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DATE

Thursday, Oct. 22, 2026

CALL PARTICIPANTS

• Vice President Investor Relations - Neil A. Russell
• Chief Executive Officer - Robert D. Isom Jr.
• Chief Commercial Officer - Nathaniel Pieper
• Chief Financial Officer - Devon May

TAKEAWAYS

• Total Revenue -- $16.3 billion, growing 19.3% year over year and exceeding the high end of previous guidance.
• Adjusted Loss Per Share -- ($0.28), outperforming the midpoint of the company's guided range.
• Fuel Expense -- $4.6 billion, reflecting a $1.9 billion increase year over year due to higher fuel prices.
• Average Fuel Price -- $3.85 per gallon, compared to $2.37 per gallon in the prior year.
• Non-GAAP CASMx -- growing 3.0% year over year, which management stated was better than the midpoint of previous guidance.
• Total Unit Revenue -- 14.5% increase, driven by demand strength across all cabins and geographies.
• International Passenger Unit Revenue -- growing 16.4% year over year, led by a 21.1% increase in Latin America performance.
• Domestic Passenger Unit Revenue -- growing 13.6% year over year, with notable strength in New York and Miami hubs.
• Premium Revenue -- growing 22.9% year over year, outperforming main cabin revenue growth of 19.5%.
• Managed Corporate Revenue -- growing 27.6% year over year, representing the sixth consecutive quarter of double-digit growth.
• AAdvantage Enrollments -- growing 27.4% year over year, reflecting increased loyalty program engagement.
• Q4 Revenue Guidance -- 19.5% to 22.5% growth, continuing the momentum from the third quarter.
• Q4 Adjusted Loss Per Share Guidance -- loss of $0.50 to $1.10 per share, reflecting anticipated fuel cost pressures.
• Q4 Capacity Guidance -- 5.5% to 6.5% growth in available seat miles compared to the prior year.
• Q4 Fuel Price Outlook -- $4.70 per gallon, nearly double the price paid in the same period last year.
• Full Year Capital Expenditures -- $4 billion to $4.5 billion, focused on fleet modernization and retrofits.
• Aircraft Deliveries -- 47 new aircraft expected in 2026 to enhance operational efficiency and capacity.
• Net Debt -- $28.1 billion as of Sept. 30, with a year-end expectation of approximately $30.5 billion.
• Total Available Liquidity -- $11.8 billion, supported by more than $26 billion in unencumbered assets.
• Annual Run Rate Savings -- nearly $1 billion expected by year-end through technology and procurement initiatives.
• Cargo Revenue -- growing 29.1% year over year, supported by expansion in widebody aircraft capacity.
• Working Capital Improvements -- more than $900 million achieved through multiyear reengineering efforts.
• Premium Passenger Unit Revenue -- growing 18.5% year over year, outperforming main cabin unit revenue by more than 4 percentage points.
• Pacific Unit Revenue -- growing 11.3% year over year, driven by joint business partnerships.
• Atlantic Unit Revenue -- growing 14.5% year over year, benefiting from joint business performance.

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RISKS

• Isom stated, "Unfortunately, the significant increase in fuel prices more than offset that strength, Higher fuel added $1.9 billion to our costs in the third quarter," noting that fuel costs were nearly 70% higher than the same period last year.
• Isom warned that the company expects its growth rate in 2027 to decelerate considerably given today's elevated fuel prices.

SUMMARY

American Airlines Group Inc. (AAL -5.59%) reported record quarterly revenue that was largely offset by substantial increases in aircraft fuel costs. Management indicated that total revenue reached $16.3 billion, though a $1.9 billion rise in fuel expenses resulted in an adjusted net loss. The company stated it plans to decelerate capacity growth in 2027 to manage profitability as elevated fuel prices persist. Strategic focus remains on expanding premium seating and enhancing the loyalty program to drive margin expansion and strengthen the balance sheet.

• Management reported that premium products generate roughly half of ticket revenue on approximately 30% of seats.
• The company announced plans to expand Starlink Wi-Fi installation across its entire mainline fleet of more than 1,000 aircraft.
• CEO Isom stated, "Premium generates roughly half of our ticket revenue on only about 30% of our seats. And we are adding more premium seats with every new aircraft in retrofit."
• The company will open 10 lounges through 2027, including the largest Admirals Club in the system located in Charlotte.
• CFO May noted, "By the end of this year, we expect to have achieved nearly $1 billion in annual run rate savings and more than $900 million in working capital improvements."
• Management indicated that managed corporate revenue growth reached 27.6%, marking the sixth consecutive quarter of double-digit gains.
• The company is evaluating a new widebody aircraft order to replace the Boeing 777-200 fleet over the next decade.

INDUSTRY GLOSSARY

• ASM: Available Seat Miles, a measure of an airline's total passenger-carrying capacity.
• CASMx: A non-GAAP financial metric measuring operating costs per available seat mile, excluding fuel, profit sharing, and special items.
• EBITDAR: Earnings before interest, taxes, depreciation, amortization, and rent, a common metric for assessing airline profitability.
• LOPA: Layout of Passenger Accommodations, the interior configuration of seats and cabins in an aircraft.
• NPS: Net Promoter Score, a metric used to measure customer satisfaction and brand loyalty.
• Rebank: The restructuring of flight schedules at a hub airport to improve connectivity and passenger flow between flights.
• TRASM: Total Revenue per Available Seat Mile, a metric used to measure an airline's unit revenue.

Full Conference Call Transcript

Operator: Thank you for standing by, and welcome to American Airlines Group's Third Quarter 26 Earnings Conference Call. Currently, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press 11 on your telephone. To remove yourself from the queue, press 11 again. I would now like to hand the call over to Neil A. Russell, vice president Investor Relations. Please go ahead.

