return profile from an investor standpoint, where do you start to think about cash returns to investors relative to debt paydown. Or is there a way to at least build a framework for people to think about and say, if I get to that 3x or if I get to 2.5x, then I can start thinking about optionality.

We're looking forward to those conversations. Right now, it is -- we're focused on achieving these near-term balance sheet goals. We're really proud of the progress we're making. But you're right, as we start to produce a lot more free cash flow, which we think we're set up really well to do and we start to achieve our balance sheet goals, then we can start talking more about what else we do with that cash. But for now, we're focused on the balance sheet.

Okay. We're coming up to the end here. Maybe, Robert, if you want to take us out, give us the high-level pitch on American as an equity.

So I'll just start with this. I think that the tailwinds that we have are rooted in, again, just laying the foundation in a year that's been really difficult. But I'll start with the economic backdrop. I think that, that is turning in American's favor. I do think that every chance that we've given the domestic consumer to come back to the table, we dump cold water on them, right? And we started the year where I had great confidence in it, and there was economic uncertainty and the accident and all of a sudden, that stalls growth. We've got the government shutdown, which clearly impacted.

But as we take a look into 2026, the supply and demand balance, I think, favors the domestic marketplace, which, again, American has a waiting in. What we've done to prepare and be ready for that consumer to return and also take advantage of premium and taking advantage of the international traffic that is out there. We're in great shape. We produce ASMs in the most efficient manner. We have the ability to take advantage of our city deal, our network, the fleet and product that we put out.

And I think that as we look into 2026, it's great things. 2026 is American centennial year, 100 years. We're getting ready to launch a number of initiatives around that. We're the airline of the World Cup here in the U.S. You've seen us do a lot of advantaged promotion with that. We're really pleased with what we see. Can't wait to take care of customers as they travel throughout North America getting from game to game. It's going to be a big year for us, and we're set up very well.

Great. Well, with that, I want to close this out here so we can get to you all on schedule. I want to thank you guys all for making the time. Neil, Nat and Devon and Robert. I really appreciate you guys coming out and supporting the conference, and thanks for your time today.

Thanks for having us.

Good afternoon, everyone. Thank you so much for staying with us today, final panel of the day, always an exciting time. I'm Catie O'Brien. I'm the lead equity analyst covering the U.S. airlines and the aircraft leasing companies. Today, I have the great pleasure of speaking with Devon May, Chief Financial Officer of American Airlines. Thanks so much for being with us, Devon.

Well, thank you for having me.

Of course. And I think you wanted to start with just a couple of minutes of prepared remarks, then we'll jump in.

Sure. That's great. I'd just start by saying we are really excited about 2026. We're ready to turn the calendar and head into our centennial year. We think the company is incredibly well set up. And just starting from a finance perspective, there's been a lot of great progress on the balance sheet. This has been a multiyear effort since we came out of COVID, but we had debt levels of $54 billion when it peaked out in COVID. We've reduced that. We hit our first target, which was to reduce it by $15 billion by the end of 2025. We achieved that in 2024. We've set another target now to get total debt below $35 billion by the end of 2027, and we're making really nice progress there. We continue to be a leader in terms of cost efficiency. It's an effort that we call reengineering the business, but we have a group set up that's effectively a transformation office to make sure we are investing in the right areas that are going to drive efficiency across our business. We've been industry leaders for several years now. We'll continue down that path as we go forward.

When I think of our team members, we have the greatest team members in the business. I'm thankful for all the work they continue to do for our customers every single day. We're in a really great spot where we have contracts in place with all of our largest work groups. So in great shape there with a fantastic team. And maybe most importantly, with where we're at right now is just I look at our commercial team, which has worked so hard over the past several years. I think they've set us up incredibly well for 2026 and beyond. But just starting with sales and distribution, we had a lot of work this year to recover from the prior strategy. We're coming out of this year effectively having regained our fair share. But across the board on commercial, I think we're executing better. We have fantastic leaders. We're excited about the Citi agreement, which launches soon. We're excited about the customer initiatives that we keep rolling out each month. So a lot of reasons for us to be excited about 2026. I think there's a lot of upside for American as a premium global airline, and we're ready to turn the page to get there.

All right. That's an exciting intro and not to be a Debbie Downer and take us back to some dark times, but this year got off to a rough start, a lot of uncertainty around the economy and trade and 2025 results are going to look really different at American and at the rest of the industry than what we thought in January. Against that backdrop, is there anything underlying the bottom line results that you would highlight that actually went better than planned?

Listen, there's a lot that you didn't feel great about in 2025 at that macro perspective. But there's a lot we feel really good about. When I talked earlier about just our cost performance, we hit our cost guide, or we will hit our cost guide for 2025 that we started the year with. We continue to be a leader in that area. These commercial initiatives, we started the year saying we're going to go back and recover our share. We did that. And you start to see it in the results as well that while nobody is happy with unit revenues not being where they expect to be not being positive for the full year, if you look at our year-over-year unit revenue performance, year-to-date, we have outperformed the other premium global airlines. So we're proud of that progress. We continue to hit our capacity targets. It's exciting to take delivery of almost all of the airplanes we expect to take delivery of this year. So a lot of good things happening in 2025 that are going to set us up really well for '26 and beyond.

And maybe just on '26, this year didn't go as planned, but are those issues in the rearview mirror? Are we entering '26 in the place you thought we would be? Like is there any bleed over from 2025 issues in 2026?

I don't think there's much that's going to bleed over. And we talk really short term here. I don't think there's anything from the government shutdown that's going to bleed over into 2026. We're just excited to get to the year. Like we sat here a year ago, and we were talking about all of these things that were going to be setting the company up well for 2026 and beyond. And you go through this year, and you start to just check them off the list. Like we started the year being really excited about taking delivery of our new 787-9P, our high premium configured 789s. And here we are at the end of the year, we will have taken 11 of them by the time the year ends.

We're excited to take delivery of the A321XLR, which is going to be an incredible airplane for us in transcon markets as well as into Europe. We've taken delivery of that airplane. By the end of next year, we're going to have 15 or 16 XLRs in the fleet. We started the year talking about recovery of sales and distribution. That's in the rearview mirror at this point. And one of the biggest things, at this point last year, we were talking about this new agreement with Citi. We spent the last year planning for it. Now we finally go and get to execute. So we're excited about all of those opportunities next year.

That's great. And maybe you brought up the government shutdown. We've had a mix of updates and non-updaters. You're in the non-update crew. Any thought -- can you just talk about what you saw in terms of booking impact around the shutdown and the FAA flight reduction order? And then where are we today? I know it's only been a couple of weeks, but like would love to just hear about the arc of the recovery.

Sure. At the time of our call, we had our call on October 23. And at the time of that call, we were talking about the impact of government travel being something less than $1 million a day during the shutdown. That's what we experienced really through the month of October. But when you started to see a customer impact, so these 3-hour TSA lines that you heard about, there were some stories about shortage air traffic controllers. You did see consumer sentiment start to change a bit and bookings started to slow. That the slowing of the bookings really peaked when we got the FAA mandated cancellations that happened there, somewhere around November 7. That's when we started to see bookings really slow. And it was an important booking window.

You're taking bookings for the Thanksgiving break for early December, even through kind of that Christmas and New Year's break, and it slowed pretty materially for that period. It has since come back. Bookings are coming in as we would expect right now. But yes, bookings slowed for that period, it impacted November, impacted Thanksgiving in the first couple of weeks of December. These next couple of weeks are going to be important for us to understand exactly how this holiday period is going to shape up. I say all that, it's still temporary. One of the reasons we didn't update today, we want to see how the next couple of weeks ago. But for the most part, this is a temporary issue. We're excited about going into '26. All of our bookings for 2026 are exactly what we expected them to look like back in October. We're only booked at 25%, but our booked revenue that we have today is exactly what we have expected 6 weeks ago.

Okay. That's great. Maybe moving to cost performance, which I know has been a bit of a feather in your cap over recent years. My interpretation of your latest comments on the medium-term outlook is that mid-single-digit capacity growth would drive approximately low single-digit unit cost growth, which will drift higher or lower depending on maintenance timing or labor step-ups. Can you remind us of any headwinds or tailwinds we should be keeping in mind in 2026 against that longer-term framework?

Yes. I don't know if I gave that exact rule of thumb, but I don't think it's too far off either. It's going to be a little different for every airline. It's going to be different based on how you're growing, if you're growing through gauge or stage length, if you're going regional at a faster rate than mainline, you're probably going to have a little bit more cost pressure. So there's a number of different factors that impact that rule of thumb. But it's probably not too far off. For us next year, I'll just start on the labor line. Our salaries and benefits this year, we did see a pretty meaningful bump up from agreements that we reached back in 2024 and some of those prior. We're not going to have a meaningful step-up on salaries and benefits next year, but we will see some wage pressure, like pilots for us and pilots for a lot of carriers in the industry are getting a 4% wage increase. So it's growing faster than inflation.

Our flight attendants just got a 3% increase. All of these different collective bargaining agreements will have out year increases, many of which outpace inflation. So there's going to be some cost pressure there, but not to the extent that other carriers would have if they're working through a new collective bargaining agreements. A line that impacts everybody is going to be just airport rent and landing fees. There' been a ton of projects done over the past 10 or 15 years that are really now coming to fruition. With that, though, comes an increase in rent and landing fees. It's going to be something that's outside of inflation that impacts everybody.

To your point, when you asked the question on the maintenance side, it kind of moves around each year. There's some years you're just going to have more engine events, more airframe events, but it's not something that we see as a really big headwind as we're looking at our budget right now for 2026. There's probably going to be some cost pressure there, but it's not going to be something that is a really meaningful line item for us. All that said, I think we've been really good at this. It's a mindset for the company to run a really efficient business. It's -- I look at our leaders across the board, David Seymour, our Chief Operating Officer and his team do an incredible job. Robert and I get to sit down with them every couple of weeks just to talk through their different efficiency initiatives and what sort of investment they need to drive those efficiencies. And I think we manage our expense lines and just drive efficiencies better than anyone.

So on the theme of efficiency, on the last call, you noted that most of your work groups are more productive today than they were in 2019. Can you dig in on what's driving that? Is it work rule changes from latest contracts, technology, something else?

It's not work rule changes. In fact, if anything, we have work rule changes that have gone the other way, where it probably makes us a little bit less efficient. But when we think about all of our different work groups to drive efficiencies, it doesn't just happen. It requires investment in technology, it requires process changes or process improvements and that's where we have been focused with our reengineering the business efforts. I look at a big grid probably once a month that is like every step of an employee experience from the time you recruit to when they're onboarded for training to your manpower planning models to day of recovery. And we're trying to get to best-in-class on all of these. And a lot of it requires technology investment. Some of it requires process improvements. David as leader is doing an incredible job on that front.

But if I go back 4 or 5 years, there's probably a lot of like reds and yellows on our stoplight chart on a lot of these different categories. And there's still yellows on the page, but there's a lot of greens as well. I think we're getting closer and closer to best-in-class. But it's been a huge effort for us. I think the company has done a great job investing in the right areas to drive efficiency across all of our work groups. And it's an opportunity that's going to continue for us. We were looking at a stat earlier today where our mainline capacity growth has been about 6% from '23 to '25. Our mainline headcount growth has been about 1% over that period. I don't know if we're able to continue at that same ratio, but I do expect we will grow capacity at a much greater rate than ASMs going forward.

And that should be a tailwind again in '26?

It should be a tailwind for us in '26, yes.

Okay. Great. moving to the fleet. You have one of the youngest fleets of your mainline peers and solid stream of deliveries through the end of the decade. But I'm coming off the GS aircraft leasing conference yesterday, and we talked a lot about lengthy backlogs that are stretching into the 2030s for narrowbodies and widebodies, even starting to be mid-2030s really after the conversation yesterday. Are you happy with the capabilities of the aircraft you currently have on order? Could there be something incremental that would make sense from what's currently available from the OEMs?

I'll just start. Our fleet is in incredible shape. There has been so much work done over the past 10 years to get the fleet to where it is today. We invested heavily through the teens. We're in this spot now with the order book where I think we have a great order book through the end of the decade and really well into the next decade. But our fleet requirements are about $3 billion to $3.5 billion of capital spend each year. And with that capital spend for the fleet, we can grow the airline by about 5% a year.

