Good morning, and welcome to the American Airlines Group Third Quarter 2021 Earnings Conference Call. Today's call is being recorded. At this time, all lines are on a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] Now, I would like to turn the conference over to your moderator, Head of Investor Relations, Mr. Dan Cravens.

Thanks, Sara (ph). Good morning, everyone and welcome to the American Airlines Group Third Quarter 2021 Earnings Conference Call. On the call this morning, we have Doug Parker, Chairman and CEO; Robert Isom, President, and Derek Kerr, Chief Financial Officer. Also on the call on the line as well for Q&A session are several of our senior execs, including Maya Leibman, Chief Information Officer; Steve Johnson, our EVP of Corporate Affairs; Elise Eberwein, our EVP of People and Global Engagement and Vasu Raja, our Chief Revenue Officer. Like we normally do, Doug will start the call with an overview of our quarter and we'll update that to the actions we've taken during the pandemic. Robert will then follow some remarks about our operations, commercial, and other strategic initiatives. After Robert's remarks, Derek will follow with details on the quarter and our operating plans going forward. After Derek 's comments, we'll open the call for analyst questions, and lastly, questions from the media. To get in as many questions as possible, please limit yourself to one question and a follow-up. Before we begin, we must state that today's call does contain forward-looking statements, including statements concerning future revenues, cost, forecasts of capacity, and fleet plan. These statements represent our predictions and expectations as to future events, but there are numerous risks and uncertainties that could cause actual results to differ from those projected. Information about some of these risks and uncertainties can be found on our earnings press release issued this morning and our Form 10-Q for the quarter ended September 30th, 2021. In addition, we will be discussing certain non-GAAP financial measures this morning, which exclude the impact of unusual items. A reconciliation of those GAAP numbers to the GAAP financial measures is included in the earnings release and that can be found in the Investor Relations section on our website. A webcast of this call will also be available on the website. The information that we're giving you on the call is as of today's date, and we undertake no obligation to update the materials subsequently. Thanks again for joining us at this point. I will turn the call over to our Chairman and CEO, Doug Parker.

Thank you, Dan, and thank you-all for being with us. Good morning. Our third quarter started out very strong. Our domestic business revenue, which declined from 27% of our 2019 levels in March to 52% in June jumped even more in July, actually jumped to 64%, as companies began to return to work and employees began to return to the skies. As a result, we in American produce our profit in the month of July. But then the spread of Delta variant led to a rebound in pandemic fears, of course, companies deferred return to work plans, and that domestic revenue, the rest of business revenues fell back to 57% of 2019 in August and 47% in September. Now, I know some people will find that kind of discouraging, but we actually think it's encouraging. Despite in business revenue in the month of July, it showed that business travel does want to return. There was enormous pent up demand and once this pandemic behind us, it should resume its prior rapid trajectory to recover. As to how it all gets reflected in the financial results, that profit in July, followed by larger losses in August and September, added up to a cumulative loss. On a GAAP basis, we actually reported a net profit of $169 million. When we exclude net special items, we recorded a net loss of $641 million. While we obviously don't like reporting losses, this is our smallest quarterly loss since the pandemic began in early 2020. [Indiscernible] is how well the American Airlines team is performing. No one is managing through this pandemic and into the recovery better than people in American, that shows in the results. At a time when airlines are struggling to build back service and respond to demand, no one has dealt…

Thanks, Doug and good morning, everyone. I want to start by thanking the entire American Airlines team for their efforts to the third quarter and throughout the pandemic. Our airline continues to succeed, thanks to the hard work of our team. As Doug mentioned, this summer represented the largest operational ramp-up in the history of American. As we built back the operation, much like other businesses, we've managed through supply chain constraints, vendor and staffing challenges, constantly changing travel restrictions, and a lot more. Through it all, we operate more flights and carried more customers in any other US Airlines. More than tripling our daily departures from May 2020, which is the low [Indiscernible] of our schedule and we're pleased with where we are. American recorded our most reliable September since the merger, based on completion factor, on-time departures, and on-time arrivals. We'll continue to focus at delivering a safe and reliable operations, and continuing the momentum as we further scale our operation, and welcome back even more customers. I also want to acknowledge the efforts of the American team in third quarter in support of the US Civil Reserve Air Fleet program. It was a tremendous honor for American to aid in the effort to bring more than 5,000 evacuees from Afghanistan to the US, as well as hundreds of members of the US military. That work included working with the Customs and Border Protection to open up the Philadelphia facilities as a welcoming center for foreign nationals. We're grateful to our team members throughout the airline, and from all over the world who came together to support American's craft activation. As we reported this morning, our third quarter total revenue was approximately 9 billion, up 1.5 billion from the second quarter. This improvement was driven by our passenger…

Thanks, Robert. Good morning, everyone. Before I begin my remarks, I would also like to thank the American Airlines team for their hard work during the quarters. Their continued resilience in the face of uncertainty due to the Delta variant is commendable. This morning, we reported the third quarter GAAP net profit of $169 million or $0.25 per diluted share. Excluding net special items, we reported a net loss of $641 million or a loss of $0.99 per share. As Doug mentioned in his remarks, this was our strongest quarter since the pandemic began. As we have discussed in the past, as we always expected, the recovery would be unpredictable and our third quarter results reflect this. Despite the Delta variant related volatility and demand and revenue trends that Robert discussed, our financial performance improved from the second quarter, but fell short of our initial expectations that we outlined in our last earnings call. While the slow down in demand was clearly disappointing, it is important to note that the trajectory of our results continues to be positive. In fact, even with the drop-off in bookings from the Delta variant and rising oil prices, our third quarter pre-tax earnings, excluding net special items improved by nearly 600 million sequentially versus the second quarter. This makes it even clear to us that the steps we are taking over the past 18 months are working. As we have navigated the pandemic, we built back our network in a way that we'd keep our capacity aligned with demand, while giving us the ability to be flexible as conditions change. We've have also worked to keep our controllable costs down, and have action 1.3 billion in permanent annual cost initiatives this year alone. Based on our results, it's clear these actions are paying off,…

Thank you. [Operator Instructions] Our first question comes from the line of Jamie Baker with JPMorgan. Your line is now open.