Neil A. Russell: Thanks, Katie, and good morning, everyone. Welcome to the American Airlines earnings conference call. On the call with prepared remarks, we have our Chief Executive Officer, Robert Isom our Chief Commercial Officer, Nathaniel Pieper and our chief financial officer, Devon May. 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 1 question and 1 follow-up. Before we begin, please note that today's call contains forward looking statements including statements concerning future events, costs, forecast of 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 news release that was issued earlier this morning Form 10-K for the year ended 12/31/2025, And subsequent quarterly reports on Form 10-Q. Unless otherwise specified, all references to loss per share are on an adjusted and diluted basis. Additionally, we will be discussing certain non GAAP financial measures which exclude the impact of net special items.

A reconciliation of those numbers to the GAAP financial measures is included in the earnings news release and investor presentation each of which can be found in the Investor Relations section of our website. A webcast of this call will also be archived on our website. The information we are giving you on this call this morning is as of today's date, and we undertake no obligation to update the information subsequently. Thank you for your interest in American and for joining us this morning. With that, I will turn the call over to our CEO, Robert Isom.

Robert D. Isom Jr.: Thanks, Neil, and good morning, everyone. American's third quarter revenue grew 19.3% year over year to $16.3 billion. Above the high end of our guidance. Excluding the years following the pandemic, that is the strongest quarterly revenue growth of my career. Unfortunately, the significant increase in fuel prices more than offset that strength, Higher fuel added $1.9 billion to our costs in the third quarter. Nearly 70% more than we paid during the same period last year. We produced a loss in the quarter that, but for this fuel spike, would have been solidly profitable but short term pressures notwithstanding. Moving in the right direction and with urgency.

We are not satisfied with the loss no matter the reason, and we will do better. The work we are doing now is laying the foundation for solid profitability as we move to 2027. Our confidence comes from the strength we see in the underlying business. Bolstered by encouraging results from our commercial initiatives and delivering on our commitment even as higher fuel prices obscure some of that progress in our reported results. We said we would elevate the customer experience, and we are. You have seen our announcements, modernizing our fleet, installing Starlink on our entire narrowbody fleet, expanding seatback entertainment to our narrow body aircraft, adding premium amenities, creating and updating lounges, and more.

We said we would rebuild our network, and we have. We grew in Miami and Phoenix and are investing in Charlotte. We rebanked our DFW and Philadelphia operations, producing meaningfully stronger operational and financial performance. And we have reestablished ourselves in Chicago. And we are restoring our presence in Los Angeles over time. that is competitive growth we needed to do. At the same time, we are focused on achieving profitable sustainable growth in any environment. And given today's elevated fuel prices, we now expect our growth rate in 2027 to decelerate considerably. We said we would grow premium revenue, and we have. Premium generates roughly half of our ticket revenue on only about 30% of our seats.

And we are adding more premium seats with every new aircraft in retrofit. This is the most profitable real estate on our planes, and these moves position us well as demand for premium continues to grow. And finally, we said we would lead in loyalty, and we are. AAdvantage enrollments and spending on our cobranded credit cards are up year over year, and the AAdvantage program remains 1 of our strongest competitive advantages. The US economy remains strong. Supported by healthy employment, rising household incomes, and significant wealth accumulation. Consumers continue to prioritize travel, and recent yield strength is allowing airlines to regain our historical share of the travel wallet.

In the near term, our focus is on what we can control. We continue to have industry leading cost performance. The efficiency efforts we prioritize are producing meaningful savings that will benefit us well beyond this year. Our premium product investments are paying off both now and in the future. Our year over year revenue growth has accelerated every quarter this year, and we expect that momentum to continue in the fourth quarter. With revenue up 19.5% to 22.5% year over year. And we will adjust our capacity to support profitability as high fuel cost persist. American is taking the right actions for long term success.

Our job now is to convert all of this progress into better margins, free cash flow, and an even stronger balance sheet. We expect the benefits of our strategy and the investments to become increasingly apparent especially as fuel prices stabilize. Of course, none of this happens without the American Airlines team. And I want to thank all of our team members for taking care of our customers and each other. And with that, I will turn it over to Nathaniel.

Nathaniel Pieper: Thank you, Robert. The work we have done across the commercial organization is resonating with customers. And it showed up in our third quarter results. Total unit revenue increased 14.5% year over year with strength across every geography and every cabin. Domestic passenger unit revenue increased 13.6% year over year, with notable strength in New York and Miami. Internationally, passenger unit revenue increased 16.4% year over year. Latin America led the way, up 21.1%, followed by the Atlantic, at 14.5% and the Pacific up 11.3%. We were deliberate in how we managed revenue during the quarter. We prioritized yield over load factor, proactively securing meaningfully higher yields in exchange for slightly lower loads.

We see opportunities to further improve revenue quality through pricing, premium products, merchandising, and loyalty. And are taking advantage, especially in this high fuel cost environment. Now let's go through each of our 4 commercial priorities. First is to elevate the customer experience. We now have enough scale to more consistently deploy our world class product. Our new Boeing 787-9 premium aircraft finished the summer with the highest NPS of any aircraft in our fleet. With 11 flying and another 19 on the way, our NPS scores will continue to rise as we introduce them further into the network. And across the system, net promoter scores for on time flights have improved in 6 of the last 7 quarters.