Now for an airline our size, run rate CapEx is probably more like the $5 billion or $5 billion plus range. But because our fleet is so young, we don't have any retirements coming up. So the fleet is in a really nice position right now with only $3 billion or $3.5 billion of aircraft CapEx that sets us up really well for free cash flow production. But more specifically to your question, on the order book right now, we're really well set up through the end of the decade on the narrowbody side. On the widebody side, we have taken 10 or 11 787s so far. We have another 20 to take delivery of between now and the end of the decade. We have options for another 25 or 30 787s that would come in, in kind of the late 2020s, early 2030s if we chose to execute on those options.

On the narrowbody side, we're in great shape. On the XLRs, we have the ability to change the -- or sorry, on the neos. We have the ability to change that to the XLR variant if we want to continue to grow the long-haul capable fleet. But right now, we're in great shape, nice narrowbody growth, long-haul capable. We have another 20 or so 787s, we have another 35 A321XLRs. So on both fronts, we're in a good spot. As to when we might go out with an order, like at some point, we're going to have to. We're going to want more widebody growth as we head into the next decade. You have to replace the 777-200s, which right now, we're doing a life extension and doing the interiors on that airplane, which will be higher premium, fantastic product, exactly the same product that we're rolling out on the 789Ps right now. It's not immediate, but at some point, we're going to have to put an order out for more widebodies.

And when would you have to press the button on the options? Is that like a rolling? Like how flexible is that for you?

I don't know how much of it's public. It's probably shorter duration options than you would see most companies have though.

Okay. Got it. Moving to commercial initiatives. So when I last got to go down and spend some time with the team in September, we talked a lot about product investments that are coming in the large expansion of your premium cabins. I think it's 20% total increase in premiums seats and a 50% increase in lie-flat between now and 2030. I guess maybe more of a philosophical one to start. Back when we started talking about premiumization pre-pandemic, the sell side scoffed. I was quite nervous about this. I guess -- and then now the more premium, the better, we're all super excited about that. 50%, why not 75%, just kidding. But I guess, what do you think has driven the success of the push into more premium for the industry?

Well, it's a handful of areas. Like one, there was a lot of efforts on premium, really not just for the last decade, but probably for a longer period than that. And if you look at what we've invested in, invested in our loyalty program and invested in our clubs and invested in this premium product pretty heavily, all leading up to this point, maybe we didn't monetize it as well as we could have though. And that was really the opportunity is how do you get a higher paid load factor? How are you able to monetize this product more effectively? And that's what we've been able to do over the past several years. But it has been a long trend. The 789s that we took delivery of this year, we designed that layout, I don't know, 5 years ago or something like that. So we're excited to be a premium global airline. We think that is where these demand trends will continue to go. We think we got in front of it with orders like the 789P with 321XLR with all of the work we've done in the clubs, and we expect it to continue.

Great. And I guess, I think also back in September, some of these investments in clubs and fleet that would fall into the non-aircraft bucket like [indiscernible]. I think you said you think that's going to be around $1 billion, $1.5 billion over the next couple of years. Is that right?

Yes, that's probably the range.

Okay. Got it. And then relatedly, from all of this premium seat config increase, what do you think the margin opportunity is for that? Like maybe -- I mean, I don't know if it's too short term to talk about, but like is that a major tailwind you're thinking about into 2026? Like how do we think about it over the next 5 years?

[ Measurment ] just in 2026 probably is a little bit too short term, but we think it's an opportunity for us in 2026 to continue to drive margin. We do a lot of work on just understanding the profitability of everything we do. So from every flight to every product offering we have. We look at profitability effectively on a per square foot basis. So when you're looking at the profit of -- of the lie-flat business product versus the premium economy versus the economy or the main cabin, we look at that on a per square foot basis to see what's the most profitable cabin we have. And inevitably, it's our premium cabins. And it's on every fleet and every entity. If we had more of it today, I think we'd be more profitable today.

But overall, I think our configurations are close, maybe not quite optimized on every fleet. So there's some work to be done. That's why we're going ahead and reconfiguring the 777-300s and the 777-200s. We're doing some work on the narrow-body. So the A319s and A320s are being reconfigured to higher premium as well. That will be a profit driver for us. And so we spent a lot of time working on it. It will be something that becomes a tailwind for us here over the next handful of years.

That's great. And we already touched on the Citi agreement a little bit. We got -- was announced at this conference last year. So I guess, I think the contract was designed to be fairly ratable over the course of the contract. So no big step in year 1, followed by a plateau. So could you just maybe talk about how we're going to see that impact the P&L over the next couple of years? And really, how is the -- it seems like to me that the contract was designed more to drive card acquisition, engagement, like any help there?

Sure. Well, that works -- we are excited. A year ago, we were talking about it and talking about the launch of it, that was really happening in early 2026. And there's been some launches. There's been some new products that are out there. We're excited about all of that. We're really excited to get it going kind of full on here as we head into the new year, though. But when we were here a year ago, we were talking about this new agreement and how it would change remuneration, not just with Citi, but with all of our co-brand partners here, but how remuneration would grow from -- at that time, it was effectively year ended third quarter 2024 until the end of the decade. And what we said is that remuneration would grow from what we had published at about $5.5 billion of remuneration for the 4 quarters ended Q3 '24, it would grow at about 10% a year. And so we would achieve around $10 billion of remuneration by the end of the decade.

So on that incremental $4.5 billion of remuneration, we said it would improve earnings by $1.5 billion. So we get out to the end of the decade, remuneration will be up $4.5 billion, earnings will be up $1.5 billion. We think that was more disclosure and more clarity than there's ever been on the loyalty business. We're excited about the opportunity to grow it. It's not going to come in at exactly 10% increase each year. It may not flow through the P&L exactly at $300 million of incremental EBIT a year, but it's going to be close to that. I do expect there's going to be some years where we get a little bit heavier bonuses and a little bit greater remuneration, some years maybe where it's a little bit less. Maybe P&L recognition comes in a little heavier, a little light some years. But for the most part, I would expect remuneration to grow 10% a year, EBIT to grow somewhere around $300 million a year. And by the time we get to the end of the decade, we're approaching $10 billion of remuneration and an incremental $1.5 billion of EBIT.

Okay. Great. Moving to the balance sheet. At the risk of always asking you what's next versus pausing, but [indiscernible] accomplished so far. What is your view long term on where airline leverage should be? One of your peers is now targeting 1x gross leverage. I believe you shared on your last call that getting to gross debt of less than $35 billion will put American about 3x net debt to EBITDAR. Where do you come outweighing potentially reduced earnings volatility versus balance sheet efficiency?

Well, one step at a time. We were pleased a year ago to say, you know what, we set this goal that we're going to reduce total debt by $15 billion. So to have it below $39 billion by the end of 2025. We achieved that in 2024. We're proud to have achieved that. We set another goal that we would be below $35 billion by the end of 2027. I fully expect we're going to go and hit that goal. We've made a lot of progress in this year alone. So 2027 feels like something that we should all be really confident in American hitting.

The leverage question, though, we need to get earnings up to get net debt to EBITDA at that 3x. But when we get there, we think that will get our credit rating to about a BB credit rating. That would be a notch above where we were pre-pandemic. So we find ourselves in a pretty good spot. Where we go from there, let us get to that point first. But if we can get to 3x, get to a BB, hit the $35 billion target, we'll be in great shape at that point. And then we can decide exactly what capital deployment is going to look like. I would imagine it will mean further improvements to the balance sheet, but let us hit that $35 billion first.

All right. We'll be patient, fine. Maybe a follow-up on the last question. At what point on the balance sheet journey, does shareholder return start becoming part of the calculus? How much of a focus is returning cash to shareholders for you and the management team?

Well, right now, the focus is on the balance sheet. And we think that's -- we're doing right by the shareholders at the same time. We want to get to a BB credit rating. We want to get net debt inside of $30 billion and total debt inside of $35 billion. So we think that's the right thing for our shareholders today. We're excited to have that conversation about shareholder remuneration going forward. But right now, we're pretty focused on just improving the balance sheet.

Okay. Got it. And as we get closer to the end of '25, I want to talk about the indirect share journey that you have been on. We're on track to get back. I guess maybe 2 questions. First one, is the margin profile of the revenue that you're going to have recovered by year-end the same as it was before? And I guess, really the question is more, should we be thinking of this as an opportunity that maybe there was a little bit of sweetening the pot to get corporates back on side mid-contract. And so therefore, the revenue is back, but maybe the next leg, there's some sort of margin expansion on top of that.

Well, I would just say the margin profile is probably exactly the same as it was previously, give or take, maybe it's a little better in some areas and a little worse than others. But for the most part, it's very similar to what it was previously. Just stepping back, though, I am really proud of the progress that the team made this year. It was a huge effort that really started under Steve Johnson's leadership back in May or June of 2024. I think he did a fantastic job studying the ship, getting us going on this effort. And the team has done a really nice job so that as we head into 2026, we're not talking about regaining lost share. We're talking about gaining more incremental share. And I think that's the opportunity for us. Right now, I mean, we're somewhere around our historical fair share, but there's been a lot of years where we've been above that. And I think we have a real opportunity to get back above where we were just prior to the sales and distribution change. And that will be the work that the sales team and the customer team and our entire frontline team is going to be focused on.

And I guess maybe just a follow-up on that. What do you think drives that incremental share? Is it some of the product improvements you're talking about? Is it regaining share in Chicago? Like is it maybe your old fair share, you don't think it actually was fair share? Like what do you think drives the move from here's our historical share to like whatever the number you come up with higher should be?

It's going to be all of those things. It has to be a competitive network. And on that front, we're really excited about the growth that we completed here in 2025. We had a really nice growth in Philadelphia. It did exceptionally well. We grew in New York. We got some slots back in LaGuardia. We've upgauged. We've increased our stage length. All of that has done well for us. Obviously, we grew meaningfully in Chicago this year. All of these are things that when our sales team goes out and talks about what we're doing, they say, well, starting with the network. The network is better than ever. So we'll continue to start by focusing on the network. All the product enhancements, yes, we continue to do a good job rolling out new products, making sure that the products we are delivering are the products that our premium customers want. And when we're doing that, it just makes the job easier for our sales team. All of that only works if you're running a great operation, if your frontline team is doing a fantastic job delivering customer service. And on that front, I think our frontline team is doing a great job, and our operating team is also doing a really nice job for the airline.

That's great. And maybe just following on the growth in Chicago, Philadelphia. That's been a big focus this year. As we look into next year, is it about annualizing that growth? Is it continuing to densify those markets? I know we've also talked about Miami, Phoenix, like where do you see the growth opportunities for '26 in the network?

It's in a lot of those areas. We will continue to grow Chicago. We didn't quite get back to 500-plus departures this year. We will get back over 500 departures next year. Philadelphia is going to continue to see growth. There's opportunities just within our current infrastructure to continue to grow in Philly, and we have the aircraft assets to do it. In a place like Phoenix, we're probably -- I don't know, this year, we might get up to 280 or this winter up to 280 departures a day or something like that. But we think we have the opportunity to grow that hub to something over 300 departures a day. Miami has all sorts of opportunity for growth. And really look across the board, each of our hubs has some opportunity. It's just when is it going to happen? What's the timing of it?

Like DFW is one of the fastest growing economies in the country right now. But right now, we don't have a whole lot of gate growth, but that's going to come online. We're really excited about Terminal F, which I want to say opens up in 2027. We have some new peers that are opening up in Terminal A and Terminal C. So you will see really nice growth in DFW. It's just going to be measured over the next handful of years. And you see that in Los Angeles as well. There's a lot of construction happening right now that's limited our capacity there. But once we get past our terminal construction, we have a real opportunity to grow back to our historical levels in Los Angeles. So for next year, it is going to be focused more on the hubs you mentioned, Chicago, Philadelphia, Miami and Phoenix. But longer term, I think there's opportunities in all of our hubs.

