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American Airlines Group (NASDAQ:AAL)
Q4 2020 Earnings Call
Jan 28, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning and welcome to the American Airlines Group fourth-quarter 2020 earnings call. Today's conference call is being recorded. [Operator instructions] Following the presentation, we will conduct a question-and-answer session. [Operator instructions] And now, I would like to turn the conference to your moderator, managing director of investor relations, Mr.

Dan Cravens.

Dan Cravens -- Managing Director of Investor Relations

Thanks, Victor, and good morning, everyone. And welcome to the American Airlines Group fourth-quarter 2020 earnings conference call. Joining us on the call this morning, we have Doug Parker, our chairman and CEO; Robert Isom, president; and Derek Kerr, our chief financial officer. Also on the call for the Q&A session are several -- several of our senior executives, including Maya Leibman, Steve Johnson, Vasu Raja, Alison Taylor, and David Seymour.

Like we normally do, Doug will start the call with an overview of our quarter and a -- and the actions we've taken during this pandemic. Robert will then fall -- follow with some remarks about our commercial and other strategic initiatives. After Robert's remarks, Derek will follow up -- follow with the details on the quarter and our operating plans going forward. After Derek's comments, we'll open the call for analysts' questions, and lastly, questions from the media.

Before we be -- begin, we must state that today's call does contain forward-looking statements, including statements concerning future revenues, cost, forecast of capacity, fleet plans, and liquidity. These statements represent our predictions and expectations as to future events, but numerous risks and uncertainties could cause actual results to differ from those projected. Information about some of these risks uncer -- and uncertainties can be found in our earnings press release [Inaudible] this morning, as well as our Form 10-Q for the quarter ended September 30, 2020. In addition, we'll be discussing certain non-GAAP financial measures this morning, which ex -- exclude the impact of unusual items.

A reconciliation of those numbers to the GAAP results is included in the earnings press release and that can be found on the investor relations section of our website. A webcast of this call will also be archive -- archived on our website. The information that we're giving you on the call is as of today's date, and we undertake no obligation to update the information subsequently. So thanks again for joining us.

And at this point, I'll hand the call over to our chairman and CEO, Doug Parker.

Doug Parker -- Chairman and Chief Executive Officer

Thank you, Dan. Thanks, everyone, for being with us. So look, before I begin my prepared remarks, I want to pre-emptively state that we will not be commenting nor answering questions on the recent activity in our stock price. As a rule, we don't speculate on the day-to-day movements in our share price and we'll stick to that rule today.

So well, we do have a lot to talk about. So I'll just start it, and then Robert and Derek will add some more, and we'll take questions after that as -- as we always do. So look, 2020 -- 2020 was obviously an incredibly difficult year. But we couldn't be prouder of what the American Airlines team accomplished in the face of extraordinary challenge.

Our team got the country and economy moving, and they did so safely and with great care. American Airlines flew more customers last year than any other -- any other airline. And our team did so while running a solid operation, ensuring our aircraft and airport facilities were clean and safe for every customer who needs us. The year ended on a high note with the extension of the payroll support program.

This positive outcome is the result of the company and union leadership working arm and arm, bring PSP2 over the finish line. It's clear that great things go about when we raise our voices together for the greater good. Of course, we're also grateful to our elected officials who recognize that the airline industry plays a vital role in the recovery from the pandemic. We talked a lot about the best days here in Americans.

We use that term to describe moments that make American truly unique and why our team believes it's the best airline in the world. December 24 was that best day for me. We welcomed back all of our furloughed team members and reinstated their pay and benefits. Thanks to our tremendous support teams working around the clock, we were able to deliver thousands of colleagues their first paycheck in months.

It's easy to forget that a lot happened in 2020 on top of navigating a pandemic. Yes, we took aggressive steps to permanently lower our costs, increase our liquidity, and care for customers in ways we've never seen before through the COVID-19. But we also accomplished significant milestones like entering into groundbreaking new partnerships and reach -- and reaching a new joint collective bargaining agreement covering our fleet and maintenance colleagues. And just last month, we seamlessly returned the Boeing 737 MAX to commercial service.

We'll talk more about the other accomplishments shortly. As we sit here today, I can unequivocally state that despite every challenge thrown our way, I've never been prouder of a co -- of a company in my entire career. The American Airlines team and our industry is incredibly resilient, and this past year has proven that. As we turn our attention to the year ahead, 2021 will be a year of recovery.

There's still a lot of unknowns, of course, when or how quickly demand will return. But make no mistake, it will return. The good news is there are vaccines. And while it will take some time for them to be widely distributed, progress is being made every day and that's encouraging.

We don't know exactly when we may return to prior levels of demand. What we do know is that we're prepared to withstand the ongoing crises irrespective of how long the recovery takes. We ended the year with over $14 billion of total available liquidity. And more importantly, we've used this opportunity to make American much stronger.

When the recovery does occur, we'll be prepared and even better positioned than we were prior to the pandemic. And we'll do so. I think of our team, our customers, and our company. On the team front, we're proud of the progress we've made especially in 2020.

This crisis has brought the American team together, strengthened the relationship between management and our unit -- and our union partners in incredible ways. Since the onset of the pandemic, we've been meeting with our unions every two weeks to discuss the company's response to the crisis and our path forward. And we stood side by side as we work to advocate for PSP -- PSP2. And while we made the difficult decision to furlough 19,000 team members last fall, we prepared for that reality in a way that was cooperative and collaborate with our union partners.

Our hope is to expand what we've accomplished in the past year, knowing that together we can be the best in the industry and advocating and caring for our team. For our customers, we're doubling down on operational excellence. Once we're back at full speed, we're positioned to run the best airline American Airlines has ever run through its operating reliability. We've reset our network to focus even more on our strongest and best-performing hubs, and migrated to a much simpler, more modern fleet.

We've talked before about efficient growth in Dallas Fort Worth, Charlotte, and that work is now done. We continue to modernize our -- our facilities at Washington Reagan and improve the connectivity of Chicago O'Hare, Phoenix, Philadelphia, and Miami. And we're building a much stronger network than we had before. In addition to the inherent strength of our hubs, in 2020, we establish new and innovative partnerships with Alaska and JetBlue that will make us stronger on the West Coast and in the Northeast.

We also [Inaudible] over the past year to make American a much more efficient airline. We have -- we had a truly unique opportunity to shut down the largest airline in the world and rebuild around our strengths. This enabled us to bring forward and accelerate a number of efficiencies in 2020 that were originally planned for the longer term, and we are passionately pursuing those efficiencies as we recover through 2021. Derek will elaborate on this in his remarks, but two of the best examples are the permanent retirement of more than 150 aircraft and five different aircraft types, and the 30% reduction in our management staff.

We believe the efficiencies we've built in the business will drive more than $1.3 billion of permanent nonvolume-related, nonfuel-related savings in 2021, and of course, beyond. So in summary, we could not be more proud of the work the American Airlines team has accomplished over the past year. We're very well-positioned and feel great about where American is going to be as demand returns. With that, I'll turn it over to Rob.

Rob Isom -- President

Thanks, Doug, and good morning, everyone. I'd like to also thank the entire team for their tremendous efforts in navigating an exceptionally challenging year. Supporting our team members and customers was paramount in 2020, and it continues to be a priority as we move into 2021. We continue to expand our pre-flight COVID-19 testing to make travel easier, including pre-flight testing for certain international destinations and at-home testing for travel to all U.S.

cities requiring negative tests. In the fourth quarter, we began the rollout of a digital health passport, VeriFLY. So customers can easily confirm testing and COVID-19 travel requirements, and streamlined airport check-in. This tool is now available for travel to many international locations and for travel in the United States.