In addition to the Starlink installations and seatback entertainment that will greatly enhance the customer experience in the air, giving us a hard product that will lead the industry, we are improving our premium ground game too. We will open 10 lounges through 2027, and have additional investments planned across our network including the largest Admirals Club in our system, in Charlotte. We are also investing in our digital experience across the board. Customers will see this as we manage disruptions better and deliver more timely information. And we are already seeing improvements in our mishandled baggage rate, and customer misconnections, among other customer focused metrics. Second is to grow the global network. Dallas Fort Worth is our epicenter.

Following this year's rebank, DFW handled record passenger volumes in the quarter. with significantly fewer misconnections, fewer mishandled bags, and unit revenue that outpaced the rest of the system. Beyond DFW, we are building stronger schedules for local customers, in our hubs. Especially Chicago, Miami, Philadelphia, and Phoenix. These travelers tend to be higher yielding and a better schedule is how we earn more of their business. Internationally, our Latin America franchise, anchored by our Miami hub, remains 1 of the strongest parts of our network. Our long haul international growth for 2027 is focused, with 7 new routes, including Chicago-Tokyo for our corporate customers and Charlotte-Barcelona for high demand leisure travel.

The network is creating value beyond the passenger business too. Cargo revenue increased 29% year over year in the third quarter, and we see future growth as we expand our wide body fleet. Third is driving premium revenue. Premium unit revenue increased 18.5% year over year. Outperforming main cabin unit revenue by more than 4 points. Expanding our premium seating volume with new deliveries and retrofit programs, which include more than 200 aircraft across our 777, A320 and A319 fleets over the next 3 years, is already bearing fruit. Corporate demand remains strong, and American is capturing meaningful share as our managed corporate revenue increased 28% year over year our 6th consecutive quarter of double digit growth.

And we are improving our revenue quality as we deliver more product choices demonstrated by a 6 point increase in the upsell rate from basic economy to main cabin. Finally, loyalty. The AAdvantage program is a differentiator for American, and we intend to keep it that way. Enrollments were up 27% year over year in the third quarter, with growth of 35% to 65% in New York, Los Angeles, and Chicago. During the quarter, we launched an enhancement for customers to use a combination of cash and miles for flight bookings, and the early results are encouraging.

Spending on our Citi cobranded card during the third quarter increased nearly 10% year over year, and we see opportunity for even better performance in our expanded partnership with Citi going forward. To close, we are delivering on our commercial strategy. Centered on customer experience, network, premium, and loyalty. We are encouraged by the progress and optimistic about continued future improvement and the revenue opportunity ahead. I will now hand it over to Devon to walk through our financial performance and outlook.

Devon May: Thank you, Nathaniel. Our third quarter results reflect strong commercial and cost execution in a very challenging fuel environment. We reported an adjusted loss of $0.28 per diluted share, ahead of the midpoint of our guidance range. The biggest factor in the quarter was fuel. We paid $3.85 per gallon. A dollar and 48 more per gallon than the same period last year. Which increased fuel expense by $1.9 billion year over year. For the full year, we now expect fuel expense to be more than $7 billion higher than in 2025. We continue to deliver on what we can control in this environment.

Third quarter CASMx increased approximately 3% year over year, better than the midpoint of the guidance range we provided in July. And we have now met or beat our CASMx guidance in 14 of the past 15 quarters. For the full year, we expect to lead the network carriers in the spread between year over year unit revenue and CASMx growth. That cost performance is not a 1 quarter result. Our multiyear reengineering efforts focused on technology investments, procurement excellence, and process improvements that drive efficiencies throughout the business are working.

By the end of this year, we expect to have achieved nearly $1 billion in annual run rate savings and more than $900 million in working capital improvements through these efforts. Turning to the outlook. Demand and pricing trends remain strong across the network, and we expect fourth quarter revenue to grow 19.5% to 22.5% year over year. Continuing the momentum we saw in the third quarter. Fuel will remain a significant headwind in the fourth quarter. Based on the forward curve as of October 19, we expect an average fuel price of approximately $4.70 per gallon in the quarter. Nearly double what we paid a year ago.

At that price, we expect fourth quarter fuel expense to be approximately $2.8 billion higher year over year. We expect fourth quarter CASMx to increase 2.5% to 3.5% year over year. And we are guiding to an adjusted loss per diluted share of between $0.50 and $1.10. For the full year, we now expect an adjusted loss per diluted share of $1 and $1.60 Our revenue performance and cost execution remain on track, And when fuel prices stabilize, we expect them to drive meaningful margin expansion. Turning to fleet and capital expenditures. This year, we expect to take delivery of 47 new aircraft, and expect $4 billion to $4.5 billion of capital expenditures.

We are making good progress on our fleet retrofit programs which support our strategy to expand premium seating improve customer experience. Finally, an update on the balance sheet. We ended the third quarter with $11.8 billion of total available liquidity, and more than $26 billion of unencumbered assets and first lien capacity. We now expect to end the year with net debt of approximately $30.5 billion which is flat to where we closed 2025. We remain committed to reducing debt, lowering interest expense, and reaching our target of 3x net debt to EBITDAR in line with double-B credit metrics. Now I will turn it back over to Robert for closing remarks.

Robert D. Isom Jr.: Thanks, Devon. In summary, we have rebuilt the network. Invested in the customer experience, expanded our premium product offerings, and strengthened our AAdvantage loyalty program reinforcing the fact that we are a premium global airline. With those investments now in place, we are seeing the benefits in our revenue performance. At the same time, we are not satisfied with our financial results, We expect America to perform better regardless of the external environment. Our focus now is on translating the commercial progress we are seeing into stronger margins and improved profitability.

We are confident in the direction of the business, but we recognize that, ultimately, we will be measured by our results. that is the standard we are holding ourselves to. Operator, please open the line for questions.

