Andrew Didora : It’s Andrew Didora. Just in terms of the balance sheet and the debt pay down, how the $8 billion gross paydown done thus far? Am I doing my calculations right, is about $3.5 billion of that coming from the pension? And then of the $15 billion kind of total gross debt paydown number, how much of that do you assume is just a reduction of pension benefit? .
Devon May : Yes. So that is the right calculation. So in the summer of 2021, when we had historically low interest rates, our pension obligation is obviously significantly higher. It’s been around $2 billion at the end of 2022. By the end of 2025, where we’ve set our $15 billion goal is still right around that number, maybe a little bit lighter based on expected asset returns and the pension contributions going to make.
Andrew Didora : Got it. And I know you’ve answered a lot of questions in terms of asset utilization, hiring and things like that. But as you sit here today for your 2023 capacity plan, do you have the pilots and the aircraft in-house to hit that plan? Or does the plan require additional hiring and additional kind of deliveries from the OEMs relative to plan in order to hit that capacity goal?
Devon May : We’ll be hiring pilots throughout the year. We feel really good, though, about the hiring forecast we have and what we’re expecting for training throughput. In terms of deliveries, as we talked earlier, we do expect to take 23 aircrafts this year. Those deliveries would be required to hit this plan. I think we’ve taken a pretty conservative approach to what we have for in-service dates. And we feel like this is the plan we’re going to be able to hit.
Robert Isom : Yes. And Andrew, that’s — look, this is — Vasu and Devon get together to build the network and work with David and see more on our operating capacity. We’re being really mindful of making sure that we have the resources to fly the schedule. So there’s a confidence factor that we’re using in that as well.
Operator: Our next question comes from the line of Duane Pfennigwerth of Evercore ISI.
Duane Pfennigwerth : Congrats to Derek and Devon. Just to follow-up, just where you left off there. I think at one point last year, I believe you paused mainline hiring because of the pilot training throughput and the pilot training lead times. Can you just mark to market like did you restart hiring? When did you restart hiring? And how many incremental do you need to hire to hit your growth plan this year?
Devon May : Yes. So we were hiring ahead of needs and training throughput as we got later in the year. So we did pause hiring for most of the month of December, I believe. That hiring has resumed here in January. Our expectations are we’re going to hire around 2,000 pilots for this year and probably a little bit on the higher end as we get through the year and training capacity continues to increase.
Duane Pfennigwerth : Okay. And then just most of my questions have been asked, but just an aircraft financing question. So hypothetically, if you had $100 million in aircraft CapEx and you debt finance that, where do you see LTVs? So is it — is it $80 million or $85 million that would go on the balance sheet. Where do you see LTVs and cost of debt today? And alternatively, if you lease that $100 million of growth CapEx how much would go on the balance sheet in the form of an operating lease liability?
Devon May : Okay. There’s a lot to that. I’ll say our treasury team right now, we have 23 deliveries, 12 of which are already financed. So our financing requirements for the remainder of this year, are pretty limited. But those are all the factors they’re going to be looking at is what sort of rates are embedded in the operating leases that are in the market today, what the LTV, we can get on the debt. What’s happening with the rest of the balance sheet and our free cash flow and they’re going to make the right economic decision. So we have a great treasury team. They’re looking at these remaining nine aircraft we need to finance for this year and looking out to 2024 as well.
Duane Pfennigwerth : Okay. I mean, fair enough. It’s not like if you will, or if you won’t. It’s — if you do debt finance $100 million in CapEx, where is the market in terms of that LTV and cost of debt today?
Devon May : Yes. It’s something that obviously, we expect is going to move around over the next handful of months. I don’t have a number that I’m ready to give right here today, but it’s something we’re going to stay tight with. And we have a team that knows the market well.
Operator: Our final analyst question before we open the line to media comes from Ravi Shanker of Morgan Stanley.
Ravi Shanker : So one short-term and one long-term question. The short-term question is — it’s good to hear that you said you’re having your best ever post-holiday booking period so far this year. Can you just expand a little bit more? Are you seeing any changes in customer behavior? Are they flying to different destinations? Are they looking to maybe kind of downgrade their tickets or look for more flexibility, kind of any signs at all of any change in customer behavior or kind of in where macro is?
Vasu Raja: Yes, we are seeing some changes in customer behavior. People are — especially leisure travelers are looking even further out. We see that the blended customers are also much more willing to book further out. And third, we see that customers, especially blended customers or people purchasing a blended trip are more willing to buy higher-value fair products and shop direct with us. So we continue to see a world where roughly 60-ish percent of our revenues are coming direct to us through our dotcom and mobile app, and we see that continuing to grow. Furthermore, as those blended trips come in to our, as we call them, owned channels, 70% of the people shopping for the lowest fare end up buying a higher fare than that. So we’re encouraged by that. And then as far as where people are flying, I suppose that’s pretty simple, too. They’re flying everywhere they possibly can, except for places in Asia.
Ravi Shanker : That’s great to hear. And maybe just a follow-up. You guys have come a really long way kind of in the last year kind of since where everyone was doing the pandemic. But the markets may be not recognizing that. So I’m wondering if there’s any plan to kind of host an Analyst Day to kind of give us a kind of a long-term plan on strategic priorities, long-term financial guidance as such?
Robert Isom : Ravi, thanks for that question. The answer to that is, look, we’ve been really pleased with the work that we’ve done throughout the pandemic and setting American up. And the answer to your question is yes, we’re going to get out and make sure that people know our story. More details on that as time progresses, but you’ll hear more from us on that.
Operator: At this time, we’d like to open the line to our media questions. Our first question comes from the line of Mary Schlangenstein of Bloomberg.
Mary Schlangenstein: Good morning, everybody, and congratulations to Derek and Devon. I wanted to ask a couple of business-related questions quickly. On your business travel, whether it’s corporate managed or not, do you anticipate any impact from the growing number of companies that are laying off workers, particularly in high tech, but also now extending to some manufacturing companies? And then my second question is, is your expectation that this shift to blended trip is, in fact, the structural change within the industry and will not diminish going forward in terms of at least as far out as you can see?
Vasu Raja: Thanks, Mary. This is Vasu. And I’ll answer the questions in reverse order. First, look, there is — we do see a meaningful change in the trip purposes that people are booking that there’s a lot more blended trips even so many people who are searching for what conventionally would have been a business style itinerary. We see it in our dot-com end up selecting something which is pretty unconventional or they stay a Saturday night or they book another person for a midweek trip or something like that. So we do see that. And our credit card partners at Citi see the same thing, too, that demand for travel is still a really strong category and as preserved — a travel at large has preserved its relationship with GDP, if not somewhat grown a little bit.
So that — there is a meaningful thing we’re coming out of the pandemic. There’s clearly a value the consumer is placing on travel. Then as far as how layoffs are impacting things, look, what’s really important to note about business travel is — yes, it’s 25% of our revenues, but those companies are intending to do the largest the biggest, largest ones tend to buy on a corporate contract. And that’s — so much of that business just really hasn’t recovered. And we haven’t built an airline plan around it. However, non-contracted business is 100% recovered, contracted business is about 75% recovered. And we don’t presume that it grows much further than that. So we aren’t seeing a really significant impact, but we also aren’t building a plan based on a lot of that demand returning.
