American Airlines Group Inc. (AAL) Earnings Call Transcript & Summary

Okay. Moving right along. I'm going to struggle a little bit with this introduction of Doug Parker. I was joking. I should have brought down an aircraft model or something to present him with. I haven't kept very close notes through the years. But I believe Doug is the CEO that has been most consistently presenting at this conference. He is widely viewed as the architect or pioneer of post-September 11th industry consolidation. In fact, and you may not remember this, Doug, but it was 10 years ago today that you and your leadership first met with the APA in this building to conceptualize the possible American merger. And of course, it was a year or 2 or maybe 3 after that, that the leap of faith presentation was afforded. Berkshire Hathaway was in the audience at the time, unbeknownst to me. I'm sincerely going to miss welcoming you to this stage, this being the last time that I can introduce Doug Parker, American's outgoing CEO. So thank you. And joined by CFO, Derek Kerr, who thankfully is staying. So keep coming to the conference. But Doug, I really, really had a good time working with you.

Thanks.

I think I may feel differently. I still have it -- inside good.

Thank you, Jamie, very much. I appreciate that. That's very kind. Yes. So yes, this is -- I'm retiring as of March 31, so I've got like 16 days left. But I do want to come do this. As Jamie said, I've -- I stopped doing these a good bit ago, but I always like to come to this one, I enjoy -- there. It's one that I've always done. And Jamie, you've been great. We really appreciate the relationship and the partnership. So -- but look, since it is my last one, it creates an interesting dynamic because I'm not going to be here 16 weeks from now -- or 16 days from now, so I'm not responsible for the results after the first quarter. So it doesn't seem like I should be talking about any forecast in the near term. So I'm not going to -- instead, it provides a really nice opportunity though for me to talk about what things I like to talk about. And that's about -- the long-term status of our industry, where I think we are now, where I think we're going to be long term from a high-level perspective, that's what I want to talk about. Now before I do that, Derek has asked me to talk a little bit about the guidance we see this morning, which I can do because it's all first quarter guidance, so it is my responsibility. We did release this morning, if you hadn't seen yet, an 8-K. But as our revenues much improved versus where we thought we're going to be, we're going to be at 83% of 2019 revenues versus a guidance of down 78% or something. So nicely improved revenues. It's on a lower production of ASMs, largely due to storms in the Dallas/Fort Worth are and throughout the country in February that hit us. So ASMs are lower. That drives our CASM up a little bit. Ex fuel, fuel, of course, is higher, but you add all those things up. Certainly, if you use the midpoint of the range, the revenues more than offset the higher fuel price and the results should be, again, if you're at the midpoint of those higher earnings estimates. And nicely, also our cash is quite strong we think. We ended the quarter at 15 -- we will end the quarter with over $15 billion of cash. That's a good bit higher than we anticipated, and it's about $1 billion higher than the industry analyst average for American for the end of the first quarter. So we are we're pleased with those results. So now then, with that said, that out of the way, let me talk about what I want to talk about. I want to talk to you today about a Bull Case for U.S. Airlines, which I recognize most people probably aren't talking about right now. But it's what I believe, I honestly believe that right now is a really great time for people to be buying airlines, certainly if you're willing to hold for some period of time. That period of time, I know is a question. We can talk about that. But this is -- look, I think I have some credibility on this point. Back in 2009, I never disclosed this because I didn't have to, but I was CEO of U.S. Airways. I looked at the valuation of the airline industry and thought this just doesn't make any sense. There's no -- maybe one of these stocks should be this low, but all of them shouldn't be. The industry is worth more than this. We will be worth more than this over time. So I went and bought with a reasonable amount of my net worth at the time, a lot of other airlines stocks. I told my Board. I know this is strange, but I actually think it's going to help me run U.S. Airways better. I'm betting on the industry. That's what we need. So I am buying other airline stocks. If I buy a share of American, I got to disclose it. If I buy a share or sell a share of other airlines, I'll disclose it. So this wasn't disclosed. I'm telling you now I did it. In 2009, I told my Board I was doing it. And the result was -- I have to go back and look but I think I mean it had tripled over the course of a couple of years because, of course, the industry was worth a lot more than that. And this feels like that time. This feels a lot like that time today. In total, the industry is so undervalued versus what we're going to produce for cash flows, and it just seems like a time that you can't go wrong buying airlines. That's my view. So let me tell you why. First, 1 thing I want to tell you is, I know this is going to seem like, okay, here's another one of these presentations where they're saying, okay, it's different this time. My thesis is not as different this time, my thesis is, it's been different for a long time. But all that changed is a global pandemic that wiped out industry revenues. And once the effects of the pandemic are gone, what you will see is an industry that has gotten stronger, and there was already a strong and well-functioning industry. So that's it. The industry is structurally sound. What changed was a global pandemic. During the pandemic, our industry has gotten more structurally sound. So when the effects of the pandemic disappear, what will reappear is an even stronger