Operator: 11 on your telephone. To remove yourself from the queue, you may press 11 again. To allow everyone the opportunity to participate, you will be limited to 1 question and 1 follow-up. Please standby while we compile the Q&A roster. Our first question comes from the line of Catherine O'Brien of Goldman Sachs. Your line is open, Catherine.

Catherine O'Brien: Good morning. Thanks for the time. You noted that 2027 capacity is expected to slow from 2026 given elevated prices, which I think is very prudent. I realize delivery schedules are still fairly fluid post pandemic versus history. But your deliveries are set to step up into 2027. What will be the offsets to get the slower growth? Is that retirement gauge utilization? And forgive me, but any additional color on how we should translate what a considerable slowdown means, like, in percentage point ranges? Thanks.

Robert D. Isom Jr.: Thanks, Catherine. Hey. I will just start with this. American, our growth in 2026 has all been about reestablishing our network. I think everybody knows that we considerably undergrew our network competitor. Competitors, you know, since the pandemic. And we are really pleased that we are in a position now where we have Chicago reestablished and have been able to flesh out the hubs in Philadelphia and Phoenix and a little bit of growth in Miami. As we take a look at next year, yes, we are we are taking into account the high price of fuel. And we are gonna be adjusting appropriately. First, first order of business there is just you know, aircraft utilization.

We can we can step that down quite a bit, and we will use that, to help us with our reconfiguration lines and Starlink Wi-Fi. Installs, and that is a great place to start. The rest of it, our aircraft deliveries are largely weighted towards the back end, but we are gonna be really conscious of making sure that we match, capacity with demand. And the kind of things that we take into account certainly, price of fuel will certainly take into account GDP. And make sure that we have a competitive network.

Catherine O'Brien: Okay. Great. And maybe just as my related follow-up, you know, as growth slows, how will that impact CASMx trends? Should we expect that to be more pressured year over year? Or really just like any high level algo you would point us to on the relationship between capacity growth and CASMx fuel? Thanks for the time.

Devon May: Hey, Catherine. it is Devon. We have talked in the past that with capacity growth in the mid single digit range, we would expect CASMx growth to be low single digit Obviously, as we reduce our growth rate, that will put some upward pressure on our unit cost, but some we are really good at, and we will continue to drive efficiencies throughout the business. But yeah, lower growth rates will drive some impact to our to our unit cost.

Operator: Thank you. Our next question comes from the line of Jamie Baker of JPMorgan Securities. Please go ahead, Jamie.

Jamie Baker: Hey. Good morning, everybody. So, you know, probably for Nathaniel, we have never debated or derided the breadth of your domestic network. Just yesterday, United even acknowledged that fact, and yeah, I am sure you are aware they do not pay you a lot of compliments these days, but you know, now the push at American is obviously to bolster the international foot But these were also, particularly in the Pacific, some of the very first routes that you cut during COVID. So my assumption is they were challenging then, and they could be challenging now.

I guess my question is, will not the international push, at least initially, caused the margin gap to worsen or put differently, what. what is different this time with going back into those markets?

Operator: Jamie, thanks for your question.

Nathaniel Pieper: This business tells you to have a tough skin, so you do not count on compliments from many competitors over time. Look. Our capacity growth in 2026 is really to reestablish our hubs. And domestically, that is where you saw us allocate our resources, and we think that is been successful. it is interesting, though, that our in the third quarter, our international unit revenue outpaced our domestic. And so you know, we are a premium global airline. And as we focus on growth going forward, you know, whether it is in the Atlantic with our great joint business there and our Heathrow franchise, it is been very successful. Latin America through Miami and terrific.

And then the Pacific in and of itself, we have got 2 really good joint businesses and 2 great joint businesses partners out there, Dallas and Los Angeles to Haneda. Strong results in concert with JAL. You have seen us announce for 2027, Chicago, Tokyo, for American, and JAL will continue to fly that also. Then Oceana, our great partner, Qantas, in joint business there, Pleased with the way that we are working together with them. And I think the foundation that we have got with international partners, Alaska partnership on the West Coast, help us feed that too. We think there is great opportunity for us to expand in The Pacific over time.

Jamie Baker: Okay. Makes sense. And then just thinking about the premium push, and granted we are in a high fuel environment at the moment, but I personally fly the United CRJ550 with some regularity, and American is obviously long. RJs I know there are some scope nuances, but have you ruled out doing a lower density premium centric, you know, E170 or something like that?

Nathaniel Pieper: Hey, Jamie. You know, if you look at our regional fleet today, it is it is pretty high premium as it sits right now. The E175s have 12 premium seats. We have a whole lot of other dual class regional jets between the CRJ 700, the CRJ900s, and the E170s that have a really nice premium footprint. We have looked at a few different LOPAs that will allow us to add some more premium seating there, but for the most part, the RJ fleet offers a lot of premium seating today, and we like where we are at.

Operator: Thank you. Our next question comes from the line of Ravi Shanker of Morgan Stanley. Your line is open, Ravi.

Ravi Shanker: Great. Thanks. Good morning, everyone. So not asking for 2027 guidance at all, but if you but you already spoke of the CASMx algo in the new low growth environment. How do you think about RASM versus load factor in 2027? And can you remind us again if there are any specific drivers of idiosyncratic RASM for you guys next year in addition to industry wide jet fuel pass through?

Robert D. Isom Jr.: Thanks, Ravi. Look. We are sitting down and taking a look at we are gonna do for 2027 right now. You will have more about that as we get to the first quarter. As I have said, our bias in terms of capacity is to the downside. In regard to what we are doing is all about improving revenue performance, specifically unit revenue performance, And as Nathaniel said in his comments, it is directed around our 4 pillars. And we believe that there is significant upside there. We are going to be the best in the business at efficient capacity production.

