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DATE

  • Thursday, July 24, 2025, at 8:30 a.m. EDT

CALL PARTICIPANTS

  • Chief Executive Officer — Robert Isom
  • Chief Financial Officer — Devon May

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RISKS

  • Devon May stated, "Based on our current demand assumptions and fuel price forecast, we expect to produce a third quarter loss per share of between $0.10 and $0.60."
  • Domestic unit revenue declined approximately 6% year-over-year, with persistent softness in the main cabin throughout Q2 2025.
  • Non-fuel unit costs, excluding net special items, increased by 3.4% year-over-year, reflecting collective bargaining agreement costs and maintenance shifts in Q2 2025.
  • Robert Isom noted, "we've been hit with our share of challenging operating conditions this summer," referencing a 36% increase in disruptive operational events and nearly 800 diversion events and over 5,500 weather cancellations in early July 2025.

TAKEAWAYS

  • Adjusted Pretax Profit: $869 million adjusted pretax profit, with adjusted earnings per share of $0.95, falling at the high end of prior guidance for Q2 2025.
  • Revenue: Record revenue of $14.4 billion, up 0.4% year-over-year, driven by international premium strength and recovery of indirect channel revenue in Q2 2025.
  • Passenger Unit Revenue: Led network peers for the fourth consecutive quarter; international PRASM up with Atlantic +5% and Pacific +1% year over year, while domestic unit revenue was down roughly 6% in Q2 2025.
  • Premium Cabin Performance: Premium unit revenue outperformed main cabin by four points year-over-year, with 77% of premium revenue from Advantage loyalty members in Q2 2025.
  • Managed Business Revenue: Grew by 10% year-over-year, exceeding general industry growth during a flat managed business environment in Q2 2025.
  • Cost Structure: Unit cost (excluding fuel and special items) rose 3.4% year over year, with over half a point improvement versus guidance midpoint, aided by maintenance event timing in Q2 2025.
  • EBITDAR Margin: 14.2%, a 1.5-point year-over-year decline in EBITDAR margin, consistent with peer margin trends due to labor and domestic exposure in Q2 2025.
  • Free Cash Flow: Delivered $791 million of free cash flow, totaling $2.5 billion year-to-date in Q2 2025, maintaining a positive free cash flow outlook for the full year.
  • Net Debt: Ended the quarter at approximately $29 billion of net debt, the lowest since Q3 2015, after repaying a $1 billion convertible note with proceeds from a loyalty term loan.
  • Liquidity: Total available liquidity of $12 billion as of the end of Q2 2025.
  • Aircraft Deliveries & CapEx: Now expects 50 new aircraft deliveries in 2025, raising full-year 2025 aircraft CapEx guidance to $2.5–$3 billion and total CapEx to $3.5–$4 billion.
  • Q3 Revenue Outlook: Projected to range from down 2% to up 1% year-over-year for Q3 2025, with July flagged as the weakest RASM month and sequential improvement anticipated into August and September.
  • Capacity Plans: Third-quarter 2025 system capacity to rise 2%-3% year-over-year, with a 5% domestic increase in July, slowing into August (+2%) and declining in September (-1%).
  • Non-fuel Unit Cost Guidance: Third-quarter non-fuel unit costs projected up 2.5%-4.5% year-over-year, tied to labor agreements, with a similar trend expected into Q4 2025.
  • Full Year EPS Guidance: Updated range from a $0.20 loss to $0.80 profit, with the midpoint targeting $0.30 profit; management noted recent demand improvement informs outlook.
  • Indirect Channel Recovery: Robert Isom said, "our indirect share is now down 3% versus historical levels" in Q2 2025, with a full recovery targeted as the company exits 2025.
  • Loyalty Program Engagement: Active Advantage program membership is up 7% year-to-date 2025; co-branded card spending increased 6% year-over-year in Q2 2025.
  • Operational Headwinds: A 36% year-over-year increase in disruptive operational events caused by storms at major hubs led to significant recovery actions in Q2 2025.

SUMMARY

American Airlines Group (AAL 0.30%) reported quarterly results at the upper end of expectations, citing record revenue and solid execution in managed business and premium segments for Q2 2025. Management provided explicit forward guidance showing continued pressure on near-term margins, reflecting higher labor costs, persistent domestic softness, and operational disruptions largely due to weather and industry-wide capacity. The company confirmed progress on indirect channel share recovery, accelerated loyalty engagement, and strategic investments in fleet, lounges, and technology, while maintaining reduced net debt and robust liquidity.

  • Devon May said, "We expect July to be one of the year's weakest year-over-year RASM performing months," but anticipates sequential improvement in both RASM and revenue through the remainder of Q3 2025.
  • Devon May confirmed, "we expect to have driven cumulative savings of over $750 million and delivered approximately $600 million of working capital improvement" since initiating the business reengineering program in 2023, with these figures expected by the end of the year.
  • Robert Isom stated the company is "on track to get back to our historical share of indirect channel revenue as we exit 2025," referencing an additional $1.5 billion in revenue potential moving into 2026.
  • Devon May addressed the competitive margin gap, emphasizing no structural impediments and identifying labor cycle timing, higher domestic exposure, and sales/distribution tailwinds as key variables for improvement by 2026.
  • Robert Isom indicated that full recovery of the Chicago hub is underway and expects peak departures to surpass 500 next year, supported by sufficient gates and improved regional staffing.
  • American anticipates opening new flagship lounges and expanding premium cabin capacity while driving customer engagement through enhancements in the Advantage loyalty program and digital initiatives.
  • Devon May noted no required aircraft retirements until the end of the decade, and any capacity adjustments will be focused through utilization management, not fleet reduction.
  • Management confirmed satellite-based Wi-Fi rollouts, with minimal expected P&L impact, and plans to expand premium seating by almost 50% through 2030.