airline industry than before. So first point. This is GDP -- airline industry revenues as a percentage of GDP back in 2010. And incredibly, in an industry that has a huge volatility, a very steady number, at least from 2010 to 2019, lowest, 0.95%, highest, 0.102%, 0.101% -- 0.102%, I'm sorry. Average is 0.98%. We are about 1% of U.S. GDP in any given year on a pretty steady basis. We're a cyclical business. When the economy goes up, our revenues go up. When the economy is down, our revenues go down. We end up being about 1%. Now in fairness, if we went back and put a recession on here, we end up going down in -- more in bad years, but not -- anyways, into like 0.9% or something. So that's what the industry is. We run about 1% of GDP. Until this, until this cataclysmic shock that took us down to 0.39% in 2020. And now we're holding at 0.58%, we held in 2021. Now that gap of 0.58%, first off, is not all the industry revenues falling, of course, because the economy is good. The industry revenues themselves would take us up to 0.89%. But the economy -- but GDP has grown from the 2019 to year-end 2021 about 11%. So that's the other point. And I think an important point to make. We all keep talking about 2019. What if we can we get back to 2019. 2019 is not where we should be. We should be at 2019 plus 11%. That's what the natural level of demand is if it's not suppressed, if it's not constrained by either fear or constraints on travel that I'll talk about. So that's the question, how do we get back to 0.98%? And when do we get back to 0.98%? So anyway, my view is, can we get back to 0.98%? Absolutely. I'll talk about that. I recognize there are some views that this -- something has fundamentally changed in the business, primarily business travel. And that it may not get back to 0.98%. I don't believe that's true. I'll tell you why. But I would point out that even if that is true, there's a huge amount of growth there, even if it happens to be true to some small extent. And then as to when, my answer to that is, it will happen when the causes of the disconnect don't exist anymore. When whatever caused that to happen goes away, this will return. That's the only thing suppressing it, is the causes themselves. So what are those? And where are we? The easiest way for me explain this to you is to tell you, is to talk about our business in 4 different buckets: domestic leisure; short-haul international; domestic business; and long-haul international. See at the bottom about what those comprise in terms of American's revenues anyway. Rounded numbers: domestic leisure, about 40% of our business; short-haul international -- short-haul international, by the way, is largely leisure business. This is international travel to places like Mexico and to the Caribbean, that is largely leisure based. It's about 10% of our revenues. Domestic business, about 30%. And then long-haul international, trans-oceanic international for the most part, 20%. So as you go across these, what you see is, as constraints have fallen, demand is picking up just fine. So domestic leisure, 40% of our business. There are no real constraints on domestic leisure, as we all know. And the demand is higher than it has ever been. I am certain you will hear from other airlines today all sorts of fun facts to tell you how strong demand is and how strong bookings are. I'll give you mine. It's this. Actually, Jamie put out a report last week that hopefully you saw that talked about how the revenues booked per day for airlines was actually higher one day last week for the total industry than it ever was in 2019. Now that's an interesting number. And as Jamie pointed out, it doesn't -- let's be sure we describe what it is. It's just people buying tickets on one day. We don't know how long they're buying them over. It could be pent-up demand, et cetera. But it's an interesting point, nonetheless. I know I can tell you as an American, last week, we didn't just have our record day. We had 3 days that were the best highest days ever. Two of them were 15% higher than any day we've ever had. The bookings right now are incredibly strong. And again, I'm careful -- careful about the number that I just explain it right. It's just how many people bought tickets that day. But we have more people buying tickets. 15% higher even though we have less inventory, even though we don't have international travel, even though we have less business travel, 15% higher revenue. That just says, if nothing else, demand for travel is really strong. And that I believe. And we know it. And we see it where it's not constrained. Unconstrained demand is resulting in really strong demand right now, given the economy where it is. Same for short-haul international. Some restrictions there, of course, if you return from Mexico or an island that's not a U.S. territory, you need to take a COVID test within 48 hours. But the resorts help with that, for the most part, that travel is just as strong. Where it starts to fall off? Domestic business. Business, of course, hasn't come back as fast, even though in the United States, again, those constraints don't exist. But the constraint for business travel isn't a fear of COVID. The constraint for business travel is people not being back in offices. People not traveling or people not being back together again yet. But it's happening. And on this, the data point I'll give you is this, and again a number I want to be sharing -- describe right. We like to look -- at American something we call held revenue. That is at any point in time, how much of that month's revenue is held. So for example, it's March 15 today, we look at March 15, March's revenue that is actually booked for the month of March. And we've held it versus the same time -- versus a snapshot this time last month. And so it's not a forecast. It's what we're actually holding. It's a pretty good indicator where we're going to end up the month, certainly see it further along in the month. So that number, that held revenue number in November and December averaged about 40% of 2019. In January and February, it fell to about 30%. In March, it's 59%. April