Thank you for joining us for American Airlines Group's Fourth Quarter and Full-Year 2024 Earnings Conference Call. All participants are currently in listen-only mode. There will be a question-and-answer session following the speaker presentation. I will now pass the call to Scott Long, VP of Investor Relations and Corporate Development. Please proceed.

Thank you, Latif. Good morning and welcome to the American Airlines Group fourth quarter and full-year 2024 earnings conference call. On the call with prepared remarks, we have our CEO Robert Isom and our CFO Devon May. In addition to our Vice Chair Steve Johnson, we have a number of other senior executives in the room this morning for the Q&A session. Robert will start the call with an overview of our performance, and Devon will follow with details on the fourth quarter and full-year 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, forecasts 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 press release that was issued this morning, as well as our Form 10-Q for the quarter ended September 30, 2024. In addition, we'll 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 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 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. And with that, I'll turn the call over to our CEO, Robert Isom.

Thanks, Scott, and good morning, everyone. Earlier today, American reported a fourth quarter adjusted pre-tax profit of $808 million or an adjusted earnings per diluted share of $0.86, above the high end of the guidance we issued in early December. For the full year, we reported an adjusted pre-tax profit of $1.8 billion or an adjusted earnings per diluted share of $1.96. I want to thank the American Airlines team for a great year and for their resiliency, continued hard work and dedication to delivering a safe and reliable operation for our customers. As I've said previously, at American, we're focused on delivering results. As we closed out 2024, we achieved a number of notable milestones. With the ratification of a contract extension with our mechanics and fleet service team members in October, we now have multi-year agreements in place with all of our largest work groups, providing labor cost certainty through 2027. We delivered nearly $500 million of value through our reengineering initiatives, nearly $100 million more than expected. We announced a new 10-year agreement with Citi to become the exclusive issuer of the AAdvantage co-branded credit card portfolio in the United States, which we expect will drive substantial incremental value to American over the life of the agreement, while unlocking even more value for AAdvantage members. We generated record free cash flow of $2.2 billion in 2024. And I'm excited to report that as of the end of 2024, we have reduced our total debt by more than $15 billion from peak levels in mid-2021, achieving our initial debt reduction goal a full year ahead of schedule. While there's still much work to do, these accomplishments are clear evidence that the American Airlines team is committed to delivering results and achieving our stated objectives. Now, on to our fourth quarter performance. Total revenue grew 4.6% on 2.5% higher capacity year-over-year. This resulted in our unit revenue inflecting positively in the quarter, up 2% year-over-year and above the high end of our December guidance. Passenger revenue strength throughout the fourth quarter was broad-based. In the fourth quarter, American's year-over-year Domestic, Atlantic, Pacific and total passenger unit revenue results led U.S. network carriers. While Latin unit revenue was down on a year-over-year basis, we expect short-haul Latin year-over-year unit revenue to be positive in the first quarter. This strong performance is the result of the actions we have taken and we're encouraged by the trends we see early in the year. Demand for American's product remains strong as evidenced by the continued strength of our business, premium and loyalty revenue performance. In the fourth quarter, managed business revenue was up 8% year-over-year, a sequential improvement of 2 points versus last quarter and we continue to see yield strength as we look ahead into the new year. Premium revenue increased approximately 8% year-over-year. Paid load factor in our premium cabins remains historically high and was up 3 points year-over-year with strength in both Domestic and International. In the fourth quarter, loyalty revenues were up approximately 14% year-over-year with AAdvantage members responsible for 75% of premium cabin revenue. 2024 was a record year for AAdvantage. Throughout the year, we had a record number of customers enrolled in the program with members earning and burning more miles than any year in our history. Spending on our co-branded credit cards was up 9.5% year-over-year in the fourth quarter, further highlighting the value of our loyalty program. American is proud to have an industry-leading travel rewards program that is frequently acknowledged as providing the best value for its members. Finally, we remain committed to providing a leading customer experience, especially for our premium customers. We're excited to introduce our new state-of-the-art flagship suite on our new Boeing 787-9 and Airbus A321XLR aircraft later this year. Over the course of the next four years, we expect to grow our long-haul international capable fleet from approximately 125 aircraft today to nearly 200 aircraft in 2029. Additionally, American has led the way in introducing premium lounges and we're on track to open our fifth flagship lounge this summer in Philadelphia, which marks the ninth premium lounge across the system. In the fourth quarter, we introduced boarding automation as a first step to improving the boarding process and customer feedback has been overwhelmingly positive. American was the first airline to offer streaming entertainment on our mainline fleet, and we're proud to offer high-speed Wi-Fi on more aircraft than any other domestic airline. In December, we began the installation of high-speed satellite Wi-Fi on our dual-class regional aircraft. We expect the entire fleet will be retrofitted by the end of this year. Additionally, we're in the process of redesigning our mobile app, making it easier to navigate and to provide more self-service options for our customers. Building on these customer-focused initiatives is one of our top priorities and we'll have more to share in the months ahead. Momentum in recovering revenue from indirect channels continued in the fourth quarter and we remain on track to fully restore our revenue share from indirect channels as we exit this year. Our indirect flown revenue share improvement was driven by sequential gains in corporate revenue share, which has been the primary focus of our recovery efforts. Importantly, forward bookings continue to show strength into the first quarter. As we enter the new year, we're in position to continue recovering share in indirect channels. We've completed new contracts with all of our agency partners that serve our corporate customers and agreed to new agreements with the leisure agencies that serve our most profitable leisure customers. Additionally, we've reviewed and reworked agreements with our corporate customers most affected by the previous strategy and largely restored share of those travelers in our hub markets. Completing these steps provides a strong foundation for us to continue to compete for that business and restore our share in these important distribution channels and with those customers. Last year, we took steps to further grow and optimize AAdvantage. In December, we announced a 10-year agreement with Citi to become the exclusive issuer of the AAdvantage co-branded credit card portfolio in the U.S. American has had a partnership with Citi for more than 37 years. The strength of that partnership has enabled us to deliver first-class products and customer service to millions of AAdvantage card members and we're excited to continue to partner with Citi. Our 2024 cash from co-branded credit cards and other partners was $6.1 billion, an increase of 17% versus 2023. The 2024 amount includes a one-time cash payment received in the fourth quarter related to our new credit card agreement. As we disclosed at the time of the announcement, we expect the agreement set to begin in 2026 will enable cash payments from our co-branded credit card and other partners to grow by approximately 10% annually. As annual cash payments from co-branded credit card and other partners approaches $10 billion, we expect annual pre-tax income will benefit by approximately $1.5 billion compared to 2024. Our expanded partnership with Citi will unlock more value and provide exciting new benefits to our customers. With the agreement completed, the teams have turned toward building the business and we look forward to making several exciting announcements over the coming year. Turning now to our operation. Thanks to the resiliency of the American Airlines team, we delivered another quarter of strong results, despite a difficult operating environment. Operational disruptions are part of the airline business. And in American, we continue to show that operational resiliency and rapid recovery are part of our DNA. In the fourth quarter, American ranked second in completion factor and on-time departures among the four largest U.S. carriers. For the year, we achieved our second-best completion factor since the merger, carrying our largest-ever volume of passengers. Looking ahead, continued investment in the operation and the technology that supports it will drive further improvements in our operating reliability and resiliency. In closing, we've achieved a number of important objectives in 2024 and our performance in the fourth quarter shows what this team and what this airline are capable of. That foundation and the momentum we've built will serve us well in 2025. Before I turn the call over to Devon, I'd like to take a moment to acknowledge those impacted by the devastating wildfires in Southern California. Our hearts go out to those communities. American's AAdvantage members and team members have donated more than $1.7 million in funds to the American Red Cross to support relief efforts, and we've donated supplies and care packages to families and firefighters in the Los Angeles area. And with that, I'll turn it over to Devon to share more about our fourth quarter and full year financial results and our outlook for 2025.

