American Airlines Group, Inc. · NASDAQ:AAL
American Airlines — Bank of America Merrill Lynch 2017 Transportation Conference
25 slides from American Airlines's conference presentation, May 18, 2017
Slide 1: Bank of America Merrill Lynch 2017 Transportation Conference
Bank of America Merrill Lynch 2017 Transportation Conference Derek Kerr Chief Financial Officer American Airlines Group Inc. May 18, 2017 Exhibit 99.1
Slide 2: Cautionary Statement Regarding Forward-Looking Statements
Cautionary Statement Regarding Forward-Looking Statements This document includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as “may,” “will,” “expect,” “intend,” “anticipate,”
Slide 3: Highlights of the First Quarter 2017
2 percent total revenue growth TRASM up 3.1 percent Pre-tax profit* of $491 million Pre-tax margin* of 5.1 percent Highlights of the First Quarter 2017 *Pre-tax profit and margin exclude net special items. Please refer to the Company’s GAAP to Non-GAAP reconciliation in the appendix. Commercial Init
Slide 4: Overview
Overview We are making significant investments in our team and product And it’s working Operational improvement Product enhancement Revenue gap narrowing The cost increases are moderating There are additional improvements on the horizon
Slide 5: Investing in Our Team
Investing in Our Team 10,000 additional team members 38% average pay rate increase per team member Unilateral implementation of profit sharing Elevate the Experience customer service training New HR team member service center Two positive space tickets for ATW Airline of the Year Best-in-class mater
Slide 6: Unprecedented Product Investment
Unprecedented Product Investment 2014 2015 2016 2017E $22.9 Billion Source: SEC filings and other company guidance
Slide 7: Product Investment: New Aircraft
Product Investment: New Aircraft 2017 2018 2019 Beyond 2019 A320 Family / Neo 20 - 25 75 A350-900 - - - 22 B737-800 / Max 24 16 20 60 B787 Family 13 6 2 - Mainline Total 57 22 47 157 E175 16 - - - Regional Total 16 - - - Airline Total 73 22 47 157 Widebody deferrals will reduce 2018 capex by $500 mi
Slide 8: Product Investment: New Aircraft
Product Investment: New Aircraft By the end of 2017, we will have inducted 399 new aircraft into the fleet since the merger, while retiring 391 older aircraft – giving us the youngest mainline fleet among our peers
Slide 9: Investing In Our Operation
Investing In Our Operation Many large operational initiatives are now complete or nearing completion PSS Cut-Over GSE Refresh Programs Operational Staffing Increases New IOC FOS Integration Hub Re-Banking MBR Improvement Initiatives New Simulators
Slide 10: Investing in Our Operation: New Technology
Coming summer 2017… Investing in Our Operation: New Technology Dynamic Reaccom Notify All Proactive Bag Notification
Slide 11: Investing in Our Facilities and Infrastructure
Investing in Our Facilities and Infrastructure We have invested in a large number of projects to improve much of our real estate Employee Support Space HDQ 1 & 2 Refurbishment Data Network Refresh Disaster Recovery Initiatives PHX Restack & Refurbishment Lounges and holdroom refurbishments
Slide 12: Product Investment: Better Customer Experience
Free Entertainment Facility Improvements Improved Clubs and Upgraded Seats Product Investment: Better Customer Experience We are making a number of changes to improve the customer experience
Slide 13: Product Investment: China Southern
Product Investment: China Southern The investment in China Southern is expected to give American customers access to 70 destinations in China Source: Diio Mi schedule data Shanghai Beijing ORD DFW ORD DFW LAX AA routes to China CZ domestic routes from PEK and PVG
Slide 14: Investing in Revenue Initiatives
Basic economy was launched in February Initial rollout of 10 markets for travel in March Second rollout to an additional eight markets in May Performing in line with expectations – 50 percent of customers given a choice opt for a main cabin ticket Expect to have it system wide by the end of the year
Slide 15: Premium Economy
Premium Economy Customers started flying the product on May 4th Over 5,000 tickets sold so far with an average upsell of over $350 Investing in Revenue Initiatives B77W (R) B772 (R) A332 (R) B788 (R) B787-9 Premium Economy Schedule* 2Q 3Q17 4Q17 1Q18 2Q18 3Q18 * (R) requires aircraft retrofit
Slide 16: Investing in Revenue Initiatives
New revenue management system New inventory system and optimizer in 4Q 2016 Significant benefits particularly in the premium cabin in the first quarter Adjusting the schedule to optimize connecting flows Revamped sales operation SVP of Global Sales appointed in 3Q 2016 Over 100 new sales people to b
Slide 17: Operational Performance Improving
Operational Performance Improving 17
Slide 18: Revenue Trends Are Encouraging
Revenue Trends Are Encouraging American was the first network airline to return to positive TRASM and is expected to outperform in 2Q and the rest of 2017 Source: Company reports. 2Q17 data is based on company guidance for AAL and LUV and analyst estimates for UAL and DAL. 3Q16 4Q16 1Q17 2Q17E
Slide 19: CASM Growth is Slowing
Costs have been elevated in recent quarters, primarily due to rate increases given to our team members This impact will lessen throughout the year and we anticipate that consolidated CASM will be less than 2 percent* in both 2018 and 2019 CASM Growth is Slowing *Excludes net special items. Please re
Slide 20: Returning Value To Shareholders
Returning Value To Shareholders 34% Reduction After: Unprecedented investment in product, team, operation, automation, etc. Elimination of high-cost debt Ensuring industry-leading cash balances American returns capital to shareholders Over $9.5 billion of share repurchases since 3Q 2014 Paid over $6
Slide 21: Conclusion
Conclusion American has continued to make great progress during the first quarter of 2017 Pre-tax profit of $491 million Launch of basic and premium economy $200 million pending investment in China Southern Airlines But we still have significant improvements ahead Complete outstanding integration it
Slide 22: Appendix
Appendix
Slide 23: GAAP to non-GAAP Reconciliation
GAAP to non-GAAP Reconciliation For additional detail regarding special items, see the Company’s SEC Form 8-K issued April 27, 2017
Slide 24: GAAP to non-GAAP Reconciliation
GAAP to non-GAAP Reconciliation For additional detail regarding special items, see the Company’s SEC Form 8-K issued April 27, 2017
Slide 25: Questions?
Questions?
American Airlines Group — Bank of America Merrill Lynch 2017 Transportation Conference on 6ix