Starting today, customers also will have the ab -- ability to use VeriFLY for travel to the U.S., to the U.K., and Canada as we will continue expanding our use of VeriFLY this year to o -- open up new -- to open up international travel in key markets. With cleanliness and safety top of mind, last month, we were pleased to achieve STAR certification in the Global Biorisk Advisory Council for our entire fleet of aircraft and for our Admirals Club lounges. This is a testament to the effective cleaning, disinfection, and infectious disease protocols we put in place over the past year. That caused us to return to the skies.

We've taken a number of steps to give them flexibility and competence when they book with American. We've eliminated the change fees on most domestic and international itineraries and fees for mi -- mileage reinstatement on canceled work bookings, domestics sa -- same-day travel standby -- standby travel, and reservations booked by phone. We also made it easier for top-tier customers to earn AAdvantage elite status, paused mileage expiration through June 30, 2021, extended 2020 status into 2022 for all members. Each of these efforts is predicated on our philosophy that American Airlines should be the easiest airline to do business with, and we'll continue delivering on that commitment as more people return to flight.

On fourth-quarter revenue -- our fourth-quarter revenue was down considerably versus 2019, 64% year over year. But we saw improvements compared to the third quarter when revenue was down 73% year over year. The momentum we saw heading into the fourth quarter was tempered by the su -- the surge in COVID-19 cases and has -- and the increased travel restrictions in many parts of the country. As we have done throughout the pandemic, we responded by making closing adjustments to our schedule while maximizing the connectivity of our network.

And in a testament to our team, that our fourth-quarter passenger unit revenues were by far the best in the industry. We will continue to be flexible and match our future capacity with observed booking trends while playing to the strengths of our hubs and the parts of the country where travel demand is great. Our year-over-two-year basis, we currently expect our first quarter system capacity -- capacity to be down 45%. The recent CDC order to require a negative COVID test for entry into the U.S.

has had an impact on our international bookings. So many countries and hospitality providers are planning to make testing available to travelers, the timing and scale of these efforts remains -- remain unclear. Given this continued demand volatility, we will remain as flexible as possible and match capacity to demand. Our ongoing engagement with leisure operators will pay dividends as we head toward a recovery.

I want to acknowledge our sales team and entire customer organization for their work. This team was recently named Airline Partner of the Year by the American Society of Travel Advisors and the Best Overall Airline for Students and Youth by StudentUniverse, which are both important -- important accolades for such a challenging year. Cargo remains a bright spot for our business. Our cargo revenue in the fourth quarter was up 32% year over year despite flying in significantly reduced schedule.

In 2020, American operated more than 5,200 cargo-only flights, transporting 167 million pounds of critical goods and supplies around the world during the pandemic. Cargo will continue to be an area of focus in 2021. We remain optimistic about the recovery because of the changes that we've made to our network. We will offer customers the largest and most compelling global airline network thanks to the actions taken in 2020.

We will have a -- a -- the full run-rate benefit of our advocates in Dallas Fort Worth and Charlotte, our best-performing hubs. And we'll have a fantastic new facility at Reagan National that will enable us to upgrade to the hub. By the third quarter of 2021, all of our DCA flights will have a first-class product and we will eliminate the 50-seat regional jet operations there. Update simplification, continued upgrading, and improved connectivity will also scale the cost of our other connecting hubs and improve their weather -- revenue-generating cap -- capabilities as well.

By partnerships with Alaska and JetBlue will also create the best and largest network for our customers on the West Coast and in the Northeast. Customers will have access to a seamless network that allows us to focus our assets on what we do best. In New York, we will remove the 50-seat regional jets, upgrade our service, and offer a much more competitive network for customers. As a result, we will launch new long-haul international flights from New York this summer and we start service to Tel Aviv and Athens.

Similarly, we are working with Alaska on the West Coast. And this year, when demand returns, we will begin service from Seattle to London, Shanghai, and Bangalore. We have also announced a new integrated frequent-flyer offering and have signed new corporate contracts. This partnership is already creating value for customers throughout the West Coast, including our hub in Los Angeles.

Lastly, while we anticipate international demand will be slower to recover, we will use our strength in Latin America and our partnerships to create a leading international network. Our Latin American network has long been uniquely valued by our customers, and its performance during the pandemic is on stand out. Despite near-term demand volatility, we expect -- expect Latin America to recover sooner than the rest of our international network and we will continue to offer customers the largest and most comprehensive network in the region. We rationalize many parts of our transatlantic and transpacific networks during the pandemic and integrating more deeply with our partners.

As an example, through our partnership with Qatar Airways, we've been able to leverage Doha as a global connecting hub, which has opened up many new markets for our customers. As demand recovers, we anticipate leveraging these partnerships to start flights and increase global -- and increased global connectivity even more. We believe the structural changes we made in 2020 will enable us to produce industry-leading -- leading revenues and lower expenses through our focused customer proposition for other network in a smaller fleet. We will continue to adapt our business to customers' needs and we'll keep working hard to make sure that they have peace of mind when they travel.

And with that, I'll turn it over to Derek.

Derek Kerr -- Chief Financial Officer

Thanks, Robert, and good morning, everyone. Before I begin my remarks, I would also like to thank our entire team for their tenacity and resilience throughout the pandemic. While 2020 was certainly a financially difficult year for the airline, the collaboration, teamwork, and sheer grit our team demonstrated was impressive. This morning, we reported a fourth-quarter GAAP net loss of $2.18 billion or $3.81 per share.

Excluding $32 million of net special nonoperating items, we reported a net loss of $2.21 billion or $3.86 per share. For the full-year 2020, we reported a GAAP net loss of $8.9 billion. And excluding net special items, we reported a net loss of $9.5 billion. Robert talked about what we're seeing with the revenues, so I'll focus my remarks on the cost side of the P&L.

Through aggressive actions, we have reduced our fourth-quarter total operating expense, including net special items, by 37% versus 2019. We remained focused on aligning our costs with capacity while preserving the maximum amount of flexibility to respond to customer demand. We have accelerated several of our long-term efficiency plans, and as Doug mentioned, we're on track to permanently remove at least $1.3 billion from our cost structure in 2021 and beyond. At the end of the fourth quarter, we had approximately $14.3 billion of total available liquidity.

Costs were flat from the third quarter to the fourth, and we continue to see a positive trend in our daily cash burn rate -- rate, which improved from approximately $44 million per day in the third quarter to approximately $30 million per day in the fourth quarter. The reduction was due to revenue improvements on higher capacity. As a reminder, our definition of cash burn includes $8 million per day of regular debt principal and cash severance payments. During the quarter, our treasury team did a phenomenal job of continuing to strengthen our liquidity through a series of capital market transactions.

We raised approximately $1.5 billion of incremental cash through two equity transactions to strengthen our balance sheet composition, and we still have $118 million left on our previously announced at-the-market equity authorization. I would like to take this opportunity to specifically thank our recently retired treasurer, Tom Weir. Tom has been an invaluable member of our team -- our team for more than 20 years. His expertise will be missed, but I am confident our new treasurer, Meghan Montana, and her team -- and her team will pick up right where Tom left off.

During the quarter, we took delivery of 10 MAX, 737 MAX aircraft, and we expect to take another seven this quarter. These aircraft were built while the MAX was grounded and were efficiently financed through sale-leaseback transactions. Also, as a reminder, we reached an agreement with Boeing to secure deferral rights on eight of our 2021 MAX deliveries and all 10 of our MAX deliveries in 2022. We have deferred five of these aircraft to date.

And as I mentioned last quarter, to avoid exercising additional deferral rights, we would need to see substantial improvement in the demand environment. As Doug discussed in his opening remarks, as we look ahead to a recovery in 2021, we are passionately pursuing the initiatives we have put in place to make the airline more efficient when we are back to a normalized demand and capacity environment. Like all airlines, our plan -- our planning begins with our fleet. As we have mentioned on previous earnings calls, we have worked hard to rebuild our fleet into one that is simpler and much more efficient to operate while offering our customers a consistent and improved product and experience.