Thank you, Robert. Excluding net special items, we reported a fourth quarter net income of $609 million or adjusted earnings per diluted share of $0.86. We produced record fourth quarter revenue of $13.7 billion, up 4.6% year-over-year with unit revenue up 2% year-over-year. Fourth quarter unit cost, excluding fuel and net special items, was up 5.7% year-over-year. Our adjusted EBITDAR margin was 14.9% and we produced an adjusted operating margin of 8.4%. In 2024, we achieved nearly $500 million of savings from our reengineering the business initiatives, exceeding our goal by nearly $100 million. Most of the value in 2024 was due to better workforce management driven by process improvements and technology implementation, along with improved asset utilization and procurement savings. We also had nearly $350 million of working capital cash release, which exceeded our expectations and helped drive our 2024 free cash flow performance. We remain focused on running the airline as efficiently as possible, while enhancing the customer experience. Moving to our fleet. In 2024, we took delivery of 20 new aircraft and 10 used aircraft resulting in $1.9 billion of aircraft CapEx. Total CapEx for 2024 came in at $2.7 billion. Looking ahead, we expect to take delivery of 40 to 50 new aircraft in 2025. Based on our current expectation for new deliveries, our 2025 aircraft CapEx, which also includes used aircraft purchases, spare engines and net PDPs, is expected to be between $2 billion and $2.5 billion and our total CapEx is expected to be between $3 billion and $3.5 billion. We continue to expect moderate levels of CapEx moving forward with aircraft CapEx averaging between $3 billion and $3.5 billion for the remainder of the decade. We ended 2024 with $10.3 billion of total available liquidity and produced record free cash flow of $2.2 billion. During the fourth quarter, we prepaid $750 million of near-term debt maturities and strategically repriced two term loans. We ended the year with total debt of $38.6 billion and net debt of $31.6 billion, our lowest level of net debt since 2015. With these actions, we achieved our total debt reduction goal of $15 billion from peak levels in mid-2021 a full-year ahead of schedule. We are thrilled to have delivered on this commitment and we remain focused on continuing to strengthen our balance sheet as we work toward our stated credit rating goal of BB. Previously, we committed to reducing total debt to less than $35 billion by year-end 2028. We are now committing to achieve that goal by the end of 2027. Now on to the outlook for 2025. In the first quarter, we expect capacity to be flat to down 2% year-over-year. This capacity is driven by lower capacity in the off-peak months of January and February, which combined are down approximately 3%, followed by growth of 3% to 4% in the peak travel period in March. We continue to expect full-year capacity to be up low-single-digits, in line with expected economic growth and our prior guidance. Our growth in 2025 is focused on improving our schedule in markets that are not yet fully restored to historical levels, primarily in our Northern hubs. We expect our year-over-year capacity growth rates to be fairly balanced between Domestic and International operations. We will remain flexible and will adjust capacity in response to demand and the competitive environment in which we operate. We expect first quarter revenue to be up 3% to 5% and for the full year, we expect revenue growth of approximately 4.5% to 7.5% versus 2024. This is driven by continued indirect revenue recapture, strong demand for our product and a constructive industry backdrop with supply in line with expected demand. First quarter non-fuel unit costs are expected to be up high-single-digits year-over-year. This unit cost growth is driven by the reduction in year-over-year capacity, the mix of that capacity and the new collective bargaining agreements that were reached in the second half of 2024. In the first quarter, regional ASMs will be up approximately 17% as we return to full utilization and mainline capacity will be down 2% to 3%. Based on the timing of our labor agreements and the shape of capacity, we expect unit costs to improve sequentially throughout the year from high-single-digits in the first quarter to low-single-digits as we exit the year. For the full year, we expect non-fuel unit costs to be up mid-single-digits year-over-year with a large majority of the cost growth coming from higher salaries and benefits. As we look out to 2026, we have certainty in our labor costs and the rate pressure from our new collective bargaining agreements will ease. We expect that in 2026 our year-over-year growth of our salaries and benefits per ASM will be well inside of inflation. We continue to focus on reengineering the business to become more efficient. Through best-in-class workforce management, efficient asset utilization and procurement transformation, we expect more than $200 million of incremental cost savings in 2025. Additionally, we are investing in a multi-year transformation in our IT and TechOps organizations to modernize technology, improve operations and optimize staffing costs. We anticipate continuing to productively utilize our workforce with mainline full-time employee counts staying approximately flat to 2024. This year, we also expect more than $100 million in additional working capital improvements. Based on our current demand assumptions and fuel price forecast, we expect a first quarter loss of approximately $0.20 to $0.40 per diluted share. For the full year, we are expecting to deliver adjusted earnings per diluted share of approximately $1.70 to $2.70. We expect another year of record free cash flow generation in 2025 and are currently forecasting more than $2 billion of free cash flow for the full year.