Hey, good morning, everybody. So Doug, I think it was like three or four years ago, you had a slide at our conference. It was entitled, There, They Go Again. It was a list of airline behaviors that you were warning investors to keep an eye out for -- it was a cool slide, actually. So two bullets on that stood out: expanding service to markets that don't touch a hub, and establishing new hubs. Could you help frame the Seattle expansion against that slide? It's not like the slide was written in stone and you carried it down from Mt. Sinai or anything. I'm just having trouble reconciling it in the current environment.

Sure. I'll do it at a high level and [Indiscernible] could chime in with more details if you'd like, Jamie. So, yeah, look, that's not a new hub, as you [Indiscernible] there's all ready a hub there, it's Alaska's, they're our partner and we're simply making net health stronger by having alliance with Alaska, whereby we can do things they can't do or they wouldn't be able to do without investment. That wouldn't make sense. By flying international because we have international aircraft and they can do things that we can't do just be in those flights with their already existing Seattle hub. So it's not a new hub [Indiscernible] to note that hasn't happened since we put that [Indiscernible] .

Yes, and James. This is Vasu. I'll add to that. Actually, we see Seattle as being really actually consistent with that. [Indiscernible] it's pretty simple that we go create value for customers by being relevant and being relevant, the biggest markets and in a way to go create a legitimate, valuable, and profitable international network, we need to be able to launch flights for international markets. [Indiscernible] historically, in the West Coast, we've had a very, very small presence. Most namely in the Pacific Northwest where we've had almost no presence. With this, which is a very creative deal. What we're doing is we're flying things like Seattle to [Indiscernible] or Seattle to [Indiscernible] all of which feed off of that huge global market that Alaska has cultivated. It draws from the connectivity of the Seattle hub. We've been really encouraged with the results, not just across the West Coast, but really across the system. Alaska Airlines is increasingly emerging as one of, if not our largest codeshare partner. We are seeing a huge customer benefit all up and down the West Coast. Actually, as we look at it, we're creating close to about 300,000 customers are now able to experience AA or Alaska where before they had no competitive option or they had one or two competitive options in the marketplace and the market is responding. We've set records for AAdvantage enrollments, but the two markets where our enrollments are growing the most are all the markets in the West Coast partnership, everything from San Diego, North of Seattle, and the other ones are New York and Boston. So we see as actually to be really consistent in a really effective and wise way to go and develop a level of network comprehensiveness that will be too impossible to do.

Okay. That's really helpful. And then a follow-up, this one, a quick one on fuel, maybe for Robert or Derek. The question I repeatedly receive is why haven't managements adjusted capacity to account for $2.50 jet kero. I know you can't speak for the industry, but for American, is there a certain period of time that you need to be convinced that higher fuel is going to be sustained? Is there too much uncertainty around 2022 revenue to be making capacity decisions today? Just looking for some color on how you would answer the question that I'm getting every day, and I imagine my competitors are as well. Thanks in advance.

Jamie, I'll go first, all because you and I have been doing this a long time. When oil price move this quick, it's really hard to have responses of what happened here. It's run up very quickly. We're already selling all the capacities out there. So what I know is, what I believe is and this has been the history of our business, if in the new normal, you will see adjustments, you will see adjustments in capacity, which will result in changes in pricing. This don't happen that quickly. It also takes a while for anyone to come to the conclusion that this is real. But 2014 was a pretty good year in the airline business, and Brent averaged 100 bucks [Indiscernible] . This is, you know it will adapt if this is the new normal. But right now, in the very near-term, it's hard to adapt. Robert?

This will come into balance and fuel prices run up very, very quickly. As we take a look of things, there must be an impact on capacity and pricing in the long run.

Got it. Thank you. All three of you, take care.

Thanks, Jamie.

Our next question comes from the line of Connor Cunningham with MKM Partners. Your line is now open.

Hi everyone. Thanks for the time.

Hey, Connor.

Hi. When listening to Delta and United's call, a huge portion of their script is about premium products and how they think there's a structural change happening. I don't think you guys mentioned much about that. I was wondering if you could just speak to how your different products are performing right now and do you actually agree that there's structural changes happening where leisure travelers are trying to book up more towards premium seats?

Hey, Connor. This is Vasu. I can start that one and others may chime in. Look, we certainly as most definitely see a change where there are customers who are much more willing to buy premium than before. Indeed, our premium revenue across our domestic system for much of the quarter was actually higher than what it was in 2019, which is pretty promising. But we spend lot of time looking at this. There's a component of it which certainly seems very promising, but still seems early to say whether this thing is structural or not. At least in our own system, we took a lot of [Indiscernible] out of international flight and we deployed them into domestic. We were really encouraged by what we saw, where there are a lot of customers with a lot more disposable incomes who would travel on leisure trip and they would not only pay for the lie-flat product, they pay a premium versus other non-lie products in the marketplace. That's certainly been an encouraging thing. But what we don't know is it's so much of that trip behavior also. It was people leaving on a Thursday coming back on Monday. So we do think that with more disposable income, there will be some interest in the consumer to have more experiences, to pay more for those experiences. What we don't know is how to size the magnitude of it. Because there's a lot of things that certainly speaking for American Airlines that was very unique for the last several months. And we don't yet know how much of a structural change that is, but to the early point of the beauty of the airline and we've -- this pandemic has proved over and over again, is that we can change where the airplanes go very, very quickly. And with that, we can also change the product design pretty quickly too. This is something that we're looking at. It is a similar trend that we're seeing. Time will tell how structural it is though.

Thanks Vasu. And to understand, hey, look, we're ready for what we've been preparing for a long time, not just in selling product which Vasu has talked about but the hard products as well. So the fleet is ready from a cabin configuration perspective, whether that's business class cabins or premium [Indiscernible] that we put in [Indiscernible] wide bodies. And then just as we look at travel recovery, in ways to service, you're going to see that we're adding back amenities that will allow us to sell and bundle in different ways. Everything from our 5-star service that this come back to the opening of our flagship lounges, which are our best in the industry. We have a way to sell into service, every customer, every end of the spectrum in terms of demand, so we feel really good about how we're set up to whatever environment that we find ourselves in.