As part of that process, we have retired more than 150 older noncore aircraft, including five total fleet types, lowering our average fleet age to 11.2 years, the lowest of the U.S. net -- network carriers. Not surprisingly, the aircraft that we exited were the least cost-efficient aircraft in our fleet. With only four mainline aircraft types remaining, we will see improved aircraft utilization and operational efficiencies in the back half of 2021 through the increasing gauge, reduction in inactive aircraft, including spares and maintenance allocations.

Additionally, we have further accelerated our seat harmonization project and now expect the entire project to be complete by the end of 2021. When this work is done, we will have a more consistent product with more premium seats, larger overhead bins, and in-seat power. These projects will provide significant opportunities to not only improve revenue production but also lower our unit costs now and well into the future. As a result, when demand conditions improve, we could eventually reach 2019 levels of capacity with approximately 10% fewer aircraft.

We will also have a more efficient workforce on the other side of the pandemic. We reduced our management size by a third, resulting in an estimated $500 million of permanent cost reductions. For reference, that would drive more than an entire pre-tax margin point on our total revenue base for 2019. Beyond that, we have implemented $700 million in additional labor efficiencies that have been incorporated into our plans going forward.

These include but not limited to optimize staffing plans and the u -- utilization of technology to be more efficient across our operation. From many of our workgroups, these initiatives will allow us to achieve the best productivity levels that we have seen in years. Many of these projects would have come to fruition over time. But due to the extraordinary circumstances in 2020, we took the opportunity to accelerate and implement these efficiencies as part of our future foundation.

As we looked at the first quarter, there continues to be a tremendous amount of uncertainty with bookings. Stubbornly high COVID-19 cases and more stringent travel restrictions continue to constrain demand. And as a result, we expect the first-quarter demand environment to be very much like the fourth. As Robert noted, we expect capacity to be down 45%.

We also expect total revenue to be down approximately 60% to 65% versus the first quarter of 2019, similar to our fourth-quarter results. When this flat revenue performance is combined with known cost pressures from higher fuel, restoring pay to our furloughed workers, and volume-driven expenses, we expect our first-quarter pre-tax earnings, excluding special items, to be lower than the fourth quarter. We presently expect to end the quarter with approximately $15 billion in total available liquidity. This results in an average -- first-quarter average daily cash burn rate of approximately $30 million per day flat with the fourth quarter.

The first quarter in -- also includes approximately $9 million per day of debt principal and cash severance payments, which includes a $360 million WTC amortization, including the maturity of our 2011-1 WTC, which unencumbers 30 aircraft. Also included in our daily cash burn for the quarter is a $240 million contribution to our pension and $225 million in nonaircraft capex. In terms of our balance sheet, we feel good about the flexibility and ef -- and efficiency we have. Approximately 40% of our outstanding debt is prepayable without penalty, and we still do not have any large nonaircraft debt maturities until our $750 million unsecured bond matures in June 2022.

After all the COVID-related financings we completed in 2020, our average cost of debt is just over 4%. For guidance for the full year of 2021, our debt payments will be $2.9 billion and our pension payment is $695 million. Full-year capex will be $900 million of nonaircraft capex. And due to our negotiated settlements with Boeing discussed earlier and attractive aircraft financing, our net aircraft capex, including PDPs, will be an inflow of $1.2 billion.

As we have previously stated, when demand recovers, we expect to use all excess cash to further de-lever our balance sheet. Earlier this month, we received the first installment of approximately $3.1 billion of PSP2 funds from the Treasury Department, and negotiated an extension on the final draw date of the CARES Act loan facility from March 26 to May 28, 2021. This extension gives us more time to decide our liquidity needs for the year based on the pace of the recovery, as well as to evaluate alternatives to drawing the CARES Act loan. Our industry still has a long path re -- to recovery ahead.

But the actions we have taken in American to conserve cash, bolster liquidity, and drive permanent efficiencies across the business give us confidence that we are well-positioned for the year ahead and the long term. And with that, I'll open it up to questions from the analyst.

Questions & Answers:


Operator

[Operator instructions] Please standby while we compile the Q&A roster. And our first question comes from the line of David Vernon from Bernstein. You may begin.

David Vernon -- Sanford. C.Bernstein

Hey, good morning, guys. I'm wondering if you could help us frame what the cost actions you guys have taken and the efficiency that you guys put forth through this crisis. Frame how that -- how we should be thinking about EBITDA margins in a -- in a -- in a -- out year perspective from a '23 or maybe '24 level. If you think about the $1.3 billion of -- of nonoperating cost takeout plus the efficiencies in the fleet, if we get to revenue levels that we saw in 2019, where should we be thinking the EBITDA margins will shake out at that point?

Doug Parker -- Chairman and Chief Executive Officer

Hey -- hey, David. Really hard, of course, to project what 2023 margins are going to be without knowing what demand is going to be. So I guess this is what I think for most [Inaudible] tell you, the $1.3 billion is -- as -- as we describe is real sustainable. I -- I -- what we -- what [Inaudible] in that is if we -- if we were starting 2019 right now with this fleet, with this lay of organization, this management, this management team, our earnings in 2019 would have been $1.3 billion back.

But you care about that cause -- and -- and other things have happened with that. That would be better. We've got a contract out with our -- so -- but you want to make those adjustments. But it's real and it's -- it's -- it's a fundamental difference in the airline right now.

So you can use that to make your own 2023 projections.

David Vernon -- Sanford. C.Bernstein

Yeah, I -- I -- I know -- I realize it's difficult and nobody knows what demand is. I guess in our conversations with investors, it feels like people are framing your -- your -- your earnings power off of the 2019 base when it sounds like with the fleet changes you're making and with the cost reduction that's you're taking, that -- that -- that's -- that's too low of a starting point. And I guess I'm just trying to -- to -- to -- to understand if that is the right way to think about it or if you think that the earnings power of the businesses is -- is going to be materially higher or -- or higher than it was. Again, assuming the revenue environment stays [Inaudible]

Doug Parker -- Chairman and Chief Executive Officer

Yes, David, and I appreciate the question. It's -- it's really hard to figure out the margins because it so dependent on revenues. But to answer your question, to the extent that people are modeling 2023 with whatever revenue assumptions they want to, if you -- if you weren't -- if you didn't know that American Airlines is going to be $1.3 billion more efficient, you should build it in your models. If -- if you already suspected that, you don't have an adjustment to make.

That's -- that's where we are. It's -- it's -- those are real differences in the way this company is now structured versus where it was in 2019.

David Vernon -- Sanford. C.Bernstein

All right. Thanks for your time.

Doug Parker -- Chairman and Chief Executive Officer

Thanks, David.

Operator

Thank you. Our next question comes from the line of Savi Syth from Raymond James. You may begin.

Savi Syth -- Raymond James -- Analyst

Hey, good morning, everyone. Just i -- if I might on -- on the cost side of things. Can you provide any color on like 1Q '21, what you're expecting on the opex side, including what might be temporary because of PSP2? And just a follow-up on -- on, Doug, your comments, response to David. I -- I think -- are you're basically saying that the 2019 -- 2019 capacity, you should see $1.3 billion less and kind of not -- nonfeel opex out of the system? Is that -- is that fair way to look at it?

Doug Parker -- Chairman and Chief Executive Officer

Yes.

Derek Kerr -- Chief Financial Officer

Yes. And -- and Savi to the -- to the answer. I mean the -- the one number that we do know is the -- the number added back to salaries is about $300 million, which is the amount of money that -- that we want higher salaries due to PSP2 coming back. The other is volume.

And then fuel price is definitely up. Fuel price -- and we -- and we gave you a 45% capacity. So I think if you take calculate where the price of fuel is now and that capacity increase, that fuel should be up right around $300 million where the curve is today. And then we have a little bit higher regional expenses because we're growing the regional a little bit by about $100 million.

