Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Gas prices, specifically jet fuel prices have a lot to
Speaker 2: do with the conversation that we're about to hear. And
Speaker 2: as we watch prices pull back a bit today, we're
Speaker 2: seeing airlines, cruise lines, other travel related stocks get a
Speaker 2: bit of bump out of some of this relief. And
Speaker 2: it's a perfect opportunity to bring in our colleague Lisa Abramowitz,
Speaker 2: who brings us an important conversation now with the CEO
Speaker 2: of American Airlines, Lisa, take it away.
Speaker 3: Thank you so much.
Speaker 1: Joe.
Speaker 4: I am here with Robert isisam the CEO, chief executive
Speaker 4: officer of American Airlines here in our New York office.
Speaker 3: Thank you so much for being here. Robert, great to
Speaker 3: see you.
Speaker 1: Please, great to see you.
Speaker 4: And right now we are looking at oil prices on
Speaker 4: a daily basis, as is your share price.
Speaker 3: Before we get.
Speaker 4: There, though, I want to start with just consumer demand.
Speaker 4: There have been a lot of questions about how resilient
Speaker 4: consumer demand actually can be as this conflict goes on.
Speaker 3: What have you seen so far?
Speaker 1: People want to travel?
Speaker 5: I think that there are still some consciousness that travel
Speaker 5: is still a bargain. Really we're just getting back to
Speaker 5: yields that we had had in twenty fourteen, in twenty nineteen,
Speaker 5: so that sense of travel is a bargain, I think
Speaker 5: is apparent. And what we've seen tremendous demand in the
Speaker 5: first quarter American airlines year over year revenue improved ten
Speaker 5: eleven percent, and we're forecasting revenue to improve fifteen percent,
Speaker 5: you know, year of year. And that's some additional capacity
Speaker 5: in there, but a lot of unit revenue performance as
Speaker 5: well would suggest that people, you know, are finding great
Speaker 5: value in travel.
Speaker 3: Where is the demand coming from? Is it leisure? Is
Speaker 3: it business? Is it both?
Speaker 5: It's all of the above, and it's business, it's leisure,
Speaker 5: it's domestic, and also international is still leading the way.
Speaker 5: Premium is still outpacing leisure. But I really like what
Speaker 5: I see, And in terms of capacity, I think that
Speaker 5: it is responding to market dynamics. I think that you know,
Speaker 5: the industry is stretched terms of margins, and at least
Speaker 5: for US, I like what I see in terms of
Speaker 5: how wet we're set up.
Speaker 4: You say capacity is adjusting, does that mean capacity is
Speaker 4: coming down and prices going up?
Speaker 1: But we've pulled a.
Speaker 5: Little capacity capacity out and we'll, of course take a
Speaker 5: look at what's happening later in the year. We're very
Speaker 5: margin conscious. I mean, at the end of the day,
Speaker 5: that's what we're in business to do. But right now
Speaker 5: demand is very robust, and as we look closing out
Speaker 5: the second quarter, we're going to close out the second
Speaker 5: quarter in a really strong fashion.
Speaker 4: Have you seen any businesses pulled back on business class travel.
Speaker 3: We've heard some companies.
Speaker 4: Start to discuss that type of measure just because of
Speaker 4: the cost.
Speaker 3: Have you seen anything like that not an American.
Speaker 5: We're business travels up thirteen percent year over year, and
Speaker 5: I think it's really responding to some of the things
Speaker 5: that we've been laser focused on.
Speaker 1: We have four pillars.
Speaker 5: One is elevating customer experience, growing back our network, really
Speaker 5: make sure we're driving premium revenue, and then leading in loyalty,
Speaker 5: and all of those are resonating with our customers right now.
Speaker 5: And American has done better year over year from on
Speaker 5: a quarterly basis last five out of six quarters in
Speaker 5: terms of unit revenue production.
Speaker 1: So I like what I see.
Speaker 4: You've talked about how there's been estimated four to five
Speaker 4: billion dollars of costs for twenty twenty six as a
Speaker 4: result of fuel prices being elevated.
Speaker 3: How much of that can you pass along to customers.
