American Airlines

American bragged about higher revenues on lower airline capacity

American’s CEO boasted that the airlines revenue was up 12.2% from 2019 while flying 8.5% less capacity. “Robert Isom — Chief Executive Officer and Chief Recruitment Officer: Excluding net special items, we reported a second quarter net income of $533 million. American produced revenues of $13.4 billion in the second quarter, and that’s an increase of 12.2% versus 2019 and a record for any quarter in the company’s history. And let me repeat that, that’s a record for any quarter in our company’s history. These results were achieved while flying 8.5% less capacity than we did in 2019. (American Airlines Group Q2 2022 Earnings Call, 7/21/2022)

American’s CEO: “Looking forward, we will limit capacity to the resources we have and the operating conditions we face.” “Robert Isom — Chief Executive Officer and Chief Recruitment Officer: The majority of this revenue growth has come directly through our website, bypassing traditional channels. Further, leisure demand surpassed 2019 levels in the second quarter, and customers continue to see us through increasing appetite for travel. Enrollments in our loyalty program continue at record levels, and spend on our co-brand cards is growing at a greater rate than ever before. Looking forward, we will limit capacity to the resources we have and the operating conditions we face.” (American Airlines Group Q2 2022 Earnings Call, 7/21/2022)

American’s CFO said the company had “record revenue performance,” driven by leisure demand. “Derek Kerr — Vice Chairman, Chief Financial Officer: We talk a lot about our goal of returning the airline to profitability, and our second quarter performance is a result of that focus. Profitability in the quarter was driven by record revenue performance. As Robert noted, our second quarter revenue was $13.4 billion, was 12.2% higher, despite flying 8.5% less capacity than the same period in 2019. Leisure demand continued to lead the way, but the acceleration of business and long-haul international demand contributed to the strength we saw in the quarter. (American Airlines Group Q2 2022 Earnings Call, 7/21/2022)

American’s CFO told analysts the company expects “total revenue to be 10% to 12% higher versus the third quarter of 2019 on 8% to 10% lower capacity.” “Derek Kerr — Vice Chairman, Chief Financial Officer: We currently expect total revenue to be 10% to 12% higher versus the third quarter of 2019 on 8% to 10% lower capacity. On this revenue strength, we expect total revenue per ASM to be 20% to 24% higher in the third quarter versus the same period in 2019. We expect our third quarter CASM, excluding fuel and net special items, to be up between 12% and 14% compared to 2019. Lower planned capacity and the investment in the reliability of the operation that I mentioned previously are driving unit costs higher for the quarter. “ (American Airlines Group Q2 2022 Earnings Call, 7/21/2022)

A Wall Street analyst pressed American about raising pay too much for regional pilots

A Wall Street Analysts pressed American on raising pay for regional pilots, calling it “surprising” and asked if its “sustainable long term.” “Savi Syth — Raymond James — Analyst: That makes sense. And if I can ask just a follow-up on that regional pilot pay. The pay was surprising, and I understand that at least part of it is a bonus that supposedly kind of rolls off in 2024. But given how kind of much the gap versus mainline pay has been narrowed or, in some cases, even higher than mainline pay, just — is that sustainable from an economic standpoint for those markets because you’re flying them with small aircraft, fuel is a bigger impact on those smaller markets? Is that sustainable long term? Or is it the right move right now because — maybe because capacity is out of those markets and fares are high or you just need to get this capacity back up? I was just kind of curious as the kind of thinking behind that big of a pay increase. “ (American Airlines Group Q2 2022 Earnings Call, 7/21/2022)

American’s CEO: “I do think that as an industry, pilot wages are going to increase. And that’s something that the industry as a whole is going to have to digest. And ultimately, that will show up through our cost structure and be a factor in terms of how we try to monetize our product.”“Robert Isom — Chief Executive Officer and Chief Recruitment Officer: Savi, let me start and then I know some others might want to jump in. The answer to that is yes. Look, the regional network to American Airlines is incredibly important. And whether it’s 50 or 65 or 76-seat aircraft, being able to serve those markets in a way that connects to our hubs and then unleashes the breadth of the rest of our network, that’s a really compelling offering that achieves higher yields. And so even though pilot expense for those regional aircraft will be going up, we’re confident that the yields that will be introduced will take that into account. But one thing I want to make clear, though, is as we take a look at regional pilot pay, but it costs quite a bit of money to become a pilot. And the expectations for a pilot coming out and saying taking that first job, right, they have changed over time. So as we look forward, I do think that as an industry, pilot wages are going to increase. And that’s something that the industry as a whole is going to have to digest. And ultimately, that will show up through our cost structure and be a factor in terms of how we try to monetize our product.” (American Airlines Group Q2 2022 Earnings Call, 7/21/2022)

American promised analysts it would not restore capacity quickly and that it would even trim capacity for the rest of 2022

American’s CCO: “there’s not a world where we’re going to go back into flying money and losing flights for strategic purposes or things like that.” “Vasu Raja — Senior Vice President, Chief Commercial Officer: So that’s when we say getting asset utilization up and running, it’s a meaningful thing, but the thing not to be lost is that doesn’t mean we’re putting back 2019. Like there’s not a world where we’re going to go back into flying money and losing flights for strategic purposes or things like that. There’s not a world where we go and complicate it. But there is one where we’ve really realized the more unique O&Ds we create, the more that turns into real revenue production for the airline.”(American Airlines Group Q2 2022 Earnings Call, 7/21/2022)

American’s CFO told analysts is that “we pulled down capacity in the third and fourth quarter.”“Derek Kerr — Vice Chairman, Chief Financial Officer: Yes. The mainline equivalent, our mainline aircraft, but what we’ve done is, instead of pulling aircraft out of the schedule, we lowered the utilization on those aircraft. So if you normally fly 10 hours a day, we now fly 9 hours a day. And if you take that hour across the entire fleet, it’s equivalent to about 44, 45 aircraft. So we haven’t really pulled anything out of the schedule. We’ve floated. Now as we look forward, I think the right answer is we pulled down capacity in the third and fourth quarter, is to probably take some of those aircraft out and utilize them for spares and for maintenance lines and utilize them to make the reliability better in the airline. So I think as we go forward, we’ll do it a little bit differently than we have and not — and we’ll raise the utilization on the rest of the fleet, but take some aircraft out to provide relief for David and his operating team to have more aircraft for maintenance and more aircraft for spares.” (American Airlines Group Q2 2022 Earnings Call, 7/21/2022)

American’s CCO said “we’re going to take capacity in places where it can create the most operational benefit” but promised to minimize “any passenger disruption.” “Vasu Raja — Senior Vice President, Chief Commercial Officer: Yes. Kyle, thanks. This is Vasu. So first, a number of the cuts that we talked about have already been loaded into our published schedules that are there. And then as we go into fall, effectively, we’re going to take capacity in places where it can create the most operational benefit, which means, one, it can go and turn into the best quality — the best level of reliability for our customers and also where we can reaccommodate people the best. So we’ve minimized any passenger disruption. And then as we go forward into later September, October and deeper into the winter, we have time yet to go and figure out how that goes. There’s still a number of things that we’re looking at before we make that determination.” (American Airlines Group Q2 2022 Earnings Call, 7/21/2022)