So those are the key -- the three key things. The rest is just depending on volume of -- of growth that we have over the fourth quarter.

Savi Syth -- Raymond James -- Analyst

That -- that's helpful. All right. Thank you.

Doug Parker -- Chairman and Chief Executive Officer

Thanks, Savi.

Operator

Thank you. Our next question comes from the line of Mike Linenberg from Deutsche Bank. You may be -- you may begin.

Mike Linenberg -- Deutsche Bank -- Analyst

Yeah. Hey. Two here. I guess Robert and Doug.

Robert, you sort of alluded to the fact that the new testing requirements that went into effect I guess earlier this week, it was obviously having some impact on maybe bookings to from Latin America, Caribbean, etc. What's -- what's thoughts on -- I know that the administration this week floated the possibility of domestic testing, and I just -- logistically, I just -- I can't get my arms around that and I'm not even sure if the airports would be -- would be able to facilitate it. Maybe it's an at-home type product and it sounds like maybe you are gearing up for that given what you're doing sort of behind the scenes. Can you just talk about that and whether or not that would even be feasible?

Doug Parker -- Chairman and Chief Executive Officer

Hey, Mike, it's Doug. Yeah, we certainly haven't been informed of that, so I think it's imminent. We -- we --what we know is what Robert said about international testing. We're doing that work with the Fed.

And Robert said it's had an impact on demand, certainly on short-haul international flight. But we're -- we're supportive of that. Anyway. Domes -- domestic testing is reasons you stated seems like something that would both be difficult and would have us testing Americans on airplanes that we all know are safe to be on.

So we'll -- we'll obviously work with the administration of what they think makes sense to our best to make sure that we're all doing everything we can to make sure that people are safe and also that we get through this pandemic as quickly as possible, which is our best interest, but also let them know what kind of impact that would have on -- on travel. But again, the bigger point is we have -- what -- what you say has been floated -- not even floated to us and so we -- we haven't heard anything directly from regulators or others about that possibility.

Mike Linenberg -- Deutsche Bank -- Analyst

OK, great. Very good. And then just a quick one to -- to Derek. You gave us the gross or you gave us the pension contribution for the year.

I think you said $695 million. How does that compare the -- what you anticipate expensing on the P&L? Thanks. Thanks for taking my questions.

Derek Kerr -- Chief Financial Officer

The expensing on the P&L is actually a credit of I think it's a -- let me get you back on that number, make sure we've got it right.

Mike Linenberg -- Deutsche Bank -- Analyst

Not a problem. Thanks, everyone.

Doug Parker -- Chairman and Chief Executive Officer

Thank you, Mike.

Operator

Thank you. Our next question comes from the line of Catherine O'Brien from Goldman Sachs. You may begin.

Catheine O'Brien -- Goldman Sachs -- Analyst

Hey, good morning, everyone. Thanks for the time. Hey. So my first one is on -- on the -- the 1.3 of the cost cut.

I guess could you just walk us through what some of the larger buckets are there? Sounds like fleet simplification, management team are decent -- management cuts are decent, percentage of that, I know you gave the $500 million for the management headcount reduction. And -- and then you touched on this a bit in your prepared remarks, but can you help us think about what proportion of that was event it pulling forward, initiatives already laid out versus maybe potentially some -- some new opportunities that came from turning over additional stones as a result of COVID?

Derek Kerr -- Chief Financial Officer

Yeah, I -- I would say -- I mean the -- the two big buckets as I talked about are the 500 in management and then the 700 in other labor. And that goes through all -- all groups. So it goes let's say as you -- as you get the summary, it's through every group: pilots, flight attendants, maintenance, fleet service. So -- so as we -- as we looked at every group, we -- we looked and see how can we be as efficient as we can in each one of these as we brought the people back.

So there's no -- that the biggest item definitely is management and that's the $500 million and the 700 of those and other things. We have a bunch of other items that are in that -- these facilities con -- consolidations, fuel efficiencies, benefits, a lot of other items that we have gone through to make sure that we're as efficient as possible. We do have other savings that are out there that due to volume will be down. But we'll have to see if those are permanent overtime and -- and whether they come back.

So I would say we did take advantage of this to do some of this earlier. All of it was on our plans over the next probably three years, but we've brought all of that forward. And as -- as we went through the process of unfortunately having to furlough people and as we bring people back, how do we -- how do we be as efficient as possible, and that's what we've done. Dynamic manning at the airport, single-agent boarding at airports, all of that stuff has been accelerated through this process and will be put in place as we -- as we grow back.

Catheine O'Brien -- Goldman Sachs -- Analyst

Got it. Understood. And -- and actually maybe one more for you, Derek. Can you just walk us through the -- through the calculus in determining how much cash you want to get on your balance sheet for the coming months just given the uncertainty? Is there a new minimum you want to have until demand gets back to a certain point and you just kind of factor in your expectations on cash burn to help decide on -- on potential incremental raises? Or is it really just more opportunistic to either use that lead to pay down debt in the future or keeping a pulse on the market, see if there are opportunities to rid of the most expensive debt? Would -- would --

Derek Kerr -- Chief Financial Officer

Yeah.

Catheine O'Brien -- Goldman Sachs -- Analyst

Yeah, thanks.

Derek Kerr -- Chief Financial Officer

Yeah, I think -- I think -- I mean we don't -- we don't have any requirements other than the 750 in 2022. And then we do have some payments, some term loans, and some to come up in 2023. So right now, the -- we've gotten ourselves at the end of this quarter, we -- we'll be at $15 billion, a significant amount above the $7 billion we had in the past. So I think the liquidity is there.

But we -- we have to keep our pulse out and we have to keep watch that, see where the recovery is. But we -- we are going to be opportunistic. Our -- our biggest -- we talked about the government loan, which we have, $7.5 billion against the -- the frequent-flyer program for that government loan which we would have to pull by May of 28. The determination of what do we do there is -- is one of our -- one of the biggest things we're going to do in the next few months.

But we're happy with the liquidity level where we're at. We're -- we're in a really strong position. We don't have a lot of capex coming forward in the next two years at all. As I -- I talked about, our actual net capex is positive this year, which will bring in cash flow for us.

So our biggest -- our biggest thing to look at right now is -- is the government loan. How do we refinance that? Actually, we haven't pulled it yet. So how do we -- what do we do for using that collateral and how much liquidity do we raise in that transaction? But we're really comfortable where we're at and we don't have a lot of commitments going forward from an aircraft standpoint or capex standpoint or debt standpoint in the next two years.

Catheine O'Brien -- Goldman Sachs -- Analyst

Understood. Thanks.

Operator

Thank you. Our next question comes from the line of Hunter Keay from Wolfe Research. You may begin.

Hunter Keay -- Wolfe Research -- Analyst

Hey, good morning, everybody.

Doug Parker -- Chairman and Chief Executive Officer

Hey, Hunter.

Hunter Keay -- Wolfe Research -- Analyst

Hey. A couple for you, Derek, probably. What's the latest on the -- the 787 delivery schedule for this year? And -- and just -- can you just give us a rundown on what you're planning for aircraft deliveries this year next and -- and how many of them you're already financing in place for?

Derek Kerr -- Chief Financial Officer

Yeah. Yeah. So we have -- right now, we haven't changed the delivery schedule on 788 yet. We have 19 deliveries coming this year, all fully financed.

And -- and as of right now, they're coming, but we are -- we are talking with our partners on -- on those aircraft. The MAX, we have eight more coming. Seven will come this quarter, all fully financed. And we have 16 NEOs coming, all of those fully financed.

So our -- our actual net aircraft capex, when we just talk about capex, is -- it's actually a positive. So those aircraft coming in will be positive cash flow. We -- next year, we have 26 air -- Airbus 3 -- 321s coming in, no financing. We have backstop financing on those, but no permanent financing yet.

