All right, folks, moving right along. For any of you that were in the room for the United presentation, I was right. Mike Leskinen is the most recently seated CFO in the U.S., so I stand by what I thought for a moment was a mistake. In any event, the second most recently seated CFO is joining Robert Isom, the CEO, up here, and that's Devon May. Coming fresh off an investor day last week, I suspect some of these slides might look a bit familiar, at least to me and Mark and some of the folks in the room. Let me turn the podium, or actually, you guys can sit there, whatever you prefer. But, ladies and gentlemen, American Airlines, thank you very much.
Good to see you.
Thanks, Jamie, and good morning, everyone, everyone. I'll add that, Devon May, while somewhat new to his role, is incredibly seasoned, so,
I think we need to apply.
Right. We feel great about having Devon in charge of our financials at American. So good morning. As Jamie said, we are relatively fresh off an investor day. That was just last week; it seems like a month ago already. And I started off that presentation by saying we hadn't had an investor day in seven years, and I've been CEO now for two years. And so some of the questions we were getting is, well, you know, why an investor day now? And my simple answer was, well, we have something to talk about on a number of fronts. And so what I wanna do today is take you through why I feel great about American now and where we're headed, and certainly open it up to any questions as well that you might have.
So, of course, our safe harbor statement, read that quickly. So the title of the presentation that we had last week was Creating Shareholder Value, and it's a time for American, now we're finally through all the integration and pandemic and recovery from the pandemic, and American is really positioned well. And one of the things I wanted to make sure is, before we came out and started talking about, where we're headed, is that we had some confidence in where the market is, and demand is strong. As we take a look now and out into the future, everything we see from a bookings perspective is solid now, and I believe that it's sustainable.
Up to this point, we've been going through the gyrations of recovering from the pandemic, so I feel good about the demand environment, and that's a reason to be talking now. Another reason to be talking now is that American truly is a changed airline. We're different than we were prior to the pandemic, and I'll tell you why as we go through this. But it is namely that we've set commitments, and we've delivered on every single one of them, and as we look forward to the next set of commitments, we're gonna do the same. As well, I wanted to make sure that it's not just a story of, "Hey, demand's back," and, you know, American's recovered from the pandemic.
I also wanted to make sure that we had something to talk about for the future: why this is an opportune time to be an investor with American. So let me just start with this: demand for air travel. Not a lot of new news here, but and we have pulled these from the investor day deck. But look, we are at a point now where total industry revenues have certainly accelerated and come back and exceeded where we were in 2019. Probably haven't kept quite up with inflation, but we feel really good about where we stand overall. And so this slide just shows you the progression from in terms of total industry revenues. Next, we have seen since the pandemic an interesting shift in consumer behavior, that of more to experiences than to hard goods.
This bodes well for the travel industry because any aspect of hospitality, it starts with airline travel. I do think that this is a trend that we will see continue long into the future, and it bodes well for those of us that are in a business that, look, serves this need. You know, while our business plan doesn't depend on this, we're still not back to the historical relationship between GDP and airline industry revenues. As you take a look at the historical average, which was really built over 10 or 20 years, that was, you know, pretty much the standard in which we built our plans. We've recovered since the pandemic, but we're not all the way back.
The point I wanna bring out here is that every single basis point is worth $2.5 billion in industry revenue, and American Airlines is 25% of that. If we were to return, and this is is potential upside, to that historical relationship, there's great benefit to American Airlines in that. Now, against that demand backdrop that we feel really good about, and hopefully there's some additional upside, there's constraints to supply, and we're in a supply and demand business. And at the end of the day, the carriers that have the capacity that can deliver in a strong demand environment, I think, are gonna win. And those constraints in the business today are really around, you know, things that we're all really well aware of. It's the aircraft manufacturers haven't been able to really deliver on schedule.