was early. But April, same data, 66%. Business travel is coming back. And it's coming back as people are returning to offices, as people are needing to get back on the road. I can't tell you how many people I've talked to that said, I just took my first business trip. And that means there are a lot of people who still haven't taken theirs. And that means there are a lot of people who are about to take their second. It's coming back. It is coming back rapidly. Again, I can't -- I don't know how to tell you how far it's going to go. I can't tell you it's going to go all way back to 100% just yet. I have views on that, which I'll talk about in a minute. But it absolutely positively is starting to come back. And that's a big part of what's in this book in those -- in that booked revenue number I talked about. So that leaves long-haul international, which has real constraints. One, it's a long way. You got to book -- people generally book it long in advance. There are real restrictions. It's confusing. All countries have different plans in place. I can go on a long time about what might happen over time. My best data point is this. Yesterday, the U.K. said that as of Friday, March 18, all COVID-19 travel restrictions will be lifted. The U.K. did this yesterday. And they said it's going to happen on Friday. That's where everyone's going to be eventually. I don't know when, but that's where everyone is going to be. That's the right answer over time. And once those restrictions are gone, once we all can travel internationally freely, just like we can today to the U.K. or -- as we can on Friday anyway, as we can now to the U.K. on Friday, this number will come back, too. It's being artificially restrained by restrictions on travel that are put in place that are suppressing demand, that naturally wants to fly. There is huge pent-up demand for international travel. As these markets open up, the demand -- the sales go up the next day. So that's what I think. When will all this happen? When will all this be gone? When will every country say it's okay to travel without COVID restrictions? I don't know the answer to that. When -- and there will be a lag, of course. It's not going to be this summer. If the U.K. announces that as of Friday, you can fly there. We still don't have bookings as high to the U.K. this summer as we did in 2019 because people have already forgone those plans. But I certainly believe it will be gone by year-end, I don't know why by the end of this year, the month of December can't be a 0.98% month. All these restrictions will be gone by then. And demand should be back. It's being artificially restrained. As the restraints go away, demand should come back. So we shall see. Again, that's -- that I know is a big question. That was a big question for all of you. But I would just suggest that when you're trying to forecast that, the thing to forecast is when do the constraints fall off? And what kind of lag is there behind that? I don't think the lag is very long, frankly. I think it's months, a few months between restrictions being lifted and demand being all the way back. That's certainly what's happened in domestic. It certainly what's happened to domestic. It's what's happening right now with business. It doesn't take long for it to come back. Okay. Another point. Now look, I would warrant and what I said is a long-term argument. This is a short-term point, but it's somewhat important. In the short term, in the near term, -- and again, I don't know what's short term for you all. That was short term for me. Over the next year, industry constraint -- industry capacity is somewhat constrained. And that's going to help us with this ramp-up. So again, this is -- in the long term, we're going to get all those corrected. But in the short term, it's worth noting that, one, we don't have as many airplanes as we want. We at American have 14 fewer 787s, and we want to be flying this. We're not happy about that. But it's similar for other airlines as the manufacturers are having trouble getting aircraft either certified or delivered. We all find ourselves with fewer airplanes. I think we all find ourselves with fewer airplanes than we would have liked. On top of that, there is a shortage of pilots at regional airlines. We have no problem getting pilots at American Airlines, of course. But we tend to hire them from regional carriers. And as we've had a lot of retirements over the last couple of years, as have the other majors, we need more pilots. And as we grow, we need more pilots. And we are depleting the ranks faster than -- of the regionals faster than they can get new hires ramped back up. So that's another constraint that is going to -- again, I mentioned it again because both those -- neither of those things is long term. But they will as we -- to the extent you're concerned about the time getting us from where we are today, whatever that number was, 0.58%, up to 0.98%, that's going to help as we run through the next 12 months. So this next point is, I think, really important. And it's -- as we have gone through this period, all airlines have used the pandemic to become more efficient. I can't speak for every other airlines. They will speak for themselves today. But I am certain, every one of them will tell you that they have used this period to get themselves more efficient. We all had this rather unique opportunity to almost shut down airlines and then only add back what makes sense. And as you're adding back, putting in place new technology that makes more sense. So for American, which is the one I can speak to, obviously, the best by far, we have $1.3 billion of such efficiencies. $1.3 billion that we defined like this. We said we want -- if we want to go back and fly 2019 again and produce the same amount of revenue, same ASMs, how much lower would our expenses be? We believe they'd be $1.3 billion lower. It's real. $500 million of that's management. We're running the airline now with $500 million less in management than we ran in 2019. A lot of it is the fact that we can produce those same ASMs with 10% fewer aircraft. Is that right, Derek?