And the investments that we are making whether it is elevation of our customer experience, the network that is now fully fleshed out, especially our drive to premium revenue and finding ways for customers to find value and to pay more, and leading in loyalty, that is what is going to be the driver for American And we think that, you know, right now, there is more upside in American given, where we stand in terms of those investments.

Ravi Shanker: Great. that is really helpful. And maybe just a quick follow-up. Is this new lower growth algorithm only as long as we have a high fuel environment? Or is that the new normal for you guys?

Robert D. Isom Jr.: No. We are always going to be making sure that we are matching our capacity to demand and doing that in a profitable way. there is obviously some things that we had to do that are going to be beneficial long term with our network this past year. that is the reason that we have the growth, and we are gonna be lapping some of that growth as we get into next year. But at the end of the day, our interest is improve. Is improving profitability, driving margins, and ultimately, the capacity that we do deploy is going to be focused on our assets and where we can, generate the best margins. Thanks.

Operator: Thank you. Our next question comes from the line of Atul Maheswari of UBS. Your line is open, Atul.

Atul Maheshwari: Good morning. Thanks a lot for taking my question. 1 of your peers talked about the ability to get to 100% of fuel recapture next year. Assuming you have a similar objective, the question is, what would you need to do from where you are today to get there? Is there room for industry price to go up further? Should fuel remain at these levels? Or realistically, at this point, capacity management is the major lever given all the price increases that have already been passed through by the industry.

Robert D. Isom Jr.: So Atul, thanks for the question. Look, in this environment, profitability for all carriers is under pressure. And we are going to, you know, make sure that we react to the marketplace And in terms of you know, the value that is that is out there, we are just now getting back to you know, airfares that on an inflation-adjusted basis. So where they were in 2019 and 2014, So we know that there is value in the product today. And in terms of the ability to hold on to that and push it further, I think the fuel price increase that we have experienced has just been a catalyst to allow us to realize that there is value.

Now where we go from here it is going to be all about how we monetize the investments that we are making in our product. And from a premium perspective, I see great things, in terms of dynamics. In the past, that would have all been, you know, a corporate related trend. But now there is so much, leisure premium that is driving that. I think it is almost 65% of our premium business now. it is really a sign that people want to take care of themselves. And we are gonna make sure that we have a product that meets them where they wanna fly.

Atul Maheshwari: Got it. And then just a quick on the fourth quarter revenue performance. Can you provide some color on expectations by various regions? And is there any expectation for trend change for any region relative to what you saw in third quarter?

Nathaniel Pieper: Yes. Q4 revenue, obviously, pleased with our third quarter performance, and we see a sequential increase going forward into the fourth quarter. From an entity perspective, we see international performance continuing to be terrific, and we see international unit revenue to exceed domestic again in Q4 as it did in Q3.

Operator: Thank you. Our next question comes from the line of Tom Fitzgerald of TD Cowen.

Thomas Fitzgerald: Hi, everyone. Thanks so much for the time. Curious where things stand with corporate demand and your share of corporate traffic within the indirect channels and how some of your conversations are going with accounts across your network and then what we should be thinking about for maybe outside of. In that area in 2027?

Nathaniel Pieper: Tom, thanks for the question. Your corporate sales performance, really strong in third quarter. Managed corporate is up 28%. Success in the TMC channel is up 27%, and maybe most exciting, our small and medium business performance what we call AAdvantage Business, was up 46% You guys know this, but yields on all of those 3 channels are really attractive, and we are pleased with our performance there. And as we look forward into 2027, just see continued goodness coming American's way. And it is all related to the products that we are putting on the shelf. They are attractive to folks. Just through our.

All of our priorities, whether it is network, all the customer experience we have made, driving premium revenue in our sales team, and then lastly, our loyalty program. So all working together, and this is great feedback from extremely discerning customers to what we are putting out there is attractive.

Thomas Fitzgerald: Nat, thanks so much. that is that is really great. And then I guess just as a follow-up on the fleet you guys have been evaluating a wide body order. I am just curious holistically, as you go into the next round of labor CBAs, just how are how are thinking about the right mix of mainline and regional? I know looking backwards, the. Your regional. Your scope advantages have been a major lever for you guys. But I am just wondering, just given a lot of the changes in regional economics over the last 5 years, if the current mix is optimal and maybe there is any ways to kind of dial that around in the years ahead.

Thanks again for the time.

Devon May: Sure. On the widebody side, we. We have been working on a campaign there for the past, 6 or 7 months. I think we are getting close. And as you know, this allows us to replace the 777-200 fleet in the next decade. And have some additional growth in addition to the, you know, 19 or so 8 sevens we have coming on and the options there. You know, mainline versus regional, the economics have changed a bit, but we still really like our regional performance. It just served these small and medium sized communities perfectly. What will change over time, though, are just the aircraft that we operate. You know, some of the smallest airplanes are out of production.

Embraer continues to do a fantastic job for us, and that is the only manufacturer out there. For that size of aircraft. So the mix of that fleet will change over time. I do not expect the overall size of that fleet to grow too much, although there may be some growth over the years on the large side. But right now, we are we are really pleased with the economics of the regional fleet, happy with where we are at, and the mix probably does change slightly going forward, but not a huge amount.

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

Duane Pfennigwerth: Hey. Hey. Good morning. Excuse me. Thank you. Welcome the shift in body language on capacity. Just several follow ups. Wonder if you can flesh that out a bit. How long we need to wait before we see it. And as we just look at maybe 3Q or the trends you are seeing into 4Q, what geographies do you think need that the most?