Speaker 5: Well, it's a big shock right now, and I am
Speaker 5: very confident that is things even out that will translate
Speaker 5: into gains for.
Speaker 1: American on our shareholders.
Speaker 5: If you take a look back at the first quarter,
Speaker 5: we were projecting solid profitability or profitability in the first quarter,
Speaker 5: which is usually a tough quarter for us, but for
Speaker 5: the shock and fuel prices and the same thing.
Speaker 1: Think about in.
Speaker 5: A year where a price of fuel is spiked four
Speaker 5: or five billion dollars, we're still projecting the same type
Speaker 5: of profitability that we had last year. That means good
Speaker 5: things in terms of what we hold. I really do
Speaker 5: think that there's some stickiness to a lot of what
Speaker 5: we're doing, and it's upside that's unique to American, but
Speaker 5: there's a rising tide as well. Everybody's got to be
Speaker 5: margin conscious, and of course there's been some struggles in
Speaker 5: the business among those that you know, are you know,
Speaker 5: serving the lowest cost demand, are the lowest revenue demand?
Speaker 3: Just to sort of put a bow on that.
Speaker 4: In other words, when you are passing long price increases,
Speaker 4: do consumers push back or they remarkably resilient and just
Speaker 4: accepting it because that is a status quo across the industry.
Speaker 5: We're trying to give our customers something that they really value.
Speaker 1: So, you know, I know.
Speaker 5: That our basic economy product offers incredible value to those
Speaker 5: that avail themselves of it, but we're giving people buy
Speaker 5: up opportunities as well.
Speaker 1: And from a product perspective.
Speaker 5: You name it, flagship suites, the new flagship lounges, you know,
Speaker 5: opening up new roots. All of those things appeal to
Speaker 5: our customers in a way that they say, hey, you know,
Speaker 5: I can find real value in what Americans offering.
Speaker 4: How crazy is it going to get ivate plane? Half
Speaker 4: the plane is a personal sort of suite where you
Speaker 4: have for entertainment.
Speaker 5: Well, I like what we're doing. We're looking at the
Speaker 5: entire fleet. The investments that we're making right that are
Speaker 5: coming to fruition right now are really an indication of
Speaker 5: we skated to the puck in the right place. So
Speaker 5: our flagship suites that are on the seventy eight seven
Speaker 5: nine that are delivering right now fortunately on time, three
Speaker 5: twenty one xl rs are coming in. But not only that,
Speaker 5: the reconfigurations that we set out to do a few
Speaker 5: years ago on our three nineteens. In our three twenties,
Speaker 5: it's all increasing the mix of premium seating that's going
Speaker 5: to grow probably at twice the rate of our leisure,
Speaker 5: our general.
Speaker 1: Cabins, our main cabins.
Speaker 5: But I really like what I see in terms of
Speaker 5: that premium product. It's leading the way, and you know,
Speaker 5: it's very positive.
Speaker 4: We talk about some of the issues that we've seen elsewhere,
Speaker 4: particularly in the budget carriers going bankrupt among them. How
Speaker 4: do you see that in terms of an opportunity to
Speaker 4: gain share?
Speaker 3: Is this a time to.
Speaker 4: See what potential business you can pick up from the
Speaker 4: likes of Spirit now that they're defunct.
Speaker 3: Is this a time for mergers and consolidation in that way?
Speaker 5: Well, I'll start with this America has the most comprehensive
Speaker 5: network in North America, and that's something that our customers
Speaker 5: can avail themselves of, take advantage and really get to
Speaker 5: anywhere else in the world with our partners as well.
Speaker 5: So as we take a look out in the future
Speaker 5: over the next five ten years, our network, you know,
Speaker 5: Miami based a large hub, DFW, Phoenix, Arizona, you name it, Charlotte.
Speaker 5: We're in all the right places where economic growth is
Speaker 5: going to happen. So first and foremost for us is
Speaker 5: growing our organic network and making sure that we're doing well,
Speaker 5: and then opportunistically if assets become available by all means
Speaker 5: and as well, you know, we have a great set
Speaker 5: of partners joint business across the Atlantic with IAG which
Speaker 5: includes BA and Iberia, with CHAT across the Pacific with
Speaker 5: Quanas in Australia.