Is the gating factor right now airport constraints driven? Like are we -- I know OEMs -- it sounds like we're delivering below what we thought we would be in 2019, but maybe we're starting to get a little bit more flow through and a little bit more predictability. Like what's the gating factor to growth? I guess, if we go into next year and we have the opposite of this year, and it's an unexpected boom in demand, and we're all super excited about that. What's the opportunity to flex up if there is one?

Well, what we've been saying with our capacity is that we have an order book that allows us to grow at about 5% a year. So the fleets we have coming online, we can grow the airline by fact up to 5% a year, some years more than that. The other end of that though is we have a lot of fleet flexibility that if it's a softer demand environment, we can pull back on that growth either through changes in utilization by returning some of our leased airplanes, by either permanently or temporarily parking some of our old airplanes. So a lot of flexibility with the fleet in terms of how we want to grow. In terms of infrastructure, there are some hubs that are somewhat limited in terms of how much growth they can take on in the near term. And that helps us decide where we're going to be deploying assets. But generally, that is long planned. These are things that are known for years and years. There's some years where we might try to push that a little bit and impact the customers or the operations, so we'll pull back in certain hubs. But generally speaking, our hub infrastructure is going to allow for at least that 5% growth if that's where we choose to grow.

Okay. Got it. And maybe just on the opposite of my last question on the downside protection. It sounds like there's a lot of off-ramps on fleet through retirement, through lease returns. How reticent would you be and how to cut non-aircraft CapEx, some of these investments in product? And how much flexibility is there to do so? Like are the seats already being built and they're arriving and there's not really any way to [ back settle ] that?

I would say like that type of CapEx, that is like long-life CapEx. When we're deciding to go and reconfigure an airplane, we're reconfiguring it because we want to operate it for the next 8 or 10 years in that new configuration. So we would not tap the brakes on a big 777-300, big 777-200 reconfiguration project. There probably is some CapEx you could pull back on, but you would likely only pull back on it if you were reducing the size of the airline at the same time. We've shown in the past, we can be pretty nimble and pretty flexible with the amount of capacity we produce, and we'll continue to do that. But in the near term, there's not much when I look at that $1 billion or $1.5 billion of CapEx on non-aircraft that we would end up wanting to pull back materially on. But around the edges, yes, you can easily cut $100 million or a few hundred million from it.

Okay. Got it. We've got a couple of minutes left. So I always like to close with the same question as I usually wind up getting some good food for thought for the next couple of months here. Is there something that you're really excited about or something or 2 you're really excited about over the next 1, 2 years? And is there anything -- happy to just hear the punch list, but is there something that's in the back of your head that you really think we on the Street are missing from the punch list of what you're excited about?

Well, I'll probably just go back to where we started. Like there's not much that we have done that I'm not really excited about. And I think generally, it's appreciated by our customers and our team members and probably the Street, but there's maybe a handful that are underappreciated. But right now, we look out, I'm really excited about our centennial year and all that we have planned for it. I'm excited about having all of our team members or maybe not all of our team members, all of our major work groups with contracts in place. And it's just not something we have to worry about. We can just focus on execute on the business. We do have 3 smaller work groups that require contracts still. We're hard at work on those. But overall, I think our 105,000 employees are all pulling in the same direction and really ready to get at it here in 2026. We've talked about the fleet. I think it's appreciated and understood by our investors.

The one thing I think gets lost a little bit is the hard product we have on this fleet. We don't talk about it enough, but if you look at our widebody fleet, read the blog, do your own research, the hard product on our widebodies, I think, is the best amongst the U.S. premium Global Airlines. It's the most consistent product there is out there. It's the best seat there is out there, the brand new 787-9 premium configuration. It's the best product out there. Others might have certain products that can compete, but it's not consistent. Ours is just this fantastic product that I don't think we talk about enough and probably don't quite get enough credit for. But we're excited to be expanding that next year as we take on more XLRs. We'll get kind of this run rate impact of these 10 787s we took this year, and we'll get 1 or 2 more next year before deliveries resume here again in 2027 and beyond. So the heart product is in great shape.

I do think the balance sheet progress is appreciated by some. So thank you for bringing that up. But I think that, that is going to continue at a similar pace. And I have full confidence we're going to hit the goal there in 2027. On the customer side, I think we're doing just a lot of really great work to make sure that we are taking care of these premium customers and to make sure that we're getting a greater share of these premium customers. So all the things I started with that I'm excited about in 2026. I we'll be excited about for the rest of the decade probably. In the areas where we're underappreciated, I think we just need to talk about it more. I think there's a lot of great work that's been done over the last several years. We should be out there celebrating it more.

And maybe just to sneak in one last quick one. We talked about it earlier. I think it's well documented. Domestic was a bit of a laggard this year. You're one of the more domestic facing of the Big 3, not too different than Delta, but less than the United. Should we be thinking about -- like based on what trends you're seeing now in the domestic part of your network, should that be another tailwind we should be focused on for next year?

It is, and it's part of the network we're proud of. Like we are proud to have the best U.S. domestic network that there is. Like there's not a more important aviation market in the world. There's not an aviation market that has more consistent revenues and more consistent profitability. And while it's down this year, yes, there's absolutely a great setup for next year as we look out to 2026, I think supply is going to be in a better spot than it was this year. The uncertainty, the macro uncertainty that we dealt with this year that really impacted domestic mainline more than our premium products and probably more than international, that should be behind us as well. So for us, it should be a really nice tailwind as we head into next year.

All right. Great. I think that's a nice positive note to end off on. So Devon, thank you so much for joining us today.

Thank you. I appreciate it.

Thank you for standing by, and welcome to American Airlines Group's Third Quarter 2025 Earnings Conference Call. [Operator Instructions].

I would now like to hand the call over to Neil Russell, Vice President, Investor Relations. Please go ahead.

Thanks, Latif, and good morning, everyone. Welcome to the American Airlines Group Earnings Conference Call. On the call with prepared remarks, we have our CEO, Robert Isom; and our CFO, Devon May. In addition, we have a number of senior executives in the room this morning for the Q&A session. 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 1 question and 1 follow-up.

Before we begin, we must state that today's call contains forward-looking statements, including statements concerning future events costs, 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 earlier this morning, form 10-Q that was filed with the SEC earlier this morning, as well as in our Form 10-K for the year ended December 31, 2024, filed with the SEC on February 19, 2025.

Unless otherwise specified, all references to earnings per share are on an adjusted and diluted basis. Additionally, 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 in American and for joining us this morning.

With that, I'll turn the call over to our CEO, Robert Isom.

Thanks, Neil, and good morning, everyone. This morning, American reported an adjusted pretax loss of $139 million for the third quarter, or a loss of $0.17 per share. This result was at the higher end of the guidance provided in July and was driven by stronger revenue performance. We see that performance continuing and have adjusted our fourth quarter and full year guidance accordingly. I'm proud of the team's hard work and resilience throughout the third quarter. They executed well despite tough operating conditions. .

At American Airlines, we're proud to be a premium global airline with an enduring legacy of innovation and a commitment to caring for people on life's journey. We've built an airline position to excel over the long term and are focused on delivering for our shareholders, customers and team. That said, we recognize there's significant revenue opportunity ahead of us and we're excited about the good work underway to accelerate our revenue growth and view that as considerable upside as we move into 2026.

The revenue momentum we've seen and the opportunity ahead is a product of our sales and revenue management initiatives, scaling our new agreement with Citi, restoring capacity in our hubs, and using consistent improvements in the customer experience as a value multiplier to everything we do. Much of this foundation has been laid thanks to the efforts of our commercial team and Steve Johnson. Last year, I asked Steve to step in and lead the commercial organization to quickly stabilize and reenergize this part of our business. We knew we'd hire a new Chief Commercial Officer in the future, and I'm grateful to Steve for taking this on. .

He and the team has strengthened our commercial position, and we're now in a great spot to make a transition. And today, we've named Nat Pieper, as American's new Chief Commercial Officer. Nat has more than 25 years' experience in leading commercial and financial teams at Alaska, Delta and Northwest Airlines, and most recently, the Oneworld Alliance. He is a seasoned airline executive who understands the complexity of highly integrated organizations. I've known Nat for more than 20 years, and he's exactly the kind of leader we want at American. He will officially join us on November 3, at which point Steve will return to his role as our Vice Chair and Chief Strategy Officer.

So with that, let's talk more about some of the work that the team has delivered. Leading off with our focus on sales and distribution, we continue to build out our sales organization and are aggressively using our loyalty program to win back customers, especially in competitive markets. In the third quarter, we grew our corporate revenue by 14% year-over-year. This result is further confirmation that our sales and distribution efforts are being well received by our customers. Exiting this year, we expect to have fully recovered the revenue share that was lost by our prior sales and distribution strategy. We'll now shift our focus to growing our share beyond those historical levels, which we believe that, combined with revenue management investments and retailing optimization will produce significant value for the airline.

Next, deepening our relationship with Citi and expanding our co-brand card portfolio will further the growth of our industry-leading loyalty program. We're excited for our exclusive partnership with Citi to begin on January 1. The teams at American and Citi have been hard at work, executing a successful cutover of our in-flight acquisition channels to Citi earlier this month. In addition, we've recently launched our new mid-tier Citi AAdvantage Globe MasterCard, expanding our card offerings to meet travelers at every level. Our partnership with Citi will provide more benefits to our customers and is designed to drive growth in our credit card acquisitions and penetration over the coming years. The upside is significant. As we approach the end of the decade, we expect remuneration from our co-branded credit card and other partners to reach approximately $10 billion per year. At that time, the incremental annual benefit to operating income is projected to be approximately $1.5 billion compared to 2024.

On the loyalty side, active AAdvantage accounts increased 7% year-over-year in the third quarter with our highest growth in enrollments coming from Chicago, which was up approximately 20% year-over-year. AAdvantage members are more engaged, generate a higher yield versus nonmembers and are a key driver for premium cabin demand. In the third quarter, spending on our co-branded credit cards was up 9% year-over-year as customers continue to favor AAdvantage Miles as their preferred rewards currency. We remain focused on strengthening our network by scaling our hubs.

We're proud of our hub network that we have with 8 of our hubs located in the 10 largest metro areas in the U.S. This year, our growth was focused on Chicago, Philadelphia and New York. American has a long history in all 3 cities with a base of corporate and premium customers that are loyal to the American brand. Our improved schedules, along with our new sales and distribution strategy and other product improvements are helping us win local high-value customers.

Performance continues to track in line with our expectations. This targeted expansion will continue through the fourth quarter and into 2026 as we add more cities and more frequencies to improve our offering for customers. Our ability to grow capacity in premium markets will be further supported as we take delivery of new aircraft and reconfigure our existing fleet. These efforts will allow us to grow our premium seats at nearly 2x the rate of main cabin seats and grow our lie-flat seats over 50% by the end of the decade.

Additionally, we're excited about the significant investments in airport infrastructure happening throughout our system, headlined by rapid construction of the new Terminal F and enhanced Terminals A and C at DFW. When complete, DFW will be a world-class facility and the largest single carrier hub in the world. All of this is intended to deliver a consistent and elevated travel experience for our customers, whether on the ground or in the air. And it's not just facilities.

The investments we continue to make in customer experience are the value multiplier on top of everything we're doing. With the ongoing rollout of our new flagship suite designed to elevate privacy, comfort and luxury, we're continuing to reimagine and advance the premium travel experience. Customers have responded very positively to this product on our new Boeing 787-9 Ps, which led American wide-body aircraft in customer satisfaction. We will offer the same product on our 321XLRs and our 777 fleets in the coming years.

We're also investing in the onboard experience of our regional aircraft, including the installation of high-speed satellite WiFi to maintain a consistent premium experience across our fleet. We're proud to offer high-speed gate-to-gate satellite WiFi on more aircraft than any other airline, keeping our customers connected while traveling. Thanks to our new sponsorship with AT&T, this amenity will be complementary for our AAdvantage members starting in January. We announced several exciting updates to our leading lounge network, including plans to open new flagship lounges in Miami and in Charlotte, and we'll expand our Admirals Club Lounge footprint in both markets as well.