Thanks, Devon. As we start 2025, the long-term targets we outlined last March remain our focus, growing margins, generating sustainable free cash flow and continuing to strengthen our balance sheet. Our priorities for this year will continue the momentum we built in the back half of last year and further our progress toward achieving our long-term targets. In 2025, we plan to operate with excellence and efficiently deliver a safe and reliable operation, take a fresh look at our product and service as we sharpen our focus on the customer experience, continue to strengthen our network, both organically and through our airline partnerships. Our December announcement with Citi was an important milestone for American. It will allow us to enhance AAdvantage and further strengthen our leading travel awards and co-branded credit card program ecosystem. All of these priorities, including the restoration of our core sales and distribution initiatives, will allow us to deliver on our revenue potential and we'll continue our work to reengineer the business as we build a more efficient airline. We know that by delivering on our commitments, we'll unlock significant value for our shareholders. Operator, please open the line for questions.

Your line is open, Catherine.

Good morning everyone, thanks so much for the time. So, you know, we don't know exactly what low-single-digit capacity growth means for the year, but if I just use 2%, that means the RASM growth is about 4% for the year versus the 5% of getting in 1Q on your guidance. You know, I understand capacity growth accelerates over the year, but can you talk about your assumptions on indirect revenue improvement and the industry outlook underlying that full-year guide? And just really wondering like what could go better than your base case?

So, Catherine, thanks. I'll start on our expectations for indirect revenue recovery, and Devon can speak to capacity, and Steve can add anything that he thinks is important as well. We're on track for recovering what we had lost. I feel really good about the progress we've made in a short six month period. And as we take a look, and you can see from our notes, as we take a look at forward bookings, it really suggests that we've got traction in the marketplace. So I have great confidence that we're going to recover fully as we move through the year. And then, you know, I just also, you know, note this, that we also believe that from a revenue performance perspective, even outside of indirect channels, we think that we're poised to perform and outperform. You saw it in our fourth quarter results and I can't speak to others' assumptions, but in an environment where the economy is improving, I think that we're going to improve faster than our largest competitors. Devon?

Yes, I don't think there's any big moves in the quarterly capacity numbers. We guided the first quarter which will be down 0% to 2%. The remaining quarters will probably be all up in the neighborhood of 3% per quarter in terms of ASM capacity, which gets you about to that midpoint on low-single-digit capacity for the year.

Catherine, this is Steve. I'll follow up with you on the potential sources of upside from our base case. I see three main areas. First, there is a good chance that we could restore our sales and distribution revenue faster than anticipated by the end of 2025. That would be an advantage. Second, I want to highlight both the third quarter and especially the fourth quarter, as our performance will ultimately be assessed based on our results, and the fourth quarter demonstrates our capabilities. Lastly, I want to mention our agreement with Citi. This new agreement begins in 2026, meaning the growth we anticipate won't commence until then. However, there is a ramp-up effort happening that could lead to increased co-brand revenue during the year.