INDUSTRY GLOSSARY

  • PRASM (Passenger Revenue per Available Seat Mile): Industry metric representing passenger revenue divided by total available seat miles; tracks revenue efficiency.
  • RASM (Revenue per Available Seat Mile): Total operating revenue divided by available seat miles; key airline revenue metric reflecting both pricing and load factor.
  • CASM (Cost per Available Seat Mile): Total operating cost divided by available seat miles; the principal cost metric in the airline industry.
  • EBITDAR Margin: Earnings before interest, taxes, depreciation, amortization, and aircraft rentals, expressed as a percentage of revenue; core profitability measure for airlines with leased aircraft.
  • PDP (Predelivery Payment): Manufacturer payments required prior to aircraft delivery; incorporated into aircraft CapEx.
  • Indirection Channel: Revenue streams generated from third-party distribution partners rather than direct sales; tracked due to margin and share implications in airline sales strategies.

Full Conference Call Transcript

Robert will start the call with an overview of our performance. Devon will follow with details on the quarter, in addition to outlining our operating plans and outlook going forward. After our prepared remarks, we will open the call for analyst questions, followed by questions from the media. To get in as many questions as possible, please limit yourself to one question and one follow-up. Before we begin today, we must state that today's call contains forward-looking statements including statements concerning future revenues, costs, forecasted capacity, and fleet plans. These statements represent our predictions and expectations of future events but numerous risks and uncertainties could cause actual results to differ from those projected.

Information about some of these risks and uncertainties can be found in our earnings press release and Form 10-Q that was issued earlier this morning. Unless otherwise specified, all references to earnings per share are on an adjusted and diluted basis. Additionally, we will be discussing certain non-GAAP financial measures which exclude the impact of unusual items. A reconciliation of those numbers to the GAAP financial measures is included in the earnings press release, which can be found in the Investors section of our website. A webcast of this call will also be archived on our website.

The information we are giving you on the call this morning is as of today's date, and we undertake no obligation to update the information subsequently. Thank you for your interest and for joining us this morning. With that, I'll turn the call over to our CEO, Robert Isom.

Robert Isom: Good morning, everyone. This morning, American reported an adjusted pretax profit of $869 million for the second quarter, or earnings per share of $0.95, which is toward the high end of the guidance we provided in April. We achieved this in a difficult and evolving operating and demand environment, and we're proud of our second quarter performance. We remain steadfast in our focus on our 2025 priorities, which will continue to shape the long-term success of American. Executing on these priorities will enable us to grow margins, generate sustainable free cash flow, and further strengthen our balance sheet.

Our priorities this year include delivering on our revenue potential, renewing our focus on the customer experience, operating with excellence, and driving efficiencies throughout the airline. We're pleased with the progress we've made on each of these fronts and we'll share more on them this morning. Let's begin with our performance during the second quarter. In the second quarter, we produced record revenue of $14.4 billion, a testament to the progress we're making on our commitment to deliver on our revenue potential, even in a challenging environment. Our year-over-year passenger unit revenue improvement led our network peers for the fourth straight quarter. Long haul international PRASM performed in line with our initial expectations, with all entities producing positive year-over-year results.

Driven by continued strength in the premium cabin, Atlantic PRASM was up 5% and Pacific PRASM was up approximately 1% year-over-year on approximately 17% more capacity. Premium demand and spending from higher-income consumers remained resilient in the second quarter. On a year-over-year basis, unit revenue in the premium cabin performed four points better than the main cabin. We're well-positioned to attract premium customers with plans to expand our premium seating further in the years ahead. The strength in international premium was offset by domestic leisure weakness. Domestic unit revenue was down approximately 6% year-over-year. The softness in the main cabin persisted throughout the second quarter.

While domestic unit revenue is expected to remain lower year-over-year in the third quarter, we expect that July will be the low point and that performance will improve sequentially each month in the quarter as industry capacity growth slows and demand strengthens. As shown on slide four of the earnings presentation that we published this morning, the efforts of our sales team to recover revenue from indirect channels beat our expectations in the quarter, with our indirect share now down 3% versus historical levels. We saw the greatest sequential improvement in indirect leisure channels, but we continue to make progress in corporate channels.

We remain on track to get back to our historical share of indirect channel revenue as we exit 2025. In the second quarter, we grew our managed business revenue by 10% year-over-year, outpacing broader industry growth. This result is further confirmation our sales and distribution efforts are being well received by our customers. Our work to grow the Advantage program and enhance our partnership with Citi is continuing as we prepare for the start of our new ten-year agreement in January 2026. Slide five highlights that active Advantage members have grown 7% year-to-date with our highest growth in enrollments coming from Chicago, Dallas Fort Worth, and New York.

Advantage members are more engaged, generate a higher yield versus nonmembers, and are a key driver for premium cabin demand, currently accounting for approximately 77% of premium revenue. Spending on our co-branded credit cards was up 6% year-over-year for the second quarter as customers continue to favor Advantage miles as their preferred rewards currency. American remains committed to offering an industry-leading travel rewards program, and we look forward to sharing more exciting updates in the months ahead. The further strengthening of our network remains a key priority for the team. In the second quarter, our growth was focused on Chicago, New York, and Philadelphia, three strategic hubs critical to our network and where we continue to see long-term opportunity.

We're encouraged by the early results from this additional capacity, with share, unit revenue, and financial results tracking in line with or ahead of expectations. We'll remain responsive to the demand and competitive environment as we execute our long-term network strategy, and we remain focused on deploying capacity that best serves our customers. Our new customer experience organization is elevating every part of the travel journey. We've continued to make meaningful improvements across all phases of the customer experience. We've announced several exciting updates to our lounge network, including opening a new flagship lounge in Philadelphia. In Miami, we've announced plans for a new flagship lounge and are expanding the Admirals Club lounge footprint.

American is proud to offer more premium lounges than any other carrier. Later this summer in Charlotte, we'll open Provisions by Admirals Club, a new unique, and additional lounge concept for customers that are seeking a quick refreshment before catching their next flight. The new flagship suite on our Boeing 787-9 officially entered service last month on select flights to London. This winter, this premium offering is expected to expand to Argentina, New Zealand, and Australia, giving more customers the opportunity to enjoy this elevated experience. Customer response to new aircraft and flagship suite product has been overwhelmingly positive. We want our customers' experience at the airport to be as easy and as seamless as possible.