Engine issues surround the industry and are gonna require a lot of maintenance expense going forward. Supply chains, as we've rebounded from the industry, it's, you know, certainly the OEMs in terms of airframes and engines, but it's actually prevalent throughout. And there's also been people shortages as well. So we're dealing with air traffic control shortages right now. We all know that, you know, the airlines have actually had to reduce the amount of traffic that we're putting into New York airspace today. I don't think that that's going to really work its way out in the short run. But it's not just shortages there. We've just gotten through a real pilot shortage from a mainline perspective. We've had regional pilot production issues.
And so there's also an issue with making sure that we have the people power to do the work. I bring these up not so much to say, you know, look, there's a problem out there. I really bring it up to say, "Hey, look, in a supply and demand business, I think that there are going to be continued restrictions on the supply side of the equation. It's gonna take some time to work this out." So we're in an environment where American, look, we've invested in our fleet. We feel really good about where we are. We're not dependent on any big aircraft orders going forward. And so in this environment where demand is returned and capacity is something that American has really delivered well on over the last couple of years, we feel really confident.
So that's the industry backdrop. Now, let me take you through American Airlines' story, at least over the last couple of years. So as we came through the pandemic, one of the things that, you know, we identified was a real opportunity for American to not just return to where we were in 2019, but actually to accelerate our progress and to really be best in the business on any number of fronts. But we knew that because of the damage caused during the pandemic, and we borrowed a lot of money, we had a lot of issues in terms of rebound. We knew that we had to prove ourselves to the marketplace.
So we started with a very focused plan, a plan back, as soon as I took over as CEO two years ago that was based on returning the airline to reliability, reestablishing profitability because we had actually lost a considerable amount of money during the pandemic, and then strengthening our balance sheet to address some of the borrowings that we had to take on during the pandemic as well. And that was the singular focus. Of course, we have really long-term goals, but that was the singular focus. And so how did we do on it? Well, American Airlines has never been the best at operating reliability, but we are today.
American Airlines canceled fewer flights on a percentage basis than any other airline, including, you know, the industry leader that had been kinda entrenched for, you know, more than, more than a decade. I feel really great about where we are, and it's a big deal to American because as we go forward and look at capacity production, this is really efficient. This is a really efficient way to deliver capacity and actually hang on to revenue. We're seeing right now a 1.5-point improvement in terms of, of delivering completion factor, year-over-year. You know, on top of that, we know that the best way to serve our customers, the way to, to, to move Net Promoter Scores, is by delivering on the most basic, which is reliability, getting people from, start to finish, with their bags, on time every time.
So we feel great about this. This is not something we were known for prior to the pandemic. We were going through a massive integration between U.S. Airways and American at the time. As we went through the pandemic, we all suffered with startup issues as we built back. For the last 18 months, certainly in the last year, American Airlines has been the best in the business at producing capacity for our customers. So great work on that front. In terms of profitability, same story. As I take a look at 2023 and producing now seven consecutive quarters of profitability, two straight years of profitability, the one thing I would ask you to note, though, that our profitability now is different than it was prior to the pandemic. And that is, it's different in that we're producing record-free cash flow, okay?
So it's great news for us, but ultimately, that bodes well for the future for American Airlines. And as a result of all that, we've been able to really pull down the debt that we had taken on during the pandemic. We set a goal end of 2021 to reduce total debt by $15 billion. We're 75% of the way to that goal. By the end of this year, we'll be 85%. And on top of that, look, we know that we're being noticed. So we've been upgraded by all three major credit rating agencies in 2023, a double-notch upgrade. That's great news for American, and as we go forward, really something to build on. So reliability, excellent work, profitability plus producing free cash flow, and a strengthened balance sheet.
So I'm here today telling you that we, American Airlines, is a changed airline in the sense that we put goals out there, we hit them. So the next point I wanted to drive home is not only do we see demand returning and strong and American well-positioned in that marketplace, not only are we delivering on our commitments, but I see opportunity upside for American as we go forward. And this is the opportunities ahead. So what we've laid out is five compelling value-creating drivers. It starts with fleet, and I'll note this because American Airlines, we've invested, I think, almost $30 billion prior to the pandemic in our fleet. We don't have to go through a major fleet order change. And that fleet, while we brought on new aircraft, we've also greatly simplified what we fly.