Appreciate it. And then just on the cost structure, I mean, investors are trying to get comfortable with different stories on the cost side for the airlines, in general. So I mean clearly inflationary pressures, but curious, if you can talk to any of the tailwinds that you might be having that happened in 2022 outside of bringing back capacity to 2019 levels. The reason why I ask is I would've thought given some of the structural changes you had within fleet simplification and so on that 4Q would have had a little bit more leverage to it. So any details would be helpful.

Yes, Connor, in the fourth quarter, I mean, the story and I touched a little bit about here is we built the airlines to fly more in the fourth quarter without a doubt, now two of the issues. One is the Boeing 787-8, which are not here. We had assumed they we're going to be in this schedule. So we have 787 pilots, we have crews ready to fly those aircraft, but we unfortunately had to pull them out of the schedule in the fourth quarter and the first quarter. The other thing from a capacity perspective that we're all dealing with right now is on the regional side. As pilot supportability on the regional side, which will resolve itself over time. But as the mainline is hiring up, a lot of places they go to get pilots is on the regionals, so we're probably not flying as much regional as we would have flown. So I think from a CASM perspective that's what drove it a little bit higher in the fourth-quarter without a doubt versus where we had planned. So we're -- we're not flying exactly what we would have flown and where we already got in the cost structures there. As we go forward, the tailwinds are really, I mean, the $1.3 billion worth of cost reductions is permanent, it's going to be in there. As we look into next year, we haven't done the plan yet, so that's why it's really hard for me to give any kind of guide on a CASM for next year. We do see these inflationary hits to mostly from a salary perspective, a vendor perspective, those kind of things, and fuel as I talked about, that will have to overcome as we look at the plan for next year and we'll do that as we dig through the process. But we'll have the tailwinds, the cost coming out that we did from an efficiency standpoint, and also the number one, getting out of the aircraft types and modifying the aircraft to be the same all across from the Oasis Project will benefit us a lot as we go into 2022.

Connor, just because we haven't talked, we didn't spend a lot of time talking about the 1.3 billion [Indiscernible] which is for others who may have [Indiscernible] closely, those are real, they're in the airline. When we look at this as we go back to fly the 2019 schedule today, [Indiscernible] that amount. It's combination and it's a lot of things, but the largest ones are $500 million or so in management, payroll and as Derek said, all the efficiencies you get from [Indiscernible] fleets, training and otherwise. So those are the tailwinds to offset inflationary pressures that's Derek is talking about.

Okay. Appreciate it.

Thanks, Connor.

Our next question comes from the line of Sheila Kahyaoglu with Jefferies. Your line is now open.

Hi. Good morning, and thank you for the time, guys. Maybe if we could talk about the transatlantic market. It begun to open up a little bit more and maybe heading into 2022, but your passenger revenues are still down about 75%. How do you think about the cadence of that recovery?

Hey, this is Vasu. I can take that one. We've been really encouraged by what we've seen over the last, let's call it, 3 or 4 weeks, [Indiscernible] international at large, but especially at transatlantic. Certainly, after the regulatory restrictions changed, we saw a big spike in bookings in the 2 or 3 days after it. But what -- which is not that surprising. What's been more encouraging to us is that it really sustained itself. But what we are seeing out there -- what you see from us right now as a little bit of cautious optimism. In November and December, we are absolutely seeing bookings coming in at a greater rate than what we saw in 2019. A lot of that though is pent up demand effect. As we get into next year with every passing week, we see our bookings step up more and more across transatlantic. And so we're really encouraged by that. But the big variable will be when corporate starts to returning back at office and start traveling again for business which we anticipate being more in the Q1 timeframe than in the Q4 timeframe. Follow more so for us where our transatlantic network is really concentrated around London. So we don't anticipate as much of a business recovery in Q4, but we are seeing a really, really mean for leisure recovery. And all the more so as British Airways builds back as connecting schedule, in Heathrow, we anticipated picking an increasing amount of demand as Q4 goes along. So you see that number in aggregate, we see that something is changing a lot from where we are on October to November to January and beyond.

Great. Thanks a lot, Vasu.

Our next question comes from the line of David Vernon with Bernstein. Your line is now open.

Thanks, Operator, and thanks guys for taking the question. Doug and Robert, we sat down a little bit before the pandemic and you had laid out a picture where American had been lagging on some of the customer-facing and information technology stuff that was kind of constraining the operation in ways like not letting you book up to a higher load factor because of the designed boarding practice, the ability to pay for upgrades, dynamic pricing on [Indiscernible] tickets, all that stuff. A lot of it sounded like IT-driven initiatives. And I was wondering coming out of the crisis as we start to look out over the next couple of years, is there still catch-up work you need to do to bring yourself at parity with peers in terms of the way they are monetizing capacity or are you kind of close that gap through this crisis?

Steve. Hi, this is Maya. And I'm proud to say that over the last several years, we really have close the gap on a number of our technology initiatives, including some of the ones that you've [Indiscernible] up like dynamic pricing and allowing subs, higher [Indiscernible] and a lot of standby on safe departure activity. We've really used the pandemic as an opportunity to really identify those gaps and to close them and really focused on a lot of the other things that we've been talking about that we will be tailwinds for next year like our [Indiscernible] partnerships, and making a better customer experience for our customers with our West Coast and Northeast alliances.

Is there a way to frame what that outlook like be in terms of load factor or sort of ancillary revenue growth, it looks like the other revenue lines performing pretty well. But is there a way to kind of put a number around some of these things?