In May, we implemented TSA touchless ID, which significantly expedites the security screening process. Additionally, we're the first airline to test one-stop security for flights into the US, starting with American's flights from London to Dallas Fort Worth, allowing customers to bypass baggage reclaim and TSA rescreening upon arrival. We're excited to be the first carrier to implement one-stop security, which will greatly enhance the connecting experience and overall journey for our customers traveling internationally. Thank you to the Department of Homeland Security for its continued partnership and commitment.

We've also introduced several additional customer enhancements during the quarter, including an option for customers to use miles as a form of payment for upgrades and improvements to our in-flight food and beverage offerings. We're excited about the momentum we've built, and we're just getting started. Our customer experience team is undertaking a comprehensive review of every phase of the travel journey and making investments that will deliver tangible improvements for our customers and our revenue performance. Turning now to our operation. The team has continued to plan, execute, and recover through very difficult operating conditions.

Disruptive operating conditions are a reality of our business, and the American team continues to do an excellent job recovering from irregular operations and mitigating the impact on our customers. In the second quarter, there was significant storm activity at our hubs in Dallas-Fort Worth, Chicago, Washington D.C., and in the Northeast, a 36% increase in disruptive operational events over the same period last year. Thanks to the investments we've made in technology and our operation, and our team's continued focus on controlling what we can control, we were able to recover quickly from these disruptions.

A big thank you to the entire American Airlines team for continuing to deliver for our customers in the midst of a very challenging operating environment. Finally, I'd like to acknowledge the families and communities affected by the catastrophic flooding in Central Texas. American is a proud Texas-based airline, and we've joined forces with our disaster response partners, the American Red Cross, Air Link, and Team Rubicon, to aid relief efforts and support impacted families. Now I'll turn the call over to Devon to share more about our second quarter financial results and outlook.

Devon May: Thank you, Robert, and good morning, everyone. Excluding net special items, American reported a second quarter operating margin of approximately 8%, earnings per share of $0.95, both at the high end of our guidance. Our second quarter revenue of $14.4 billion was up 0.4% year-over-year. Second quarter unit cost, excluding fuel and net special items, was up 3.4% year-over-year, over half a point better than the midpoint of our guidance. This is a result of the team's continued strong execution on our efficiency initiatives and a shift in timing of maintenance events to later in the year.

This resulted in an EBITDAR margin of 14.2%, a 1.5-point reduction year-over-year, which is similar to the year-over-year margin decline of our network peers. This is a great result considering the current domestic demand environment and our differentiated position, which includes the relative domestic weighting of our network and paying full market rates for all of our largest labor groups. We are committed to running the airline as reliably and efficiently as possible while continuing to improve our revenue performance and enhance the customer experience. These efficiencies are driven by best-in-class workforce management, efficient asset utilization, and procurement excellence, and are unlocked by investments in technology and process improvements.

By year-end, we expect to have driven cumulative savings of over $750 million and delivered approximately $600 million of working capital improvement since we launched our reengineering the business efforts in 2023. During the second quarter, we raised $1 billion through a loyalty term loan financing and used the proceeds to cash settle our billion-dollar convertible note earlier this month. American ended the second quarter with approximately $38 billion of total debt and $29 billion of net debt, our lowest net debt levels since the third quarter of 2015. We ended the second quarter with $12 billion of total available liquidity.

In the quarter, we produced $791 million of free cash flow and have now produced $2.5 billion of free cash flow in the first half of the year. We anticipate having positive free cash flow for the full year. With regard to our fleet, we now expect to take delivery of 50 new aircraft this year at the high end of our previous range of 40 to 50 deliveries. This is driven by earlier than planned deliveries of several aircraft that we now expect to receive in the fourth quarter, a few months earlier than our previous expectation of the first quarter of 2026.

Based on these expected deliveries, our 2025 aircraft CapEx, which also includes used aircraft purchases, spare engines, and net PDPs, is now expected to be between $2.5 and $3 billion, and our total CapEx is expected to be between $3.5 and $4 billion. We continue to expect moderate levels of CapEx in future years, with annual aircraft CapEx averaging approximately $3.5 billion for the remainder of the decade. I'd now like to walk you through our outlook for the third quarter. We continue to be mindful of both the demand and competitive environment as we develop our capacity plans for the remainder of the year. For the third quarter, we expect capacity to be up 2% to 3% year-over-year.

Our year-over-year domestic capacity is up by approximately 5% during the July peak, but growth will slow to approximately 2% in August and will be down 1% in September. We expect third quarter revenue to be between down 2% and up 1% year-over-year. We expect July to be one of the year's weakest year-over-year RASM performing months, given the higher industry capacity, that the month was largely booked prior to the strengthening demand trends we've seen over the past couple of weeks. But we believe the worst is behind us, and year-over-year revenue will sequentially improve each month this quarter.

Third quarter non-fuel unit costs are expected to be up 2.5% to 4.5% year-over-year, driven primarily by the collective bargaining agreements we have ratified over the past two years. This performance is in line with the second quarter, but on a lower rate of growth. We expect similar performance in the fourth quarter, given the shift in maintenance expense from the second quarter to the fourth quarter. Based on our current demand assumptions and fuel price forecast, we expect to produce a third quarter loss per share of between $0.10 and $0.60.

Based on recent demand trends, we expect full-year earnings per share of between a loss of $0.20 and a profit of $0.80, with the midpoint being a profit of $0.30 per share. We believe the top end of the range is achievable if demand in the domestic market continues to strengthen, and we would only expect to be at the bottom end of the range if there was macro weakness that we don't see in our recent booking trends.

We are proud to be forecasting a profit in a year where we have faced the challenges of a tragic accident, significant and continued ATC delays, unprecedented weather, the full financial cost of new collective bargaining agreements, and a material drop in demand in the domestic market where we produce over 70% of our revenue. It is a testament to the durability of our business and the resilience of our people. I'll now turn the call back to Robert for closing remarks.