We've gone from 9 different fleet types that serve the mainline down to 4, greatly simplifying what we do and making it easier to operate. As well, we've adjusted all of the older aircraft; we've put them all, nearly all now, through a reconfiguration program that puts them in a common fashion as well and really serves the needs of our customers as well. We've done a nice job of adding premium seating, and I feel great about where we stand, going forward. I'll spend a little bit more time on this because I think within fleet, it's also one of the ways that American can distinguish themselves because we actually have untapped utilization within that fleet. I mentioned operational excellence, and this is just what we're gonna be known for.
American Airlines is gonna continue to really drive home that we operate more flights, complete more flights than anybody, good times or bad. We recover faster than anyone else. And we're putting technology to bear here. So everything that we do, we're putting a technology mindset first and one that really helps with optimizations overall. And over the long run, this is gonna be something that we build on. So from a network perspective, you know, there's two things that stand out here. One, we have these incredible Sunbelt hubs. It's where all the population is moving to. It's where economic activity within these regions is outpacing the rest of the country. American is very fortunate to have the hubs that we do in Phoenix, in DFW, in Charlotte, in Miami.
And of course, we have hubs in, you know, some of the largest business environments as well, in Chicago and New York and Philadelphia, as well. We feel great about our network, but there's an aspect here that is distinct for American as well. It's not just the Sunbelt hubs. It's that we create more origins and destinations, more city pairs than anyone else by a far, far margin. And the way that we do that is by tapping into our regional network. We're able to fly around the world and really serve, you know, everyone because of the way that we support our hubs, because of this number of cities that we connect.
We're uniquely benefited in that respect, and I look forward to that as being a real driver for American as we fully recover from the pandemic and as business travel, you know, fully comes back, as well. So we use that Sunbelt hub and regional flavor to really drive everything else that we do. You know, you'll see that our partners and we have the best partners in some of the biggest business destinations around the world in Tokyo and London Heathrow. They really value that network that we provide, and we're able to extend everything that we offer our customers on that. So building on this fleet, operational excellence in this network, I'll speak to next opportunity, which is our rewards program. And this is something that is an untapped asset.
We have one of the largest rewards programs in the world, the AAdvantage Program, obviously. But in this, we have a unique opportunity right now to create a real travel ecosystem, a travel rewards ecosystem where we've, in some sense, lagged some of our competitors. But this is an opportunity for us because right now, we have the opportunity to renegotiate our co-brand credit card deals. We have great relationships with Citi and Barclays, but we can be so much more. The underlying theme that we have is that life is better as an AAdvantage member. And we know that what we see from revenue generation today, that it truly is not just better for the customer, but it's better for American Airlines as well. And so you'll see a great push to expand, extend this rewards program and to offer compelling opportunities for our customers.
We're seeing the fruits of that right now. But as we go forward, you can bet that this is an area that we will continue to really ensure we deliver on. The last point here is reengineering the business. I mentioned that leading up to the pandemic, American Airlines was busy with the most complex merger in aviation history, pulling U.S. Airways and American together. We were just finishing that up as we got to the pandemic. We're finally at a point where we have our hands on the wheel and really can deliver. This is something that is facilitated by the good work that we've done in putting together new labor contracts with our pilots, our dispatchers, our agents. We look forward to getting deals done with our flight attendants as well.
But in this reengineering, I'll, I'll point out a few things. First is our fleet plan. Now, I, I mentioned that we have some utilization, and I'll, I'll cover that next. But look, we're at a point right now where, we're really, certain on our current aircraft deliveries now and in the future. If you have that basis, you can plan an airline to be incredibly efficient. So I feel great about this. And one of the things you-you'll notice is that we have, a delivery stream that, that really is in the 30-40 aircraft range as we go out into 2028, through 2028. And I know that there's a lot of questions about, "Hey, what's your exposure to Boeing?" And I'll just, point it out right away.