Hey, this is Vasu. We're in early stages of doing that as we build next year's plan but probably our top-line initiative is making sure that all of these partnerships are really integrated and seamless for the customer. A lot of the longstanding issues that have existed in co-sharing relationships really get alleviated pretty quickly. And a little bit -- we're pretty pleased with that. We've made a lot of progress with the Alaska and JetBlue, and what we're seeing is very encouraging. To my earlier comments, we're seeing a lot of customers come in and a meaningful amount of revenue production that there too. As we looked at in Q3, it was a massive benefit to customers. We estimated benefit and about a half percentage point of system revenue, but something which is a lot more meaningful to New York and Boston and West Coast network which was operating at 50% historical level. So we think there's a lot of uplift to the whole thing without a lot of investments, further.

All right. Thanks a lot, guys.

Our next question comes from the line of Dan Mckenzie with Seaport Global. Your line is now open.

Hey, thanks. Good morning, guys. The first question here is just a housekeeping question from a prior question, the Oasis Project. Is that included in the 1.3 billion of structural cost savings or is that above and beyond? And then just related to that, if that had been fully implemented in 2019, how much would that have contributed to pre-tax income?

Yes, it is included. It added more seats in some of the aircraft. And from an operational benefit, it will help out a lot because as we swap the aircraft, they will both be in that. So it is in that because we reduced the aircraft types, but it's included in that number. What it's going to do is benefit number 1, from a CASM perspective because we'll have more seats, and from a revenue perspective because we'll be able to sell more seats.

Yeah. Understood. Okay. Second question here. What is the aggregate wallet spend, say a fortune with 1,000 accounts in the Northeast that American can now access for the first time as a result of the Northeast Alliance. So accounts that really where you had no shot at winning, free the relationship with JetBlue versus now, you walk in, you sit down with the corporate travel managers. You can actually put together a competitive network solution and then just related to that potential aggregate spend, what would American's fair share and American JetBlue's fair share be of that?

Hey, Dan, this is Vasu. Thanks for the question. I appreciate what you're trying to get out of it, which is effectively how much more market can we access than what American could access on it's own. And while -- I don't have specific numbers in some cases, but we got to be a little bit careful in what we share about it. As we see it, in New York historically, we might have been at 25% player, but we were competing for something which was actually like 10% to 15% of the available business travel market at large, not just the corporate market. So in large part because we had a really great product in Heathrow or in the transcom markets, if we couldn't get you very effectively to Toronto, at some point customers, especially larger accounts or power travelers, business top customers, just stop flying us. Now as we see it, we have the best network between AA and JetBlue. We've come from a world where we have four trips a day JFK, San Francisco, one we're we'll have 12, 13, 14 trips a day where all of our transcom product is full flat. We've taken a 50-seat RJ out of New York altogether. So when you think about New York, it's a business travel market which is not 2 or 3 times larger than the next biggest market, but several orders of magnitude more than that and that's all out of the market that we get to compete for and compete where we see a New York who's [Indiscernible] instead of under-performing the system by 10% to 15%, can perform in line with the system.

Hey, Dan, I just wanted to go back and just to add one more point regarding the fleet harmonization project, which we're almost done with. We only have I think 60 of the 321s that are remaining and will be completed by the first quarter. Derek mentioned that in the 1.3 billion, so much of the savings in terms of actual commonality and what we can take out in terms of reduction of fleet side is the day of back rate, the airline more efficient. That's included in the 1.3 billion. What's not, though, is we are having seats. So, that has very, very low marginal cost. So growth from a 160 seats on [Indiscernible], and then on an average, adding a few seats to the 321 as well. That's benefits that will be seen in run rates going forward.

That actually was my question --

From a revenue perspective.

Yeah, the incremental revenue that you gave, that was actually my question, was that's what -- that's what I was trying to get at. But thanks for the time you guys.

Thanks Dan.

Our next question comes from the line of Stephen Trent with Citi. Your line is now open.

Good morning, gentlemen, and thanks for taking my question. I just had a quick one on looking at your investment. So you guys committed to invest in Jet Smart and Goal and South America. You of course have this tie-up with JetBlue in the United States. When you think about other international [Indiscernible] . Do you see any opportunities for the similar kinds of tie-ups, for example, outside of the Oneworld Alliance?

Hey, this is Vasu, Stephen. I can start on that one. Look, ultimately, what we wanted to do is to create the most comprehensive network for our customers and whether it is a codeshare, an investment, the joint venture, whatever it is, we don't see them in ends in themselves. Those are just simply means through which we can create something really comprehensive for our customers. In many parts of the world, we want to be able to do it all just organically with American Airlines [Indiscernible] that's not always possible from regulatory or other reasons. So based on that, we employ different mechanics, whether it is in an investment, a codeshare, a loyalty partnership, until it will change out there. But for us, the [Indiscernible] is creating this comprehensive global network and we see that. Whether it's -- we've seen the benefits of it for consumers in the Northeast and the West Coast. As we look at South America, really it has less to do with investments and more that the one thing we can't do for the South American customer is carry them within South America. So we are always on the lookout for partners that can help us do that and create more value for the customer. How we go in partnerships together is a second order issue.

I appreciate it, Vasu. And just one very quick follow-up. How are you guys thinking longer term about your pipeline of pilots and when you think about retirement in the next 5 to 7 years and what have you?

Stephen, I'll take that one. Our profession has never been a better time to get into it. And what I will tell you is we can -- we will attract people to the profession given the kind of starting salaries that we're offering right now. And ultimately, at what pilots top out at. So I do see this ultimately an economic issues that will be solved. You've seen us do some things recently with regional pilots to make sure that they stay in position and progress onto American Airlines and we will continue to monitor that over time, as we saw a few years back, this will be brought into balance simply based on economics. People will want to come into the profession.

Okay. I appreciate that. Thank you for the time.

Our next question comes from the line of Chris Delhopeles with Susquehanna. Your line is now open.

Thank you and thanks for taking my question. Good morning. So on headcount, how should we think about FTEs in 2022 and if possible 2023? Could you run your network at or above 2019 capacity on fewer FTEs relative to 2019?