We also introduced several additional premium enhancements, including new amenity kits, improvements to our food and beverage offerings and a new partnership with Champagne Ballanger. We continue to explore partnerships to elevate the art of travel, like our new coffee partnership with Lavazza that aligns with our focus on refined offerings and exceptional service throughout the travel journey. Nothing matters more to our customers than flying on a reliable airline. While this quarter presented challenging operating conditions, the American team quickly recovered, minimized disruptions and maintained a resilient operation for our customers. Thanks to continued investments in technology, including the expansion of our Connect Assist platform, we've enhanced the connection experience and successfully preserved customer connections.

The team is focused on investing in the right areas, and we're committed to executing on our initiatives to deliver on our revenue opportunities. Before closing, I'd like to take a moment to recognize the dedicated aviation professionals who continue to uphold the safety and security of our industry during the government shutdown. We're hopeful that action will be taken to reopen the government as soon as possible.

And now I'll turn the call over to Devon to share more about our financial results and outlook.

Thank you, Robert. Excluding net special items, American reported a third quarter adjusted loss per share of $0.17, a 50% beat versus the midpoint of our prior guidance. We continue to progress on our commitment to deliver on our revenue potential. We produced record third quarter revenue of $13.7 billion, which was about 1% ahead of the midpoint of our initial guidance.

Domestic year-over-year PRASM improved sequentially each month and turned positive in September. While premium continued to outperform Main cabin, we've seen improvement in the main cabin since its low point in July. That momentum has continued into October, and we're encouraged by the bookings we have taken for November and December. Our international entities performed in line with the guidance we gave in July. After a very strong second quarter, unit revenue in the Atlantic region was down year-over-year due in part to the macro uncertainty during the peak booking window and a continued seasonal shift in demand from the third quarter to the fourth quarter.

That said, Atlantic was our most profitable region during the quarter, and we expect Atlantic unit revenue to be solidly positive in the fourth quarter. In Latin America, unit revenues were down year-over-year as the short-haul Latin market was oversupplied during the quarter. American's presence in the region, the premium services we offer and the scale we have in Miami and our other Southern hubs allow for profitable results in this environment and a continued long-term competitive advantage in the region.

Lastly, Pacific year-over-year unit revenue declined mid-single digits in the quarter. We expect fourth quarter unit revenues to be approximately flat year-over-year off a very strong 2024 base, supported by strength in the premium cabins. Premium continues to perform well with year-over-year premium unit revenue outpacing main cabin by 5 points in the third quarter. Capitalizing on this demand, American is continuing to invest in expanding our premium offerings across the customer journey. While already recognized amongst the U.S. network carriers for having the highest rated and most consistent lie-flat product across our long-haul fleet, we are elevating this experience with the investment in our new flagship suite, which we launched with our high premium Boeing 787-9s.

As Robert said, in the coming quarters, we'll expand this product further with the introduction of our A321 XLRs and the retrofit of 20 777-300 aircraft, which will increase premium seats on this fleet by over 20%. We're excited to announce that we'll continue scaling our new flagship product on our 777-200 aircraft. These aircraft, which will be receiving a nose-to-tail retrofit, will see a 25% increase in lie-flat and premium economy seats, along with new in-flight seatback entertainment system. Additionally, we continue to expand premium on our domestic aircraft. We are retrofitting our A319s and A320s, where we will grow first-class seating by 50% and 33%, respectively.

With these investments in our existing fleet, along with our new deliveries, our premium seat growth will outpace our non-premium offerings. Our total capital expenditures in 2025 are expected to be approximately $3.8 billion, which includes the delivery of 51 new aircraft this year. Longer term, capital expenditures remain consistent with our prior guidance and our current expectations for 2026 are approximately $4 billion to $4.5 billion of total CapEx. We continue to make progress in strengthening the balance sheet.

Total debt at the end of the third quarter was $36.8 billion, down by $1.2 billion from the second quarter. We ended the quarter with $10.3 billion of available liquidity. At the start of the year, we made a commitment to reduce total debt by approximately $4 billion to less than $35 billion by the end of 2027. Just 9 months after making that commitment, we are more than 50% of the way to achieving that goal.

Now on to our outlook for the remainder of the year. For the fourth quarter, we expect capacity to be up between 3% and 5% year-over-year as we continue to build back our hubs and adjust our schedules to meet evolving seasonal demand trends. We expect fourth quarter revenue to be up between 3% and 5% year-over-year. If we achieve the midpoint of our guidance, we'll deliver flat unit revenue in the quarter after being down 2.7% in Q2 and 1.9% in Q3. Fourth quarter CASM ex is anticipated to be up 2.5% to 4.5% year-over-year, in line with the guidance we provided in July.

We are continuing our multiyear reengineering the business effort to utilize technology and streamline processes to enable an improved customer and team member experience while driving a more efficient business. These efficiencies are being realized through best-in-class workforce management, efficient asset utilization and procurement excellence. These efforts have resulted in $750 million of annual savings versus 2023. As a result of the investments and process improvements we have made, most mainline work groups are operating at higher productivity levels today than they were in 2019.

With labor cost certainty through 2027, American is able to focus on our long-term efficiency efforts while executing on our commercial and customer initiatives. With this fourth quarter guidance, we expect to deliver an adjusted operating margin of between 5% and 7% and earnings per share between $0.45 and $0.75, over 2x higher than the midpoint of our implied fourth quarter guidance from July. This brings our full year EPS guidance to a range of $0.65 to $0.95 per share. Based on these earnings and capital projections, we expect to generate free cash flow of over $1 billion for the year.

I'll now hand the call back to Robert for closing remarks.

Thanks, Devon. We're positioning American for long-term success. Our commercial efforts in sales and distribution and revenue management are taking root, driving business and premium revenue outperformance. We're poised to take advantage of the new relationship being launched with Citi in 2026 to grow the world's first and largest airline loyalty program at unprecedented rates.

We started down the path of restoring our network presence, further expanding our industry-leading footprint in North America, the world's most important aviation market, all powered by the youngest and most fuel-efficient fleet. These efforts are being bolstered by our focus on elevating the customer experience, evidenced by the continual announcements this year of exhilarating upgrades.

Finally, we'll always remain focused on efficient capacity production. We've been a leader in this space for years, and we'll continue to make smart investments that drive efficiencies in our business. We're looking forward to closing out 2025 in strong fashion, and with this groundwork, we plan to deliver meaningful long-term value for our shareholders in 2026 and beyond.

Thank you for your interest in American Airlines. Operator, you may now open the line for questions.

[Operator Instructions] Our first question comes from the line of Scott Group of Wolfe Research.

So I think I saw you said that September unit revenue was positive. Fourth quarter guide is sort of flat. So maybe just explain that change. And then within that, I think I just heard you say domestic unit revenue, you think is flat in Q4 as well. Maybe just some thoughts premium versus domestic and how that shakes out.

I'm sorry, Latif, I think we were on mute there. So we'll start this over. Steve, do you want to take this question?

Sure. Latif, can you hear me now? .

Yes, sir. Please proceed.

Yes, Scott, thanks for the question. What we've seen, I think, is what you've heard from the other airlines is July was a really very difficult month for the industry. August was better than July, September better than August, and indeed, we did inflect positive during the month of September. October looks better than September and the fourth quarter looks strong. That has been driven interestingly, largely by improvements in -- for us, anyway, in main cabin revenues. The premium revenues, as we've discussed, have been strong all year long, really not faltering notwithstanding any of the economic uncertainty we went, but that economic uncertainty and Liberation Day and all of that has played a very -- it's been very difficult on main cabin revenue, the demand from our most price-sensitive customers.

In any event, the projection that we have for the fourth quarter of being flat year-over-year is a sequential improvement -- quarterly sequential improvement. Something we're excited about is a combination of good performance, I think, in the domestic entity, good performance across the Atlantic, in the North Pacific, and in South America, and a little more uneven performance in the South Pacific largely because of capacity, and then year-over-year, not great performance in short-haul Latin America, again, a capacity issue.

That entity, while down year-over-year, remains a really important part of our business and a profitable part of our business as we have real network strength from Miami and DFW and Phoenix into those regions. So I think we're excited about the sequential improvement being able to project a flat unit revenue year-over-year.

Okay. And then I want to see if you want to provide any sort of early thoughts for next year. So if I look at Q4, right, we've got capacity up 3% to 5%, what are you saying unit cost up 2.5% to 4.5%. Is that sort of the right way to think about capacity and unit cost for next year? And ultimately, what I'm trying to figure out is what's the visibility or confidence in sort of a price cost inflection next year?

Scott, we're just in the planning process for next year as we sit here today. So we're not guiding to capacity or unit cost performance at this point. But we'll stay consistent with what we've been saying on that front is we have this fleet plan that can allow us to grow somewhere around mid-single digits. Our guardrails on capacity production are at one end, we just want to understand what sort of economic growth and what sort of demand growth we're seeing, and we like where we're at on that front.

The other side is where the competition is at. And lastly, just what sort of growth opportunities we have. We're really excited about the growth we put into the market this year, primarily in Philadelphia, Chicago and New York. Those markets will continue to grow in 2026, and we're also excited about growth opportunities in Miami and in Phoenix. On the cost side, I think you see it in our numbers. We believe we manage cost and efficiency better than anyone. It's been a very formal and long-standing effort. And so next year, we look out, yes, we're looking for margin expansion as we head into 2026.

Our next question comes from the line of Sheila Kahyaoglu of Jefferies.

Maybe digging a bit deeper into the capacity and premium investment comments now that you have also the 777-200 fleet going, the schedules are loaded up 5% in the first half of next year. The fleet grows a similar amount, assuming no retirements. So how are you thinking about the mix in premium versus main cabin and short haul versus long haul?

So I'll start. Thanks, Sheila. Well, first off, in terms of capacity mix, international, domestic, it takes a strong domestic and very strong hubs to support a thriving international operation. And so we'll keep a balance in terms of that growth. It's really exciting in terms of premium offerings. So our premium seating, we expect, especially now with the 787-9s, 9Ps, the XLRs, the reconfigurations we're making, the premium seating is going to grow roughly at twice the rate of what our non-premium offerings would grow.

And even more specific in terms of our live flat international capable seating, that is going to grow by 50% as we look out towards the end of the decade. So we feel really excited about it, and it all plays into what we're seeing in the marketplace that people are willing to pay for experience. And we're going to make sure that we have a hard product that they enjoy.

Great. And then maybe if I could ask another one on just domestic hubs. You mentioned Chicago enrollments are up 20% year-over-year for AAdvantage. Lots have been said about this market. When you look across domestic hubs, where are you seeing the greatest level of unit revenue improvement, either sequentially or year-over-year? And how are you thinking about capacity next year?

Well, I'll just start. Look, we're pleased with our efforts in Chicago. Certainly, we've done a nice job in growing that back. And as you look towards next year, that's a hub that will be over 500 departures. And we have just an incredible base of customers that are waiting for us to really get back in the marketplace. Those AAdvantage enrollments overall, we grew 7%. But in Chicago specifically, 20%. I mean that's a really remarkable number. We're going to take advantage of that desire for our product, as I mentioned. And as we look out into the future, we anticipate that Chicago will return to its rightful places as one of our largest and more profitable hubs.

So capacity, at least in Chicago, as we take a look at, we're going to fly what we can. It will be, again, over 500 departures. Capacity throughout the rest of the system, it's really focused on restoration of flying in Philadelphia, Miami, Phoenix. We've already have DFW and Charlotte appropriately sized. So we're really excited about what we're going to be able to bring back to markets that, quite frankly, because of regional aircraft and delivery delays, we haven't been able to serve as thoroughly as we'd like.

Our next question comes from the line of David Vernon of Bernstein.

I hate to bang the same drum, but maybe I'll ask the same question in a slightly different way. If we think about what percentage of premium seats are in the mix kind of as we end 2025? And how does that change? If you can put a number on that, that would be helpful as well as any sort of commentary or directional commentary on the relative buy-up from what would be considered a non-premium versus a premium seat. I think what we're trying to all kind of model out here is what kind of unit revenue lift you could get because the product mix is changing so much next year. I appreciate the twice the normal seat growth rate, but I think what we're trying to do is really kind of help handicap what kind of margin expansion should be coming from that product investment.

Thanks, David. Great question, even if it is bang in the same drum. This is a really good story for the industry, really good story for American. As I've said earlier and the guy said in the opening remarks, premium has been strong all year despite economic uncertainty. If we look back a long time, some of us have been around in the business for a long time, I can just remember discussions about whether we could ever, as an industry, find a way to get people to pay more for better products and services. And I think the answer to the question these days is a resounding yes.

