American Airlines Group Inc. Q3 FY2024 earnings call

• Acknowledged the impact of hurricanes Helene, Milton, Debbie and the CrowdStrike outage, which reduced third quarter earnings by approximately $90 million. - Achieved an adjusted pretax profit of $271 million and adjusted earnings per diluted share of $0.30, higher than July guidance. - Focused on revenue performance, operational reliability, and cost execution. - Made progress in regaining corporate and agency revenue share, with indirect flown revenue share showing improvement. - In the third quarter, continued negotiations for new incentive-based agreements with TMCs and agencies, rebuilt agency support capability, and relaunched the corporate experience program. - Fleet plans: 2024 expected to take delivery of 17 new aircraft, with 2024 aircraft CapEx expected at approximately $1.7 billion and total CapEx at ~$2.6 billion, a reduction from July guidance. - On track to deliver $400 million in cost savings in 2024, with $300 million achieved by the third quarter.

American reported an adjusted pretax profit of $271 million in the third quarter. TRASM decreased by 2% during the quarter, which was 1.5 points better than the midpoint of prior guidance. Domestic PRASM declined 3.1% year-over-year, but flown yields in September were positive year-over-year. Long-haul international showed positive year-over-year unit revenue growth, driven by strength in the Atlantic and South America. Managed business revenue increased 6% year-over-year, premium revenue grew approximately 8% on 3% more capacity, and loyalty revenues were up ~5% year-over-year. Indirect flown revenue share improved modestly, with corporate and agency flown revenue share having bottomed at 11% below historical levels and recovering to 7% below historical levels by the third quarter.

• Fourth quarter capacity is expected to grow by approximately 1%-3%, and full-year capacity is up ~5%-6% compared to 2023. - Fourth quarter TRASM is expected to be down 1%-3%, and full-year TRASM is down 3%-4% versus 2023. - Fourth quarter CASMx is expected to be up approximately 4%-6% year-over-year, and full-year CASMx is up ~2%-3%. - Fourth quarter adjusted operating margin is expected to be between 4.5% and 6.5% or earnings of approximately $0.25 to $0.50 per diluted share, and full-year adjusted operating margin is between 4.5% and 5.5% with adjusted earnings per diluted share of $1.35 to $1.60. - 2024 free cash flow is expected to be between $1 billion and $1.5 billion. - 2025 capacity is expected to grow low-single digits year-over-year, focused on markets not yet restored to historical levels.

• Operational disruptions from weather events such as hurricanes, which can impact earnings. - Impact of IT outages like the CrowdStrike outage, which can reduce earnings. - Supply chain challenges affecting fleet reconfigurations, deliveries, and equipment availability. - Competitive pressures that can affect revenue and market share.

Q: About top line growth and recovery of corporate/agency share.

A: Robert Isom stated that there is confidence in regaining share, with corporate managed business growing 6% in Q3 and indirect share recovering from 11% below historical to 7% below.

Q: Co-brand card program negotiations.

A: Steve Johnson likened progress to a baseball game in the 7th inning.

Q: Fourth quarter unit revenue guide and regional growth.

A: Robert Isom and Devon May discussed demand strength, election/Halloween noise, and regional vs mainline growth.

Q: Network deficiencies and product preferences.

A: Robert Isom spoke about network strength, premium product investments, and Wi-Fi upgrades.

Q: Fleet delays and corporate share recovery geography.

A: Robert Isom and Steve Johnson discussed impact of fleet delays on 2025 capacity and share recovery in major cities.

Q: Maintenance strategy and frequent flyer program.

A: David Seymour and Robert Isom talked about maintenance technology and loyalty program value.

Q: Wi-Fi revenue headwind and CapEx debt paydown.

A: Robert Isom and Devon May discussed Wi-Fi investment and debt reduction plans.

Q: AI and revenue upsell.

A: Robert Isom and Steve Johnson spoke about AI-driven efficiency and revenue opportunities.

Q: Corporate strategy wrong steps.

A: Robert Isom discussed realizing strategy issues and focusing on customer listening.

Q: Cabin refurbishment and election booking lull.

A: Robert Isom talked about refurbishment timelines and election-related demand lull