Yeah. I think -- I mean, we have taken out a significant amount of headcount out of the Company that's part -- that's mostly what the $1.3 billion of cost reductions, permanent cost reductions are. As Doug alluded to, 500 of that is management headcounts, 600 of it is productivity at the other areas throughout the Company. So yes, we will run -- I don't have a number for the 2022 plan because we haven't put that together yet, but that is the significant portion of what that $1.3 billion worth of permanent cost reductions are, it's mostly in the headcount and the personnel side of things at American Airlines.

Okay and the second question on the corporate side. So you mentioned a full recovery by year-end 2022. Just curious with the mix of users is here. I know you mentioned industrial, healthcare and I think one other group, but are your surveys showing a mix similar to pre-pandemic travel or is it shifted and is your outlook contemplating the same type of travel, meaning both in user type and frequency? Thanks.

This is Vasu and I can help with that. Look, our -- we see you're exactly right. Certain industries and verticals are traveling more than others. We do anticipate there being a rebound across all of them because at this point, all industry verticals are improving. There are just different points in the improvement curve. More critically and more importantly to your question, what we see is that even in sectors where travel is less back, the rate of progress we're seeing is mirroring those sectors where travel is relatively more returned. So we do have some real confidence that indeed corporate travel is likely to come back. As Doug and Robert mentioned earlier in their remarks, there is an immense amount of pent up demand. And we find that once people start to travel, they continue to do so. Very importantly, though, for us and our system, we have a lot of -- a lot of our business style demand is small and medium-sized business, really across the Southeast and the Southwest and we're seeing on a traffic basis, that is very well recovered on the revenue basis. That will start to recover as people come back and have more flights, more frankly.

Hey, Vasu. I'll add this, Alison Taylor just held our corporate customer advisory board down in Miami. I was able to attend as well for a part of it, and that brings together our top 50 corporate customers and those that are responsible for procurement of travel at those companies. I'm really pleased to hear just over and over again about, look, we have to get back to the office. Once we get back to the office, travel is going to come. So it's not surprising that the industrials and healthcare pharmaceuticals are leading us right now. They're back in the office. They've got to take care of us and put food on the table. That's happening, what's going to come next is some of the other banking and financial services, entertainment, as those get back into the office in the start of the new year, they're going to come back to just as we're seeing in some of these other sectors.

Hey, Chris, it's Doug. Just being around just to support some of what Robert just told you. I talked about how in July we were up to 64% of our 2019 levels in terms of business revenue. There's a big difference between large companies, those that we have on corporate discount programs, and our small and medium business. In that 54%, the large corporates are 35% on a year-to-year basis, and the small and medium businesses at 83%. So [Indiscernible] people that are back at work are traveling. When the large corporates get back to work, they'll travel. It's less about sectors, more about people just getting comfortable, bringing people back to the office. Those companies that don't have large headquarters and large HR departments are out flying because they need to across all sectors. Those companies that are large organizations and need to worry about those things more aren't yet back. They were starting to come back. But they'll get up under the same ranges. That's where business wants to be.

Great color. Thank you.

Thanks.

Our next question comes from the line of Helane Becker with Cowen. Your line is now open.

Hi, everybody. I hope you are all doing well.

We are, Helane. How are you?

I'm okay. I guess I'll see you tomorrow night. By the way, congratulations.

Oh, thank you.

Here's my question really for Derek. Interest expense, I think in the third quarter was $476 million, I want to say. Can you just talk about debt pay down and the cadence of that and how it's going to look over the next couple of years in that context of you're going from 15 billion, I think you've said in the press release, $15 billion of debt paydown by 2025.

Yeah. Well, I can give you what our scheduled debt paydowns are over the next few years. So, we said we're going to pay down $4.4 billion this year. Next year is $2.5 billion, the year after that, I will just say it's around $3 billion to $3.5 billion each year as you go forward. So -- but we will -- but we do plan, just as I talked about on the call, we do plan on financing aircraft in this environment going forward. So the net debt will be a little bit different than that. So the 10 billion will come off, let's just So, call it 2 billion a year over the next 5 years. That will reduce that. What we do on the other 5, we had talked about 1 billion already went at -- in 2021, so we did the paydown of the spare parts loan. We also, because of the recovery, slowed a little bit. We're going to hold on to cash and hold on to cash where we're at today. Once we feel we're comfortable with that, I think we will quickly use the excess cash to pay off most of the remaining 4 billion. It just depends on where our cash balances. It depends on how it will grow over time. But I would expect it to be sooner than later, as long as the recovery happens, business comes back, and the earnings are there to do that. So, the prepayment would be upfront, the debt pay down over time, that $10 billion will be over gradually over time. I don't think we have any big -- huge debt payments. There's a $750 million one in 2022 that we have nothing huge going forward. So I wouldn't look at it that way is pretty ratably the 10 billion over the next four years. Then we would try to attack the other four billion as soon as we feel comfortable and have excess cash that we can take it down to that 10 to 12 billion. We're at 18 today. So we would most likely do it early, or as I said in the comments, we could use cash to pay for aircraft and just not add the debt instead of paying off any pre-payable debt. So that's the plan that we have today.

Okay. That's very helpful. Thank you. Then on the 787 I think those were going to be leased in aircraft from [Indiscernible] does the delays changed any of the financing arrangements for those aircraft?

No, it does not change the financing of the aircraft, still leased-in.

Okay. Perfect. Thank you.

Our next question comes from the line of Duane Pfennigwerth with Evercore ISI. Your line is now open.

Hey, good morning. Question for Doug. I thought it was interesting in the prepared comments that more capacity versus peers and more revenue versus peers was called out. Is that the main goal of the Company at this point, more revenue or do relative margins matter? To what extent is profitability a priority for the Board at all? Or does it not even come up in conversations given how high liquidity is? What is the Board trying to solve for?

For relative margins, Duane. We feel really good about that. The reason I talked so much about the absolute growth at this point in time is because we're all working to add back capacity and to get to where we can meet the demand [Indiscernible] . I'm really proud of what the team's done to get back more capacity than others, take care of more customers than others, and to do so, obviously safely and efficiently, and to do so in a way that [Indiscernible] pre-operation right now. Of course, that's not the goal of the Company. It's just [Indiscernible], the goal of the Company is to maximize shareholder value over the long term, and the way we'll do that is producing returns and what we feel very good about is our ability as we come out of this to improve our relative margins certainly versus, I think probably versus everybody, as you compare them back to 2019 or other years.