Robert Isom: Thank you, Devin. In closing, we're pleased with our second quarter results and the hard work of the American Airlines team. This year has been challenging, but our team has skillfully managed through an uncertain demand environment and difficult operating conditions to deliver a safe and reliable operation for our customers. We're confident that we're delivering on the right long-term initiatives. With our continued focus on execution, we remain on track to deliver for the long run. We believe American is uniquely positioned to benefit as domestic demand recovers in the back half of the year. With that, operator, you may now open the line for questions.

Operator: Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. You will be limited to one question and one follow-up. Please standby while we compile the Q&A roster. Our first question comes from the line of Jamie Baker of JPMorgan Securities. Please go ahead, Jamie.

Jamie Baker: Thanks. And good morning to the team. So, Robert, you and I had a constructive exchange, in my opinion, back at the March industrials conference. So I wanted to kind of stick to that theme following some of the more recent OA disclosures. You know, what we heard from a competitor when discussing the industry landscape is that, you know, several airlines are operating at double-digit percentage of their flights at a loss. So I guess my question for you, Robert, is twofold. First, can you give us an approximation, maybe on a full-year basis, to adjust for seasonality what overall percentage of American flying loses money? And maybe how that's changed, you know, and evolved in recent years?

And then second, is there a path towards a more modest percentage of loss-producing flying? How do you accomplish that? What are the upside drivers? Thanks.

Robert Isom: Okay. Thanks, Jamie. And, you know, I'll just start with we don't run our airline based on, you know, other airlines' perceptions of our business. We run and have a fantastic hub and spoke network system, a great set of partners. We're really proud of what we do. And on a system basis, you know, if you take a look at our results today, the primary differentiator between us and, you know, some of our competitors is long as they do things. You know, one, we're paying our team members at market wages. Others, you know, are benefiting from not doing that. I'm sure that will catch up, you know, over the long run.

The second thing is we do have a network that we're proud to say is more oriented to the domestic network. And let's face it. The domestic network has been under stress because of the uncertainty in the economy, and the reluctance of, you know, domestic passengers to get in the game. We think that's gonna change. We think that's gonna be a tailwind for us. And especially as demand and capacity come back in more in the balance, it's gonna fit very well with the things that we're doing to make American really thrive in the long run. Delivering on a revenue potential, improving our customer experience, and playing into premium. Taking advantage of international.

We're gonna be having, you know, some international growth. And it's all based on or all keyed off of, you know, an incredible level of efficiency. So I feel proud of what we got.

Operator: Thank you. Our next question comes from the line of Connor Cunningham of Melius Research. Your question please, Connor.

Connor Cunningham: Hi, everyone. Two if I may. You mentioned a sequential improvement in the US domestic of outlooks from some of the other players out there. So I was hoping that you could help frame up what you actually see within your US domestic performance from maybe July to September. Does it just track the capacity plans? And the reason why I ask, like, obviously, things changed in July, and you talked about how you were basically fully booked for July. So if you could just talk about where you're booked for the remainder of 3Q and then maybe 4Q, that would be super helpful. Thank you.

Robert Isom: Sure, Connor. I can start. But, hey, I just want to note that our vice chair and chief strategy officer, Steve Johnson, he's recovering from a case of pneumonia, not with us today. He's fine, but getting some rest and is on the mend. So I'll start and hand it over to Devin. Look. When we take a look at, you know, what we've got on the books right now, July's been, you know, tough. Really hit hard by the uncertainty during the primary booking period that, you know, for those that wanted to travel in July. As we take a look through the third quarter, you know, we probably have about 65% of revenue on the books.

I think that's probably, you know, plus or minus. Right? And about 20% on the books for the fourth quarter. So there's a lot to go and good reason to have a lot of optimism for some of the trends that we're seeing going from July into August and September. And into the fourth quarter. But, also, look, we've had a lot of volatility in the business so far, and we want to be mindful of that as we forecast as well. Devin?

Devon May: Yeah. Namaste to add. Like Robert said, we will see sequential improvement throughout the quarter. July is going to look a lot like our second quarter results. But as we get into August and September, we're gonna see some nice improving trends there. And expect that to continue into Q4.

Connor Cunningham: Okay. That's helpful. And then maybe I could talk maybe we're gonna ask a little bit about just earnings baselining. Obviously, a lot has gone on in the first half of this year. And the question that I get is just around, like, what the actual potential of the business is now that you've kind of gotten back to, you know, a sufficient to what they may maybe what you were thinking in January. So if you could just talk about, you know, what the headwinds that you faced in the first half of this year and what you don't necessarily expect to repeat next year, I think that would be helpful as we to think about 2026 and beyond.

Thank you.

Devon May: Yeah. We're obviously a ways off of run rate earnings right now. And we see a lot of potential for margin expansion as we go forward. And it's everything Robert's talked about, and it's everything we've talked about over time. Like, it is we look out for the next six months, the domestic marketplace is going to be improving. That's a great tailwind for us. We head into next year, we expect that to continue, and we're gonna start benefiting from our new credit card agreement with Citi, which we're incredibly excited about. We continue to invest meaningfully in the customer and the premium experience. We think is also gonna drive nice tailwinds for us.

So this year, obviously, a really tough first half. We think we're gonna get some nice tailwinds as we head on to the second half and expect expansion as we head into 2026.

Operator: Thank you. Our next question comes from the line of Catherine O'Brien of Goldman Sachs. Please go ahead, Catherine.

Catherine O'Brien: Good morning, everyone. Thanks for the time. Two questions. First one, a bit of a follow-up to Connor's. Can you just speak on how you're thinking about capacity and unit cost versus January? You know, within the low single-digit and mid-single-digit ranges, you're expecting have things shifted at all? And then I know this is early, but this year, I think you had a couple points of pressure from new labor contracts. Can you just speak to, like, headwinds tailwinds we should be thinking about into next year? Thanks.

Devon May: Sure. You know, this year is largely unfolding as we expected to start the year. First quarter, we had guided to CASM up pay percent for a lot of reasons that we had talked about mainline regional mix, labor expenses, a reduction in capacity. We came in just inside of that. Second quarter, we had guided a CASM up 4%. Again, we came in just inside of that number and felt good about it. We're executing on all of our different cost initiatives. We did benefit in the second quarter with some maintenance expense that pushed out to Q4.