That's great. Thanks for that additional color, Steve. Devon, maybe one more for you. As you've reached your medium-term debt goal, can you speak to how you're thinking about capital allocation between now and that longer-term goal in 2027? Understand you have more deleveraging to do to hit that 2027 goal. And then you mentioned a BB credit rating. But what's the gating factor to consider shareholder return? Thanks so much for all the time.

Hey, thanks, Katie. Well, I'll just start. We are really proud of achieving the $15 billion goal that we set out to do two or three years ago at this point, and we achieved it a year early. But our focus still remains on improving the balance sheet. We've set another near-term goal here to have total debt down another $4 billion to around $35 billion by 2027. So we'll focus on that. We'll continue to focus on reinvesting in the business. And as we continue to improve free cash flow and improve the balance sheet, we'll come back and talk more about other capital allocation priorities.

Thank you. Our next question comes from the line of Conor Cunningham of Melius Research. Your question please, Connor. Our next question comes from the line of Connor Cunningham of Melius Research. Your line is open, Connor. Conor, please make sure your line isn't muted, and if you have a speakerphone lift your handset. We'll go to the next question. Our next question comes from the line of Scott Group of Wolfe Research. Your question please, Scott.

Hey, thanks. Good morning. So Devon, I think you laid out CASM going from high-singles to start the year towards low-singles ending the year. It doesn't seem like guidance implies a big deceleration in RASM throughout the year. So can you just talk about how you see the progression of price cost on a net basis trending throughout the year?

I'll start by discussing our cost performance, as we're experiencing some pressure in the first quarter compared to the rest of the year. We're really proud of our cost achievements over the past several years and I'm optimistic about our efforts to reengineer the business and enhance efficiencies. We're making important investments in technology, and our operations team is focused on delivering a more effective operation for our customers. However, in the first quarter, we are seeing unit costs increase in the high single digits. This is due to a few factors: we have less capacity in the first quarter compared to last year, which will improve as we expand capacity during the last three quarters. There is a significant amount of regional capacity being added, which is more expensive than our mainline capacity, contributing to a 4% to 5% decrease in average gauge year-over-year in the first quarter. Additionally, stage length is down and the labor agreements from the latter half of last year were not accounted for this year, resulting in cost pressures in the first quarter that will ease as the year progresses. We believe we are very well-positioned as we move into 2026, and we manage our business as efficiently as anyone. On the margin side, it's unlikely that any individual quarter will show significant margin improvement year-over-year. We've forecasted EPS at a midpoint of $2.20, indicating a positive EPS improvement from last year, but I don't expect any one quarter to stand out significantly compared to our performance in 2024.

Okay. And then can you just talk about maybe the progression of RASM throughout Q4 and then just regionally how you see RASM playing out in Q1? Like Transatlantic was up 12% in Q4. Can that sustain itself in the near-term? Just any regional color? Thank you.

Well, Scott, thanks for that. I'd just point to the fourth quarter in which we had strong performance across the board. So Atlantic, Pacific and then also Domestic in terms of year-over-year improvement, led our network competitors and overall we led it as well. As we take a look out into this year, I see continued strength domestically and the strong dollar is absolutely going to have an impact on buying and travel to Europe this summer. So we take a look to March and as we look to some of our peak periods, spring break and getting into the summer, I see robust demand across the board. We've talked about premium traffic as being wind behind our sales and also something that I think that we're going to be able to do even better in. And Steve mentioned some of the things that are going to be additive as well in terms of potential for even better performance. So overall, really confident about the year and like what we see and how we can operate in this environment.

Thank you. Our next question comes from the line of Jamie Baker of JPMorgan Securities. Your line is open, Jamie.

Hey, good morning, everybody. So an interesting statistic that United throughout yesterday was that the margin gap between its best and worst performing hubs had narrowed to, I guess, the lowest gap in, I think, it was nine or 10 years. We've discussed American's relative hub performance on these calls and in person for quite some time, but I never asked about the range. Would you be willing to comment on that margin range between your top and bottom hubs and whether it's improving or widening? Obviously, a lot of moving pieces in many of your hubs at the moment. Thanks.

Okay. Hey, thanks, Jamie. And I'll start. Devon and Steve can add in. Look, it's no secret that we've had to build back our network and we have a large portion of our network that is supported by our regional fleet. I feel great that in 2025 we're going to have our regional fleet fully deployed. And what that's going to allow us to do is better fill out some of the hubs that, quite frankly, are ready and I think willing to support the network in a different way. But we've got to put the capacity there. So you're going to see the largest schedules that we've ever had in places like DFW in Charlotte, Miami in its peak, will be bigger than it's ever been. DCA, which had been a laggard coming out of the pandemic, is now getting back to the performance levels that we had hoped. And we've talked about some of the work that we're going to be in Chicago. So across the board, we see performance improving. Some of the weaker points in our network as we take a look to the coast in New York and out in Los Angeles, I'd say this, that the schedule changes that we've made in LaGuardia, the largest schedule that we've run since the pandemic, I believe just as we closed out the fourth quarter, we're really seeing nice results in terms of where we put that capacity. And so from that perspective, I believe that we have improved considerably our New York performance. And I hope and have confidence that that will be something that we can maintain going forward. In Los Angeles, from that perspective, there are some capacity restrictions, but on that front, that's one where we really do partner well with our Oneworld partner, Alaska Airlines, and we look forward to continuing that progress. So when you take a look at American, you've always known that DFW, Charlotte, DCA and now DCA getting back into the ranks have performed well. Philadelphia is getting back to where it should be. Phoenix has historically been strong. And then as I mentioned, we've got a focus on the coasts in Chicago.

