American Airlines (AAL) - 2025 Bernstein Industrial Conference
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American Airlines Group Inc.
Bernstein Strategic Conference Presentation
Date: December 10, 2025
Location: 2:00 PM GMT
Management Team Present
Robert D. Isom — CEO, President & Director
Devon E. May — Executive VP & CFO
Additional members referenced as present: Nat Pieper & Neil (Commercial leadership)
1. Summary of Recent Results & Operational Backdrop
“No matter what was thrown at us this year… the team did a great job of managing through” despite Flight 5342 incident and a U.S. government shutdown.
“We have labor contracts in place… all the way up to 2027, 2028. First time in my career…” establishing cost and labor certainty.
“We’ve been able to continue to pull debt down… from $54B… below $37B… on our way to $35B.”
Fleet deliveries finally normalizing: “Boeing and Airbus finally started to deliver… 787-9Ps… 737s…” after years of constraints.
AAL has fully restored its regional fleet that had over 250 grounded aircraft during the pandemic.
Sales & distribution missteps now “recovered from where we were before the missteps” with benefits expected to flow in 2026.
2. Financial Performance
Government shutdown impact: Initially “less than $1M a day” but worsened materially in late October–November due to “tremendous disruption and a lot of customers that weren’t booking.”
Bookings have now “rebounded… and we are exactly on track with where we thought we’d be for 2026.”
Margins: Premium cabins now carry “higher profitability… than our main cabin.”
Relative margins: AAL had “the exact same EBITDA margin as United” pre-2024, with a “slight gap to Delta.” The 2024 margin gap was “largely related to sales and distribution.”
2026 outlook: Management expects margin expansion as tailwinds from Citi, network, premium mix, and domestic recovery take hold.
3. Guidance & Future Trends
ASM growth potential: Up to ~5% annually driven by aircraft CapEx of $3–3.5B/year and no required retirements. “We can grow the airline by somewhere around 5% each year.”
Growth will be flexible and tied to demand: “We’re pretty flexible… we acted quickly in 2024 and 2025 pulling down capacity when needed.”
2026 network expansions focused on Miami, Phoenix, and ongoing growth in Chicago and Philadelphia.
Premium seating to grow: “Lie-flat seat growth… 50%... premium seats growing 30%.”
Premium segment now “50% of our revenues and growing.”
2026–27: intro of A321XLR, more Flagship Suite installations, and satellite WiFi on all but 50-seat regionals.
4. Capital Allocation & Balance Sheet
Debt has been reduced from $54B → inside $39B → on track for $35B by 2027.
Lowest net debt since 2015–16. “Debt is fine — we need earnings to improve.”
CapEx expected to remain $4–4.5B in 2026.
Target: Net debt/EBITDA → ~3x, aiming for BB credit rating in the near term.
Cash returns to shareholders will come only after hitting leverage goals; currently “focused on the balance sheet.”
5. Premium Product, Loyalty & Customer Experience
“We are a premium global airline… best network in the most lucrative travel market in the U.S.”
Heavy investment in lounges (Flagship & Atmos), free WiFi, AT&T partnerships, upgraded food & beverage, bedding, amenity kits.
A321XLR + 787-9 deliveries and retrofits will dramatically raise premium seating mix.
Seatback entertainment: “Table stakes for international… will be on 321 XLR and widebodies.” Domestic remains BYOD with strong connectivity.
Premium pricing opportunity is structurally improving: “Our premium cabins have higher profitability across the board.”
6. International Strategy & Network
International is expected to grow faster than domestic over the next 5 years due to long-haul aircraft additions.
Long-haul fleet grows from 135 aircraft → ~200 by end of decade with 787s + A321XLR flexibility.
Philadelphia highlighted as core transatlantic hub for “secondary cities in Europe.”
Priority markets: JFK–LHR, DFW–LHR, Miami (short-haul Latin America), Chicago expansion.
JVs with IAG, JAL, Qantas, and strong Qatar partnership support global connectivity.
7. Technology, AI, & Operational Efficiency
AI primarily used to optimize operations: “Disruption handling, crews, maintenance… putting the airline back together more efficiently.”
Customer use cases include automated rebooking, personalized offers, and new “inspiration tools” for trip planning.
Not focused on bypassing partners; AAL will “work with our partners” for distribution.
Reengineering-the-business program has delivered $750M of the $1B efficiency target.
Headcount growth only 1% vs 5–6% ASM growth — structural productivity gains.
10 Notable Direct Quotes
“We never stopped building the foundation for the future.”
“We have labor contracts in place… the first time in my career I haven’t had a major issue staring us in the face.”
“We’ve gone from $54 billion total debt… to below $37 billion… on our way to $35 billion.”
“Premium traffic is now 50% of our revenues and growing.”
“We can grow the airline by somewhere around 5% each year.”
“Our premium cabins have higher profitability across the board than our main cabin.”
“Sales and distribution was the primary reason for the 2024 margin gap… we’ve made a ton of progress.”
“The Citi deal will be a material boost… $1.5 billion versus 2024.”
“AI is a tool available to every organization… we’re already using it to optimize operations and customer disruption handling.”
“2026 is our centennial year… we’re the airline of the World Cup… It’s going to be a big year for us.”
Q&A Summary
Q: Government shutdown impact?
A: Early stages were “less than $1M/day” but later months saw “tremendous disruption” and weaker bookings. The network has now recovered and bookings have “rebounded.” Final quantified impact to be given at full-year earnings.
Q: ASM growth outlook?
A: AAL can grow ~5% annually with current CapEx and zero retirements. Flexibility to reduce or exceed based on demand and macro trends.
Q: CASM-ex range with growth?
A: At ~5% ASM growth, unit costs should decline low single digits. If growth slows, CASM-ex rises; if growth accelerates, CASM-ex improves. Efficiency programs continue to add savings.
Q: Competitive / premium position?
A: AAL has long roots in premium with the largest U.S. loyalty program, most ultra-premium lounges, and major fleet upgrades. Premium mix is growing and highly profitable.
Q: Seatback entertainment return?
A: For international flights, yes — “table stakes.” For domestic narrow-body, BYOD with strong WiFi is the strategy for now.
Q: Margin gap vs peers?
A: Mainly driven by 2024 sales & distribution issues and labor timing. Tailwinds (Citi, premium, network) should close the gap in 2026.
Q: Co-brand Citi partnership specifics?
A: Expected to grow 10% annually; $1.5B incremental EBIT improvement vs 2024 by end of ramp. Begins January 2026.
Q: International growth priorities?
A: Philadelphia for Europe, Miami and DFW for Latin America, and premium long-haul from JFK/DFW to London. Long-haul capable fleet increases ~50% by end of decade.
Q: Balance sheet & leverage targets?
A: Debt < $35B by 2027; net debt/EBITDA ~3x; aiming for BB credit rating. Cash returns to shareholders come after leverage goals are reached.
Q: AI opportunities in booking & RM?
A: Focused on operations optimization, tailored disruption handling, and merchandising capabilities. Working with partners rather than disintermediating them.
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