Yes.

With 10% fewer airplanes, larger airplanes. A simple -- a harmonization of the fleet that has us being able to produce the same amount of ASMs with fewer aircraft. So that's real. That's where we've gotten stronger through this. And as we come out of this, you'll see the industry stronger. Another point I'd like to make is the structure of this industry, and this is to my long-term point, is so much different than the last time we went through something like this. This is 2007, every airline that comprised more than 2% of the ASMs of the U.S. airlines on the left in 2017, on the right, 2019. What you see is in -- I'm sorry, 2007. In 2007, what you see right before we went into the Great Recession, we had 6 network airlines, 6 airlines trying to do the same thing, connect people around the globe. None of them strong enough to do it well enough. And it was a flawed structure. It was a structure that couldn't provide the utility customers wanted and resulted in these incredible losses during really difficult times. What we have now is 3 network airlines, incredibly, intensely competitive structure. Still obviously, given what's going on with our financials, this is an intensely competitive business. But the network carrier is much better prepared to do what we're supposed to do, which is compete against each other in -- for customers to fly anywhere around the globe and have the utility to do -- and provide that utility that none of the 6 individually could have done. And then what you see is the small -- either low cost or smaller hub-and-spoke airlines have picked up share. And they've continued to grow as well. But this is an industry that's competitive, that's structurally sound, 3 network airlines providing global utility and choice to consumers that we didn't have when we went through these things in the past. Next, labor. We get a lot of questions on our business about what's going on with labor. And I always fear, I -- investors telling us, we fear investing in airlines because you seem to always have labor problem. Fair enough. A couple of points I'd offer on that. First, and I think really importantly, is what we did together with our labor unions over the last couple of years. We, management and labor, worked hand in hand to get past the Payroll Support Program, which provided $54 billion of support for us to pay our team to keep doing their jobs so that we would be here when the -- when people -- when demand came back. That was no small feat. Other industries didn't accomplish the same thing because they didn't have the same force we had. We had the management teams working with labor on behalf of labor, on behalf of our team, fighting not just to go get loans to keep us solvent, but fighting to go get pay for our team to keep them in place. And that was really, really a great time. We have a couple of our APA team members in the room today. Thank you, gentlemen, for all you did to help with that. Thanks to all the unions that have helped with that. Look, maybe that was a one-time event. I sure hope not. What it showed is what we've all known a long time, is that when we work together, we get so much more done than we're at odds with each other. Now look, I know that as we go forward though, there will still be stops and starts. Negotiations in particular tend to result in angst between labor and management, at least in our business. The second point I want to make though is, on the negotiations, at least of my view, that I think they should not at least have the same level of angst around it that they had in the past. First, by far, the most difficult labor negotiations are what we call joint collective bargaining agreements. They've been happening a lot in our business over the last several years. That's when you take 2 airlines, put them together, and you've got to take 2 contracts and put them together. That's really hard. They're very different. They have very -- and any changes to either -- they have to get to be one so there have to be changes to both sides. And those are really difficult to get -- the union leadership or the members to understand. So -- but those are done at least for the network carriers. We're not going to have any more joint collective bargaining agreements. The other point I'd make is this, what this chart shows, which is we've gotten to the point, and again, I know some of our unions will take exception to how close we may be to other carriers' contracts. But certainly, on pay rates, these contracts are now quite similar to each other. That hasn't been the case in a lot -- many times in the past. But at least at the 3 network airlines, here, you see pilots, flight attendants, mechanic pay rates, they're all relatively similar. Whoever signs the next contract will go higher than the other 2. And the other 2 will then need to go up near those levels or to those levels or a little higher. That's what we call pattern bargaining. That's what other industries have. It's -- by no means am I suggesting it'll just happen. You won't hear about contract negotiations. But it should -- the expectations should be more aligned around these types of