Just a quick housekeeping and I appreciate you taking the questions. Just looking into the fourth quarter, do you expect the operating cash burn to be larger than the 1.7 billion burn in 3Q? I'm not sure if you have the call, but can you speak to the daily cash burn estimate? Are we going to head back to there? Thanks for taking the questions.

We -- go ahead.

No, please.

No, were are not heading back there. The fourth quarter is the season -- seasonally, you do burn cash in the fourth quarter.

I hear you, but I go back through every fourth quarter since you guys merged, and there's no negative operating cash burn. Understand revenue is depressed, fuel's a little bit higher, but operating cash flow is typically positive in the fourth quarter.

Operating cash flow, but the seasonality does in profitable years has cash declining [Indiscernible] that operational cash flow will track with the earnings estimate that Derek gave.

Thank you for taking the questions.

Thank you, Duane.

Our next question comes from the line of Andrew Didora with Bank of America. Your line is now open.

Hi, good morning, everyone. So as American keeps ramping up capacity and maybe a little bit -- little bit quicker than your network peers and with your vaccine mandate upcoming, just curious, are you planning your network or staffing any differently into peak holiday season? How do you think about the operational risks around that?

Hey, Andrew, it's Robert. We're getting ready for the holiday season. We expect a lot of passengers. Tremendous pent up demand, especially as vaccinations take hold and infection rates decline and we're going to be ready. We have to get ready for the holidays always. This year, we're doing our best to make sure that we have right people in the right places at the right time. That's the effort and we're taking the appropriate precautions where necessary, but we're flying a full schedule as we go into the holidays and looking forward to it.

Hey, Andrew. This is Vasu. One important thing to note is to clarify on your question also, the absolute ASM production of American Airlines in any month in the queue in the fourth quarter is actually less than the absolute ASMs that we're producing in July. Right, so we're very much -- from where we have been being able to go and get the big pools of demand as that have been out there at geographies that are really favorable to us has really worked out but as things shaped up. We are very much managing the [Indiscernible] profitability of the airline. Just to clarify so that gets lost in the year-over-year versus 2019 comparisons.

That's a fair point. Thank you. Then just second, maybe to ask the fuel question a little bit differently. I think I know the answer to this, but over the past year, year plus, did you ever consider introducing a hedging policy and do you think that this is an option you could rethink going forward? Thanks.

Yeah. Andrew, [Indiscernible] we've been quite happy being unhedged now for however many years.

[Indiscernible]

I'm sorry, what?

2008.

2008 We stopped hedging and that feels right to us. What we find is -- what I said is over time the industry adjusts, and what generally happens is we end up paying a premium for the hedge without much benefit at all. So, I don't want to say we won't ever do it, but it's not something we began to look at [Indiscernible] We prefer actually, we think we have a regional economic hedge in terms of what happens with fuel prices and the economy as well. So obviously, we've come together and have us tell you not right now.

Got it. Thank you.

Our next question comes from the line of Mike Linenberg with Deutsche Bank. Your line is now open.

Good morning, everyone. Derek, you talked about the delayed 787 is providing or creating a bit of a CASM headwind in the fourth quarter. Can you just remind us how many airplanes -- how many incremental 787s were you supposed to have in 4Q and how many percentage points of headwind is that just roughly?

Well, it depends on when we were taking. But earlier, we were supposed to have all 13 in 2021. That schedule has changed weekly. If you go back to last quarter, we probably had 6 of them built into the schedule. It probably a point of ASMs that we had to take out of the schedule. That's really what's driving a lot of this. Then as I said, the regional, we went ahead and pull-down in ASMs from a regional perspective, just a pilot supportability, which we will -- which we're getting all under control right now. But both of those have caused a reduction in ASMs that we would have flown in the fourth quarter, primarily driven by the 788s.

Okay. Then just my second question, and this is either Doug or Robert. Can you be willing to share with us where you stand on vaccinations across your employee work group? Then just any thoughts on the testing, which it seems like every carrier is going to have exemption issues and they're going to have to test and we're hearing that costs are high, they're not, you don't have guidance from the government. Is it a meaningful cost headwind that we have to worry about or? Anything that you can share on that topic would be great. Thanks.

Hey, I'll start. It's Robert. Look, the vast majority of our team members are vaccinated, and we're working through the process. We set a November 24th deadline for vaccination or accommodation request to be provided. We don't expect anybody to leave American Airlines. Certainly, they're going to be out there helping us during the holiday. So no issues there. We don't know what exactly in -- a combination would look like for the minimal number of people that actually apply for that. But it's likely to be some combination of masking self-declaration and testing. And that testing, we don't, we don't know the details of. We're working through that. As time goes on, we'll be able to fill you in.

Yes. Thanks, Robert and Mike. I certainly wouldn't be [Indiscernible] costs in your forecast. So to the extent there will be testing going on, it will be for those who have chose they still have to be vaccinated [Indiscernible] religious or medical exemption that we are accommodating while there's still work. I don't suspect that'll be an extremely high percentage of the employees. I don't have [Indiscernible] that that's a material costs to test those individuals, [Indiscernible] standards once a week. I don't know where on that, we're working through the accommodation process with our unions, but yeah, [Indiscernible] issue I would do everything I could to try and let you don't have to worry about that piece. As to the -- again, just to follow-up, just to reinforce what Robert said. I think it was part a little bit of Andrew's questions. Certainly when this was first announced, I think there were concerns about what was going to mean for airlines to TSA and others. [Indiscernible] extremely comfortable with that. That was accurate to see yesterday the comments from the White House from [Indiscernible] and about how the goal of this is to get everybody vaccinated not to punish anyone and they're going to have people [Indiscernible] really just for medical exemptions, they'll be accommodated [Indiscernible] hear from all the airlines, we're all well-prepared to meet all federal mandates and meet all the customers that are coming to [Indiscernible] .