Part of what we're seeing is -- and I have to say it feels like a post-pandemic new normal. It's just been so consistent and so consistent through difficult economic circumstances. But it's -- premium has always been driven by -- and there remains a component of that, that's business demand. But business doesn't always let their employees fly in premium. And so really, what we're seeing is, I think, a renaissance or maybe a new beginning for premium leisure.

And this goes to my comment about our customers being willing to pay more for better services and better products.

Our premium cabin is now 65% load factor is -- we think is premium leisure. It's outperformed the main cabin by 5 percentage points, 5 RASM points year-over-year. Our paid load factor in premium is up 2 points year-over-year. It is now nearly 80%. And we were selling on a paid basis only in the mid-60s before the pandemic. Nearly 50% of our ticket revenue comes from premium.

And in recognition of those market dynamics, our focus is on taking advantage of that and growing that. Robert and Devon talked about the additional premium seats that we're adding to the fleet. We're designing better products. We have easier ways and super simple digital ways to upgrade and lots of opportunities to upgrade on a wallet-friendly basis. It's really, I think, becoming just a really important and really exciting part of our business.

Okay. And then maybe as you think about beyond the hard product investment, right, and that -- however that mix shift is going to change in the number of seats, Robert, when you're talking to the team or maybe and working with that as he's ramping up, when you think about the product investments or experience investments that you need to make, what are the 2 or 3 areas that you are most focused on with the team?

Thanks, David. Well, the good news on this is that we're really bringing to fulfillment a number of investments we made over time. And then adding to that this reimagined and reinvigorated customer experience effort here. As you know, we launched a new team that has been taking a look at just in-flight amenities and products.

And so whether that's, again, relationships with great brands for coffee or champagne, whether that's getting back into the creature comforts with amenity kits and things like bedding and duvets, those things are all happening. We're mixing that on -- so that in-flight experience is then being mixed with an on-the-ground focus. And so whether it's the investment in the facilities that we're making throughout the system, notably our premium lounges, which, again, we have already the biggest network of premium lounges. We're just only going to add to that in places like Charlotte and Miami.

So I'd say that that's the second thing. And look, you do need to have the hard product. And so as we've talked before, first off, no one has a more consistent lie-flat product than we do. I'm super excited about the new deliveries of 787-9s and the XLRs. But on top of that, whether it's our A320s, our A319s, our regional aircraft and how we're equipping them with satellite WiFi, that's all fantastic.

And then what we announced today, the 777-200 reconfigurs, that is a big deal for us because extending the lives of those and putting those into service really gives us a capital spending holiday in terms of fleet replacement. So it's a win-win-win for our customers, for our company and most certainly our investors.

Our next question comes from the line of Dan McKenzie of Seaport Global.

Congrats on the outlook here in the quarter. Going back to an earlier question on Chicago and the response that you expect it to return to its rightful place as the largest and one of the more profitable hubs. That, of course, is pretty different messaging than what we heard from one of your chief competitors there. So just a couple of questions. One, can the airport support 2 strong competitors longer term? And what does history tell us? And then finally, with the 20% improvement in enrollments, is that enough for you to help close that margin gap there in '26 or 2027?

Thanks, Dan. I'll just again, restate what we've been saying all along. Of course, Chicago can support 2 hub carriers. It's been doing it forever. American has served Chicago now for almost 100 years. And so we're looking to serve it well into the future. I've talked about a hub. It's going to be our third largest hub. There aren't many 500 departure hubs out there. It's critically important to our customers in Chicago and those that connect in the region. It ensures that there is service, competitive service. And I think that, that's probably the thing that maybe a competitor doesn't like that we're going to be there. We're going to be investing in Chicago.

And there aren't going to be really any impediments to us building out the network and the footprint that we need there. So thanks for the question. Really excited about Chicago and what's coming up in 2026 and beyond.

Yes. Very good. And then, Robert, you mentioned a $1 billion cost labor disadvantage to competitors on CNBC this morning. Is it your sense that this cost disadvantage should go away in '26, at least in theory? And can the domestic supply backdrop support the higher fares needed to offset that increased cost or whether or not more capacity needs to exit?

Well, you'll have to ask that question of our competitor that is obviously has profits that are built off of a labor cost advantage. And it's a labor cost advantage that is in just rate. And so I can't imagine that, that is something that moves into the future. It's not -- certainly not something that we would ever contemplate at American over the long run.

Now in regard to ultimately improving margins in the business, this is where American, I think, has a tremendous opportunity. So first off, we already have market rates built in. We already have labor cost certainty. And I think that, that enables us to launch the efforts that we're undertaking. And so whether that's the restoration of our network, we know that we have the pilots and flight attendants and everybody that is going to be -- are going to be situated to fly the network and to rebuild some of the places that we've, quite frankly, lost some share in.

We know that we're set up well as we move into 2026 with our new Citi deal, which is going to produce a tremendous improvement in terms of net income going forward. And I mentioned earlier about sales and distribution, and I gave Steve credit for helping set the team up. We've made tremendous progress.

One of the things I'm so proud of is that from a managed corporate revenue perspective that we performed 14% better year-over-year. Nobody else is doing that. And the good news on that front, we're not all the way there. We have not only some share left to catch up as we exit the year, but we're not going to stop on that front. And underscoring all of that is the work that we're doing in premium that we've talked about. And so I feel really positive about American's positioning no matter the economic backdrop.

And everything that I see bodes well just in terms of what we do well. I think domestic supply and demand is coming back into balance. I think that the places that we serve are the fastest growing in -- certainly within the country, and we're poised to really take off as we go into 2026.

Our next question comes from the line of Jamie Baker of JPMorgan Securities.

First question probably won't come as much of a surprise, reminiscent of what I've been asking this season. So this whole idea of premium leisure yields eclipsing corporate yields, at least in some markets, is interesting to me because I think most investors still think of corporate yields as kind of the gold standard. So my question to American is, how prevalent is this across your domestic -- well, across all markets, I suppose. And does it make you think any differently in terms of how aggressively you pursue corporate share if premium leisure yields may be the future? Any thoughts on that?

Jamie, thanks for the question. And this is one where I think we've learned some lessons. Quite frankly, corporate travel is incredibly rich in terms of yield. And while we love what's happening from the premium space, premium leisure, we need both. And that's why we're doubling down in terms of our investment in our sales team. We like what we see, and we think that there is upside for American.

Now I'll note one other thing, which is we talk about business travel, and it has not recovered in terms of passengers to the levels that it was in 2019. I think that there's a lot more room for growth. I don't know if we ever get back to the total percentage of business as a percent of total revenue, but there's a lot more that can be gained.

And as we take a look at what's going on in the world right now and with even continued return to office and this desire to meet face-to-face and renew connections, I'm very optimistic on that front. Now from a premium leisure perspective, yes, we've got to be ready for it. And that's why we have a fleet that I think is tailored to meet those needs. And we're going to make sure that we have a great product offering to attract those customers, and that will be a key to margin expansion. And it's -- look, American is a premium carrier to begin with, and we're only going to become more...

And Jamie, I'd just add that while we do see the phenomenon right now where there's a lot of premium leisure demand, it's really good yields. We got to remember that business has been with us forever, and it's going to be with us forever. It's really important to remember that business travelers are very frequent travelers. Even if they're a little bit less than our premium yields now, they're still 1.5 to 2x the yields we get from other sources. They tend to be AAdvantage members and AAdvantage members give us more business. They tend to be co-brand cardholders.

And the regular business travelers in an effort to accumulate miles and participate in loyalty programs tend to move their leisure travel to the airline that they fly on business. And in some ways, you can even think of our business travelers as being some of the source of our premium leisure demand. So I think a really exciting part.

Robert mentioned, right now, I mean, we calculate that business travel is only 80% of what it was in 2019. And that's an absolute number, not adjusted for the size -- for the growth in the economy. So very significant upside. And as Robert said, I mean, we'd love to fill the airplane with business travelers and premium leisure travelers.

Got it. And Devon, while I have you, a quick follow-up on the air traffic liability. Your drawdown from the second quarter to the third quarter was the most modest that I've seen, at least going back a decade. And it was quite a bit less than the drawdowns at Delta and United. I assume the American's domestic international balance may have something to do with that. Maybe it's attributable to some of the second quarter challenges and subsequent recovery. Whatever the case, it jumped out at me, maybe it shouldn't have any thoughts?

Well, I think it's in part due to some of the seasonal trends that you're seeing. So a strengthening fourth quarter just means there's going to be more bookings for fourth quarter travel that happened in the third quarter, so less of a drawdown on that front. Relative to United and Delta, there may be some entity mix there and perhaps just some of our relative performance in the quarter. But I think more than that, it's just the seasonal trends we're seeing in demand.

Our next question comes from the line of Tom Wadewitz of UBS.

This is Atul Maheswari on for Tom Wadewitz. First, on the shape of the fourth quarter RASM or yield, you mentioned that September RASM turned positive and October looks better than September. So implicit on those points is that November and December would be a little worse than October for you to be flattish for the full fourth quarter. So the question really is the expectation around November and December being a bit slower than October. Is that simply due to American being cautious given difficult compares you and the industry have from the demand strength that you saw during the holidays last year? Or is there something in the current booking data that suggests that December or the holiday yields are tracking lower than what you're seeing for this month?

And really good question, and I'm sorry that I wasn't more clear about that. I mentioned October as being part of a sequence that we're seeing and I think that the industry is seeing. I didn't mention November and December because we just don't have a lot booked at this point in time. And so I just didn't pick up on it.

We're -- I will say about November and December, I think we're getting very encouraged by the way the holiday periods are booking and seeing as we have throughout the year during trough periods seeing a little bit of softness there. But we're, I think, focused on our best estimate right now of where the quarter is going to end up is flat year-over-year. And we'll take another look at that as we see more bookings for November and December come in.

Got it. That's helpful. And then just as a quick follow-up. As you run rate the normal historical share in the indirect channel that you expect to get back to in the fourth quarter, how much revenue lift does that provide next year, especially in the first 3 quarters of the year? I guess another way to ask it would be, like in the past, you mentioned like about $1.5 billion of shortfall due to the prior strategy. How much was recovered this year and what's left to be recovered in '26?

Well, Tom (sic) [ Atul ], thanks for the question. we don't have a full run rate of our recovery in because it's something that progressed over the course of the year. As we take a look out into next year, it's going to be built into any of the guidance and the forecast that we give. I think a good indication, though, is just the level at which we're outpacing some of our principal competitors in things like managed corporate travel. So I feel really good about that.

And as we exit the year, where I do think we'll be fully restored, then the objective is moving on to actually doing better than that. And from that perspective, what we will measure ourselves on going forward, okay, will be overall unit revenue production. And of course, we'll always break out from a corporate perspective.

Yes. And just to think about it, as we've gone through the year and improved our sales improved our share indirect channels. You've seen that sort of step up over the course of the year. So next year, we're going to have the benefit of that continued step-up plus the run rate of that, which we've already captured and returned to American.

Our next question comes from the line of Catherine O'Brien of Goldman Sachs.

I wanted to ask more of a theoretical question on CASM. So you guys have done a lot of work on building efficiency into the system. And just wanted to understand, is the fourth quarter a good example of what the business can do, like low to single -- low to mid-single capacity growth drive low to mid-single CASMex? Or there's more to go here and CASMex could ultimately be lower on that level of growth? Just really trying to get a sense of what you think CASMex could look like on the base case mid-single-digit capacity growth over the next couple of years, understanding there's always going to be some lumpiness year-to-year.

Yes. And I appreciate you kind of starting the question with -- it's at least somewhat dependent on the level of capacity growth that sits out there. Right now, we're working through the 2026 plan. What I will give some color on is just the lines of the P&L right now where you are seeing some costs growing at a greater rate than inflation and some areas maybe where we're going to see some potential goodness. But labor right now, as we've talked about, we have contracts with all of our large frontline team members.