So we're working on 2022. We won't take any aircraft that don't have financing going forward. So we're fully financed on all 2021 with sig -- with really good financing. And we still are -- are looking at 2022 right now.

And -- and -- and we -- we will look -- as we look at the Airbus planes next year and the 78s, we'll continue to look at those aircraft as -- as we talk to manufacturers.

Hunter Keay -- Wolfe Research -- Analyst

Super helpful. Thanks, Derek. And then just two -- two sort of quick clean up. One is interest expense.

Can you help me out with that this year and next would be great, even '23 if you want to take a stab at it? And then when does your blackout period end? Thanks.

Derek Kerr -- Chief Financial Officer

I'll get you the number. To blackout period ends today or tomorrow.

Hunter Keay -- Wolfe Research -- Analyst

OK.

Derek Kerr -- Chief Financial Officer

And I'll be back down in interest expense numbers.

Hunter Keay -- Wolfe Research -- Analyst

OK, great. I'll wait.

Operator

Thank you. Our next question will come from the line of Dan McKenzie from Seaport Global. You may begin.

Dan McKenzie -- Seaport Global -- Analyst

Hey, thanks. Good morning, guys. Question on corporate demand. The broad view is that it's -- it's permanently impaired.

And I just wondering if you can elaborate on the latest conversations with your corporate travel managers, what that path to recovery might look like? I'm pretty sure there's no airline planning for 50% permanent decline in the span and I'm thinking Americans got some share shift here. But I'm just wondering if you could just help us connect the dots on that -- on this part of the recovery story?

Vasu Raja -- Chief Revenue Officer

Yeah. Hey, Dan, this is Vasu. I'll -- I'll start into that. Look, the reality is -- is corporate travel demand is down.

It is 5% to 10% of -- of what its historical levels were. And though we're very optimistic that it'll return as vaccines are distributed, the timing, the speed, the -- the -- the rate of that is unfair at best. But also, as -- as important as that is, the -- the thing that really never forget, I -- I mentioned this a lot, I'll do it again here, is the power of the network business, right? That -- that for us, as the primary value we create -- as we create more origin and destination markets for customers, that creates more value for them and that results in them, they're paying us more for that product. And indeed, what we see right now is that 50% of the revenue that we're drawing are from origin and destination markets where really American Airlines has the best network or, in some cases, the only travel option.

And indeed, the yields in those markets are 50% higher than in markets where our product is the most monetized and a ton of different carriers can provide the O&D. So that's a huge degree of -- of leverage in the business because, of course, the -- the big way of going versus if we can move our capacity around. And so in a world where -- where corporate travel is slow to come back, and we expect that it is, we -- what we've really tried to do is make the airline as limber as possible so that we can go and create as much connectivity where there is travel demand. And that -- some -- in some cases that we are taking leisure or are taking it, in some cases, where -- where our origin and destination network is -- is uniquely advantaged versus other airlines, and the yields that we see in those O&Ds are materially higher than -- than what we can generate even from what business travel is there and really commodities all these.

Alison Taylor -- Chief Customer Officer

Yeah, thanks, Vasu. And thanks, Dan. We're paying really close to our corporate travel managers and their risk management team to give them all the information they need to feel comfortable to get their travelers back on the road and have to spend most of their days doing that and building confidence in travel through information and communication. We also think very close to GBTA and the other large association to provide great communication to these travel managers.

A little early to say, but as you saw, some of the surveys coming out from GBTA. They did indicate the back end of '21 to start corporate travel. Thank you.

Dan McKenzie -- Seaport Global -- Analyst

Yeah. Thanks for the -- the perspective. I guess just following up on that. I wonder if you can elaborate a little bit more on -- on travel passport initiatives? What countries are you focusing on initially for -- for adoption? And I appreciate that it's early, but is there a read on what it's going to take for these -- for countries to get a little more comfortable with this -- this idea? Maybe COVID metrics or what -- what type they want to see?

Alison Taylor -- Chief Customer Officer

Luckily, we have great partners. We don't do this alone. So working with tourism bodies, our hotel partners. We've been able to stand up very quickly in 19 soft market testing, and of course, we have our VeriFLY health wallet that provides all the documentation.

Just if you're ready to travel. You've got a ticket, you can go on. And actually, as an example, Dan, on Tuesday, we have thousand plus travelers coming back from Cancun to the U.S. Everyone checked in and boarded successfully and had their negative test.

So we've been able to facilitate this through communication with our customers and being very proactive with our notification, and calling customers directly, and working on the ground across every station led by [Inaudible] group, who's done a great job of making sure that on the ground, we're ready to help our customers.

Dan McKenzie -- Seaport Global -- Analyst

I see. Thank you. Appreciate it.

Doug Parker -- Chairman and Chief Executive Officer

Thanks, Dan. Thanks, Alison.

Operator

Our next question will come from the line of Jamie Baker from J.P. Morgan. You may begin.

Jamie Baker -- J.P Morgan -- Analyst

Hey, good morning, everybody. Very thorough call. Most of my question has been answered. But, Derek, you disclosed you are able to achieve 2019 capacity on 10% fewer aircraft.

Would you be able to express the capacity base that would be required to get you back to 2019 ex-fuel CASM? Apologies if I missed that in your prepared remarks.

Derek Kerr -- Chief Financial Officer

Capacity base meaning area number of aircraft?

Jamie Baker -- J.P Morgan -- Analyst

No, ASMs. And -- and if 2019 is even the correct base to be using, that's just sort of become the -- the -- the industry standard at the moment. How much capacity do you have to operate to get back to 2019?

Derek Kerr -- Chief Financial Officer

All -- all we're trying to do is -- I mean, obviously, we're not back to those levels yet and we don't know when we're going to be back to those levels. All we're trying to do is acquaint to the fact that if we did get back to 2019 levels, we could do it with a significant amount fewer aircraft because we got -- which -- we don't have to add a bunch of aircraft to get to those levels. Our -- our spares are down. Our maintenance allocations are down.

The MAX has come back, which we're down in 2019. So we have a significant amount of utilization increase and gauge increase in our -- in our fleet so that we would not have -- in order for us to get to 2019 levels, the point is that we would not need anywhere near as many aircraft to get to those levels because of those things. Whether -- whether that's the -- whether that's the right point, it's a -- it's a level that we know and that we were at back at that point in time. Hopefully, some -- someday in the future, we'll be ahead of those levels.

Jamie Baker -- J.P Morgan -- Analyst

Sure. Would you have a corresponding ex-fuel CASM number that would then equate to the 2019 capacity?

Derek Kerr -- Chief Financial Officer

No, we do not have.

Jamie Baker -- J.P Morgan -- Analyst

OK.

Derek Kerr -- Chief Financial Officer

We don't have that right now. Yup.

Jamie Baker -- J.P Morgan -- Analyst

And -- and second, I came into the call, Mark and I are also curious on with the net proceeds of PSP were going to be in. And -- and I think you answered this in response to Savi's question, so is -- is the $300 million in -- in incremental labor the only thing we net out or were there any other additional operating costs?

Derek Kerr -- Chief Financial Officer

That's what you would net out.

Jamie Baker -- J.P Morgan -- Analyst

OK. All right. Thank you very much. Take care.

Doug Parker -- Chairman and Chief Executive Officer

Thanks, Jamie.

Jamie Baker -- J.P Morgan -- Analyst

Thanks, Doug.

Operator

Our next question comes from the line of Helane Becker from Cowen. You may begin.

Helane Becker -- Cowen and Company -- Analyst

Thanks very much, operator. Hi, everybody. Thanks for the time. Doug, you've been very close to [Inaudible] and you've done a lot to get this PSP in place.

Ha -- has there been any discussion and maybe it's -- it's too early in the new administration about changes going forward once we get post-pandemic to capital controls or anything else that would ensure the industry remains solvent in the event there is another crisis?