Yes, that's helpful. And while I have you, Robert, when I last saw you in September, you mentioned you were spending half your time on efforts to reconcile with corporate accounts. You might have said that publicly at a conference or two. I'm not sure if you meant exactly 50% or if that was more figurative. However, from your description of the effort in your prepared remarks, it seems like most of that work is behind you. Is that the correct understanding? I'm a bit confused about where American stands on the reconciliation front and how managed corporate recovery trends will develop from here. Thanks in advance.

Thanks, Jamie. Look, I will give a ton of credit to our commercial team led by Steve Johnson for the enormous amount of work that had to be put in. And they absolutely enlisted me in that effort. And I will say I don't know if it's 50% of the time. I spent a considerable amount of my time making sure that I was up to speed and talking to our corporate customers and agencies as well. That work is paying off. It's foundational in that. Don't forget these contracts are set up over a period of time. Revenue doesn't show up right away. But we're not resting on that. We're learning from certainly the issues associated with our past strategy. And that, I believe, bodes well for the future. So, Steve, why don't you spend some time talking about progress and how you feel about where things are headed?

Sure, Jamie. I want to say that the team and I feel positive about our progress. As Robert mentioned in his initial remarks, we are on course to fulfill the commitment to fully recover our market share by the end of 2025. I believe we can achieve that sooner, although the process isn’t straightforward and depends on various events. In the third quarter, Robert pointed out that we were moving away from the previous strategy that impacted our share. The reintroduction of content into EDIFACT also affected our share, along with our engagement with partners in the third quarter, which Robert referred to as the Apology Tour. The fourth quarter involved significant work, but it was focused more on infrastructure and establishing new agreements with our partners in the indirect community, which is quite a demanding task, handled one partner at a time. During that period, we were negotiating, so we didn't see much shift in market share. Some partners communicated more strongly during those negotiations. However, we succeeded and now have new agreements with 30 key TMCs and agencies. Moreover, we have adjusted the terms for all significant corporate customers affected by our previous strategy. As we often say, and our partners frequently echo, three airlines are better than one. These agreements will provide genuine incentives for shifting business to American Airlines and will help restore the market share equilibrium that existed at the start of 2023. I anticipate these agreements will significantly influence market share in the first and second quarters, leading to ongoing progress.

Thank you. Our next question comes from the line of Conor Cunningham of Melius Research. Please go ahead, Conor.

Hi, everyone. Can you hear me now?

We've got you, Conor.

I'm trying to understand your perspective. It sounds like you see potential for regaining some corporate shares and benefits from loyalty programs, along with improving costs as the year progresses. However, your full-year guidance at the lower end implies a year-over-year decline in earnings, and I'd like to clarify that. Are you indicating that there won't be any improvement in the main cabin from this point forward? This seems quite conservative considering what has been shared today and what we've heard from others. I'm just looking for further clarification. Thank you.

Okay. Conor, I'll start. Devon can add in here. Look, again, we can only forecast based on what we know and what we see right now. We don't know what others are putting into their models. We've told you that we think that there's continued strength and that in terms of revenue performance, especially given the capacity that we're putting in, we see significant growth in our unit revenues. Now if there is a better overall performance in the industry, as I said, I think that we'll continue to show outperformance because of the things that we've been doing. So that's my comment in terms of questions about how is your forecast versus what the assumptions others are making. Devon, anything you want to add?

Yes, I'll just say midpoint of our guide is $2.20. That's up more than 10% versus what we did in 2024. There's obviously variability in earnings. We think the midpoint is what we seek to achieve. We'd like to do better than that, but we put a range of outcomes because there is still some volatility that's there and things like fuel or some amount of economic risk at a macro level. But right now we feel really good about the midpoint on the guide and it's nice year-over-year improvement and we hope to exceed that.

Okay, that's helpful. I'm trying to get a better understanding of the renegotiation with Citi. The economics will change in 2026, but I believe there is a volume and spending component that will impact 2025. Can you clarify how the earnings contribution will evolve from 2025 to 2026? It seems there could be some surprises in store, so I would appreciate your thoughts on this. Thank you.

Sure. Let me clarify the question. Our existing agreement includes minimums for new accounts and new business that Barclays and Citi have committed to. We expect them to exceed those expectations as we approach 2026. Is that helpful?

Yes, thank you very much.

Thank you. Our next question comes from the line of Ravi Shanker of Morgan Stanley. Your question please, Ravi.

Great. Thanks. Good morning. Just wanted to start with a follow-up on the corporate normalization commentary. I think you said that you adjusted the economics for some of the biggest accounts there. Can you just unpack that a little bit more? How does the profitability of the corporate business compare to what it was before now that like or once the share is normalized?