Speaker 4: So as it's become available, meaning planes and maybe gates,
Speaker 4: not necessarily.
Speaker 5: Entire airlines, planes and gates, Planes and gates first and foremost,
Speaker 5: and how we've really flesh out our network.
Speaker 1: I want to give a shout out to our team.
Speaker 5: They do a great job taking care of customers every
Speaker 5: day where a liability is key. So when I talk
Speaker 5: about customer experience, that is you know, front and center,
Speaker 5: and they deliver it every day. But anything that we
Speaker 5: can do to add to the franchise, we're doing it.
Speaker 5: And then of course we've been really creative in the past,
Speaker 5: whether it was the NEA, which you know, a judge
Speaker 5: I think inappropriately struck down would have benefited us in
Speaker 5: Jet Blue, or what we're doing with Alaska Airlines, West
Speaker 5: Coast International Alliance. All of those things are just creative opportunities,
Speaker 5: and we'll continue to look for those. But in the meantime,
Speaker 5: there's more upside in American than really any other carrier
Speaker 5: because of what we've been doing and investing in our
Speaker 5: four commercial pillars, and because of the fact that there's
Speaker 5: quite frankly more ground that we've had to make up.
Speaker 4: So a marriage between American and United not in your
Speaker 4: not in your Euro Bingo card.
Speaker 5: That was a no from the get go, And at
Speaker 5: the end of the day, you know, doing something that
Speaker 5: would be viewed as anti competitive by just about everybody
Speaker 5: that looked at it is just something that we don't
Speaker 5: spend a lot of time on, and that's why all
Speaker 5: of our attention is directed at really making sure American
Speaker 5: takes advantages and gets set up for when fuel prices,
Speaker 5: you know, normalize a bit, that's going to.
Speaker 1: Mean good things for us.
Speaker 4: Do you think that American can thrive even with oil
Speaker 4: prices where they are today?
Speaker 5: Well, and you take a look at the team in
Speaker 5: the later teams in the United States airlines made good
Speaker 5: money with oil prices above one hundred dollars a barrel.
Speaker 1: Now, my own view is I don't.
Speaker 5: Believe that oil prices will stay at this level. I
Speaker 5: think that the conflict in the Middle East at some
Speaker 5: point is going to be resolved. And I want to
Speaker 5: thank all of our service members for what they do
Speaker 5: every day, and want to thank the administration for making.
Speaker 1: Sure we get through this.
Speaker 5: But on the other side of this, I'm really confident
Speaker 5: that we're set up better than anybody to take advantage
Speaker 5: of fuel prices that are more moderated levels.
Speaker 4: Do you think that right now, the way that things
Speaker 4: are set up, if the prices that we have today
Speaker 4: at like ninety dollars a barrel or eighty five dollars
Speaker 4: a barrel, you could return to the profitability that you
Speaker 4: would forecast the beginning of the year.
Speaker 5: Well, it's going to take some time, but that is
Speaker 5: certainly the intent. And not only that, I mean it's
Speaker 5: not just what we forecast this year, but for us,
Speaker 5: I look for pre tax margins to get back into
Speaker 5: the higher single digit levels. And the way that that
Speaker 5: happens is is keeping a close eye on the marketplace
Speaker 5: and ultimately, yeah, we're in this business to make margin.
Speaker 5: I think it's different in that a lot of the
Speaker 5: lower priced competition is really having struggles. And so as
Speaker 5: we go forward, if there's a need to reduce capacity
Speaker 5: to get back to a business model that produces acceptable margins,
Speaker 5: we're going to do that. You know, right now we
Speaker 5: see considerable strength. I hope this is more of a
Speaker 5: blip that is, you know, months in the making as
Speaker 5: in years in resolving.
Speaker 1: But when we get through this will be in great shape.
Speaker 4: Robert im thank you so much for being with us today.
Speaker 4: Robert Eisam, the CEO of American Airlines, a wonderful summary
Speaker 4: of exactly how a lot of the airlines have managed
Speaker 4: through a difficult time with the incredible resilience of the consumer.
Speaker 3: Everyone wants to travel