And so we're gonna see a similar unit cost trend to what we saw in the second quarter for both the third and fourth quarter. So at the midpoint, unit cost up probably somewhere around 3.5%. As we head into 2026, it's early. It's gonna be somewhat dependent on our capacity production. But I'd just say over the long term, I think we've done an exceptional job managing costs. We spent the last couple of years really focused on reengineering the business for efficiency, and that's across the entirety of our business. And I think we're doing a really nice job with it.

So that's the outlook for this year, and I think in 2026, we'll continue to perform really well relative to the rest of the industry.

Catherine O'Brien: Okay. Great. And then maybe just one on the indirect revenue share if I could. You know, I saw that came in better than expected in the second quarter, but on an operating margin basis, you know, the gap to peers is about the same this quarter. It was in the second quarter of last year with indirect revenue much more recovered. Is there an element where revenue share is getting close to historical levels that's more volume-driven than it was before the distribution strategy change and there's some element of pricing that recovers over time in those contracts?

Or is it, you know, the margin pressure is coming from the relatively higher domestic exposure and maybe more market labor rates versus one of your peers you spoke with earlier in the call. Just would love to impact that. Thanks.

Devon May: Yeah. Thanks. You hit it exactly right at the end. Like, it feels like a pretty incredible result that our margin performance year-over-year was very much in line with our peers. In a quarter where we know the weakest part of the business was the domestic marketplace and we have more exposure to domestic and like you said, on the cost side, we are faced with the full cost of newly reached collective bargaining agreements. At least one of our peers isn't in that position yet, but will be eventually. So for us to produce the same year-over-year margin in that environment, seems like a really great result, and you see it in the unit revenue numbers.

We've got relative outperformance on unit revenue. It's just hard to have that flow through to margin or relative margin when you have these types of differences.

Robert Isom: Catherine, I'll just add, you know, one of the other proof points is the corporate managed traffic that's improved 10% year-over-year in a relatively flat business market. We're not done yet. And that's the point I think is really important. We've got a few percentage points more to get back to where we were to sales and distribution strategy change. But we've got even more from that because we know that our network and our team is capable of delivering at higher levels. I do believe that, you know, the last few percentage points are gonna be hard, but, also, I think that they're gonna be the most profitable points we bring in. Thank you.

Operator: Our next question comes from the line of Tom Wadewitz of UBS. Please go ahead, Tom.

Tom Wadewitz: Good morning. This is Atulnice on from Tom Warowich. Thanks a lot for taking my questions. Robert, if I heard you right, did you say that you're expecting a full recovery in indirect channel market share as you exit 2025? If you could please confirm that and related to that, are you able to quantify what would be the revenue lift we should expect for 2026 as you run rate the 2025 exit rate? To all of next year.

Robert Isom: Well, Tom, I'll start with the first, which is just getting back to our historical share. As we exit 2025, we're on track to getting restoring our full indirect channel share. And what that means is that, you know, as we exit the year, so it's not embedded in, you know, the full year 2025 results. But as we move into 2026, I expect to see that come through. We talked last year about that representing $1.5 billion of revenue. You know, there's a good chunk of that's gonna flow through. And we're really pleased with our performance getting back on track.

Tom Wadewitz: Okay. And then as my follow-up, you know, just following up on some of the questions that have been asked already, but if we look at your profit margins, relative to your network peers, just it would seem based on the outlook set, all of you have provided this year, that your margin gap even at the EBITDA level is likely to widen this year. Really, as you look out over the next few years, what do you think American really needs to do to make progress in bridging this gap? And do you think there are any structural impediments to American actually fully bridging this gap over time?

Devon May: Well, I'll just start with last year. The end of last year, we had a two-point EBITDA margin gap to you and added inclusive of Delta's third-party business. We had about a two-point EBITDA margin gap to them as well. And that's a gap that we expect to close over time. This year is an unusual year for all the reasons we discussed, and have to probably dig a level deeper. One, we have a larger domestic exposure than either of our large network competitors. Two, we're just at different cycles with where we are at with collective bargain agreements. We have all of ours in place. One of our competitors does not.

So not everything is going to come through in margin, in a linear fashion. But we do think, over time, yes, we expect we can close that gap. We don't think there's anything structural. We had talked about what we think are some of the key reasons around it inclusive of your first question, sales and distribution, is something that was a headwind last year. It remains a headwind for us this year, coming into next year, we think it'll be a tailwind to margin. We've talked about our Citi agreement. There's been a gap to our peers there.

We think we have an incredible partner, an incredible agreement in place, and we're gonna close that gap over time as well. And we like a lot of the work that we're doing on the commercial side of the business including some really nice investments in premium and premium customer, we think will help as well. So there's a gap today. And there will be a gap this year, but we do expect to close it heading into 2026.

Operator: Thank you. Our next question comes from the line of Michael Linenberg of Deutsche Bank. Please go ahead, Michael.

Michael Linenberg: Hi. Good morning. This is Shani Darian on for Mike. So American recently agreed to drop its lawsuit against Chicago Aviation Authority. Where do you guys stand today, and what does it mean for your schedule later this year and early next year out of Chicago? You know, presumably, you thought you have more slots and not less than when you have.

Robert Isom: Oh, thanks for the question. And, hey, regarding Chicago, this is, you know, a tremendous opportunity for America. We've been slowest to rebuild out of the pandemic, our network for a number of reasons, largely because of pilot shortfalls in our regionals. But now that we have, you know, full ability to staff, we're in good shape. And so you'll see Chicago hit 485 peak departures, and you know, we're on our way to producing even more than that over 500 as we take a look into next year. We have the gate capacity we need to fulfill that growth and even more. And in terms of the status of the litigation, we feel really good about where we're at.

We, you know, worked with the city to design and, you know, finance the expansion of Chicago. And all we're asking to do is have them live up to what they said they would do in terms of gate allocation. So we're not concerned. We've got what we need now. And we're gonna have what we need going forward.