So the step-up in labor isn't much more than inflation, although we do have a couple of labor groups, pilots, for example, that will get a 4% increase next year. That's consistent with the industry. So if it's going to outpace inflation, it won't be by much. Other areas like airport rent and landing fees will continue to grow at a rate greater than inflation. Maintenance is kind of TBD at this point, but that will kind of come and go depending on the year. What you're seeing in the fourth quarter right now, I think we can do better than that longer term, but let us work through the plan for 2026, and then we'll work to get some longer-term guidance out there.

Great. And then, Devon, probably a second one for you. You've made great progress on the balance sheet even in a tough year demand-wise. I think looking back at my notes from the 2024 Investor Day, the longer-term goal is to get to net debt below $30 billion and leverage below 3x in 2028. I guess, is that still the goal? And really, is that your ultimate goal? Or do you believe there's a benefit to taking leverage lower than that over time? I realize this is a longer-term one, but just trying to get a picture of how you're thinking about capital allocation over the next couple of years.

Yes. Well, just one step at a time. We're incredibly excited to have hit our first goal of total debt reduction of $15 billion. We did that a year earlier than planned. We completed that last year. The next goal we set out for total debt was that it would be inside of $35 billion by the end of 2027. That's another goal we brought in by a year. We're really pleased with the progress right now. It's happening because we have pretty limited capital needs right now.

We talked about being able to grow the airline at 5%, but we're doing that with aircraft CapEx in that $3 billion to $3.5 billion range. That's a really nice spot to be in. And in a year like this, even where earnings aren't exactly where we want them to be, we're producing really nice free cash flow that we're using to improve the balance sheet. So that's where we're at now.

We fully expect to hit our $35 billion goal. That would, to your point, put us inside of $30 billion of net debt and hopefully well inside of that. We have this goal at that point, obviously, to be within net debt-to-EBITDA leverage ratios of about 3x, which you get to that BB credit rating. To get there, we have to continue to focus on improving margins and improving earnings. And I think we're focused on all of the right things there. right things there. Where we go beyond that point, we'll see. I think a BB credit rating puts us in a really good spot with the borrowings we're going after.

Our next question comes from the line of Conor Cunningham of Melius Research.

Just talking about thinking about building blocks for 2026. I think a big one is just the loyalty component. I was curious if you could just remind us what you think the incremental dollar value is from just the loyalty step-up alone. It seems like a pretty big lever for you all and a pretty massive driver for earnings in general. So just any thoughts around that would be helpful.

Yes. Conor, we'll just go back to what we've been saying. The new Citi relationship, I think, launches us into an opportunity to grow cash remuneration by 10% per year. Ultimately, we see -- as we go out towards achieving $10 billion of remuneration, we see another $1.5 billion of net income flowing through. So that's all -- those are all really sizable numbers.

Agreed. Okay. And then maybe we could talk about just -- there seems to be a lot of talk about just like CASMex and RASM and all that stuff. And I think that the industry in general probably needs to move more towards if we're going to invest in the product, we should expect margins to improve in general. So if you could just talk about how you're thinking about investment spend in the customer service product and what that could mean to -- are you earmarking a sizable chunk of costs associated with that, knowing that you'll get paid back for it on the customer side? Just any thoughts around the investment spend that you need to have in the product going forward?

So Conor, yes, the name of the game here is to grow margins, increase profitability. and ultimately increase shareholder value. So everything we do, we've been incredibly thoughtful, diligent, efficient in terms of when we deploy capital. But as Devon said in his comments, we have, look, a capital expenditure profile that others would love to have. What we are spending, I believe, is going to, number one, drive the revenue benefits that continue to drive revenue benefits that we see.

And if you take a look at our guide and the outperformance or the improved performance in the third quarter and what we're anticipating in the fourth quarter, that's a result for us of revenue performance. Now again, we'll continue to be incredibly efficient in terms of how we deploy our capacity. But the opportunity for us going into next year, I think, look, we have better opportunity than most. Domestic capacity, I think, is more in balance. That benefits American. We've got catch-up to work to do from a sales and distribution perspective. That benefits American.

We finally have our Citibank deal that's coming into play. That will start in January. We have a network that is fantastic, but again, hasn't been able to serve all of our customers' needs. And as we restore in places, we're going to be a more formidable carrier from the perspective of premium and business traffic and a better carrier for all of our alliance partners to deal with. So there's a lot of opportunity for American. And I think in many respects, that will benefit American more than others.

Our next question comes from the line of Michael Linenberg of Deutsche Bank.

I guess a question to Devon. Just given the age of your 777-200ER fleet, how much of the decision to make the nose to tail investment was a function of just lack of new wide-body availability? And what is the cash payback period of those investments?

Michael, you know what, this has actually been something we've been planning on doing for a while. This is an aircraft we think we can run well into the next decade. And obviously, it's time to go through a cabin refresh. We have a nice product on there right now, but the new flagship suite is going to be a fantastic addition to it. We think it pays back really nicely over the useful life of the airplane and sets us up well for our CapEx requirements in the next decade.

And I'll just add that there's a lot of capital that has to go in this business from the perspective of aircraft, certainly facilities. And we're going to get full use out of what we buy. I think that's something that's paid off for certainly one of our competitors over time. We're not looking to have the youngest fleet forever. We like what we have. We're looking to have a product that appeals to customers and one that is -- we're really smart about in how we get full use out of it over its lifetime.

Great. And then just a second question, given that we're day 23 in the shutdown, and I know you guys have a sizable presence at Reagan, we have seen the volumes really trend down, especially the last week at Reagan. What are you seeing there? And is it just really contained to the D.C. area on the government shutdown?

Well, first off, I just -- I'm going to start with -- I've been in constant contact with Secretary Duffy about the impact of the government shutdown and doing everything we can to mitigate. And from that respect, a huge shout out to TSA, CBP, our air traffic controllers. For the most part, they've been keeping the air system running and airports running fairly well.

In terms of the business impact, government travel, it's important to us, but it's something that is certainly less than $1 million a day in terms of revenue. So the impact, while it's there, is something that I'm quite confident when the government reopens, there's going to be some pent-up demand. And hopefully, we get back on track pretty quick. In terms of Reagan, overall, we have had some difficulties in terms of operating delays and issues with air traffic control. I'm also confident that those are things that are temporary. And that as we progress through the year, that should also be a benefit to American as we go into 2026.

At this time, we will be taking media questions. [Operator Instructions] Our first question comes from the line of Leslie Josephs of CNBC.

Just wondering with the push to premium, what is your end goal? Is it to catch up to Delta United margins? And what would you be satisfied with? And what inning would you say American is in, in that transformation? And is there any limit to the amount you're willing to spend to get there, thinking of everything from onboard amenities to eventually a new plane?

Thanks, Leslie. Good question. I would just frame it in the way we frame all questions about how we think about the business and how we invest. We're interested in providing a service for our customers and meeting demand. And we're very excited about the growth in premium demand, again, because it allows us to serve our customers better and allows us to earn higher yields. And we are going to invest and provide product and grow the number of the capacity of our premium cabins as our customers demand us to do. And we'll invest as much capital in that as is appropriate and will allow us to earn a return and will allow us to provide the service that our customers are demanding.

As I said earlier, we spent a lot of time way back when in the ancient days of the airline industry, wondering if our customers would pay more for a better product. And the answer to that question is a resounding yes, and we're going to respond to that and respond to it for so long and to the extent that our customers demand it.

And where do you think American is in that process? And also, if I could add about the operation, do you have any idea of the cost of improving the operation and what steps you want to do to improve reliability?

So Leslie, thanks. Well, the great thing about the airline business, we run every day, and we're going to run this year and for the next 100 years. So there is no end of the game. And so in terms of where we're at right now, really excited about getting the hard product up to par and beyond, love what we're doing with our lounges, you'll just see continued attention and investment.

And from -- I want to talk about the investment side of things. From the hard product side of things, the reconfigurations, the new aircraft deliveries, those are built into our capital plan. So that's nothing necessarily extreme. What we're doing from an operating expense perspective is we're taking a look at where we can take expenditures today in the case of our new coffee brand. We've always provided coffee. We have a much better brand now associated with it in Lavazza.

And in terms of overall expenditures, while there may be some differential in brand, it's not considerable. And so when we take a look at other aspects of our operation, we're doing things in a more efficient way and yet at the same time, able to provide our customers with a much better experience. So I'm not looking for a number specifically. I look at our entire P&L, maybe save fuel and look at the entire expense category as something that is dedicated to improving and taking care of our customers.

And Leslie, I'd just add, over the course of the last year, we've added customer amenities and improvements and responses to our customers in advance at a dizzying pace. But it's just -- as Robert said, it's an infinite game. It's going to continue. I probably have 3 dozen new ideas for customer experience improvement just sitting on my desk that I'm going to look forward to hand off to my successor here in a week or so.

But this is going to go on, and I think it is a part of the business that is going to address a lot of the questions that people had here today about how we're going to afford to pay the labor bill, how we're going to afford to pay for the increased cost of operating the airlines. I think it is through these ideas of just providing a better customer service, more opportunities for customers who enjoy better products, more premium, more amenities that customers look forward to enjoying on American Airlines and throughout the industry.

Our next question comes from the line of Niraj Chokshi of New York Times. Please go ahead, Niraj. Niraj, please make sure your line is unmuted. And if you are on a speaker phone, use your handset.

Sorry about that. I was just wondering if you could talk a little bit about how you're balancing sort of the focus on kind of core hubs with opportunities to grow in sort of the non-hub markets where there might be populations and demographics that you want to -- that might be beneficial.

Sure. First off, we were fortunate to have our hubs positioned in the fastest-growing metro areas. And our hubs, I think we represent 8 of the 10 largest metro regions, and that's something that we're going to benefit from going forward. And then I just take a look at what we've done recently. We made sure coming out of the pandemic that DFW and Charlotte were restored as fast as we could. And we've done a nice job of that.

DFW has some new capacity coming on with new Terminal F and remodeled Terminals A and C. We're going to take full advantage of that. American will continue to be the largest carrier in DFW, and we think that we're only going to grow our presence there. Charlotte, we've taken a little bit of a break in terms of growth there. We definitely need to make sure that, that operates efficiently and runs well. But then as you take a look at opportunities for growth in 2026, the near term and even right now, it is going to be focused. This past year 2025 was on New York and Chicago. As we take a look into 2026, it will be those 2, but along with Phoenix and Miami and Philadelphia.

And I'll note that while Miami operated one of its largest schedules, both Phoenix and Philadelphia are far from being to the size that they were. And the cool thing about that is we're not building $100 million gates to go fly there. That's an opportunity for us and you'll see substantial increases in terms of deployment. But of course, as we always talk, we operate with the guardrails of making sure that we're paying attention to the supply and demand environment, overall GDP and also at the other side, making sure that our market share and our presence is competitive with our primary competitors.

Since you mentioned GDP, I'm just curious, do you feel like is that relationship as steady as it's always been? There's some talk about it's maybe not as closely tied? Or I'm just sort of curious what your thoughts are on that.

I'd say for some revenue streams, it's not as closely tied. And there's some parts of GDP growth that don't drive air travel. But in general, there's still a large component of our travel that's somewhat dependent on the economic environment and economic growth. So it's a component of how we think about revenue. We obviously do a lot of other things as we go through our forecast, but airline revenues aren't completely disconnected from economic growth.

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. We appreciate everybody's interest in American, and we look forward to getting back to work and delivering on our commitments. Thanks. .

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

Great. So let's keep cruising on here at a high altitude with American Airlines. Please count how many airline analogies I get through, through the course of the day. Very happy to welcome back to Laguna, American with CFO, Devon May; and Chief Strategy Officer, Steve Johnson. Gentlemen, thanks so much for being here.

Thank you.

Maybe, Steve, do you want to open up with some opening remarks?

Sure. Thanks, Ravi. It's -- we have to start the day by remembering that today is September 11. Obviously a super day -- important day in the airline industry. Sure there are a lot of you who remember exactly where you were when you heard about it and probably a lot of you who can't believe that it's been 24 years. It's obviously a super impactful day at American Airlines. We lost among the hundreds and thousands of people that were killed that day, we lost 23 of our team members. We'll never forget them. I know Mike will be up here in a few minutes, important day for United and Scott and Andrew and Mike, if you're listening, our best wishes to your team as well. But I think it's a testament to the airline industry. If you think about the events of 9/11, the impact that it had on our business and where we are 24 years later, just a real salute to the resilience, the capability, the ingenuity of our team, our industry team and the team at American Airlines as we continue to provide and build and make better just this backbone of the economy and this important product for our customers. So thank you for that.

