American Airlines Group Inc. Q3 FY2025 earnings call

• Sales and Distribution: Grew corporate revenue by 14% year-over-year in Q3, expect to fully recover lost revenue share by year end and focus on growing beyond historical levels.
• Loyalty Program: Exclusive partnership with Citi begins January 1, launched new mid-tier Citi AAdvantage Globe MasterCard, active AAdvantage accounts up 7% year-over-year in Q3 with highest growth in Chicago (20% year-over-year).
• Fleet and Network: Taking delivery of new aircraft and reconfiguring existing fleet to grow premium seats at nearly 2x main cabin rate, lie-flat seats over 50% by end of decade; significant investments in airport infrastructure, including Terminal F at DFW.
• Customer Experience: Ongoing rollout of new flagship suite, investment in onboard experience with high-speed WiFi, updates to lounge network, partnerships with brands like Lavazza and AT&T.
• Operational Resilience: Quick recovery from challenging operating conditions, investments in technology like Connect Assist platform to preserve customer connections.

American Airlines reported record third quarter revenue of $13.7 billion. Domestic year-over-year PRASM improved sequentially each month and turned positive in September. Atlantic unit revenue was down year-over-year due to macro uncertainty and seasonal demand shift, but expected to be solidly positive in Q4. Latin America unit revenues were down year-over-year due to capacity issues but remained a profitable part of the business. Pacific year-over-year unit revenue declined mid-single digits in the quarter, but fourth quarter unit revenues expected to be approximately flat year-over-year off a strong 2024 base, supported by strength in premium cabins.

• Fourth Quarter: Expect capacity up 3%-5% year-over-year, revenue up 3%-5% year-over-year, CASM ex up 2.5%-4.5% year-over-year, adjusted operating margin 5%-7%, earnings per share $0.45-$0.75.
• Full Year: EPS guidance $0.65-$0.95 per share, expect free cash flow over $1 billion.
• Long-Term: Capital expenditures in 2026 expected $4 billion-$4.5 billion, focus on reducing debt to below $35 billion by end of 2027.

• Operating Conditions: Challenging operating conditions in previous quarters, though team recovered quickly.
• Government Shutdown: Impact on industry, hopeful for government reopening soon.
• Competitive Landscape: Labor cost advantages of competitors and potential capacity issues affecting margins.

Q: September unit revenue positive, Q4 guide flat. Explain change.

A: July was tough, August/September better, October better than September, fourth quarter expected flat due to sequential improvement across regions.

Q: Premium vs domestic unit revenue in Q4.

A: Premium strong all year, main cabin improved from July low, fourth quarter projection flat due to good performance across regions.

Q: Premium seat mix and buy-up.

A: Premium cabin load factor 65% leisure, outperformed main cabin by 5 RASM points year-over-year, nearly 50% of ticket revenue from premium, focusing on growing premium seating.

Q: CASM and capacity growth.

A: CASM ex depends on capacity growth, labor costs consistent with industry, airport rent/landing fees grow faster than inflation, focus on margin improvement through efficiency and revenue growth.

Q: Loyalty program incremental value.

A: New Citi relationship expected to grow cash remuneration 10% annually, ultimately see $10 billion remuneration and $1.5 billion incremental net income.