Michael Linenberg: Thanks. And if I just may follow-up, on the Embraer Terrace, you know, we've heard that some airlines don't have to accept delivery of airplanes. That gonna be the case with you? And Embraer as seen that, you know, current sheriff goes through?

Robert Isom: Embraer is a terrific partner. And, you know, the E175s are just an exceptional aircraft with, you know, soon to be satellite-based Wi-Fi and full first-class cabin and so it fits really well. We're proud to be the operate the world's largest fleet of Embraer aircraft, and that's, you know, unique to American. We're working with Embraer on deliveries. But we don't anticipate any, you know, long-term issues. As a matter of fact, we know that the Brazilian government's working with the administration and Embraer as well. And so over the long run, we know what's best. You know, there's a tremendous amount of US-based content on those Embraer aircraft.

And there's a lot that goes into, you know, negotiating, you know, trade deals. So we stand by ready to help in any way, and we've made sure that the administration and Embraer knows our interest. And we're confident we'll be taken care of.

Operator: Thank you. Our next question comes from the line of Andrew D'Dora of Bank of America. Please go ahead, Andrew.

Andrew D'Dora: Hi. Good morning, everybody. So, Robert, you've been speaking a lot, you know, about your revenue share in indirect channels. When I think about share more broadly, right, your capacity growth has been trailing your network peers for the past, you know, six or so quarters. I guess, as we move forward from here, are you content with growing less than your peers and driving that RASM outperformance that you've been getting? Or does there come a time when, you know, share matters and you need to maybe at least grow in line with some of your primary competition? Yeah. Any thoughts around that?

Robert Isom: Oh, sure. It's always that balance. And it's something that, we're gonna make sure that we have a network that, you know, takes care of our customers in a way that they we need to serve them and that we can do so profitably over the long run. We're super pleased with the hub network that we're fortunate to have. You know, our hubs are based in the metro areas that are growing the fastest in the United States. You've seen from, you know, some of our recent announcements about, you know, the new terminal F in DFW, gonna allow DFW to be the world's largest hub. We're confident that our hubs will support, you know, more growth.

And, you know, specifically, as we look into 2026, you're gonna see us make sure that, we restore, you know, our share in Chicago. You're gonna see us continue to build Philadelphia, which has been, you know, a really a bright spot. And you'll also see us continue to invest in Miami. All that goes with, you know, a tremendous, you know, domestic network that is ultimately, you know, the anchor, to help support international growth. And our fleet is gonna allow for more of that, and I like the opportunity we have to play both in the international market and, you know, premium space as well. So good things on the horizon from that perspective.

We're gonna take care of our customers.

Andrew D'Dora: Got it. Thank you for that. And just my second question here. I know you've spoken about kind of your corporate revenues growing, you know, 10% in a flattish market. Can you more quantify the demand improvement you've seen of late that just gives you the confidence to speak to the accelerating revenue growth despite the tougher comps as we head into the back half of the year?

Robert Isom: Yeah. It's just booking trends. And it's especially what we see coming in from June moving into July. And then as you move into August and September, we feel really confident in terms of an improving capacity and supply environment, and American benefits, and we should benefit, you know, more than others given our exposure.

Operator: Thank you. Our next question comes from the line of David Vernon of Bernstein. Your question, please, David.

David Vernon: Hey, good morning, guys, and thanks for taking the question. Robert, I wanted to ask you a little bit about the investment in sort of the customer experience, and I wanna ask it in kinda two ways. One, first, kind of, you know, as you look at yourself relative to your peers, you know, where are the big opportunities for you to improve the customer experience? And as you talk to investors about this, like, how are you thinking about measuring this? Is it net promoter scores? How are you gonna kinda judge the performance on improving this overall customer experience?

Obviously, it'll eventually show up in the bottom line, but just wondering how are you thinking about talking about your progress on this journey to improve with investors and analysts. Thanks.

Robert Isom: Thanks, David. Appreciate the question. First off, we're gonna measure this by, you know, our customer's perception. And by revenue performance. Okay? So first off, we will evaluate our net promoter scores that will be a huge driver. And as well, you know, in terms of revenue performance, this is gonna be, you know, we're doing this to improve, you know, premium revenues and revenue overall. So unit revenues will be the metric that we take a look at. And so in terms of where we're at, you know, we've had a long history, you know, of first in terms of, you know, customer experience enhancements and improvements, and we're building on that.

So whether it's the new flagship suites, on our 787s, which will soon be on our 321 XLRs, which then will also be on our 777-300s that are being reconfigured. You know, that all plays into that our premium lounge network, which is larger than anyone else. You heard our Philadelphia announcement, Miami, and there will be more on that. A lot of that is built into the capital spending that we've already planned. So, you know, I would suggest that there's not a lot of catch-up on that upfront. You will see us invest in, you know, our food and in-flight amenities. And, again, you will see us continue to avoid to invest in the premium experience.

Where I look at, you know, opportunities going forward, though, it really is, you know, the ability to serve that premium customer, especially internationally as well. And we have a fleet that is ideally suited to do that. So those adjustments that I described, you know, they're all gonna result in our ability to serve, you know, almost 50% more premium customers in premium seating as we move out to 2030. From an international perspective, you know, our fleet is going to allow us to serve more or actually improve flying by almost 50% or more than 50% as we move out into 2030.

David Vernon: Alright. Thanks for that. And I guess as you think about kind of where you guys stand relative to peers in terms of net promoter or do you guys benchmark that at all?

Robert Isom: Oh, we do. And we think it's a great opportunity. But it's something, again, that is on a front that we take very seriously. It starts with running an exceptional operation. And we've been hit with our share of challenging operating conditions this summer, certainly in June and July. No place has been hit. No airline has been hit as hard as American. It starts with running a reliable operation. We're making sure that we can recover as quickly as possible investing in technology on that front. And then, you know, moving from there, it really is making sure that we have the basics and, you know, those things that are just essential for competition.

And then there's some things that you're gonna see us, you know, plan that we'll look to, you know, even outpace the competition. And on that front, it's all designed to improve, you know, our customer experience and revenue performance.

