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Gas prices, specifically jet fuel prices have a lot to do with the conversation that we're about to hear. And as we watch prices pull back a bit today, we're seeing airlines, cruise lines, other travel related stocks get a bit of bump out of some of this relief. And it's a perfect opportunity to bring in our colleague Lisa Abramowitz, who brings us an important conversation now with the CEO of American Airlines, Lisa, take it away.
Thank you so much.
Joe.
I am here with Robert isisam the CEO, chief executive officer of American Airlines here in our New York office.
Thank you so much for being here. Robert, great to see you.
Please, great to see you.
And right now we are looking at oil prices on a daily basis, as is your share price.
Before we get.
There, though, I want to start with just consumer demand. There have been a lot of questions about how resilient consumer demand actually can be as this conflict goes on.
What have you seen so far?
People want to travel?
I think that there are still some consciousness that travel is still a bargain. Really we're just getting back to yields that we had had in twenty fourteen, in twenty nineteen, so that sense of travel is a bargain, I think is apparent. And what we've seen tremendous demand in the first quarter American airlines year over year revenue improved ten eleven percent, and we're forecasting revenue to improve fifteen percent,
you know, year of year. And that's some additional capacity in there, but a lot of unit revenue performance as well would suggest that people, you know, are finding great value in travel.
Where is the demand coming from? Is it leisure? Is it business? Is it both?
It's all of the above, and it's business, it's leisure, it's domestic, and also international is still leading the way. Premium is still outpacing leisure. But I really like what I see, And in terms of capacity, I think that it is responding to market dynamics. I think that you know, the industry is stretched terms of margins, and at least for US, I like what I see in terms of how wet we're set up.
You say capacity is adjusting, does that mean capacity is coming down and prices going up?
But we've pulled a.
Little capacity capacity out and we'll, of course take a look at what's happening later in the year. We're very margin conscious. I mean, at the end of the day, that's what we're in business to do. But right now demand is very robust, and as we look closing out the second quarter, we're going to close out the second quarter in a really strong fashion.
Have you seen any businesses pulled back on business class travel.
We've heard some companies.
Start to discuss that type of measure just because of the cost.
Have you seen anything like that not an American.
We're business travels up thirteen percent year over year, and I think it's really responding to some of the things that we've been laser focused on.
We have four pillars.
One is elevating customer experience, growing back our network, really make sure we're driving premium revenue, and then leading in loyalty, and all of those are resonating with our customers right now. And American has done better year over year from on a quarterly basis last five out of six quarters in terms of unit revenue production.
So I like what I see.
You've talked about how there's been estimated four to five billion dollars of costs for twenty twenty six as a result of fuel prices being elevated.
How much of that can you pass along to customers.
Well, it's a big shock right now, and I am very confident that is things even out that will translate into gains for.
American on our shareholders.
If you take a look back at the first quarter, we were projecting solid profitability or profitability in the first quarter, which is usually a tough quarter for us, but for the shock and fuel prices and the same thing.
Think about in.
A year where a price of fuel is spiked four or five billion dollars, we're still projecting the same type of profitability that we had last year. That means good things in terms of what we hold. I really do think that there's some stickiness to a lot of what we're doing, and it's upside that's unique to American, but
there's a rising tide as well. Everybody's got to be margin conscious, and of course there's been some struggles in the business among those that you know, are you know, serving the lowest cost demand, are the lowest revenue demand?
Just to sort of put a bow on that.
In other words, when you are passing long price increases, do consumers push back or they remarkably resilient and just accepting it because that is a status quo across the industry.
We're trying to give our customers something that they really value.
So, you know, I know.
That our basic economy product offers incredible value to those that avail themselves of it, but we're giving people buy up opportunities as well.
And from a product perspective.
You name it, flagship suites, the new flagship lounges, you know, opening up new roots. All of those things appeal to our customers in a way that they say, hey, you know, I can find real value in what Americans offering.
How crazy is it going to get ivate plane? Half the plane is a personal sort of suite where you have for entertainment.