Robert D. Isom Jr.: Thanks, Duane. Look, as we go out into the fourth quarter, a lot of what you are seeing in terms of our growth is just of where we have made investments so far. You will see a little bit more of that as we move into the first quarter. But beyond that, we have more or less lapped growth that we have focused on for competitive purposes. And so as you move out into 27, that is where you are going to see the reductions.

Duane Pfennigwerth: Okay. And then maybe just a related follow-up. If you think about the opportunity for seasonally shaping your capacity, which should help margins. Maybe you feel like you are doing this already, but is there anything structurally different about American versus your network peers that limits this? And maybe where you would score yourselves on that journey? Thank you.

Robert D. Isom Jr.: Thanks, Duane. And on that, we are working on that as we speak. But 1 of the things we have seen is the fourth quarter actually been with higher demand than we had the past. October has been a really significant benefit to the network. We are gonna continue to make adjustments. We are really conscious of making sure that we have a network that appeals to the highest yielding customers.

And from that there is some things that we have to do on a really consistent basis And so you will probably see the schedule, you know, level out more throughout the time as opposed to you know, a lot of the peakiness that maybe you would seen in the past.

Operator: Thank you. Our next question comes from the line of Scott Group of Wolfe Research. Your line is open, Scott.

Scott Group: Hey. Thanks. Good morning. So if we look at Q3 relative to other network airlines' best yield performance, but biggest drop in load. I guess, why do you think we saw that outcome? And how do we think about Q4? And then I guess I never thought I would be the 1, like, questioning an airline you know, lowering capacity, but you know, Q4, you are gonna have capacity up 6% and RASM up 14%. So, like, there is at least some degree of, like, decoupling of pricing and capacity. Like, what is 1 or 22% capacity instead of 3% or 4% next year? Like, what is that actually unlock for you?

Analyst: From a pricing standpoint?

Nathaniel Pieper: Hey, Scott. it is Nathaniel. there is, like, 9 questions in there, so I am gonna start with the first 2. Listen, we actively, in the third quarter, prioritized yield over load factor. And we are pleased with the way that worked out with our 19.3% growth above the high end of our guide. You know, American traditionally has been a leader in load factor. And as we looked at our performance relative to our peers, really identified yield improvement as a top priority, and that is partially what is driven.

And you have seen the way that we have scheduled the airline focusing on rebuilding our hubs and chasing yield from that perspective and willing to accept marginal load factor minutiae from doing that. We obviously monitor that trade off extremely closely. And felt good about where that played out. As we look forward to Q4, again, good capacity growth lined up, and we will adjust that as it goes. But a unit revenue perspective, we see that as being healthy as well. We will continue to prioritize yield the way that the economy is playing out.

As Robert mentioned in the script, I think I did too, you know, our premium product and our premium performance continues to be really strong, which drives you to let's go secure yield, and that. that is been the right approach for us.

Scott Group: Yeah. I mean I mean, I guess, like, the second part of the question was just, like, what is the. Is the relationship between capacity and RASM changing, or is this just a temporary thing and, like, there is no way to, like, actually decouple it? Or is this just about. it is less capacity, like, cutting some unprofitable routes? And if it is, I gotta think that like, there is a lot of them. Like, maybe. it is like, is there a chance capacity could be down next year?

Robert D. Isom Jr.: Hey, Scott. Thanks for that. Again, 1 of the reasons that we are seeing the revenue performance that we are is because that we have actually built back our network in a way that is appealing to customers. So we are not. that is. We are not gonna decouple that from all the other work that we are doing. As we take a look into next year, as I said before, you are gonna see our growth decelerate. And with that, we are gonna be able to actually know, really fill in, some of the capacity that we put out.

And, no doubt, Nathaniel and team are going to be able to make good use of that The supply demand dynamics of the business there is absolutely that aspect that we have to manage. As well as the drive to premium products. We are gonna be really sensitive to making sure that, our capacity does not get out in front of demand. Thanks.

Operator: Thank you. Our next question comes from the line of John Godyn of Citi. Your line is open, John.

John Godyn: Hey, guys. Thanks for taking my question. Robert, I just wanted to kind of plug into your kind of bigger picture thinking on you know, the shape of the industry and American's role in it. We have had what there may be a case that the industry is kind of 1 you know, decent M and A deal away from an industry that really takes it to the next level. You have experience integrating large airlines successfully over many years. And I am just curious if there is a state of the world where American takes a more proactive view on M and A Maybe you could just kind of brainstorm on that a bit.

Robert D. Isom Jr.: Thanks for the question. I will just start with this. American has always been a leader in the business in finding new and creative ways to make sure that our customer have the best network available to them. Nathaniel talked a little bit earlier about our partnerships. The joint businesses, we pioneered those. We have more than anyone else. And I think that they are absolute things that we are going to look to build on in the future. As we grow, it is gonna be in conjunction with JAL. And with Qantas and with IAG and with Qatar.

So really pleased with that As well, you have known that we have been very creative in trying to find ways to partner. And so whether it is the West Coast International Alliance that we have with Alaska, that I think that there is a lot more that we can do. You have seen that we are intent on bringing them into the Atlantic joint business as well as the Pacific joint business. I think that it will be very beneficial for their customers and ours. We are going to be opportunistic. We are gonna be mindful and going to be active in ways that improve our network as we go forward.

John Godyn: That makes a lot of sense. And we are in a domestic as well where some of the low cost carriers are struggling in different ways. And that may create opportunities We saw an example of that earlier this year, obviously, with Spirit. Does that create opportunities for you? And maybe we can discuss that a Yeah.

