American Airlines Group Inc. (NASDAQ:AAL) Q2 2023 Earnings Call Transcript

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Brandon Oglenski: Good morning and thanks for taking my question. Vasu, I want to come back to the unwind of the NEA because it does look like you have quite a bit of international capacity you’ve added at JFK, but not a lot of domestic connectivity on your own network. And I think JetBlue was part of that answer historically. So, can you talk to what the long-haul strategy looks like out of JFK going forward?

Vasu Raja: Yes. Thanks for the question, Brandon. Look, there were really two issues that we had in New York. One was the amount of connectivity support that we had for our long-haul and the other was just the huge expenses we had operating out of New York Kennedy. As I mentioned earlier, we’ve done a lot of things to go and reduce our expense base to where, it’s not just more in line with our other low-cost hubs that’s materially lower than what any other operator has in New York City. But also — and this is meaningful to it. Look, the NEA was a great outcome for customers who got to go and experience our product who weren’t there before. But actually, when you look at those international flights, roughly, as things have settled out and markets recover, roughly 35 to 40 points of the load factor that’s on them is actually being generated by our international partners.

Our partnership within the NEA was actually a very small amount of the onboard load factor that’s there. That’s why when we couple both the expense reduction that’s there and some changes that we can make ourselves, we believe that we can go and really replace a lot of the demand, especially now that we’ve got such a larger New York City originating customer base than what we had before.

Brandon Oglenski: I appreciate that response. And I guess maybe a quick one for Devon, because I think you mentioned aircraft purchases out in the future could be around $3 billion to $3.5 billion annually, if I heard it correctly. Do you think strategically, that’s the right level of reinvestment in the business, especially given that some of your competitors might be spending a bit more than that?

Devon May: Hi Brandon. Yes, so the comment was we think we’ll have somewhere around $3.5 billion on average of aircraft capital beyond 2024 and probably for a good part of the decade. And where we are different than our competitors is we don’t have any fleet replacement needs between now and the end of the decade. So when we are investing in an aircraft that is an investment to grow the network and to grow the airline. What you’re seeing from some of our other competitors who just have older airplanes, there’s a lot of fleet replacement CapEx required for them. And again, for us, it is just growth aircraft requirements.

Brandon Oglenski: Thank you.

Operator: Thank you. Our next question comes from the line of Duane Pfennigwerth of Evercore ISI. Your question please, Duane.

Duane Pfennigwerth: Hi, good morning. I’m really tempted to ask another NEA wind-down question, but we’ll leave that for off-line. Maybe just on fleet. Where do you think your biggest gap or constraint is at the moment? Like where do you wish you could be bigger today? And can you talk a little bit about — I think you mentioned some regional fleet adds. What are the kind of staffing circumstances you see that are allowing you to invest there?

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