Operator: Thank you. Our next question comes from the line of Dwayne Fenigwerth of Evercore ISI. Please go ahead, Dwayne.

Dwayne Fenigwerth: Hey. Hey. Thanks. Good morning. So depending upon how we interpret the guide for 3Q, maybe there's slight sequential improvement in RASM depending upon how the quarter plays out. But I wonder, you know, how would you rank your enthusiasm for sequential improvement by entity, maybe domestic versus Atlantic versus Latin? And, you know, do you see a path back to positive RASM for domestic this year?

Devon May: Hey, Duane. I'll just say this about the environment. Right now in Q3 versus Q2. In the third quarter, domestic is going to be better, but it starts with a month of July that's going to look very similar to what we had in the second quarter. But we do expect improvement beyond that point, and that's actually the entity where we expect to see the most improvement. Transatlantic, we had outstanding performance in the second quarter. You know, as the Iran conflict was heating up, that was during a pretty decent booking window for Q3.

So we do expect a little bit softer performance in the Transatlantic in July and August, but by September, we think it's going to be performing really nicely again. The rest of the network, I think, there's probably some pressure in short-haul Latin, long-haul Latin, and transpacific probably perform pretty similarly to what we saw in Q2. But when we look at it in totality, we really like the environment that we're in now versus where we were, you know, a couple of months ago. And especially as we get to the back end of this quarter, we think there's some really nice potential for positive unit revenue ahead. That's not baked into the guide.

Obviously, we're going to have negative unit revenue this quarter at the midpoint, but we do think as we head out to the fourth quarter, there is potential for positive unit revenue performance.

Dwayne Fenigwerth: Thanks for that. And then I may have missed it. Apologies if I did, but you guys have been pretty good at keeping your capacity in kind of this 3% range. Basically, for all the quarters of this year, you made some comments about early deliveries. Does that change the trajectory for the fourth quarter, or do you lean harder on retirements, or is it just a rounding error? Thank you.

Devon May: There may be a little bit more capacity that comes in the fourth quarter with deliveries. It's not going to be a huge amount though. Just on retirements, I think you may be aware, we don't have any aircraft retirements that are necessary between now and the end of the decade. So for us, when we're managing capacity, it's really just being tight around utilization during the off-peak periods. And I think we were pretty quick to react here in the third quarter, at least for these periods like August and September, which are traditionally lower demand periods. As we head into the fourth quarter, though, we like the demand trends we're seeing.

I think we're gonna put the right supply in the market to meet that.

Operator: Thank you. Our next question comes from the line of Savi Syth of Raymond James. Please your line is open, Savi.

Savi Syth: Hey. Thanks. Just a clarification there. Sorry. So on the domestic capacity side, you know, with the declines is that solely related to, you know, just taking off the capacity out? So as you get into the fourth quarter, you'll see that step up again. Is that how you're thinking?

Devon May: Well, I'll just say fourth quarter capacity isn't finalized yet. But, yeah, in the third quarter, like we would in a normal year, we pull capacity down in August and September. Year, just given the trends we have been seeing in demand as we went into the second quarter, we pulled August and September down more than we normally would. Some of that capacity would naturally come back in the fourth quarter. Which is traditional seasonality, and that's what I would expect again this year.

Savi Syth: Makes sense. And then on the operations front, it seemed like that was one area that you've had really improved kind of versus where you were maybe pre-pandemic. Over the last few years of this year, you know, clearly more issues in wonder if you can kinda is it really down to DCA and weather? And if that's the case, I mean, weather might not change. Like, how do you manage through this? Because it seems like the metrics have gotten worse at American versus peers even though, you know, you are kinda recovering better.

Robert Isom: Oh, thanks, Savi. Look, I think American runs the most reliable safe operation, you know, possible. You know, at all times. I'm really proud of our team and the way they've been able to recover. Let's just go through some of the things that we've dealt with. You know, first off, you know, June, you know, saw regular operations up, you know, 35% plus over, you know, the prior couple of years. And, you know, just go ahead and multiply that by two or three times as we moved into July. You know, I said earlier today on another call that we've had almost 800 diversion events and 5,500 plus weather cancellations just in the first three weeks of July.

Now that is not something that is, you know, something that will continue long into the future. It's an anomaly. And we've seen that now that, you know, heat has kinda come back into the summer and, you know, we're more in a normal cycle. We're gonna make sure, though, that we do the things that, you know, make American as resilient as possible. And so whether that's investing in a little bit in the schedule, to create some redundancy, extra resources, technology, you know, we're putting AI to use. To make sure that we have the best recovery plans and options for our customers out there. So I feel good about our ability to manage through.

We do need investment in air traffic control. One of the issues that we're facing today is that's unique to us is a slowdown out of DCA. We had, you know, the aircraft incident earlier in the year and but I fully expect that we will recover from that, and that will no longer be an impediment. So over the long run, I think that the weather normalizes for everyone. I think that American because of what we do and how we've operated during a really difficult environment, we're gonna shine. You know, over the long run, and I feel really good about that. So couple other proof points.

One is that even with these irregular operations, our mishandled baggage rates are improving, you know, very, very, very much. And I know that, you know, we're doing a great job in getting customers to back online when operational events create problems. So there you have it.

Operator: Thank you. Our next question comes from the line of Tom Fitzgerald of TD Cohen. Please go ahead, Tom.

Tom Fitzgerald: Hi. Thanks so much for the time. Most might have already been answered, but I'm curious to start thinking about the New York market. Organically now that seemingly a lot of the inorganic growth options there have been closed off.

Robert Isom: Thanks, Tom. Hey. We have a great franchise in New York. We're the third largest carrier with over 260 peak day departures across all three airports. You know, our largest operation is at the preferred New York Airport, LaGuardia. And we have 150 departures there. The new terminal is great. It does come at significant expense. But we're optimizing our network to adjust to make sure we can take New Yorkers to where they wanna go and customers that wanna go new to New York. We're making sure that we have the ability to do that. And so based on what we're doing, we're seeing margin expansion year-over-year.