On the 737 MAX side, as we go through 2026 and go from 20 down to 10, those are MAX 8s. And we really don't have any exposure to the MAX 10 until we get out into 2028 and beyond. And of course, the 787s, this is just a modest delivery stream that will be very well-managed, I'm sure. So a lot of flexibility here. The point that I would underscore is that our aircraft CapEx is in the $3-$3.5 billion range, very manageable as we go through. And in terms of asset reengineering the business, asset utilization, where we have this untapped capacity, we still probably have in the range of 75-90 underutilized regional jets that we'll be bringing back up over the next year.
We have, because of the simplification effort that we've gone through, our mainline fleet will be able to get much more utilization out of it as we work forward. That's great news. It's the easiest way to bring forward capacity to the marketplace, and we feel great about that. As we grow, one of the benefits as well of putting all the work that we've done in is we're gonna do it much more productively with it much more efficiently. Productivity is going to grow. So some simple numbers here are easy numbers to understand here. Our growth rate for full-time employees is much less than the capacity growth. It hadn't been that way prior to the pandemic. It is now. As we look out into 2024 and beyond, we're gonna be able to produce mid-single-digit capacity with very little additional headcount.
And then one of the other areas that in terms of fleet utilization and also better utilizing our team, we also know that we have an opportunity with procurement. American Airlines, for you know, for its history, it operated with a decentralized procurement department. We're bringing that into a centralized fashion and more or less just modernizing. This is low-hanging fruit for us. We think that there's working capital opportunities here as well as considerable expense savings. And so from this, from all of this, we anticipate producing about $1 billion worth of savings as you build in all of the reengineering efforts. And so that leads me to our guidance. We've published this this morning. I'll state first, we feel really comfortable about demand. Demand is strong.
The only change to our guidance is really around fuel, which for us has increased in a fashion that we feel it's appropriate to note. We're in a position now where we're gonna deliver the capacity we said. We'll deliver the revenue we said. Our CASM-ex fuel, where we said, fuel's off a bit. And so that will put us towards the lower end of our range for first-quarter guidance. It does not change anything that we've said about the long-term future for American, including our 2024 estimates. We still anticipate producing $2 billion of free cash flow, EBITDA margins of 14% or 14%. And as I said, as we get towards the end of the year, 85% of the way on our total debt reduction plan.
As we take a look out into 2025 and 2026, we see margins growing. We see free cash flow growing. And that, as you sum it all up, bodes well for American, and it bodes well for those that invest in us. So with that, I'd like to thank you. And Jamie, welcome any questions that people have.
I think Mark's gonna kick us off.
It'd be, as I said, Devon's up here. He'll help as well.
Excellent.
A couple of things. Number one, on the industry revenue to GDP slide.
Yeah.
88 basis points. We're at 83 basis points, 5 basis points of upside to get back to the average. Is the average the goal, or do you think that industry revenue can exceed the historical average relative to GDP, given the importance of loyalty and so forth?
Right. So Mark, I'll start with this. First off, our plan, what I showed you in terms of 2024, 2025, and 2026 doesn't depend on that coming back. We haven't, you know, there's some modest improvement, but we haven't built that, you know, fully rebound into our plan. I think it's upside. And as you said, I do think that in terms of where we ultimately end up, I think a lot's gonna be driven based on consumer behavior. I'll start with the shift of spending to more experiences, as opposed to goods. I think that bodes well. And I think as time goes on, if there's one thing about the pandemic that it's taught us, people wanna travel. They don't like being cooped up, and they're gonna come back to our product.
So I feel really good about where we stand. We know that business travel's not all the way back yet. You know, look, I think that it bodes well for American overall.
One thing Jamie and I are intensely focused on is your push into new distribution channels.
Yes.