Doug Parker -- Chairman and Chief Executive Officer

No. I'm not -- no, we certainly haven't asked for that. Nothing like that, Helane.

Helane Becker -- Cowen and Company -- Analyst

OK. That's -- that's very helpful. And then that was -- that was my main question. And then the other thing is when you look at the fleet with -- I think you said eliminating five types and down to where you are now, and having 11.5 years.

How does that compare from an ESG perspective? Like what -- what will your -- what -- if -- if your carbon goals were to be half by 2050, what would the new goals be now? Like where would you be in say 2030 or 2035? Thank you.

Doug Parker -- Chairman and Chief Executive Officer

Yeah, I'll -- I'll try, Helane. The -- the goals we already have in place are -- are -- are re -- required in things like this improvement. So you're right. This is -- this is helpful to -- younger fleet is help for the environment.

In -- in terms of -- and American have done a lot in that regard already. We already have the youngest -- slightly younger even though -- even though years go on through this. So we're proud of that. But that's -- that's a big part of our -- of our commitment to getting to carbon neutral is continuing to have -- have a modern fleet, we've done with these -- these retirements.

Helane Becker -- Cowen and Company -- Analyst

OK. That's very helpful. Thank you.

Doug Parker -- Chairman and Chief Executive Officer

Thanks, Helane.

Operator

And our next question comes from the line of Joseph DeNardi from Stifel. You may begin.

Joseph DeNardi -- Stifel Financial Corp. -- Analyst

Thanks. Good morning. Maybe a question for Doug or Derek following up on -- on hires. Do -- do you feel comfortable from a -- a legal standpoint selling stock into this market and how quickly can you increase your I guess your -- your authorization?

Doug Parker -- Chairman and Chief Executive Officer

Yeah, Joe, kind of falls on the stuff that's referenced come in on. What -- what -- again, what has Derek has comments, we still have $118 million left on our previously announced at-the-market equity authorization. And if -- if -- if we choose to do anything more than that, we obviously need to inform our investors. But right now, that's -- that's what we have to tell you.

There's a $118 million on the ATM equity authorization. And whether or not we choose to do that or feel comfortable doing it, we can't talk about it.

Joseph DeNardi -- Stifel Financial Corp. -- Analyst

OK. And then, Vasu, can you just quantify maybe what -- what -- what gauge looks like on the other side of this relative to pre-COVID? And then if you could just walk through the -- the four geographic entities and speak to maybe the -- the structural impact to capacity based on the -- the fleet actions if -- if that makes sense? Thank you.

Vasu Raja -- Chief Revenue Officer

Yeah. The -- we -- indeed, we will be getting a material about our updating as you probably figured from -- from Derek's comments. By the time we get to December, we have the ability to produce 2019's level of capacity on about 110 fewer airplanes. The -- and the -- and that'll be a gauge increase of about 4%.

Joseph DeNardi -- Stifel Financial Corp. -- Analyst

Got it. Thank you.

Operator

Thank you. Our next question will come from the line of Andrew Didora from Bank of America. You may begin.

Andrew Didora -- Bank of America Merrill Lynch -- Analyst

Hey, good morning, everyone. My questions have -- have already been answered. But just -- just one for -- one for Derek. I know you're talking about net cash flow in from -- from capex.

Can you give us the gross aircraft capex number? How much financing you're assuming there? I'm just trying to understand the bridge to that -- to that inflow number. Thanks.

Derek Kerr -- Chief Financial Officer

Yeah. Gross -- gross aircraft capex is about with $1.1 billion and the aircraft capex for the MAX as in the NEOs. The 787s are fully financed and direct leased to us. And -- and then net on the -- that aircraft is approximately about $200 million.

So positive. So we will over finance those aircraft that are coming in. And then we have -- as -- as part of this settlement, we have some difference in our PDP's schedule that goes forward. So that's the -- the difference between the 1.2 and the 200.

Andrew Didora -- Bank of America Merrill Lynch -- Analyst

But that's perfect. Thank you.

Operator

Thank you. Our next question comes from the line of Sheila Kahyaoglu from Jefferies. You may begin.

Scott Forbes -- Jefferies -- Analyst

Hi, it's actually Scott Forbes on for Sheila. But I was wondering if you can maybe elaborate a little bit more on the fleet. I mean you removed 150 aircraft from the fleet. You're going to come out of this with the youngest fleet among the network carriers.

I mean can you talk about maybe how that plays into your planning for the recovery with route structure and how you're thinking about the competitive environment post-COVID?

Vasu Raja -- Chief Revenue Officer

Yeah, this is Vasu. Indeed, as -- as we've gathered from my remarks, we would be able to produce a similar level of capacity much more efficiently than what we could before. It doesn't necessarily mean that we'll do so. That's all going to be a function of -- of demand.

But a lot of what you see is -- is -- is really the -- the schedules that are out there flying right now. The strongest parts of our network, all of our core connecting hubs in Charlotte, Chicago, Dallas, Phoenix, Miami, Philly will continue to be that way. And indeed, with larger gauge airplanes, we can operate there much more efficiently, right? We can -- we can sca -- scale their expenses on more seats, but also by having fewer departures in there. It's more efficient and reliable product.

We would be shutting fewer and fewer departures to the airspace. The -- the biggest parts of our network is, as -- as Robert mentioned in his opening remarks, that -- that have we struggle in are really shored up through our partnerships with Alaska in the West and JetBlue with the Northeast. And through those, we anticipate the combination of those partnerships plus larger gauge airplanes and a more efficient fleet will enable us to go in and do things like take 50-seat regional jets out of those -- those markets, which are uniquely high cost but also really challenge the airspace. And so at -- at large, we can go in and provide more connectivity into the system, provide a better higher quality network for our customers, and do it in a much more efficient way than -- than what we would have done in 2019.

Rob Isom -- President

Hey, Vasu, I'll just add that every time we move one of those 50-seaters out, we're bringing in a two-class product. Obviously, with the -- a first-class section that has Wi-Fi and in-seat power as well. So it's -- it's a much more compelling offer to our -- to our customers, and we're really looking forward to.

Doug Parker -- Chairman and Chief Executive Officer

Thanks. Thanks, Scott.

Operator

Thank you. And at this time, we'd like to give the media a moment for questions. [Operator instructions] And our first question will come from the line of Mary Schlangenstein from Bloomberg News. You may begin.

Doug Parker -- Chairman and Chief Executive Officer

Hey, Mary. Mary?

Operator

Mary, your line is open.

Mary Schlangenstein -- Bloomberg -- Airlines Reporter

Sorry, I was on mute. Thank you. Hey, Doug, I know you're a little hesitant to talk about demand further out into the summer. But I'm wondering if you could talk about what you guys are seeing now in terms of spring break demand? Do you expect that that's just going to be a nonevent or do you see travel demand picking up a little bit maybe around that period?

Doug Parker -- Chairman and Chief Executive Officer

We'll let Vasu will give you that, Mary. Thanks.

Vasu Raja -- Chief Revenue Officer

Yeah. Hey, Mary, good to hear from you. I'm Vasu. And -- and look at -- what -- what makes demand forecasting so uniquely challenging in these times is that 75% of our booking curve happened inside 45 days.

So really, so much of spring break is -- is kind of a question mark right now and there's -- there's different tailwinds and headwinds for -- for what might happen with -- with demand there right now. What we have seen, as -- as --as Robert mentioned his comments, is that since there have been more restrictions on international travel, our international bookings have -- have roughly -- roughly halved in the last seven days versus the first call it two weeks of January. It remains to be seen how much that trend holds. Certainly, a lot of the -- of -- of travel partners out there are working hard to go bring testing online.

And so we'll see how -- how that goes for us. The biggest thing is to remain as limber as possible on how we plan the airline, and we'll continue to do that through the first quarter and beyond.