And, you know, our one world hub at JFK terminal eight, which I think is really unique to American, we offer a seamless experience with 125 peak day departures across AA and our partners. We got a great product, especially from a transcom perspective. London Heathrow to New York, the biggest business market in the world. Yes. Our New York is more specialized given our network and where it complements where we're strong in so many other places, but we have the ability to grow as well. And that growth can be through, you know, upgaging and we're always making sure that we're flying to the right places.

Tom Fitzgerald: Okay. Thanks very much. That's really helpful. And then just as a follow-up, I don't know if you're able to give us any, like, sizing or, like, in terms of, like, points of RASM, but how are you thinking about, I guess, headwinds from the Wi-Fi for next year and then and tailwinds from the improving mix as you take on more premium heavy fleet. Thanks again for your time.

Robert Isom: Okay. So I'll start with that. And, Devin, you can pitch in. Hey. Regarding satellite Wi-Fi, that's it's gonna be fantastic. American will be the first carrier to really offer satellite-based Wi-Fi across its entire mainline fleet, and, you know, everything but our 50 seaters, you know, from a regional basis. Those installations are going on and doing very well. We have a wonderful partnership with our satellite Wi-Fi being sponsored by AT&T. That offers a tremendous, you know, opportunity for both companies to take care of our customers in the way they that they want and find ways to serve them, you know, even better.

So from that perspective, I believe that based on our partnerships and what we think in terms of consumer sentiment, and also usage of the service, think that we're gonna do pretty well, and you won't see much of an impact in terms of the P&L. And in terms and I spoke earlier about the work that we're doing from a premium product perspective. We've got a fantastic foundation. And whether it's our facilities, our lounges, the aircraft that were coming in that are already built into our capital plan, yeah, we're gonna augment that a little bit with amenities and service. And we'll do that, but that won't have a material impact either.

Operator: Questions. Please standby while we compile the Q&A roster. Thank you. Our first question comes from the line of Allison Sider of Wall Street Journal. Please go ahead, Allison.

Allison Sider: Hi. Thanks so much. I guess I'm in New York. I am just curious what you all made of the United JetBlue arrangements. You know, how compelling do you think that'll be, and how much of the setback is it that, you know, American wasn't able to come to some other agreement with JetBlue?

Robert Isom: Thanks, Ali. Look, we had a creative relationship with JetBlue for a number of years that really benefited customers. Unfortunately, you know, we couldn't maintain that long into the future. And so, you know, we haven't had the benefit of that for, you know, a couple of years now. We as I mentioned before, we like our New York franchise. It's specialized. But it's centered on those things that really, I think, are most meaningful, not only to our network, but our customers. Transcons and international service, and really taking New Yorkers, you know, where they wanna go and making sure that we have a great schedule from all of our hubs into the New York region as well.

New York is one of the places that we've grown. Our advantage enrollments, you know, actually even at a faster clip than we have in the last couple of years. So we know that we have a fantastic customer base there, and we'll look for ways to serve them. We have the ability to do some growth ourselves through upgaging. We've got our partner network in our one world hub in JFK T8. So I feel really confident about how we're set up and where we're headed going forward.

Operator: Thank you. Our next question comes from the line of Leslie Josephs of CNBC. Your line is open, Leslie.

Leslie Josephs: Hi, everyone. Thanks for taking my question. Just curious if you could talk a little bit more about this weakness you're you've been seeing with the consumer Robert, I know that you mentioned the uncertainty going into July. What is that exactly, and what are the signs of that? And just because it differs a bit from what we heard from Delta and American. Thanks. Oh, sorry. Delta and United.

Robert Isom: Well, I think that differs from what we've said as well. So you know, the uncertainty, that is in July is really due to bookings. That were made in the second quarter. As we move from June into July, we're seeing the same uptick in bookings. That anybody else is seeing. It's been remarkable. And it's something that gives us great confidence as we look into August and September in the third quarter. And the early bookings, we only have 20% of revenue on the books for the fourth quarter. But as we look out into the fourth quarter, it all looks very promising. That benefits us because it's largely, you know, domestic rebound.

And so given our exposure domestically, I think that bodes very well. Now in terms of the drivers of the reduction in uncertainty, I think that comes from, you know, more stability tax bill. I think it comes from tariff deals being, you know, done. With the UK recently announced Japan. Hopefully, something with the EU soon. So all of that bodes well for the consumer. Joblessness is trending in the right direction. While GDP has been pulled down a little bit, it's still positive for the back half of the year.

And I think that all lends to a customer that's more willing to get out there and spend travel and, you know, do some things that they wanna do.

Leslie Josephs: Okay. Thanks. And just one follow-up. One of your competitors talking about using AI more for pricing. How do you think about that, and is that something that you're considering or already experimenting with? Thanks.

Robert Isom: Oh, thanks. I appreciate the question because I quite frankly, think that some of the things I've heard are just not good. For American, we will use AI to improve operate the airline. We're gonna be more efficient because of it. We're gonna be able to, you know, our team members are gonna have an easier time of doing their jobs. For our customers, it's going to improve their customer experience. We're gonna be able to give them the ability to see more of the amenities that we can offer. That we're gonna be able to serve them in a way that when they do run into difficulties, that they can recover faster.

We have projects underway now that are all aligned in that fashion. You know, we talked about operational difficulties. One of the big AI investments we've made is in a project that we call heat that allows us to rebuild the operation as quickly as possible going forward. So for us, of course, we're gonna find ways to get our product in front of consumers. But as consumers need to know that they can trust American. Okay? This is not about bait and switch. This is not about tricking. And, you know, others that, you know, talk about using AI in that way, I don't think it's appropriate. And certainly from American, it's not something we will do.

Operator: Thank you. This concludes the Q&A portion of the call. I would now like to turn the conference back to Robert Isom for closing remarks. Sir?

Robert Isom: Thanks, Latif, and thank you to everybody on the call today. We remain confident that the actions that we've taken to deliver on a revenue potential strengthen our network, and operate with excellence, and find ways to drive efficiencies throughout the airline position us well for the long term. I wanna thank you for joining us. And thank you for your support and interest. Have a great day.

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