Very good. Thanks, guys.

Thanks, Mike.

Thank you. We will now take questions from the media. [Operator Instructions] Please stand by while we compile the Q&A roster. Our first question comes from the line of Alison Sider with Wall Street Journal. Your line is now open.

Hi, Ali.

Hi. I have a vaccine question. Just curious -- I know you talked a lot about the exceptions, but what sort of planning or strategizing you guys might be doing if it does end up being some portion of the workforce that just doesn't get vaccinated or has to be terminated or something like that. Is there a kind of a plan B or a backup plan for how you'd handle that?

Well, again, first off, we'll with what we know, we know which is again the vast majority of our employees are vaccinated, and we're seeing that rise every day as the mandates were put in place. So we're highly confident by the time we get to November [Indiscernible] when the demand comes in place that we're going to be down to a very small number of people if any that are either not vaccinated or don't have a valid medical or religious exemption. So I understand your -- I understand your question is whether or not that's true. But I -- first off, I don't think that's going to be the case and we know that based on the [Indiscernible] . But however -- again -- so that's why I think the answer is -- but even in the case that that happens, we'll continue to work with those employees that have, that have chosen to get to that point. Again, I think it's going to be a really small number. But whatever that number is, we'll continue to work to accommodate those employees and make sure that they continue -- they -- that are -- that we're working together. Again, as Jeff Sine suggested they'd be doing with government employees, we'll be doing the same with ours. We have flexibility, but I don't think we're going to need that.

Okay. I'll just add. We're working with the team and we're working with our labor unions as well to get everybody vaccinated right now. So you see that we continue to provide incentives for team members to get vaccinated turn in records of their cards. We're working with the entire team to collect that information, as we speak. Fortunately, every day, we see good signs that word is getting out and people are turning in vaccination status or accommodation request. As Doug said, we're really confident that we'll be in great shape as we come into the holidays.

Got it. I mean, your pilots have been saying that that will serve the whole debate and controversy is becoming a distraction and leading to some potential safety issues. Are you seeing that in your data at all?

Look, we have an obligation to make sure that we're focused on flying. So any type of distraction, whether its vaccine or anything else, we want to jump on. To that end, we're -- again, we're working closely with our labor units to make sure that we're on top of anything that is potentially a safety concern. But we're [Indiscernible] schedule of flying very well and flying it incredibly safely. We set very, very high standards, not just for the industry, but especially for American Airlines.

Our next question comes from the line of Leslie Josephs with CNBC. Your line is now open.

Hi everyone. I'm just trying to square this idea that you don't expect any employees to leave American Airlines, but this week you told them again that they could be terminated if they don't comply with the mandate, either getting vaccinated or the exemptions? Then, how come the exemption -- the mandate doesn't apply to your wholly-owned subsidiaries [Indiscernible] government contracts?

Thank you, Leslie. I just start, first off, we have an executive order and so there's not a lot of debate or argument. We're trying to find best ways to comply. So all our efforts are making sure that our team members get vaccinated. To that end, as we've said, we're seeing the kind of results that we want. We have no desires to see anybody leave American and through getting vaccinated, which we're making very available and easy for folks to get done. Or those -- the small numbers that apply for accommodations, we will continue to work with people to encourage them to make sure that they take care of themselves. We're working cooperatively with our labor unions as well, and we have different agreements that we have to follow in accordance with our collective [Indiscernible] agreements to make sure that we're doing everything possible to make sure that people stay with American and we're looking through that and we're committed to take care of our team.

Again, just a distinction. I think Leslie, between where early on in this process there was concern about not having enough people and where you're seeing everyone get now is, there was -- I think there was a period that that was at least somehow [Indiscernible] those who could not get vaccinated or chose to not get vaccinated, would be on unpaid leave or something like that [Indiscernible] that's what give us the comfort, we do know there will be some people on American Airlines who have a reason they can't get vaccinated, they will have exemptions. But if we have exemptions, we're going to work to accommodate them. They also can do their jobs and that's that I think if anything between a few weeks ago to now where you're hearing extreme comfort around our ability to deliver versus where we might have been when we first heard this. That's the distinction, and the exact same distinction. By the way as I said, that we heard yesterday from the administration about TSA and other agencies. That's what gives us a comfort. That's why we think we're not going to see anyone leaving American -- it's not like anyone's going to want to leave American because they can't get -- because either they just -- they choose not to get vaccinated or they don't have a religious or medical exemption. On the -- on our subsidiaries, just like every other airline, the regional carriers are not subject to the mandate. They'll -- they have to work through that themselves to see whether or not they deem themselves federal contractors. But to the extent they're not, they're not subject to the mandate. They will be subject to the OSHA requirement when it's effective for airline -- for companies that have 100 or more employees. At that point, they will need to respond accordingly. But there isn't. I certainly don't think, between American, Delta, United, none of the regional carriers than any of us use are working toward a vaccine mandate this way because they have concluded they don't have -- they're not covered by the mandate.

Okay. Then for the exemption, do you expect to approve all of them?

No, of course not, don't worry, no. Again, what I believe is -- what I really believe [Indiscernible] is going to be a small percent of the workforce. At most everyone will get vaccinated. But certainly there are always medical exemptions and to the extent people have valid medical exceptions, we're not going to put them on an unpaid leave and we going to make accommodations for them as we should sort of [Indiscernible] and for those that don't receive approval for those exemptions, we fully expect them to get vaccinated.

Got it. Thank you.

Thanks, Leslie.

Our next question comes from the line of David Koenig with Associated Press. Your line is now open.

Hey, David.

Hi. Good morning. Good morning, Doug. I have two follow-up questions, but I'll try and be quick. First, sticking with the vaccination theme, United and Delta have put numbers out there, and why can't you tell us how many or what percentage of your employees are vaccinated? Secondly, and this goes back to something that came up a couple of times on the analyst section about flying a fourth quarter schedule that's pretty close to 2019 levels and how you're going to do that with your current headcount. Why shouldn't passengers expect to see the same kind of disruptions that you had over the summer?