Sure. We have made adjustments to our business with our corporate customers over the past seven or eight months. We previously discussed this on the last earnings call. Some of these changes were due to macro changes we implemented, such as reestablishing what we call corporate experience, which offers unique advantages for our traveling corporate customers. This includes waivers and favors that allow travel agents to, in certain cases, book flights or change tickets in ways that differ from the general rules. Some of this has proved to be quite beneficial. Previously, we had a one-size-fits-all discounting system for corporations that applied broadly, which resulted in uncompetitive discounts for about 24% of our corporate customers whose contracts we were able to renegotiate. We have since worked with these customers to establish terms that are more competitive and consistent with our past practices. Overall, the revenue from these revised agreements, even with improved discounting, is expected to be very beneficial.

Yes. And Steve, I think we've said this, that when we talk about sales expense and bringing back sales team and potential impact on some of the things that we're doing, the overall cost impact is going to be less than a point of CASM. But again, all of this is going to be highly beneficial to the company.

Great. That's a helpful explanation. And maybe as a follow-up, you guys mentioned upgraded Wi-Fi, which is great to hear. But kind of as we kind of enter like a new era of premium cabins, if you will, obviously you guys have new planes, but how do you think about bringing your own device versus screens on seats and maybe the ability to monetize those screens over time?

So Ravi, can you say that one more time? I missed a part of that question.

So the question was kind of as we enter a new era of premium cabins, how do you guys think about bringing your own device versus having integrated screens on seats? Kind of does one versus the other kind of impact your ability to either kind of sell a premium service or monetize that screen over time?

Thank you for your question, Ravi. I'm excited to share what we have planned for our product offerings moving forward. We are thrilled to introduce our new flagship suite on the 787-9s and the A321XLRs, which are designed for long-haul international travel. We will ensure that our customers, particularly in premium cabins, have access to in-flight screens along with the latest Wi-Fi and streaming entertainment. These aircraft will be fully equipped. We are also reconfiguring our 777-300s to include flagship suites and increase our premium seating options, which will feature the latest seatback technology. From a domestic standpoint, our goal is to provide satellite-based Wi-Fi on all aircraft we operate. While we cannot implement this on our smallest regional jets, we will have streaming Wi-Fi available on all larger regional aircraft by the end of the year. This comprehensive approach allows us to enhance our offerings, and as the year goes on, we will continue to explore ways to better serve our customers, particularly those at the highest tier. Additionally, we expect to see more collaborations and partnerships, notably our record-setting relationship with Apple+, which we believe is just the beginning of what we can achieve.

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

Hey, thanks. Good morning. Just on your northern hub build-out. That comment kind of caught our attention. Can you talk about what inning you're in and maybe expand on how much of your footprint transitioned over to JetBlue, how much of that has transitioned back and basically what your footprint in your northern hubs looks like now versus pre-pandemic?

Look, Duane, I'll start and Steve can elaborate further. But I'll just note two, two points right off and that's LaGuardia and DCA. We're going to be back to our largest schedules, largest number of seats offered in both LaGuardia and DCA since the pandemic. And that I believe is indicative of the focus that we're putting on. And by the way, we're seeing really nice results with that added capacity. In terms of Philadelphia, that had been one of the markets that had been most difficult for us given the pull-down of regional aircraft. And the same holds true for Chicago. As we restore our regional aircraft lift, the beneficiaries of that are going to be Philadelphia and Chicago. In Philadelphia, Steve, I don't quite know the size of Philadelphia compared to prior times, but I think we're getting close to back to where we were.

Yes, and that's the intention to have Philadelphia more or less the same size as it was pre-pandemic.

That's helpful. And then I don't know if you have a metric to share, but just on how you measure competitive capacity, how do you see that in 1Q and maybe an early read on 2Q versus what you were seeing, maybe in 4Q? Thanks for taking the questions.

So, Duane, I'll start with this. Look, competitive capacity, it's important, but it's all important to the extent that it drives profitability. We're focused on margins and we're focused on making sure that we take advantage of the assets and the strengths that we have. So we're focused on that, but obviously keeping track of what's going on in the marketplace. And if there is an impact in any one of the places that we fly, we're going to adjust accordingly. The good thing about the fleet that we've built up, despite the difficulties that we have with supply chain and aircraft deliveries throughout, is that we spent since the merger, $30 billion plus in terms of new aircraft. We have the youngest fleet. We don't anticipate any big retirements coming up. And we have the ability to flex this fleet in a very economic fashion should we find that conditions warrant expansion. So you'll see us with moderate growth based on expectations for this year as we get out into the latter stages 2025 and 2026. If demand and profitability warrant an adjustment, we'll be ready to go.

I would just add that if your question is based on a comparison of ASM growth, I also consider the growth in departures and recognize that as we expand, we will see growth during the most competitive time periods and in the most competitive locations. So, I don't believe ASMs is the ideal metric for comparison.

Thank you. Our next question comes from the line of Michael Linenberg of Deutsche Bank. Your question, please, Michael.

All right, yes. Hey, good morning. Two sort of fleet-related questions here. Just on the comment on growing your international fleet from 120 to 200 by 2029. At that point in time, how many A321neo XLRs will you have in your fleet at that point? And presumably, that's in that 200 number?