issues. And as a result, I think you'll see less anxiety around labor contracts. For example, you can see, by the way, American's mechanics rates are higher than Delta and American -- and United because we signed our mechanic contract in February 2020. We signed one last. So they will need to catch up the next time. That's what I believe will happen as we go through these contracts. Again, not trying to be pollyannish in pretending like we're all holding hands together in this, but I do believe that this is a change. And the joint collective bargaining agreement is a change. And those things, I think, result. And most importantly, the success we've had over the last couple of years I hope will result in management and labor working better together and working for each other and management teams who I do believe want to take care of their teams doing so in a way that everyone feels is fair. Next, these management teams are incredibly experienced. And noteworthy to me is to look at the -- those that have been named since COVID. We've had, myself included, 4 CEO retirements at major airlines. And they've been replaced by people with, on average, 29 years of airline experience. That's Robert Isom, Scott Kirby, Bob Jordan, Ben Minicucci. Every board when asked, okay, your -- the CEO is leaving in this time period, has decided, we want to go with someone that knows how to run airlines, someone that knows airlines. Someone that can lead, these are incredible leaders, all of them. Someone that knows strategy, but someone that wants to continue on the path we're on. That is much different than you've seen in our industry in the past. In the past, as we got through difficult times, boards -- frustrated boards and shareholders would bring someone from outside. We've had CEOs from banking, from hotels, oil and gas, rail. That's not what's happening here. And I think that's noteworthy. This is, indeed, I know that's what we feel at American. Robert Isom is the absolute right person to run this airline because he's Robert Isom. But he's also the right person to run this airline because he has been a part of what has been built and will continue us on that path as we come out of this. And those are the kinds of people, those are the kinds of leaders that other airlines and other boards are picking as well. So I'm guessing by this point, you're like, okay, yes, but wait. What about demand for business travel? You just kind of waved your hands and said, it's going to get back to 0.98%. Well, how do you possibly believe that -- you don't notice that people are not traveling as much for business, these things called Zoom, Teams and Webex. And I don't think it's going to get back there. Fair enough. First off, I will go back to my point on held revenues at American and point out again how quickly business revenues are growing back right now, with the simple fact that -- of more offices opening up. That gives me a lot of confidence that this is going to come back. But indeed, it's not all the way back. So if I'm telling you it's at 67% today, how do we know it doesn't stop at 80%? I don't know. I don't -- I can't tell you for certain I know that. This really, I guess, is the bet. But boy, it sure doesn't feel like what's going to happen. It's not what's happened in the past. I can tell you that. Again, since I've been doing this so long, I can tell you stories of people asking me questions back when the internet came around. And those questions from investors were, wait a second. How much of your business travel is lawyers running documents during the day? It's not going to be needed anymore. I swear. That was a question that I couldn't answer. I don't know. Maybe a lot. But -- and sure enough, I'm certain we don't have any of that business anymore. There's no one flying documents day of across the country. And that was probably a really lucrative revenue to airlines in the 1980s. But it was replaced by other things. It gets replaced by other business travel. When asked at the time that question that I couldn't answer, Bob Crandall gave the right answer, who I worked for at the time. He said -- and what Bob said was -- anything that makes the world smaller eventually results in more demand for air travel. That's what the internet did. It made the world smaller. And when people can connect more easily, eventually, they want to connect in person. The act of doing business is a social function. And you can't do it as well -- we all learned, you can't do it as well over a Zoom as you can do it when we are all together. And people will travel. It may be different. I had a lawyer a couple weeks ago say, I'm never going to go fly down to San Antonio for a deposition again. I can tell you that because I can do them online. I can do them on Teams. Fair enough. But I bet you that lawyer still travels as much over time, because they will find other things to do, where they will connect with people they couldn't connect with before. And that's what I believe will happen. It's happened every time. We got the same questions with video conferencing. And again, didn't change a thing. Indeed, it results in more demand for