Robert D. Isom Jr.: We will see. Spirit, their eventual bankruptcy filing and liquidation, you know, we took a look at some of those assets. Were not successful in getting those. But we will keep our eyes open on any others that may have issues. Look. We have been a great of the things I pride myself in, and I know the airline has been just great at it, We are fantastic partners. there is no doubt that, American has the best network from a North American perspective. And that has enabled us to partner in ways that continue to drive our reach across the globe.

So you are gonna continue to see us make sure that we have just incredible strength within The US and North America, and that is gonna be something is very appealing and I think going to be a driver of our growth and profitability long into the future.

Operator: Thank you. Our next question comes from the line of Andrew Didora of Bank of America. Your line is open, Andrew.

Andrew Didora: Hi, good morning, everyone. Thanks for taking the questions. Maybe first 1 for Devon or if Robert wants to chime in. Just on kind of capital spend, capital allocation in this environment. Now are we at the point, just given where fuel prices are, where you maybe begin to think about CapEx differently. You know, are there areas to cut or kind of reduce spend in order to preserve some, you know, to drive some free cash flow, or is that really not part of the thought process yet?

Devon May: Well, as we slow capacity, it something we can look at. But, you know, right now, we really like the economics of the aircraft that are coming our way. We do not have massive CapEx requirements right So we do not have any fleet retirements. So, there is no CapEx replacement needs. We have a guide out there for this year with to $4.5 billion of total capital expenditures. It might step up slightly next year, but it is still well below our run rate needs well below our peer set. So we feel really good about the investments we are making.

There may be some trimming around the edges, but for the most part, the investments we are making support our revenue initiatives, and we expect to drive margin.

Andrew Didora: Got it. Understood. And maybe for Nathaniel, just thinking about you know, you have been in the seat for a little bit now. Just bigger picture, you know, you are you are investing in LAX, you know, growing your Pacific gateway. This is historically been a smaller part of your network. Now when you think of it. Think out over the next you know, couple of years, what are the areas of the. Of strength that you wanna continue to lean on? And then maybe some areas of weakness or geographies that you are, you know, that are smaller today that you would really like to improve. Thanks for taking the questions.

Nathaniel Pieper: Thanks, Andrew. Yes, it is been 11 months, and it is hard to believe that it is only been that. I actually feel really good about the commercial strategy that we have and really building on, you know, what was in place when I came and took the job. I think American's been really clear in articulating our 4 priorities. it is network, it is customer experience, it is premium revenue, and its loyalty. And think not only have we made considerable strides on each of those, we have got initiatives in the pipeline that are gonna continue to deliver revenue performance, continue to help us close the gap versus our peers and drive margin expansion. So excited about it.

I am excited about the next few years and really you know, continue to push American forward together.

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

David Vernon: Hey. Good morning, everybody. So Devin, I am just wondering if you and the Board are talking more about sort of the balance sheet. I think the promise has been we can close the margin gap, pay down our debt, and kinda get to a little bit more of equal footing from a credit perspective. But, obviously, the fuel crisis that we are going through right now is postponing that. Are you kind of having more conversations about different ways to maybe recapitalize the company, whether it is a transaction with, the credit card program or other efforts to try to kinda alternatively repair the balance sheet just given the impact of fuel?

Devon May: Thanks. Yeah. I. We have made a ton of progress on the balance sheet. Like, you look where we were 3 to 4 years ago, midst of the pandemic, we had $54 billion of total debt. We have reduced that to around $36 billion today. We have less total debt today than we did 10 years ago. We have less net debt today than we did 10 years ago. So the balance sheet, we are gonna continue to make progress on. But the key to us driving improved credit ratings is earnings. And so while you can try to do some different transactions to improve our debt levels, the real key unlock for leverage improvement is on the earning side.

And that is where we are focused We are focused on driving margin improvement. We know it is going to come from the revenue side of the business. When we do that, limited CapEx requirements are gonna allow us to produce meaningful free cash, and then we will use that continue to improve the balance sheet. But our focus right now is on margins.

David Vernon: Alright. Thanks for that. And then, you know, the decision to get a little closer to American on the joint venture side, could you talk a little bit, Robert, maybe about the strategic rationale for that? And other things you can do to kind of strengthen that relationship? It seems like you guys are drifting a little bit closer together, I do not wanna turn this into a consolidation question because I know that is not something that you are gonna address. But you know, when you think about the motivation, the intention, the benefits that Alaska maybe brings to that JV, if you could kinda give your perspective on that, that would be helpful.

Robert D. Isom Jr.: Perspective on this is just Alaska has been a great partner. And they complement a lot of what we do in a in a in a very great way. They have been part of OneWorld now for a few years. Super happy about that. And, you know, my relationship with Alaska, you know, dates back, you know, well prior to the pandemic, and it is always been about trying to find ways that we can serve our customers in a better way. And to that end, I think we have really been able to develop a great partnership West Coast International Alliance is doing what we had hoped.

And really looking forward to bring Alaska into the joint businesses as time goes by here in the next year.

Operator: Thank you. Our next question comes from the line of Sheila Kahyaoglu of Jefferies. Your line is open, Sheila.

Jack Ewell: Hi. This is Jack Ewell on for Sheila. Just wanted to. You have announced a flurry of customer experience investments this year across Wi-Fi to return feedback and continued fleet upgrades, among others. When you contemplate these investments, can you just talk about the return thresholds you look at once reaching maturity, whether it is an ROIC target or maybe an expected RASM slash yield uplift?

Devon May: Yeah. Obviously, these types of investments do not have a direct return. What they do is they support all of our commercial initiatives. And so in some cases, there are like, obvious indirect returns but it does not cover all of the capital or all of the operating expense that goes with it. And so for the most part, you are expecting a uplift on yields or an improvement in market share. And that is how we view it.