Yes, that is in the 200 number. And we expect to have 40 XLRs at that point.

Great.

Great. For my second question, as we consider the aging of the fleet, particularly regarding wide-body aircraft and the ability to acquire them, I understand it makes economic sense to buy narrow-body planes from both OEMs, which you've successfully done with the MAXs and the A321 or A320neos. Are we approaching a time when it makes sense to make similar decisions for wide-body aircraft, whether by procuring from different OEMs or from two different families within the same OEM, as you think about replacing your wide bodies later this decade? Thank you for addressing my question. Thank you, Mike. I'll begin, and others can join in. I'm very pleased with our current fleet situation. We operate the largest fleet of 320 family aircraft in the world, and we're one of the major operators of 737 aircraft. We are receiving deliveries of the MAX 8s, and we have orders for the MAX 10s. Having such a large fleet is very advantageous for efficiency. We're not managing multiple aircraft types, which simplifies operations for our pilots, flight attendants, catering, servicing, maintenance, and supply chain. This philosophy extends to our wide-body fleet as well. We are particularly fond of the 787 model—the 8s and 9s will be the primary workhorses moving forward, and our customers appreciate them. Regarding the 777s, the 777-300s will be in service for an extended period with some refreshing planned. Starting this year, we will start to see the new flagship suites added to the fleet, which will remain for a long time. We will eventually need to decide what to do with the 777-200s, whether to reconfigure them or consider other options, and we are in discussions with both Airbus and Boeing. We recognize the advantages of having a simplified fleet that offers great flexibility in terms of range and demand. It is true that fleet aging is a natural process, but we are starting from a significantly better position compared to our competitors. As Devon pointed out, our projected long-term capital spending remains modest, around $3.5 billion through 2026 and beyond. The year 2025 will see minimal capital expenditure from us. With the lowest average fleet age and no upcoming retirements, we are in a strong position while others are committing to heavy investments in their fleets and facing challenges with aircraft deliveries. Overall, I’m very satisfied with our current status.

Thank you. Our next question comes from the line of Brandon Oglenski of Barclays. Your question please, Brandon.

Hey, good morning, everyone, and thank you for taking the question. Robert, I guess if you step back, I mean, because obviously so much has changed in the past year, especially since the Investor Day, I think, in March of last year. But obviously, you've talked about a lot getting corporate share back. But how would you articulate American's commercial strategy going forward today? And I guess I'm just observing here, but it feels like maybe you're still in a zone of defense. When does that then transition into an offensive front with that strategy?

Thank you for your question. We are committed to our Investor Day promises. I'm not satisfied with our margin growth. Looking to the future, as Devon mentioned, I believe we are well-positioned to increase margins due to our efficiency efforts. It's important to note that this isn't solely about costs; we have generated record free cash flow and have successfully structured the airline to avoid balance sheet concerns, placing us in a unique position. I've previously discussed our fleet, and moving forward, American will dedicate more focus and resources to enhancing our customer experience in ways that we can monetize. We have established a solid foundation that I believe others are trying to catch up to, such as introducing satellite Wi-Fi across our fleets, opening ultra-premium lounges like the new one in Philadelphia, and offering a premium seating selection on our aircraft. We have exciting enhancements, including new flagship suites on our 787-8s, 787-9s, and XLRs, and our regional product featuring the E175s is unmatched. Additionally, we are upgrading our older aircraft, including the 320s and 319s. I believe we have all the elements in place to excel. We need to work on presenting and selling our story more effectively. We are the largest player in the U.S. market and hold a strong position in the biggest business hubs, including London and Tokyo, backed by excellent partnerships in those key markets. American is moving ahead with significant momentum.

I appreciate that, Robert. And then, Devon, I know you talked a lot about the cost headwinds this year, but is there any productivity offsets potentially in these new labor agreements and especially in the context of that simplified fleet that Robert was just discussing?

Not necessarily offsets related to the labor agreements themselves. I think the offsets we're finding are just a lot of work on efficiency and investing in the right technologies. As we've talked about last year, our reengineering the business efforts generated about $500 million in value. This year, we think we're going to generate a couple hundred million dollars, but that's net of some really meaningful investments that we're making in our IT shop that we're making in our TechOps organization to digitalize all the work that they are doing. So I feel great about the investments we're making. It doesn't all necessarily pay back in this calendar year, but we look out to 2026. I think our cost profile is going to look really good. I've always said, I look back over the last several years, I think we've performed better than anybody when it comes to unit cost delivery. So we're not necessarily seeing anything in labor agreements. That's not what we were going after in those labor agreements. But we are running a more efficient business right now, and I think we're going to run a more efficient business a year from now than we are today.

Thank you. We will now take questions from the media. Our first question comes from Alison Sider of the Wall Street Journal. Please go ahead, Alison.

Hey, thanks so much. Curious after the starship breakup last week, how concerned are you about sort of the operational and safety impacts from space launches? And is there anything you're asking the FAA to do differently in terms of kind of how it handles those?