business travel. The more people connect -- the easier we make it for people to connect, the more likely they are to want to eventually go and meet each other. That's what I believe will happen again. Not to mention -- and maybe a lot of people trying to get to their offices from where they're now living as opposed to when they used to drive to their office. So anyway, that -- again, I can't stand here and tell you for certain that's what's going to happen. I can tell you what's happened in the past. I can tell you what we're feeling right now. It's ramping up quickly. I certainly believe that we're going to get that 0.98% because I think business travel is going to come all the way back. So okay, what about high fuel prices for God's sakes? That's got to be a problem, right? Sure. It's always -- our fuel prices are the largest source of our -- largest expense we have. But look, here's just to show you a case of what's happened in the past with a more sound industry structure. 2010 -- I'm sorry, I'll just read you this table. 2010, oil was $79, $80 a barrel, and the industry made $4.8 billion. That, by the way, is a record earnings in 2010. $4.8 billion was a record for the industry, at $80 a barrel oil. Oil went up to $111 a barrel in 2011, sure enough our earnings fell. It takes a while to react. The reaction to higher prices and -- higher oil prices is modestly less capacity and higher prices. So it takes -- when it runs up quickly like it just did, it takes a little -- it takes a while to respond. But we respond. And indeed, in 2012 at $111 a barrel oil, we got back to nearly 2010 earnings. And then at 2013 at $109 a barrel, much higher. And then in 2014, $100 barrel oil, this industry made $15 billion, 3x what the record was 4 years earlier. We can make money at oil prices of $100 a barrel or higher, and we will. That's not a long-term impact. It may have short-term impact. But it is not a long-term impact on the industry's ability to make money. And to my point, that indeed, this industry has been fixed for a long time, this number of $15 billion in 2014 grew to $24 billion in '15. Stayed around there. Fell down to like $19 billion in '18 and '19. This is an industry that prior to COVID had itself structurally sound. So I said I was only going to tell you about the industry, but it wouldn't be right nor do I believe that it's right to not tell you about American because I think we're uniquely well positioned within it. I'll be quick on this because you've heard this before. But I do believe we're uniquely well positioned for 4 reasons. First, our global network. We had the good fortune of, since 2019, being able to expand in our best markets. We've added gates at Dallas Fort Worth, added gates at Charlotte, Douglas, both of whom are here representing as well, so thank you, DFW and Charlotte. And we've also added capacity at Reagan, 3 of our best-performing hubs. And then we've been able to expand our network for our customers with alliances with Alaska, JetBlue and GOL. We -- the efficiencies, I already talked about. I won't tell you again, but it's real, $1.3 billion. Within the industry, we also -- we have higher debt than others as we have better assets. We have gone and modernized our fleet, and others still need to do that. The result is in -- from 2014 to 2019, our average CapEx was $5 billion a year. Going forward, as shown on this chart, '22, '23, it's around $2.5 billion, $3 billion. We think that's the run rate going forward. We're going to have -- we think that will be a nice -- help us with free cash flow as we go forward because we made that investment already, and we don't need to continue to make. This management team, I talked about. Look, it's not just about Robert. Robert is fantastic. He's going to do great things. I can't wait for you all to know him better and see what he does. But the team he's built is as strong as he is. You all know Derek. But the other people on this team individually, they're incredible. As a team, they're even better. And I'm really excited about the team that is coming up and what they're going to do. So look, that's it. I'm really bullish on this business for all these reasons. The relationship between revenue and GDP, the barriers to demand that are falling, the constraints on growth we're having in the short term, the fact that we're more cost efficient, the fact that the industry is more efficiently structured, the fact that the management-labor dynamics are improved, and the fact that we have experienced leaders running. So that's my pitch. Go buy them all. And if you want to get a little more focused on that, I'd focus on the network airlines. They are the ones that have been beaten up the most and have the most upside. See [ Andrew's ] -- I see my friend, [ Andrew ] on his phone back there. I can't believe I'm suggesting you buy United, but yes, go ahead. Honestly, I mean, really, as just an investment play, go buy American United and Delta. Hold on to them. I think a year from now, you'll be really happy. And if you really want to get more specific, just buy American. We are the best positioned of the 3. That's it. Thank you.