We view it from a broader lens than just kinda 1 investment or 1 initiative at a time, but we think we are taking the right steps and making the right steps to drive closure in this revenue gap that we have today.

Jack Ewell: Absolutely. that is really helpful. And, so I would just kind of follow-up there, in May, you announced, you know, Starlink would be added to 500 narrow bodies, and then, you know, quickly rolled it out that you are gonna go across the entire fleet. I am just wondering what informed that decision to go across the whole fleet, and do you generally view Wi Fi installations as a race to the finish in order to maintain and attract the higher yielding, you know, loyalty members across, you know, the you major brand-loyal airlines in the US.

Robert D. Isom Jr.: I will just take a step back. We laid out our pillar to elevate our customer experience. And whether it is what we are doing, you know, on the ground with lounges some of the new concourses and terminal developments, that are going on throughout our system, the drive to put premium seats, the flagship suites on our aircraft, the aircraft that we are bringing in, you know, all of that is designed to make sure that we have a hard product and also the amenities that customers really want.

1 of the things we know, we have been a leader in satellite based Wi Fi having it on more of our aircraft than any other airline for some time now. We know that our customers value connectivity and that is something that we are confident is going to be table stakes. And, you know, right now, I think it could be a differentiator for American. We are gonna move as fast as we can to get Starlink installed on our entire fleet of narrow bodies wide body aircraft over the next year or so. And super excited about that. And I know that our customers will value that greatly.

Operator: And we will be taking media questions. Media, please press 11 on your telephone to ask a question. Again, at this time, we will be taking media questions. Thank you. Our first question comes from the line of Alison Sider of Wall Street Journal. Your line is open, Allison. Allison, please make sure your line is unmuted. If you are on a speakerphone, if you-- oh, sorry about that.

Alison Sider: Sorry. Sorry. Hi. I was curious about fees. Given sort of the trade offs you are thinking about between pricing and filling seats, if there is any further thought or opportunity you are seeing to increase things like bag fees or other fees or if you expect more increases there across the industry?

Robert D. Isom Jr.: Hey, Alison. Nathaniel can chime in here. Look. We do not talk about pricing or fees, you know, specifically. Look. We are all about making sure our customers get great value in the products that we offer. And I tell you, it is at every end of the spectrum. So we wanna make sure that our customers in business class have that live flat flagship suite, want to make sure that we have the best lounges. And, you know, it goes down, even to those that are the most, you know, price conscious, budget minded, And so for our basic economy fares, we are really intent on making sure that our customers have just a great product. You know what?

We offer incredible value. You know, we do not charge, you know, $75 for a carry-on bag. for that product like some of our competitors do. We wanna make sure that our customers are finding real value throughout the spectrum of products that we offer. And we are really, you know, pleased with the investments we are making and what it will do, you know, ultimately for our customers and the loyalty that we will get for that too.

Alison Sider: And then I guess on the changes that you have made in your approach to involuntary denied boarding, I mean, seems like that is really been paying off and been successful in getting those rates down Like, why is that not something you chose to tackle earlier?

Nathaniel Pieper: Alison, I guess the new guy gets to answer that question. that is fine. Listen. I think from a customer experience perspective and what we wanna deliver and making American the airline of choice, it really is just something that is terrific to promote, and I know our teammates at the airport feel so much better about it, and certainly the proposition that we are delivering to customers and having that So choosing just to focus on the way forward, the technology that is in place for it, you know, we feel really good about how that rolls out and where it is leading American.

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

Leslie Josephs: Hi. Good morning, everyone. The passenger counts, loads are down, not just for you, but other airlines. At what point does that worry you or become an issue to your results? And then secondly, do you think you have a chance that these fuel prices or similar to be profitable in 2027? Thanks.

Nathaniel Pieper: Leslie, I will take the it is Nathaniel. I will take the first 1. Listen, as I said earlier, we are actively prioritizing yield versus load factor. And really happy as we see it. It fits right in with the premium investments that we are making. It fits right in with a lot of the merchandising and the value that we are delivering to different customers at different price points. So we feel good about that, and we are we are gonna continue to prioritize that as we go into the fourth quarter.

Robert D. Isom Jr.: Obviously, that is a relationship that you watch closely. And regarding profitability, of course, we think we can be profitable next year. And that is that is driven by what we have seen, you know, this year. We have had fuel expense now grow $7 billion over the course of the year. You know? But for that, we would be solidly profitable. We would be, you know, certainly 1 of the companies that have had the greatest percentage growth in profitability, you know, year over year, but for, you know, the dramatic increase in fuel. You know, fuel prices, whether they stay higher, they move lower, it is really about the volatility that we have been dealing with.

And as fuel prices stabilize, I am confident we are gonna be able to manage our supply and demand to make sure that we are in balance. And then on top of that, all the investments that we are making in terms of driving revenue are gonna show up. And, on top of the industry leading performance in terms of efficiency and cost management, that is going to lead to profitability. So I have great confidence in our ability to get back to profitability.

Everything that we see in terms of how we are performing versus others, and then also the revenue performance, which is which is the primary focus, leads us to believe that we have a great chance to get back profitability and really be the airline with the most upside for our investors. Thanks.

Leslie Josephs: And just 1 follow-up on the widebody order You said you are really close. Are you looking at a split fleet or a split provider order or a single provider? And what is the pros and cons of each?

Robert D. Isom Jr.: No real no real comment on, what we are thinking right now other than just say the campaign's going really well, and we hope to wrap it up this year.

Operator: Thank you. I would now like to turn the conference back to Robert Isom for closing remarks. Sir?

Robert D. Isom Jr.: Thanks, Katie, and thanks, everybody, for listening in. We are going to get back to work Thank you very much.

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