Look, David, I'll take that. Look, we have done a tremendous job of making sure that we're set to fire our schedules. As we said in our comments, we flew most reliable September in our Company's history and that's the kind of performance that you can expect from American going forward. We did a tremendous ramp up to get to where we were during the summer. By the way as Vasu mentioned in some of his comments, the schedule we're going to fly around the holidays is actually larger than what we had flown during the summer. All we've done since that time, has been able to add more resource to make sure our partners are better positioned and that we're better equipped to handle whatever may come our way. So we feel really confident on that point. In regard to --

And I would add to that Robert.

Okay.

David, hi. This is Derek, the hiring we're doing now is for the summer of next year. So we're very confident having enough resources to run Thanksgiving and Christmas. We already have those people onboard.

He's asking in the next year, though.

Yeah.

[Indiscernible] the structure we had at the end of June was purely us just not having as many parts for the train processes as we'd expected. We've rectified that issue, and we're going to make sure that we have -- as we expand, that we have the right number employees. That's not an issue at all. To answer your first question, yeah, I guess [Indiscernible] have released their numbers. Our number is still moving every day as more and more people are getting vaccinated. [Indiscernible] one of them put in place on a unilateral mandate for their teams so that -- if they're through with that. The other one put in place requirement. But if you are not vaccinated, you're going to pay more for your medical benefits. It's already in place. But I don't think any other airlines have talked about exactly where they are and probably for the same reasons, we haven't because we had a voluntary program in place, and now we have a mandate in place, and that number continues to grow. What we know is, by the time we get to November 24th, we're going to be where the others are, which is virtually everyone vaccinated. Those that aren't, will have valid medical or religious exemption because we'll be flying our airline, taking care of our customers.

Thank you. Our next question comes from the line of Dawn Gilbertson with USA TODAY. Your line is now open.

Hi. Good morning. Of course another vaccine mandate, holiday travel question. Specifically, Scott Kirby, which you no doubt aware of, yesterday had some pretty strong comments predicting a holiday travel meltdown for everyone, of course, but United. But I wondered, he's saying, even if, say you do have to go to testing for some of these people that he said, if there's a weather melt, if you think of weather meltdown is something where do you see as these people tests positive last minute and a slurry of last-minute flight cancellations, so ensure he is predicting, [Indiscernible] beware for people. How do you specifically respond to that? My second question is, who is approving these exemptions? Is that just the Company or is -- does the government play a role in that too? Thank you very much for any color.

Yes, Dawn. Again I [Indiscernible] discuss comments, but anyway, [Indiscernible] if that's what he says. It's not right, of course [Indiscernible] you know, we'll be well prepared for all the reason you [Indiscernible] . I'm highly confident that we are going to [Indiscernible] schedule and whatever the accommodation process is I expect, again, for a large percentage of the airline and certainly won't be process that will be cumbersome on the operation. So, we're still working with the accommodation process will be with our unions and there'll be some combinations of testing, and masks, and social distancing and things like that as it should be, had to make sure everyone is safe. But we do need to accommodate those who have valid medical order [Indiscernible] to exemptions. Again, I go back to at least the OSHA requirement is weekly testing. So I'm not saying it's where we'll end up, but I don't -- it's not going to certainly [Indiscernible] operational impact we anticipate having all the people [Indiscernible] when it first came out because we didn't have this kind of direction. We are not remotely concerned now. As to who approves the exemptions, I think that's the employer's duty to improve the exemptions.

In fact, we already have a process in place and have to deal with accommodation requests already.

[Indiscernible] because of visibility. I'm sorry. Robert, go ahead.

Yeah, that's it.

It's the same process, it's just bigger now.

Thank you very much.

Please go on.

Our next question comes from the line of Justin Bachman with Bloomberg. Your line is now open.

Thanks for the time today. I wanted to ask about the DOJ lawsuit regarding your relationship with JetBlue in the Northeast. Are there any discussions going on with the government about that lawsuit in terms of any type of concessions or changes to that agreement or is this a case where it's kind of all or nothing in your view?

That's what we [Indiscernible], we're going to on [Indiscernible] This is highly beneficial to consumers, and we're perplexed as to why they file this lawsuit and [Indiscernible]

Doug, did you say the discussions were ongoing at the time and they still are they're not going up?

[Indiscernible] they're not going up. [Indiscernible] are talking to lawyers. I don't know anything like that. But I can tell you for certain, the Company is not interested in sort of talks about settling this. We feel extremely good about our case. It gets better every day as we continue to expand and provide more service to customers.

Great. Thank you.

Our final question comes from the line of Kyle Arnold with Dallas Morning News. Your line is now open.

Hey. How are you adjusting your staffing levels at the same levels that you had done in previous years when you look forward to the holiday season? I know some other airlines have said that they essentially have to put more workers on the line and have more workers out there as they come out of this pandemic. How are you approaching staffing over the next couple of months?

I'll take that. We're going in for holidays just as we always do. We've done a remarkable job. I want to give a shout out to our team. You know, American Airlines in terms of real reliability, arriving on time and in completion factor, we're not at the top of the industry, but I'll tell you what we're beating our other network competitors. They're doing a real nice job of managing through the pandemic. So really pleased with that and that kind of attitude goes into how we look forward to the holidays. We'll be ready for and make sure that we have staff in place and make sure that customers have a very nice experience.

But you're not adding extra staff or adjusting staffing levels upward?

Just specific [Indiscernible] issue, you have to get ready for things like [Indiscernible], weight-finding in the airports, managing security, TSA security lines, load factors will be hire. So we always have a provision to make sure that we have staffing at the gates to accommodate. As Derek mentioned as well, we're doing hiring throughout the business, and that includes places like our reservations offices as well. All that is being bolstered from where we are today. Again, those kind of things that we would've done in the past we'll be ready for, and looking forward to the holidays.

Thanks, Robert.

This concludes today's question-and-answer session. I will now turn the call back to Mr. Doug Parker for closing remarks.

Thank you very much. We appreciate your interest. Any other question, please let Investor Relations or [Indiscernible] communications know. Thanks for your time.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.