Second, just about the third quarter. We are -- the third quarter is playing out pretty much exactly as we projected during our earnings call. We came off a terrible July. I'm sure a lot has been said about that already, so I won't belabor that point. But as I think we talked about then and others have talked about, we saw bookings start to firm around the 4th of July weekend, and that's resulted in August that was better than July, September that was better than August. And although we're only about 50% booked, it looks like October is going to be better than September. So that same progression that we anticipated is playing out exactly right. That's resulted in our being very comfortable with our third quarter revenue guide. We're going to produce that on slightly fewer ASMs, maybe towards the bottom of our ASM range, but that's what our quarter looks like at this point.

And then third, maybe turning to a little longer range point. We feel really good about where American is positioned and we talk a lot about margin improvement, but we don't often talk about revenue, and I'd like to just maybe say a few words about that today. American is a company that has, I think, been noteworthy in it's really terrific management of its cost and cost structure. And that's been the case for years. And we've -- over the course of the last couple of years, we've actually improved upon that with our reengineering the business initiatives, which are going to take by the end of this year, another margin 1.5 points out of our cost structure. That's -- we've had really terrific performance, but we've been less capable at producing revenue.

About 15 months ago, I think on the heels of a failed sales and distribution strategy, we made a leadership change in our commercial group and the initial focus and maybe initially, we thought the only focus was sales and distribution recovery. I'm happy to report that continues at pace. It's continued deliberate improvement. We are on track to beat the objective that we've set out in our earnings calls to restore our performance by the end of this year to where it was in 2023 before we actually started the new strategy. But as we looked and with a new set of eyes and new leadership and new perspective, we found that there was lots of opportunity across our commercial operation and in the way we produce revenue. We started to attack that in December. We announced the new credit card deal with Citi, with Citi as our exclusive partner. The way in which that's structured and the exclusivity is going to allow us to grow that business much faster than we have in the past, and we've talked about the impact that that's going to have on profitability.

The next thing we did is build a new team, 7 people to oversee the commercial portfolios. I think without a doubt, the best 7 people that we've ever deployed at American Airlines focused on commercial and revenue development and delivery. Those folks have been in office since February. They're already starting to get traction. They're very anxious and excited about the opportunity to improve the performance of their portfolios to world class. But think maybe the most interesting thing for me is how they've come together as a team. Revenue is a team sport for sure. And this group of people, they've known each other for a long time. They work together really well and they've really put -- they really understand that as we perform as a team we'll perform this company. So that's terrific.

But that's led to some other initiatives. First, our customer experience effort, the reimagination of customer experience and the creation kind of a new customer-based culture in American. We're off to a fast start on that. That's I think both really interesting from a vision perspective and from a culture perspective, which ultimately is, I think, the grounding for everything we do. But we've also had some quick wins and initiatives. We've talked about free WiFi. We talked about our new app, which is not only more competitive, I think, but has been replatformed into a place -- into an automation structure where we can be very nimble with its continued improvement. We introduced a new airplane, the 787P, which is both, I think, remarkable in its hard product and the soft product that will follow it and very different from the already pretty good product that we had out there.

We've had a handful of 787Ps in service now. The feedback from our customers has been terrific. But that's going to be followed by the A321XLR, which we'll put in the market in the fourth quarter on the transcontinental route, but that airplane looks just like the 787P and just like the 787P has much larger premium and premium economy footprint than the airplanes that it will replace on transcontinental. And then, of course, it's going to provide in 2027, a really significant opportunity for us to attack secondary markets in Europe and ultimately, on a seasonal basis in Northern South America.

We are participating in the lounge competition, arms race in lounges. We historically have a great lounge footprint around our network. And we were the first to introduce premium lounges in the United States and still today have the most of them. But we recognize that that's a battle that's going to continue to be fought on a number of fronts to make the premier lounges better, to have more of them and ultimately to address capacity requirements as we demand for our premium products grows and our credit card penetration increases. So we're excited about that.

We've done some simple things like just changing the boarding priority at American. And I hope that you've all been able to enjoy that. From my perspective, as one of our best customers, the stress level and just kind of the buy as we wait to get on an American airplane, seems very different than and very much better than it was 6 months ago. And we've got some food and beverage strategies that I think are going to be deployed in the short term and the long term. We started last week by making an announcement about some regional experiments that we're trying. So food and beverage that is sort of focused on the place where the flight originates from or its destination. We've got a fun champagne announcement coming next week. The team is going to be mad at me for disclosing that in advance. But -- and then focusing on something simple as having a coffee provider that I think everybody looks at -- looks to as being -- is providing really good coffee.

We're continuing to grow and invest in our network. The long-haul aircraft are part of that. We increased the number of long-haul capable aircraft and premium seats to a point where we'll be up something like 20% by the end of the decade. And that the A321XLRs as I mentioned, give us a whole new set of markets that we can serve. We're focused on our domestic network growing. We focused after the pandemic on growing DFW and Charlotte to bear maximum capacity. Now this year, we focused on Chicago. As you know, we grew our gauge in New York as a result of just deploying bigger aircraft there. Philadelphia, we've increased our relative market share pretty significantly. We've seen really good responses and good financial performance in all 3 areas, at least compared to our expectations.

As we get into 2026, our growth will be -- we'll continue that, and we have opportunities in Miami and Phoenix to accomplish some of the same things we accomplished in Philadelphia, in particular, by growing our relative market share there. Our partnerships, really important part of our business and providing a global network to our customers. Those retrenched, I think, during the pandemic, and we've spent a couple of years getting those back to where they were in 2019. And our future focus on our partnerships and making those more seamless and making those more expansive are all upside for us.

And then even kind of the more routine but really important stuff, we're very focused in taking a comprehensive look at the way we revenue manage on a day-to-day, week-to-week, month-to-month, year-to-year basis focused on how we price, how we compete, how we price in markets that are competitive, how we price and market that are less competitive. The quality of our automation, the opportunities to deploy AI in revenue management, all real opportunities for us in the long run. Now we're definitely playing the medium and long game here. We're able to see some of this already in our third quarter performance and looking ahead to our fourth quarter performance.

But we're just getting traction on these things, and we're -- it shows up less in the revenue environment we're in that is still kind of a tougher revenue environment. But as we get into 2026, I think you'll both see it more in the revenue line, and we'll have an opportunity at earnings calls and meetings like this to talk about it in more detail. So I mean it leaves Devon and Neil and me and the team, the American team, I think, really encouraged about the upside for American on the revenue line. As I said earlier this morning, we do have a margin gap to the other airlines, more than 100% of that is accounted for by our revenue -- historic revenue underperformance. So I think really good upside. Some really fascinating things for us to address and achieve, but we're very excited. So thanks, Ravi, for the opportunity.

Got it. No, that was incredibly comprehensive. Maybe just start on that very last point, the 100% of the margin gap being revenue-driven. Is there some kind of switch or inflection point at which you guys decided, hey, we've done, I want to say, enough on the costs, but kind of, hey, let's target this as a real issue or kind of what's driving this kind of shift in focus, if you will?

Well, I can start just by describing the margin gap. And obviously, we're first focused on our own margins, but we do spend a good amount of time looking at relative margins as well. If you look back a few years, look back pre-COVID, American, United had pretty similar margins. When I think margins, I talk on relative margins, EBITDAR. We have different capital structure, different financing decisions. So relative to EBITDAR margins. American and United were in a very similar spot, trailing Delta by probably a couple of points. It was the exact same thing in 2023. American and United, very similar EBITDAR margins, trailing Delta slightly. 2024, more of a margin gap appeared. And we've talked about sales and distribution. We've talked about our co-brand credit card and the opportunity we felt we have there, and we're really excited about the opportunity with Citi.

But we have seen really great cost performance over the past 5, 6, 7 years and probably longer than that, just our mentality around cost shifted a little bit from how can we cut cost a little bit to how can we just be more efficient. How do we change process? How do we invest in technology to drive real cost savings. And I think over the last 5 years, we've done a really nice job of that. On the revenue side, though, we did see more of a revenue gap appearing. I think we're focused on all the right things that Steve talked about. And as we get through it, I think we're going to be able to shrink that margin gap pretty meaningfully. I look at second quarter as a proof point of that. Nobody had margins up in the second quarter. We all had margins down 1% or 1.5%. And for American, I think that's a pretty incredible accomplishment that our margins were down about the same as our big network peers in a world where we have market labor rates for almost the entirety of our team members.

There's a handful of small groups that we have some work to do on. One of our large competitors does not. And that's a meaningful margin impact when they get to that point, but there is a cost benefit for them in the second quarter. The other side is if you look at domestic versus international right now, international is performing really well. On the domestic side, we obviously see some weakness in domestic main cabin. We're more exposed to domestic. We're happy to be the largest carrier in the United States. It's the most important aviation market in the world. It's just a great position to be in.

But for this year, there's an entity mix component that should be driving our relative margins down. But you look at it, we all have the same margin performance. I think there's a lot of traction, probably measured like 2 to 3 points of relative margin differential between this temporary labor cost differential and this -- what I think is going to be temporary entity mix differential as well. So we're making up nice ground. I think you're seeing really nice relative unit revenue performance for 3 or 4 quarters in a row where we're outperforming, and we're focused on continuing to improve.

Got it. So maybe let's just hit some of those topics and maybe starting with the demand environment. Steve, you said that things are tracking pretty much exactly as you expected coming out of 2Q. Can you just unpack that a little bit more, particularly in domestic, where kind of all the focus has been? Obviously, we saw this big weakness in corporate, big weakness in close-in leisure in 1Q. How has that trended? And obviously, like July was a month where I think everybody had to really stimulate RASM to keep load factors up. How have both of those things trended in August, September, October with a particular focus on close-in leisure and corporate?

Sure. I -- we talked about July, I sort of think of July as I said, maybe the worst non-pandemic July in my career, probably between demand and weather. But it was really the last of what looks like 7 months of really challenging revenue environment and things certainly around the 4th of July, things started to inflect and get better. We first of all, our business traffic has continued, I think, to develop nicely. We do have a little bit of a tailwind because we are winning back corporate share as part of our sales and distribution strategy. But nevertheless, you can see that business traffic is staying pretty firm, particularly as you come out of August, which is a slow business travel month. Premium has just been a star throughout notwithstanding the revenue environment, our premium performance, particularly our long-haul premium performances, just been very good and very solid and seems to be continuing.

And the demand for premium products seems to be a -- somebody called it earlier, a secular trend, but it seems to be -- I'll just use less fancy word, just say seems to be part of the industry environment now. It is -- we're seeing that demand continue through difficult times. We're seeing lots of feedback from our customers, both directly through surveys and just sort of indirectly as we interact with them, just looking for the opportunity to purchase premium products and willing to pay more for those products to get them and applauding all of the product improvements we do. So that's been great.

I think what you're seeing -- a good part of what you're seeing in August versus July in September versus August, et cetera., is actually a firming of main cabin demand. It's just getting a little bit better. But getting better off a really low base. I mean, we're not just joking around about July. It was a really difficult month from a -- particularly from a main cabin demand perspective. And you're starting to see that come back. And I think that makes sense. It was -- it looks like it was economic uncertainty and all the confusion about the tariffs and what that might do that drove July to the point that it was. As some of that's dissipated and I think as the traveling public has become comfortable that the tariffs, whatever they're going to do to the economy, it's going to be around the margin and not catastrophic.

And you're seeing that demand pick up. It's, I think, especially noteworthy in that we're seeing demand for future bookings really strong. And that's sort of, I think, an implicit commitment by main cabin travelers that they feel like everything is going to be okay, and they can make commitments to travel, buy expensive airline tickets in the future and they're -- they feel like they're going to be in good shape.

Got it. That's pretty helpful. Delta this morning said that they were seeing some weakness in international main cabin offset by corporate strength kind of are you guys seeing that as well?

