American Airlines Group Inc Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Scott Group - Wolfe Research LLC - Analyst : Hey, thanks. Good morning. So I think I saw you said that September unit revenue was positive. Fourth quarter guide is sort of flat. So maybe just explain that change. And then within that, I think I just heard you say domestic unit revenue, you think is flat in Q4 as well. Maybe just some thoughts premium versus domestic and how that shakes out. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 23, 2025 / 12:30PM, AAL.OQ - Q3 2025 American Airlines Group Inc Earnings Call

Question: Scott Group - Wolfe Research LLC - Analyst : Okay. And then I want to see if you want to provide any sort of early thoughts for next year. So if I look at Q4, right, we've got capacity up 3% to 5%, what are you saying unit cost up 2.5% to 4.5%. Is that sort of the right way to think about capacity and unit cost for next year? And ultimately, what I'm trying to figure out is what's the visibility or confidence in sort of a price cost inflection next year?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Good morning, guys. Thank you for the time. Maybe digging a bit deeper into the capacity and premium investment comments now that you have also the 777-200 fleet going, the schedules are loaded up 5% in the first half of next year. The fleet grows a similar amount, assuming no retirements. So how are you thinking about the mix in premium versus main cabin and short haul versus long haul?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Great. And then maybe if I could ask another one on just domestic hubs. You mentioned Chicago enrollments are up 20% year-over-year for AAdvantage. Lots have been said about this market. When you look across domestic hubs, where are you seeing the greatest level of unit revenue

Question: David Vernon - Sanford C Bernstein & Co LLC - Analyst : Hey, guys. I hate to bang the same drum, but maybe I'll ask the same question in a slightly different way. If we think about what percentage of premium seats are in the mix kind of as we end 2025? And how does that change? If you can put a number on that, that would be helpful as well as any sort of commentary or directional commentary on the relative buy-up from what would be considered a non-premium versus a premium seat. I think what we're trying to all kind of model out here is what kind of unit revenue lift you could get because the product mix is changing so much next year. I appreciate the twice the normal seat growth rate, but I think what we're trying to do is really kind of help handicap what kind of margin expansion should be coming from that product investment. Thanks.

Question: David Vernon - Sanford C Bernstein & Co LLC - Analyst : Okay. And then maybe as you think about beyond the hard product investment, right, and that -- however that mix shift is going to change in the number of seats, Robert, when you're talking to the team or maybe and working with that as he's ramping up, when you think about the product investments or experience investments that you need to make, what are the two or three areas that you are most focused on with the team? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 23, 2025 / 12:30PM, AAL.OQ - Q3 2025 American Airlines Group Inc Earnings Call

Question: Dan McKenzie - Seaport Global Holdings LLC - Analyst : Well, hey. Thanks for the time, guys. Congrats on the outlook here in the quarter. Going back to an earlier question on Chicago and the response that you expect it to return to its rightful place as the largest and one of the more profitable hubs. That, of course, is pretty different messaging than what we heard from one of your chief competitors there. So just a couple of questions. One, can the airport support two strong competitors longer term? And what does history tell us? And then finally, with the 20% improvement in enrollments, is that enough for you to help close that margin gap there in '26 or 2027?

Question: Dan McKenzie - Seaport Global Holdings LLC - Analyst : Yeah. Very good. And then, Robert, you mentioned a $1 billion cost labor disadvantage to competitors on CNBC this morning. Is it your sense that this cost disadvantage should go away in '26, at least in theory? And can the domestic supply backdrop support the higher fares needed to offset that increased cost or whether or not more capacity needs to exit?

Question: Jamie Baker - JPMorgan Chase & Co - Analyst : Hey, good morning, everybody. First question probably won't come as much of a surprise, reminiscent of what I've been asking this season. So this whole idea of premium leisure yields eclipsing corporate yields, at least in some markets, is interesting to me because I think most investors still think of corporate yields as kind of the gold standard. So my question to American is, how prevalent is this across your domestic -- well, across all markets, I suppose. And does it make you think any differently in terms of how aggressively you pursue corporate share if premium leisure yields may be the future? Any thoughts on that?

Question: Jamie Baker - JPMorgan Chase & Co - Analyst : Got it. Thank you. And Devon, while I have you, a quick follow-up on the air traffic liability. Your drawdown from the second quarter to the third quarter was the most modest that I've seen, at least going back a decade. And it was quite a bit less than the drawdowns at Delta and United. I assume the American's domestic international balance may have something to do with that. Maybe it's attributable to some of the second quarter challenges and subsequent recovery. Whatever the case, it jumped out at me, maybe it shouldn't have any thoughts?

Question: Catherine O'Brien - Goldman Sachs Group Inc - Analyst : Morning, everyone. Thanks for the time. I wanted to ask more of a theoretical question on CASM. So you guys have done a lot of work on building efficiency into the system. And just wanted to understand, is the fourth quarter a good example of what the business can do, like low to single --

Question: Catherine O'Brien - Goldman Sachs Group Inc - Analyst : Great. And then, Devon, probably a second one for you. You've made great progress on the balance sheet even in a tough year demand-wise. I think looking back at my notes from the 2024 Investor Day, the longer-term goal is to get to net debt below $30 billion and leverage below 3 times in 2028. I guess, is that still the goal? And really, is that your ultimate goal? Or do you believe there's a benefit to taking leverage lower than that over time? I realize this is a longer-term one, but just trying to get a picture of how you're thinking about capital allocation over the next couple of years. Thanks.

Question: Michael Linenberg - Deutsche Bank AG - Analyst : Hey. Good morning, everyone. I guess a question to Devon. Just given the age of your 777-200ER fleet, how much of the decision to make the nose to tail investment was a function of just lack of new wide-body availability? And what is the cash payback period of those investments?

Question: Michael Linenberg - Deutsche Bank AG - Analyst : Great. And then just a second question, given that we're day 23 in the shutdown, and I know you guys have a sizable presence at Reagan, we have seen the volumes really trend down, especially the last week at Reagan. Is it -- what are you seeing there? And is it just really contained to the DC area on the government shutdown? Thank you for taking my question.