Mary Schlangenstein -- Bloomberg -- Airlines Reporter

Great. Thank you very much. And I had a quick follow-up. I noticed that you guys mentioned that DOJ and the attorney general of New York looking into the JetBlue Northeast U.S.

alliance. I'm wondering, there -- there have been some others filing objections to that, and -- and I'm wondering if your expectation is that you may have to -- to gear up for some kind of a second round of review by the DOT or having to go to greater efforts to -- to get that thing finally in place?

Doug Parker -- Chairman and Chief Executive Officer

Hey, thanks, Mary. We'll give you Steve Johnson.

Steve Johnson -- Executive Vice President, Corporate Affairs

Hi, Mary, how are you doing today? Let me start by saying that both the Alaskan, the JetBlue alliances that we've announced are profoundly pro-competitive and -- and kind of create enormous benefit for consumers. And -- and -- and that's why we like them, that's why we did it, and that's why we're so excited, and -- and our partners are so excited about implementing those. But as you know, the Department of Justice has over the last I guess 12 or 13 years looked really hard at all of the agreements between airlines, including all the mergers, taking a really good look at those. And that's what they're doing in connection with our JetBlue alliance.

That investigation is going to continue. My suspicion is that they're going to allow it to be implemented and see and -- and -- and take a look and determine whether the benefits that we've promised actually do materialize. And if they do, I think we'll be fine.

Vasu Raja -- Chief Revenue Officer

Hey, Mary. The -- the only thing I'd add to that is that we're working very ardently both AA and all of our partners to deliver on exactly that. We anticipate in the first quarter, we'll be rolling out some pretty comprehensive frequent-flyer and -- and productivity co-chair with customer. And in second quarter, we anticipate being able to start ramping in that new markets such as Tel Aviv and Athens, and certainly with JetBlue start the process of -- of deeper schedule integration.

Mary Schlangenstein -- Bloomberg -- Airlines Reporter

Great. Thanks very much.

Doug Parker -- Chairman and Chief Executive Officer

Thank you, Mary.

Operator

Thank you. Our next question will come from the line of Alison Sider from Wall Street Journal. You may begin.

Alison Sider -- Wall Street Journal -- Air Travel Reporter

Hi. Yeah, I was wondering -- hi. I was wondering if -- if there's been any discussion yet about what will happen after March 31 with the employees that have been recalled? If you're able to say yet whether they'll be able to stay on or if there's discussion at this point about another round of government aid?

Doug Parker -- Chairman and Chief Executive Officer

Yeah. Thanks, Ali. We -- we need -- your -- anyway. To state the obvious, April 1 is approaching and demand hasn't gotten much better by then.

So we -- we're definitely going to need to address this. And once demand starts to pick up, we -- we're -- we're already talking to our unions about things we might be able to do. But -- anyway, nothing really to report yet other than what we had hoped, which is that demand would be -- would have -- would have picked up. Maybe not so much by April, but into the summers that we would be ramping up for the summer, hasn't happened yet.

So we find ourselves with -- with April 1 approaching being concerned about this, and our unions being concerned about it. I'll work with them. I know -- I know our unions are already talking to -- to the administration and Congress about -- about this -- the -- anyway, with the current proposal to -- for stimulus to be included in there. We would -- we would obviously be supportive of that.

So anyway, that's what I know right now. Not -- not enough to tell you in definitive. But just tell you what we know, which is it's -- it's something we're going to need to address here before too long.

Alison Sider -- Wall Street Journal -- Air Travel Reporter

Thanks. And on the management side, I know you mentioned the -- just the cost savings of -- of all the reductions, the staff on the management side. But I guess do you worry at all at some point about brain drain? Is it hard to recruit new people into the airline just given the state of the industry right now?

Doug Parker -- Chairman and Chief Executive Officer

Yeah, but we're -- we're starting on -- starting on working on brain drain. We got an amazing team here. And -- and frankly, those that -- those that are here are engaged and doing an amazing work. And if anything, we find ourselves working more efficiently and better together just because there's not enough -- there's not -- not enough people to be doing inefficient things.

So I -- I feel really good about where the team is right now. We certainly have issues like all companies do in these times to make sure we're doing the right things to keep people engaged and retain -- and retain. But so far -- so far, so good. We really have an amazing human places working better together than I think we ever have.

And we're here, we can make that continue.

Alison Sider -- Wall Street Journal -- Air Travel Reporter

Thanks.

Doug Parker -- Chairman and Chief Executive Officer

Thank you, Ali.

Operator

And our next question comes from the line of Dawn Gilbertson from USA Today. You may begin.

Dawn Gilbertson -- USA Today -- Consumer Travel Reporter

Hi, good morning, everyone. Hey. Two questions. The first one is for you Doug.

Why -- I know this proposal was just floated, but I'm unclear and you're not the only one who has said this. Why you support international testing on flights but not domestic? And my second unrelated question, I'm not sure who it's for, is can anybody give any color on what you're seeing at international airports, especially in Mexico and the Caribbean in the first few days of the international testing requirements? Any problems that have cropped up? Anything you've had to do differently? Thank you very much.

Doug Parker -- Chairman and Chief Executive Officer

Yeah, I'll take the first one and give Rob the second one. I -- again, we -- we support international testing because that -- that's about getting more people to -- to be comfortable flying across borders. And we have worked with regularity on the administration to make that happen on very short. So -- and indeed, hopefully in doing so, that -- that allows the administration to get comfortable with allowing or to be more open and allowing people from New York, for example, to begin traveling to the United States at some point.

So -- anyway, that's -- we -- we work together and are supportive of that. I -- I didn't actually say that we weren't supportive of -- of doing something more expansive than that. What I said is we haven't heard it. We haven't been asked to do that.

And if we did, we -- we certainly would want to make sure it was something that wouldn't -- wouldn't restrict demand. We have seen drops in demand of course. I'm sure [Inaudible] And -- anyway, so which -- we work with the administration to see what, and if indeed, there is -- there are any -- any thoughts about doing something for having Americans fly within America. It certainly seems like it -- we'll wait and see what -- where they -- what -- if indeed there is anything there.

You have also just said it's been floated. No one has talked to us officially about doing that. If they do, we'll do our best to work with them, make sure we -- we stressed how safe it is to fly and which I know they know and they have proven that, and work to make sure that our customers feel comfortable flying. Robert.

Rob Isom -- President

Yeah, and, Dawn, thanks -- thanks for the question. Hey, the -- the biggest challenge is -- is getting word out to people that the new testing requirement has to be complied with. And to that end, we've done a terrific job of -- of getting word out through every imaginable channel. And what we found, as Alison mentioned a little bit earlier, our largest international destination these days, Cancun.

We've had on the first out of the box, no -- no no issues whatsoever. All passengers were basically boarded. So we've also done tremendous work at -- in all international locations and making sure that testing resources are available. And so yeah, we've seen some -- some customers show up with -- without the -- the necessary proof.

And we're reaccommodating them as -- as -- as required. But word getting out. And fortunately, with all the work that we've done to put the tools in place like VeriFLY, the -- the digital health passport, we're doing a pretty good job and -- and we're going to be able to handle this.

Dawn Gilbertson -- USA Today -- Consumer Travel Reporter

Thank you very much.

Doug Parker -- Chairman and Chief Executive Officer

Thanks, Dawn.

Operator

Thank you. Our next question will come from the line of Leslie Josephs from CNBC. You may begin.

Leslie Josephs -- CNBC -- Airline Reporter

Hi, good morning, everyone.

Doug Parker -- Chairman and Chief Executive Officer

Hi, Leslie.

Leslie Josephs -- CNBC -- Airline Reporter

What are your pilot needs and pilot training needs for summer of 2020. So Delta calling back 400 pilots. Do you expect them all, including the -- the 1,200 plus that were furloughed to be active by summer? And then just another question on capacity going forward with these partnerships. Do you expect American to continue to or do you know the percentage of how much American will sort of outsource some of this capacity thanks to these new partnerships?