Yes. I mean the main cabin, it seems almost like the other side of the coin from the really noteworthy uptick in demand for premium cabin. It seems like at the same time, we're having trouble getting as an industry, I think, filling the main cabin on long-haul international. It's just -- and so we're -- I think all have to look and figure out what the right product mix and price point is for main cabin travel in long haul. The first thing we're doing at American, and I think our competitors are doing as well is simply building airplanes and reconfiguring airplanes with more premium seats, more premium economy seats. That's where the demand is and fewer economy seats. But I think you'll -- over the course of the next few years, you'll see the industry and us come up with new products to try to improve demand for -- and just increase the opportunity to travel to a wider group of people who are price sensitive.

Got it. Just last point on the corporate recovery by year-end. You said you're absolutely on track for that. You should have enough visibility into what that business looks like when it is fully normalized. So if you compare that revenue base today versus what it was before the change in strategy, are you happy with the size of the mix, the margins of that corporate business versus what we were before.

Yes, so far, so good. It's working out the way we planned. So far we haven't had to make any sort of crazy investments in winning back or buying back that business. So it's coming back the way that we like. It's coming back deliberately and incrementally over time. So while we'll be back to our sort of first quarter 2023 levels by the end of the year, it's going to be next year before we actually see the full run rate value in terms of absolute revenue enhancement. But yes, no, it's going well.

I think it's important to note, though, that, that opportunity is bigger than just returning to where we were by the end of this year. In first quarter 2023, we weren't in a great place. That was one of the reasons I think why we considered an alternative strategy. And so we're looking not just to finishing the year strong, but also to opportunities to grow our corporate share in 2026 and 2027 beyond that.

Got it. Same thing on indirect that the piece of business when restored looks just as good if not better than...

Yes. I mean again, it's a different revenue environment at a different time, but it's working out the way that we like. It's one point to make is that while the strategy that we adopted in early 2023 was too much, too fast. And on top of that, not particularly well executed. It was an experiment that allowed us, I think the rest of the industry, the TMC community and the people who run corporate travel programs to see some things about the way in which that community and that ecosystem works. And while we never want to go back and we're never going to say that what we did was a good thing. I think one of the outcomes is going to be that, that the intermediation of that business is going to evolve over time in a positive way for the industry. Positive for industry shareholders, positive for airline customers and travelers as the intermediation becomes smaller, probably, it becomes more efficient.

The intermediation will be increasingly focused on that, which it does really well for customers and less about just being an intermediary. So I think that there's hopefully, we're past that. We are making great progress in winning back share. We -- I think we have some future opportunities ahead of us to improve beyond where we were earlier, but hopefully, it's -- we're going to have a good impact and make the business all around better and allow us to provide more products and better fares to our customers and better returns for our shareholders.

Got it. Maybe switching gears away from revenue and talking about capacity for a second. You said that you're tracking towards the low end of the ASM guide for 3Q. I don't know if that's just a function of what July was like or if it was a planned decision? Or what do you think 4Q looks like for you guys and very happy with the schedule that's loaded right now?

Yes. For the third quarter, we'll be at the low end, and it's really just because operating environment in July and probably into the first part of August was really difficult. Just a lot of weather hit our hubs particularly hard, still within the range, but probably at the low end. For the fourth quarter, we don't have a formal guide out there yet, but what you will see is a little more capacity growth for American in the fourth quarter than what you've seen in the first 3 quarters of the year. Part of that, if you look at our fourth quarter last year, we didn't have much growth at all.

We are adjusting with an oversupply environment in the first half of '24. We probably pulled down a little too much in the fourth quarter of '24. So there's some capacity and utilization to come back there. And partly just continuing to adjust to this new seasonality that back half of the third quarter, a little softer than what it used to be. Fourth quarter, probably a little bit stronger than what it used to be, and we're putting our capacity in at a time of the year where we see more demand.

Got it. So maybe kind of sticking with this point, we're looking on the cost side as well. Kind of obviously, we've focused about all the revenue opportunities here, but you've also been very aggressively focused on cost, $250 million cost savings in '25, cumulative savings of $750 million. Can you talk about what the opportunities might be going forward? Or are you close to the end of the pipeline?

Yes. It's been a long effort for us. I feel we've had the right focus. Like for the longest time, you're just trying to figure out, can you cut a little bit here? Can you ask for teams to do a little bit more there? We took a different approach when we entered into this about 3 years ago now. And it was all around how do we invest to drive real efficiencies in our business. And it's process change, it's technology investment. It's in every part of our business. These initiatives are tracked and measured monthly, reported back to Steve and Robert and myself. It's with every single work group, how do we do things a little better, right, from the decision to staff to training, to onboarding to day of our regular operations, recovery, how do we do things better? How do we rely on more technology and make it better for our customers and for our team members. So that's how we've delivered so far.

We delivered probably a lot more early this year, a couple of hundred million dollars. Some of these just take longer. We've got to sit down with our tech ops team. We were in our maintenance operation 2 days ago. And the way they're going to be running tech ops in 2027 is completely different than how we ran tech ops in 2022. It's all digitized. We're able to measure productivity of all of our team members. We're able to ensure they have the right tools to do the jobs at the right time. It's super exciting when you just watch some of this develop, some of it just takes more time.

But -- and I can't stop talking about or can end this discussion on efficiency without talking about our procurement team. We started a huge opportunity for the organization a few years ago. We built a team that's led by what I think is one of the top procurement professionals in the world. He's doing an outstanding job, leading an outstanding team to drive real savings. Working capital improvements of over $0.5 billion to date and more to come. So it's a huge effort. The whole organization is behind it, and I think there's still more to come there.

If I could just maybe just add one thing. I've been very impressed with the contribution of our team as a whole, just to the ideation of this. So really I should salute to the team that they're -- they've been so creative and so committed to trying to make the business better. And that's what leads me to think that we're not done. I mean they just continue to come up with ideas about doing things differently that can be built into programs as part of this and it's been really fun to watch.

Got it. Devon, just one nuance on CASM. The maintenance expense has shifted from 2Q to 4Q, kind of that's still on track to meet it, right?

Yes. That's for the year. At the start of the year, we said we were going to grow low single digit, and we have unit costs in kind of that mid-single-digit range. That's probably where it's coming in. The timing of it has shifted a little bit. First quarter came in a little bit better than our initial expectations. Second quarter did as well. There is some maintenance timing that we talked about on the earnings call where we've seen some maintenance expense shift into the third and fourth quarter. But for the full year, expenses are largely coming in as expected.

Understood. Any questions from the audience?

You mentioned a little bit at the top in the opening remarks around AI for revenue management, but I was wondering if you could talk maybe a little more expansively on AI, both on some of the customer-facing things that you guys are working on as well as the operational side.

Sure. I'll start and Devon can do. I think I certainly do, and I think my colleagues all believe that AI is just a revolutionary opportunity for society, but certainly for the airline industry with opportunities to deploy it limited only by our imagination, I think, individually. It's a business that is enormously complicated, and the ability to have automation that can, in effect, produce answers more comprehensively and faster is always going to be valuable for us. So it's just across the board. Applications in the way we run our operations, applications in the way we run our operations when they're disrupted, applications for revenue management, which are just -- I mean, we file -- I mean an uncountable number of fares 3 times a day, all of which we have to make competitive in a super dynamic environment. AI is going to help us do that.

We have a customer base that we talk a lot about wanting to respond to our customers. But we think about it and have historically thought about it in sort of the top-down macro way. We have 63 million individual customers each year at American Airlines. AI is going to help us really understand what those customers want and help us produce products that can be tailored for their specific needs and their specific times and to offer them opportunities to travel that they may not have thought of in their own in a way that we just can't do it with humans or present automation.

It will deploy certainly, one of the easy and most immediate, I think use cases is disrupted operations and customer relations where AI can provide a big majority of the circumstances can do a better job than a human being can do in managing problems that we see over and over and in organizing responses to disrupted flights or broader weather disruptions. I mean I could probably talk for the rest of the afternoon about it but...

Yes. The only thing I'd add is, structurally, I think we're set up really well for it. And in part because of this transformation office, we set up with reengineering the business that we've now put that on the leader of the transformation office to make sure we are driving investment into AI initiatives that we think are going to drive better revenue, better earnings, more efficiencies and he's partnering really well with the IT team and the business units to make sure that investments are going and that we're putting our money in the right places.

I just want to go back to international really quickly. What are your thoughts on some of the domestic carriers, let's say, like Alaska, JetBlue expanding routes in the transatlantic? And what would that look for American?

Well, generally speaking, the real competition on transatlantic and international as a whole is, I think, competition between the three global alliances or maybe the joint businesses that are built into those global alliances. And our focus is on competing with Delta and SkyTeam, United and Star, et cetera. And we have really great partners that allow us to do that really effectively. Starting with JetBlue, I suspect that JetBlue we will continue it's transatlantic operations. It's pretty small compared to what any of the joint businesses do, but they provide an interesting differentiated product and we wish them well. But again, it's always going to be pretty small compared to the size of those markets. Alaska is maybe a bit more interesting. First of all, they are our partners. So we wish them really well and support their efforts.

But they actually are going to operate in a more traditional way with wide-body aircraft with traditional and products with the Alaska touch on those, and they're going to operate from a really fabulous international gateway in Seattle, supported by a pretty solid domestic operation out of Seattle that's helped out by American Airlines. So I feel like, ultimately, in a -- they're going to be ultimately effective in operating internationally out of Seattle. I think both on the transatlantic and transpacific.

Any more questions? Maybe I'll kind of end with a couple here. Obviously, a big announcement for you guys end of last year with a new Citi announcement that kicks in end of this year or early '26. Can you just talk about the discussions you had with them kind of the economics of the agreement and kind of how much benchmark that is for other carriers in the space?

Sure. We -- I think at both Citi and we, a couple of years ago, determined that the underperformance versus Delta and Amex, just to use an example, was the fact that they had figured out a way to grow their program in a way that we had not figured out. And so almost all of the work with Citi in the lead up and during the negotiations was focused on creating an environment where we could both grow the program in terms of card members, card spend, but also the ecosystem for earn and burn and rewards. That -- the first thing -- the first conclusion we reached is that, that was impossible with 2 card providers, but became very possible with an exclusive card provider where we could be -- we could create a partnership that was a lot tighter.

And a good part of that is just recognizing that Citi has a fabulous customer base that hadn't been exposed to an airline travel program. And we have a fabulous base of advantage members who are in need of banking services. So we by combining those 2, we were able to expand the overall products that we can offer as a partnership. And, in effect, start the process of -- I wouldn't say combining but sort of cross-pollinizing the 2 card programs, our co-brand program and Citi's proprietary program. So first of all, we can provide benefits to Citi's proprietary program that they hadn't been able to. They have a program where they issue Citi branded cards that aren't affiliated with an airline, and they give points, thank you points. Some of you may be Citi cardholders.

But they hadn't -- didn't have access to an airline program in the same way Amex, for instance. So we can now provide that, and that makes the utility of those cards better and demand for those cards better. Likewise, we -- those cards had not had the ability to -- we hadn't had the ability to engage in what the card gang calls points transfer. So at Delta and American Express for a long, you probably are membership rewards members, some of you. You know that you can use your membership rewards points to acquire Delta miles, for instance. And use those to just -- for travel in Delta. Citibank's customers hadn't had that opportunity, and so we introduced points transfer.

We also noted that we -- while we had a big set of card offerings between the 2 of us, we had holes in our offerings compared to the Delta and Amex products and even the Chase and United products. So we're working hard and introduced a new product a few weeks ago to, I think, pretty good applause that fills in one of those holes. We'll have another announcement next month about another card like that. But it was all focused on trying to create a program that could grow faster, that could -- the faster growth the program, the bigger you can create -- the bigger the network you can create that increases your ability to attract, earn and redemption partners. Increases the ecosystem, increases the utility of the advantage mile and just allows us to grow the program faster. And that's what gives us the ability to project the 10% annual growth under the new program and ultimately by the end of the decade, getting to something like $10 billion and a $1.5 billion EBIT improvement.

Got it. That is really helpful. Thank you for the comprehensive updates. And yes, we look forward to more in the conference call. Thank you, Stephen and Devon.

Thanks Ravi.