Well, I like what we're doing. We're looking at the entire fleet. The investments that we're making right that are coming to fruition right now are really an indication of we skated to the puck in the right place. So our flagship suites that are on the seventy eight seven nine that are delivering right now fortunately on time, three twenty one xl rs are coming in. But not only that, the reconfigurations that we set out to do a few
years ago on our three nineteens. In our three twenties, it's all increasing the mix of premium seating that's going to grow probably at twice the rate of our leisure, our general.
Cabins, our main cabins.
But I really like what I see in terms of that premium product. It's leading the way, and you know, it's very positive.
We talk about some of the issues that we've seen elsewhere, particularly in the budget carriers going bankrupt among them. How do you see that in terms of an opportunity to gain share?
Is this a time to.
See what potential business you can pick up from the likes of Spirit now that they're defunct.
Is this a time for mergers and consolidation in that way?
Well, I'll start with this America has the most comprehensive network in North America, and that's something that our customers can avail themselves of, take advantage and really get to anywhere else in the world with our partners as well. So as we take a look out in the future over the next five ten years, our network, you know, Miami based a large hub, DFW, Phoenix, Arizona, you name it, Charlotte. We're in all the right places where economic growth is
going to happen. So first and foremost for us is growing our organic network and making sure that we're doing well, and then opportunistically if assets become available by all means and as well, you know, we have a great set of partners joint business across the Atlantic with IAG which includes BA and Iberia, with CHAT across the Pacific with Quanas in Australia.
So as it's become available, meaning planes and maybe gates, not necessarily.
Entire airlines, planes and gates, Planes and gates first and foremost, and how we've really flesh out our network.
I want to give a shout out to our team.
They do a great job taking care of customers every day where a liability is key. So when I talk about customer experience, that is you know, front and center, and they deliver it every day. But anything that we can do to add to the franchise, we're doing it. And then of course we've been really creative in the past, whether it was the NEA, which you know, a judge I think inappropriately struck down would have benefited us in Jet Blue, or what we're doing with Alaska Airlines, West
Coast International Alliance. All of those things are just creative opportunities, and we'll continue to look for those. But in the meantime, there's more upside in American than really any other carrier because of what we've been doing and investing in our four commercial pillars, and because of the fact that there's quite frankly more ground that we've had to make up.
So a marriage between American and United not in your not in your Euro Bingo card.
That was a no from the get go, And at the end of the day, you know, doing something that would be viewed as anti competitive by just about everybody that looked at it is just something that we don't spend a lot of time on, and that's why all of our attention is directed at really making sure American takes advantages and gets set up for when fuel prices, you know, normalize a bit, that's going to.
Mean good things for us.
Do you think that American can thrive even with oil prices where they are today?
Well, and you take a look at the team in the later teams in the United States airlines made good money with oil prices above one hundred dollars a barrel.
Now, my own view is I don't.
Believe that oil prices will stay at this level. I think that the conflict in the Middle East at some point is going to be resolved. And I want to thank all of our service members for what they do every day, and want to thank the administration for making.
Sure we get through this.
But on the other side of this, I'm really confident that we're set up better than anybody to take advantage of fuel prices that are more moderated levels.
Do you think that right now, the way that things are set up, if the prices that we have today at like ninety dollars a barrel or eighty five dollars a barrel, you could return to the profitability that you would forecast the beginning of the year.
Well, it's going to take some time, but that is certainly the intent. And not only that, I mean it's not just what we forecast this year, but for us, I look for pre tax margins to get back into the higher single digit levels. And the way that that happens is is keeping a close eye on the marketplace and ultimately, yeah, we're in this business to make margin. I think it's different in that a lot of the
lower priced competition is really having struggles. And so as we go forward, if there's a need to reduce capacity to get back to a business model that produces acceptable margins, we're going to do that. You know, right now we see considerable strength. I hope this is more of a blip that is, you know, months in the making as in years in resolving.
But when we get through this will be in great shape.
Robert im thank you so much for being with us today. Robert Eisam, the CEO of American Airlines, a wonderful summary of exactly how a lot of the airlines have managed through a difficult time with the incredible resilience of the consumer.
Everyone wants to travel