Operator: Our next question comes from the line of Conor Cunningham of Melius Research.
Conor Cunningham : Thank you. And congrats, Derek and Devon. It’s great to hear. Just back to Jamie’s question on the operation and maybe some of the Southwest issue. I’m just curious if you could speak to the converse, how your conversation with your corporate partners has evolved given your just operational strength. Like I would imagine it would be a lot easier in these days, but can you just talk about how that’s how that’s changed at all and what your expectation is for new contracts and so on.
Robert Isom : Conor, I’ll start, and I’m going to hand it straight off to Vasu. But I’ll tell you what. One thing that hasn’t changed is that reliability it translates into likely to recommend. It translates into Net Promoter Scores. And we see it over the holidays and as we really progressed through last year and and got reliability to a really high level, our scores have improved to the highest levels that we’ve seen. So those are the kind of things that I think that our corporate customers are interested in as well. Vasu?
Vasu Raja: Yes. Robert, it’s 100% right. And — so first, I’ll say, for our customers at large, they clearly benefit from a better operation, and we see it — for the year, we — as Robert said, we posted our best likelihood to recommend scores by a meaningful amount in any time post-merger. And that’s no action. That is the operation. But what’s really important out there is, yes, many of our corporate partners are encouraged. But what’s really important — and this links back to some of the other questions is that also the marketplace has changed very meaningfully. As I mentioned on our last call, we see the same trends where roughly 30% of our revenues are coming from what we’ve historically called leisure. About 45% are blended trips.
Only about 25% of what we’ve historically called business trips. And of that 25% — historically, that number would have been about 35%. So it shifted a lot. And within the 25% only about 5 to 7 points of that are coming from contracted corporations. The rest are non-contracted, unmanaged businesses who are flying on us. And what we see amongst those contracted corporations is quite striking. Almost 2/3 to 75% of our corporate contracts are actually not fulfilling the terms of their contracts for understandable reasons. For so many companies, if you’re struggling to bring people back to the office, it’s hard to compel them to go do a day trip to Chicago or New York. And so we see that broadly. And so even though many customers are happy with our service and many corporate travel buyers are very happy with our service.
The reality is same-day corporate business trips, which used to be 3% to 4% of our traffic is less than 1% of our traffic. And that’s been out there for a while, and we are planning that that’s going to be the new one.
Conor Cunningham : Okay. Great. That’s one. And then on the — if you’re talking about free cash flow, again, that’s obviously great to hear. I’m just curious how your expectation for future aircraft deliveries has changed. Are you — should we expect that we’re going to start paying cash for these planes going forward? I realize that your CapEx budget is lower. But just curious on how you’re thinking about financing those aircraft in the future.
Devon May : Yes. This year is a low point for aircraft CapEx. We’ll see it come up a little bit next year and then get back to a type capital expenditures as we get out into 2024, 2025. In terms of financing, it’s going to be dependent on where the market is at. And so — yes, there is potential opportunity that we may pay cash for some airplanes, but it’s dependent on what sort of free cash flow we are delivering and what sort of market rates we’re able to achieve.
Operator: Our next question comes from the line of David Vernon of Bernstein.
David Vernon : Robert, I wanted to ask you about how we’re exiting 2023 on the cost side. You guys have been running a pretty clean operation and the margins are obviously pretty healthy. I’m just wondering how much baggage are you carrying in the 2023 outlook from lower productivity, more full training classrooms. Is there a way to think about what that penalty would be from a unit cost perspective because of some of those lingering effects of restoring the network embedded inside of the 2023 guidance?
Robert Isom : Well, I’m going to ask Devon to help me ask. But David, I would tell you that I think the biggest issue that we have right now is that we have aircraft that we could be utilizing it at a much higher level. And absolutely positively we’re going through some training cycles that are just unprecedented. And as the hiring is going on at American right now, that is going to over time stabilize, and we won’t have to work those assets quite as hard. Biggest thing right now is aircraft. Devon, do you want to give some numbers on what you think that…?
Devon May : Yes. I’d just say for aircraft utilization, we are just starting to approach historical levels. So just starting to approach our 2019 levels of aircraft utilization as we get through this year. So like we’ve talked about, this is a fleet that should be able to produce higher aircraft utilization than the fleet we had prior to the pandemic. Just recall prior to the pandemic, we had a lot of older aircraft, smaller sub fleets that have really high spare ratios. So even though we will likely put more into operational support than we would have planned to a year or two ago, we still think this is a fleet that can produce significantly higher utilization than what we’re doing today.
David Vernon : Okay. I mean the leverage on the aircraft ownership cost is pretty straightforward. But as you think about increasing that utilization, Can you talk about the impact on the — at the margin on costs and things like labor and the rest of the business? I’m just trying to get a lot of questions about scalability and and how unit cost should be moving as we’re thinking about — not just ’23, but also ’23 and ’24. Any added color there would be helpful.
Devon May : Yes. I think just as Robert said, there’s certainly some more operating leverage in the business. And I’m asking specifically about the salary line or the training headwinds. I think that is absolutely a part of it as we get through this year and get our training throughput to a level that it should be. I think we are going to see some efficiencies on that side. Through the rest of the P&L, yes, there’s opportunities as we increase aircraft utilization in areas like airport rent and landing fees, and that type of thing.
Robert Isom: And in maintenance. When you have aircraft that sit on the ground, especially within our regional fleets, it’s not as if those don’t require maintenance. So look, the fleet meant to be flown and whether it’s things like rents and landing fees, maintenance, those are the areas that I would probably look to most as being opportunities for us to see much greater efficiency.
David Vernon : All right. And then one last real quick one. Free cash flow should be something like 130% of net income — in this — based on the guidance today. As you think about the go-forward look, I’m just curious about the — whether you’re able to use the losses in the last couple of years. How long is that going to affect sort of cash taxes? And where do you think cash taxes are going to start to become a part of the equation here? Is that a ’24, ’25, ’26 thing? Or is that like any sense of when that might kick in?
Devon May : Yes. We don’t expect to be CapEx payers in that period for at least through 2026.
Operator: Our next question comes from the line of Andrew Didora of Bank of America.
