American Airlines Group Inc. (NASDAQ:AAL) Q3 2023 Earnings Call Transcript

And on that journey, we’ve certainly invited all of our retailers to come along with it, but that is a different world than what was there before. And what we’ve seen before is really encouraging, actually. In the quarter, our total business revenues were up 2%. We actually performed better year-over-year among contracted corporations than we had in a number of months prior to it. But very importantly, our cost of sale is down 13%. So we’re finding that we’re able to generate more revenues through less cost of sale, which is very encouraging to us. And like I said, as we go forward, we intend to continue the momentum that we’ve got. We certainly invite any retailing partner to join us along the journey. And in fact, most recently, we launched a new business program called AAdvantage Business.

And AAdvantage is very much the platform upon which we will build all of our commercial programs. But through that — through AAdvantage business, companies of all sizes can access our content in a way that’s cheaper, simpler, better servicing, and in a way that’s more rewarding for travelers. We’ll accelerate their status. So we’re actually really encouraged by what we’ve seen, encouraged by its revenue production, and look forward to continuing the momentum.

Andrew Didora: Great. Thanks for that.

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

Michael Linenberg: Hey, good morning everyone. Hey, Vasu, can I just — I know you’ve sort of called out what the revenue for premium for AAdvantage members was up year-over-year? If I look at in its entirety what year-over-year was the gain in premium product revenue. And then when we think about sort of the split, where are you, you know, as a percent of your passenger revenue, total passenger revenue, premium versus non-premium? Even rough numbers would be fine. Thanks. Hello?

Vasu Raja: Sorry, Mike. Shame on me. My microphone wasn’t on. But I’ll repeat, I’ll answer the first question first. Indeed, premium cabin revenues are up across our system, about 6% to 7%.

Michael Linenberg: Okay.

Vasu Raja: By AAdvantage members whose revenue is up about 7%. Non-members are up about 5%. And then to your question [Technical Difficulty] about customer base. Look, one of the things that we’ve certainly noticed is probably more importantly than segmenting based on fair products is by the customers themselves. And so what we do is we look at customers who are buying non-premium products. Those are fairs that are not eligible for discounts, mileage earn, things like that, are lowest selling products. And we look at it for customers who are non-advantaged customers, who tend to be our most transitory customers. And we find is that transitory customers buying our lowest selling fares is about 30% of our system revenue. The other 70% is customers, who are buying premium quality fares. And that number is disproportionately weighted to advantage customers.

Michael Linenberg: Okay, great. And then just my Second question on, you know, I saw that you’re applying for — to fly from JFK, Haneda. And I’m curious because, you know, sort of post-NEA, I got the sense that maybe you were going to be sort of maybe, I don’t know if downsizing New York is the right thing, but the fact is, you know, wide bodies are scarce and for everyone. And that would take two frames. And you already have JAL in that market with the code shares. So, you know, what’s the rationale behind that? Thanks for taking my questions.

Vasu Raja: Yes. Hey, thanks, Mike. And I’ll answer through the lens of New York, which I know is probably on a lot of our investors’ minds. And I’ll answer the Haneda question as part of it. At the time pre-COVID and certainly prior to the NEA, American Airlines had a really fundamental problem in New York, which is we were losing our relevance to New York city originating customers. Every year we had declining originating share, our AAdvantage enrollments were declining year-after-year, simply because we didn’t have a slot portfolio to compete with the two largest ones. And that was the reasons behind doing the NEA. Now in these last several weeks and months, what we’ve noticed is actually the New York originating customer has changed what they demand.

Same day business trips are down a lot. There’s way fewer people originating New York, who are looking to take day trips to Boston or Chicago or Detroit. But that New York city customer is much more interested in flying long haul, internationally long haul, to the west coast [Technical Difficulty] market in Florida. That’s a thing that our slot portfolio is much more built to do. And in the last few weeks since the NEA has been terminated, actually what we’ve seen is that our originating share is stable. New York city can be the number one market in our system both for AAdvantage enrollments and for credit card signups and penetration. So we’re encouraged by that and you see that. The last thing I’ll mention about it is through our global partnerships we’re able to offer a thing in New York which is very unique both in our TA facility and also being able to go and operate our major partners — major complexes whether that’s Heathrow or Haneda or Doha for that matter.

Michael Linenberg: Makes sense. Thank you.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Catherine O’Brien of Goldman Sachs.

Catherine O’Brien: Hey, good morning everyone. Thanks for the time. Devon, I just wanted to dig in a bit on the cost performance to-date. You know, you came in close to a point below the low end of your 3Q range. I know you mentioned some timing shift, but you’re also sticking with your prior midpoint for full-year CASM-ex despite the extra crew for pilot retro pay since you last updated that full-year cost outlook? I guess, you know, what has been going better than expected? And then can you just remind us what you had originally baked in for the open flight tenant contract in the second-half did that have any impact on 3Q? Thanks.