What you've done with your corporate sales force, which you've downsized more so than your competitors, and so how is that you referred to it a little bit at the investor day. We talked about it on the quarterly, our quarterly wrap-up as well 'cause it looks like so far, so good. We can't necessarily see anything in your numbers that show that's the but we're hearing from others that there may be some share shift. Obviously, I think the corporate travel world is all up in arms about what you're doing and pushing the ball forward. So just maybe you can talk a little bit about your experience with pursuing those new distribution channels and the strategy behind what you're doing with the corporate sales force.
Sure. So, thanks for that question. This is something, again, where I look at where American was prior to the pandemic and where we are now. And I'm really proud of us being aggressive and taking some bold moves. It's not without risk, obviously, but I'm very pleased with where we stand right now. There's nothing that I see, in terms of consumer or customer behavior that would suggest that we're not on the right path. So let me start with this, though, the rationale. We do better. Our customers do better when they have the opportunity to engage with us directly. Our customers do better. We do better. Everybody that we're associated with do better when we invest in modern retailing and servicing technology.
And for a long time, you know, we've had issues with getting our all of our intermediaries to a point where we can service and sell what we really think is best for our customers and ultimately for American Airlines. So we're pushing, and that push isn't gonna stop. And while you may have seen, you know, some changes to our sales force, I feel really good about what I see in terms of cost of sale. And I also feel really good about how we've been able to hang onto our share as well. So as we go forward, everybody's we want everybody to come with us. And, you know, whether it's the GDSs or whether it's the TMCs, there's a place at American where we can all do well.
But it takes investment in technology, and it's where the marketplace is gonna go anyway. Customers are going to demand being able to service, and to shop, with, you know, how they do everywhere else. And so as we push forward here, I see our customers, I see our partners all engaging in a way that's beneficial for us and ultimately American Airlines. Thanks.
So building on that, it's been interesting to me because, you know, American, historically, I would identify, you know, thinking back to the Crandall years, you know, as quite a maverick, you know, an innovator. So I certainly give you guys credit for thinking outside the box. It's nice to have the backdrop that allows you to, you know, to do that now. The market's response to investor day was, I don't know, lackluster, for lack of a better term. And it's only been a week. But, you know, where have you been getting pushback in the last week? Is NDC even part of the pushback? Is it just that the market has been trained to think, "Oh, regional jets bad," or, you know, something like that?
But you know, why, why, why the lack of embrace considering all the work that went into the event?
Right. Well, thanks, Jamie. And a lot of work did go into the event. But as we take a look forward, I think the real issue at hand is that we've gotta continue to deliver. And so two years while hitting, you know, just about every number and delivering on every front is something that, you know, I feel like is pretty good track record. I think what the market's demanding right now is prove it to us. 'Cause I know this, that when we produce margins like we've identified in 2024 and free cash flow like we have in 2024, 2025, and 2026, we're undervalued, plain and simple.
So, I think that there's just a disconnect between what we've laid out as a plan and what the marketplace is willing to accept right now. But we're in it for the long run. And whether it's, you know, how we've structured our airline to take advantage of the opportunities ahead of us, how we're responding to customer demand, I feel great about where we're headed. And against this backdrop of others struggling and trying to find their way and, you know, having big aircraft orders out there, we're not. And so that's, I think, a differentiating element. And as we take a look at, you know, the months ahead, we're gonna continue to deliver. And I think that is probably the biggest disconnect right now.
Devon, great progress on the balance sheet. Exceeded probably everyone's expectations. You and Meghan have done a fantastic job in that regard. I mean, one of the takeaways we had, and a couple of investors noticed it as well, when you look at the free cash flow guide over the long term, it doesn't necessarily foot with the long-term debt guide. In other words, if you meet the free cash flow guide, your debt guide looks a little conservative in that you should be able to pay down leverage more than that. So you've left some wiggle room in there to consider capital returns.
Yep.