Rob Isom -- President

So I'll try to -- to take both. So just in terms of -- of pilot. The question is how much you're flying? And so to that end, it's -- it's a -- it's a question mark out there. If demand comes back, we -- we know that over the long run, we'll have a home for -- for all -- all of our pilots.

Those -- certainly those that have been furloughed in the past. And hopefully that we'll -- we'll be able to keep everybody on -- on board. And that's just because of the -- that the pilot -- pilots and -- and retirement age, we anticipate that -- that we will be hiring pi -- pilots in the not too distant future. Now, second question was in terms of -- of that -- in terms of --

Leslie Josephs -- CNBC -- Airline Reporter

And having that not -- not flying your own metal versus.

Rob Isom -- President

Yeah, in -- in terms of -- thanks -- thanks -- thanks for that as well. The -- the relationships are not about outsourcing in any -- any way, shape or -- shape or form. It's all about better utilizing those assets we have and finding -- finding ways in the long run for -- for growth for us. And these -- these partnerships are -- are really creative in -- in that sense in that they're going to be able -- able to allow American Airlines to -- to do what it -- it does -- it does best, both domestically and internationally.

So prospects in -- in terms of the work that we do for the -- for the long run is --- is -- is very, very bright.

Doug Parker -- Chairman and Chief Executive Officer

Yeah, and, Leslie, and these are really pro -- pro-consumer. And what that means is they're going to -- they're going to generate more demand just because we can connect with each other. So we think it adds actually more -- more flying for American Airlines, lar -- more -- big airplane sets smaller airplanes, for example, in New York. Because we're -- because we're able to -- to compete better against other airlines who have larger networks in those areas than we do.

Leslie Josephs -- CNBC -- Airline Reporter

OK. And just one follow-up, do you have any expectation of how long American will be so domestic-focused versus its pre-pandemic global network?

Vasu Raja -- Chief Revenue Officer

Hey, this Vasu. And right now, a lot of what -- what you see in our -- in our asset footprint is more just we're operating where indeed there is demand. And if you go look out there in -- in nonbar schedules, so in February and March schedule, you'll see that the -- the Latin American network that we're operating is indeed in many cases larger than -- than what was there before the pandemic because that is the place where we see demand and heard Alison and Roberts comments, a place where we see a lot of testing get -- getting stood up pretty quickly itself. For those international, will -- will really be a function of coming back.

And then international bring back will be really a product of where demand is and how fast testing can get ramped up.

Leslie Josephs -- CNBC -- Airline Reporter

OK. Thank you.

Operator

Thank you. Our next question will come from the line of Tracy Rucinski from Reuters. You may begin.

Tracy Rucinski -- Reuters -- Analyst

Hi, good morning. Hi. So given the strong rise in shares this morning, are you planning an equity offering or anything to delever the balance sheet?

Doug Parker -- Chairman and Chief Executive Officer

Yeah, Tracy. We -- we said at the start of this call, we can't comment on the recent stock price movements. But we -- what we did say is that we have $118 million of authority on a previously announced after market equity authorization. So -- and -- as -- as well we might do in the future risk, we can't talk about.

Tracy Rucinski -- Reuters -- Analyst

I apologize. I'm -- I'm not setup --

Doug Parker -- Chairman and Chief Executive Officer

And that's OK.

Tracy Rucinski -- Reuters -- Analyst

OK, thanks.

Doug Parker -- Chairman and Chief Executive Officer

There's a lot going on. Thanks, Tracy.

Tracy Rucinski -- Reuters -- Analyst

Thanks.

Operator

Our next question will come from the line of David Koenig from the Associated Press. You may begin.

David Koenig -- The Associated Press -- Business Writer

Hey, good morning, everybody. At -- at the risk of may -- maybe rephrasing something that you are kind of getting at in -- in what in Mary and Dawn's questions. I wonder if you can talk about how much travel restrictions, including what we saw from the U.S. this week? How -- how the travel restrictions are changing your view about the pace of recovery this summer? And -- and then secondly, what -- what impact would you see if -- if there is a testing requirement for domestic flights?

Doug Parker -- Chairman and Chief Executive Officer

All right, David, I'll try again. So first off, travel restrictions. Again, on international, has resulted in a reduction in demand for international travel. But as -- as we've said a couple of times now, we expect that to improve as -- as -- as it becomes easier to for people to get those tests, which is happening already.

So it certainly had an impact on demand and customers need to present a -- need to present a positive test to travel. And we've seen that particularly in the short-haul international travel, things like Mexico and the Caribbean, now in the U.S.-Caribbean destination. And then it relates to any other travel restrictions and things like mask mandates. We've been do -- we've been doing mask mandates well before it was mandated by the government.

We intend to con -- continue doing that. Those are great things. We will continue to do so. If anything, we just want to make sure that the government doesn't put in place exemptions other than ones we have, which is children who are two years old.

So we're huge proponents of mask mandates. Huge proponents of what the administration is trying to accomplish and -- and that's what we've been asked to do so far. If we're asked to do more, we'll do everything to impress our desire to -- to letter write to know we have a shared objective, which is to get the pandemic behind us as fast as we can, allow our country to keep moving. In the meantime, people are -- people are driving from state to state, they're flying from state to state.

They're doing so safely. And we just want to make sure that we continue that to happen with the goal of making sure we end the pandemic as soon as possible. I know the administration shares that goal and I suspect anything we come up with will be consistent with that.

David Koenig -- The Associated Press -- Business Writer

OK, thanks. I think that's more concise and -- and you -- you -- you must have an opinion though about what impact you'd see if there is a domestic flight testing requirement?

Doug Parker -- Chairman and Chief Executive Officer

It's -- well, I have to stay on this one, David.

David Koenig -- The Associated Press -- Business Writer

OK. All right. Thank you.

Operator

Thank you. And that ends the media Q&A. I'll turn back the call to Doug Parker for any closing remarks.

Doug Parker -- Chairman and Chief Executive Officer

All right. Thank you all. Thanks very much for your interest. We really again just couldn't be prouder of our team and what they're doing.

It gives us great confidence as we forward. l know everyone's interested in how fast things will rebound. We don't know the answer to that. We know it will.

And when it does, we're going to be there ready to take care of people when they want to travel. And we're ready -- we're ready to withstand how hard it take. Everyone will be safe because of the great job Derek and the team have done and get our company's [Inaudible] position. Thanks for your time.

Operator

[Operator signoff]

Duration: 74 minutes

Call participants:

Dan Cravens -- Managing Director of Investor Relations

Doug Parker -- Chairman and Chief Executive Officer

Rob Isom -- President

Derek Kerr -- Chief Financial Officer

David Vernon -- Sanford. C.Bernstein

Savi Syth -- Raymond James -- Analyst

Mike Linenberg -- Deutsche Bank -- Analyst

Catheine O'Brien -- Goldman Sachs -- Analyst

Hunter Keay -- Wolfe Research -- Analyst

Dan McKenzie -- Seaport Global -- Analyst

Vasu Raja -- Chief Revenue Officer

Alison Taylor -- Chief Customer Officer

Jamie Baker -- J.P Morgan -- Analyst

Helane Becker -- Cowen and Company -- Analyst

Joseph DeNardi -- Stifel Financial Corp. -- Analyst

Andrew Didora -- Bank of America Merrill Lynch -- Analyst

Scott Forbes -- Jefferies -- Analyst

Mary Schlangenstein -- Bloomberg -- Airlines Reporter

Steve Johnson -- Executive Vice President, Corporate Affairs

Alison Sider -- Wall Street Journal -- Air Travel Reporter

Dawn Gilbertson -- USA Today -- Consumer Travel Reporter

Leslie Josephs -- CNBC -- Airline Reporter

Tracy Rucinski -- Reuters -- Analyst

David Koenig -- The Associated Press -- Business Writer

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