Well, thanks for the question, Allie. We're in constant contact with DOT and FAA. Launches do have an impact on our network, especially due to airspace issues. So, we coordinate closely. I've got David Seymour here, our Chief Operating Officer. He'll tell you that our coordination efforts are better than ever, and we work with any launches to minimize their impact regarding the time of day they occur. Dave, do you want to add anything?

Yes, Robert, you made important points about our coordination with them. The FAA is being very cautious about the launches, and they implemented their strategy by establishing a containment zone for that launch. This caused some disruptions for us, leading to diversions and holding aircraft on the ground, but we managed to recover effectively. As Robert mentioned, our current coordination with the FAA and air traffic has reached an all-time high, and we will continue to collaborate with them.

Got it. I mean, do you know, or is there anything you want to be done differently for future launches in terms of the sort of perimeter for the closed airspace or the timing of launches or anything you're looking to change from a safety perspective?

We're still waiting for the FAA to continue their review of that but on the surface right now, I don't see anything different that we're going to see. They've done a lot of work over the last several years of actually continuing to manage that. So we have not been as impacted as we were in the past, but we're going to work with them. But I think they need to continue their review of that situation, and then we'll get back and see if we need to adjust plans.

Great. Thanks.

Thank you. Our next question comes from the line of Mary Schlangenstein of Bloomberg News. Your question please, Mary.

Hi. Thanks. I wanted to ask about the in-flight entertainment in the premium cabins that you're discussing for the future. I'm curious about what has led to this change in your approach to in-flight entertainment. Is it due to competitive pressure, consumer demand, or something else driving this shift?

Oh, hey, Mary, you might have misunderstood something. Regarding our IFE strategy, the in-flight seatback entertainment on our international wide-body aircraft, and in the case of the 321XLRs, will be designed to meet our customers' needs. The remainder of our fleet will offer satellite-based Wi-Fi, except for the smallest regional jets.

Right. But you don't currently have IFE on your international wide-bodies, or am I wrong on that?

We currently have IFE on our international-based aircraft.

Thank you. Sorry about that. And the other question I wanted to ask was what changes that you potentially foresee from the Trump administration in terms of either the operations of the FAA and ATC issues with them trying to step up hiring or make changes faster than the past administration had to change the ATC issues affecting the airlines?

Well, as I said in some earlier comments, I think President Trump and the administration, they recognize the importance of aviation to commerce. They certainly did that during the first Trump administration in response to COVID and the support that was provided to the industry. It's a reason why the industry is as strong as it is today. And credit really does go to the first Trump administration and the quick reaction. Now in regard to what we do next, I do believe that it's imperative that we look at investing in air traffic control. We know that there's a huge tax put on efficiency for the airlines on our customers in terms of the time it takes to fly. And ultimately we've got to address it because there's a lot of growth that I think is possible and hoped for in the industry. But we can't keep on jamming more aircraft into the skies in a way that can't be serviced efficiently. So today, it takes a lot longer to fly from Chicago to New York or Washington to New York than it did 20 years ago. There's no reason for that. There's plenty of room in the sky. There's technology that we can be deploying that would be helpful from an overall control perspective. And also our aircraft are actually equipped to handle and to perform in a different system. So we've got a lot of work to do. It's going to take investment, but I have great confidence that that will be the type of work that we're able to engage on. And the last thing I'll just say is I also believe that the administration will be very cognizant of regulatory issues that can benefit both the airlines and our customers as well. And we'll be working closely with them on that. So I'm very, very optimistic about the future.

Thank you. Our next question comes from the line of Leslie Josephs of CNBC. Please go ahead, Leslie.

Hi, good morning, everyone. Just considering what the Trump administration has said about DEI and how they're extending that ordering changes within the federal government. I was curious where American Airlines stands. I see the website says DEI are foundational to American Airlines' culture and that you plan to lead the industry with DEI. Any changes there internally and do you have any concerns about the review at the FAA that the federal government is doing? Thanks.

Thanks, Leslie. I can't comment on the situation at the FAA. However, I can say that at American, we are committed to hiring the best team members possible. We serve over 650,000 customers on peak days, representing a diverse range of backgrounds from all over the world. We have 130,000 team members working globally. Our focus is on caring for people during their journeys, which we aim to achieve in a way that benefits our customers and is profitable for our airline. This will guide us as we seek to enhance our service to both customers and team members. That is our priority, and it's the direction in which American is headed.

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?

Thanks, Latif. I appreciate everybody's interest and time today. And I'd just like to reiterate that the fourth quarter was a quarter for us in which we laid down some incredibly important milestones. It was important for us to outperform the industry in terms of revenue production year-over-year. It was important for us to achieve record free cash flow that put us in place to take advantage of a lot of other things that we've been doing in this company to make sure that our balance sheet is as strong as possible. And we're excited about the challenges that we've taken on, not only to restore our revenue performance, but also to expand upon that and take advantage of everything that we've built in this airline over the last several years. And so I'll reiterate our commitment to our customers to take care of them in the best possible fashion, and then I'll also reiterate our commitment to our investors. We are intent on growing margins, producing sustainable free cash flow, further continuing to strengthen our balance sheet. And there's a tremendous amount of upside in American right now. When you take a look at our performance and what we're capable of doing as we look out into 2025 and going into 2026, American is poised to outperform. Thank you for your time.

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