You've probably got some people in the room here that are a little bit nervous. Is this the old American again? Are you guys gonna be buying back stock as soon as you get that balance sheet back to sort of a double B level? When you've got Delta and United here before you talking about getting to investment grade or closer to investment grade, you're shooting a little bit lower, or a little bit higher in terms of leverage. Maybe you could just sort of talk about the thought that went into when you were setting the long-term debt goals and the free cash flow goals, how you're sort of thinking about that wiggle room for share repurchases in a couple of years when you get there. I'm curious to hear what you think.
Yeah. We haven't made any calls on exactly how we're gonna allocate our capital going forward other than to say, through the end of 2025, all of our free cash flow is going towards the balance sheet. And right now, we have this target out there where we are going to reduce total debt by $15 billion from our peak levels. We feel really good about achieving that. And that's where the focus is right now. Beyond 2025, we did put out a further debt reduction number, effectively another $4 billion of debt reduction. Taking total debt down to $35 billion, net debt would then be in the high 20s, net debt to EBITDA inside of three times. All of those, we feel really good about. We've talked in detail about our goal of a double B credit rating. We'll see what happens beyond that point. But you're right.
It does give us some room to decide how we wanna allocate capital. That may be further debt reduction. It may be something else. I look forward to having those conversations. But for the next couple of years anyways, we are totally focused on reducing total debt, and achieving our $15 billion target.
Questions from the room?
I just have, well, you wanna take?
You talked about a little bit at investor day the opportunity with renegotiating with your credit card partners that are underway and so forth. So when we think about how to benchmark where you stand versus if we wanna say Delta's the leader with American Express, you've got United was just here with Chase and so forth. You know, is there a way to quantify that opportunity? And just to clarify what was said at investor day and sort of level set sort of where you're headed with those credit card arrangements?
Well, let me start, which is just first. Credit card deals and the Advantage program just integral part of American Airlines. It's a great way to really deliver benefits and sell seats. And so, you know, I'll start with that. And in terms of comparisons versus, you know, OAs, you know, we feel that we're at a considerable disadvantage, where we're at, versus Delta today. And I'll leave it at that, Devon, if you wanna put, you know, a finer point to it. But I think it's a tremendous opportunity for American going forward.
And t.
That's in your margin guide, though. The presumed step up in loyalty economics is envisioned as part of the.
Yeah. I would just say if we're able to completely close the gap that we have, I think we would find ourselves at the higher end of our margin guide.
Yes.
Just timing on that, just to clarify as well, what the where we are in that process. Is that something you expect this year to have new agreements in place with both partners, or?
We're working hard right now. It's, as I said, it's a tremendous opportunity, and it's something that we're very focused on. And fortunately, I know our partners are as well.
Last question. Anything on the regulatory front that gives you pause? And I'm not thinking so much, you know, regulatory overview at, you know, Boeing and what have you. But, you know, some of the narrative on, you know, credit card legislation, you know, that sort of thing. And obviously, consolidation doesn't matter to you guys at the moment. But anything on the regulatory front that causes you any concern?
Well, we are a highly regulated business and one that I feel good about how we work with our regulators. So I'd start on a couple of fronts. Of course that, you know, we're focused on Credit Card Competition Act and, you know, potential impact. And we know that we deliver great value to our customers. And so we've been, you know, advocates of making sure that we, you know, protect customers' rights to rewards programs. So we've been vocal on that front. I'll say that as we look forward as an industry, I think that investment within the FAA is going to be, you know, a real driving factor consideration that we all have to take into account.
It will be great to get to a point where we are able to plan for the long run, because much as, as I've said, that planning the airline over the next five years gets a lot easier when you know the kind of fleet you have and the kind of investment capability you have. The FAA needs that same type of mindset. Administrator Whitaker has been a wonderful addition. I've spoken to Secretary Buttigieg about where we're headed overall. But we need, as an industry, we need to drive investment. I look forward to being able to be a voice to that going forward. So thanks, Jamie.
Thanks, Jeremy.
Thanks, everybody. Appreciate the chance to talk about American. Take care.