Thank you, Doug. I sincerely hope that JPMorgan isn't looking for a different airline analyst because that was a really good pitch.

I'm not interested. Go ahead.

What should the industry's top 3 or 4 priorities be for the next 5 years in light of everything that you opined on today?

Yes. The industry's priority -- listen, obviously a wide opening. We got to get ourselves well, we need to back to profitability. I think everybody's doing this, by the way. I don't -- I don't have any advice for anybody. I think everybody is doing the right things. But I think the right things are slow down, get yourself back to profitability, make sure you got -- the structure is sound, stay within the structure, work with your teams, try and build on these relationships that have been -- that are building up with our labor, and focus on taking care of your teams and your shareholders. I think we're on the right path.

Doug, you stole my -- 2019 isn't the right baseline line, that we're 11% higher in 2022. So I love that. Go ahead first, but that's -- the -- but -- as Derek knows, I'm the credit guy. So just a couple of questions for Derek here because I want to make sure we loop him in. So Derek, my investors, obviously, last week saw oil prices, got a little freaked out, of course, right? I think there's a little bit of confusion on minimum liquidity and target liquidity. So can you talk about that difference?

Yes. We're sitting, as Doug said, we expect to be over $15 billion at the end of the quarter. What we have talked to is that, at some point in time, we're going to pay off $15 billion of debt in -- by 2025. That's our target. That's what our goal is, and we're going to do that. A lot of that is just amortization that we have to do over time. Now when we talk about minimum liquidity, we've run this company at $7 billion of minimum liquidity forever, right? We haven't determined what that minimal liquidity is going to be in the end. That will be a Board discussion as we go through that process. But in the near term, what we have said is we'll go down to $10 billion to $12 billion. Look at that case. And then we'll review it again. But what we have said is any excess liquidity over that $10 billion to $12 billion, we'll use to pay off debt, and we'll pay off debt early. So the question has been when are you going to start that? Could it be early? It definitely could be early depending on the recovery and what Doug talked about, that, that could come soon. This year, we only have $750 million to pay off on an unsecured. Next year, we have $1.2 billion on a term loan at the end of the year. Those are the only 2 things we have to do in the next 2 years. So what you'll see us do is we've been holding on to as much cash as we can until the recovery holds, which, if you look at today and where we're at it, we're getting close to it. So at some point in time, I will give the Treasury Department the green light, as we call it, to use that excess cash above, in today's world, $10 billion to $12 billion, to take that debt down and to take it down quicker. But I believe our minimum liquidity at some point in time is going to be less than that. We ran it at $7 billion before. Do we need a little bit more cushion past that? That's going to be a Board discussion as we go forward. And does that come in the $7 billion to $8 billion range? Where does that come? We don't know yet. But in the interim, we're holding on to all the cash until we know we're out of this. And then anything above that $10 billion to $12 billion when we get out of this, we'll use to pay down the debt sooner than 2025.

But I'm sorry, but Derek, even the $7 billion is not a minimum. The $7 billion is a new target. It's a lower new target. So to your question, I mean that's what I think you might be worried about. Where you actually need to get worried as a debt holder is well below that. There's -- I don't know what the number is, but.

Well, that's why I'm saying. I think there's confusion. When you talk about $10 billion to $12 billion, I have investors that say, well, I can throw $4 into a model and I can show liquidity getting down $4 jet fuel. I can show liquidity getting down to $11 billion in 12 months. And should I be worried at that level? Now they're not adjusting for -- you made a great argument here. They're not adjusting for fare increases, right? They're not adjusting for everything that the industry would do at $4 a gallon jet fuel. But people are running those scenarios, and that's the problem, right, in the marketplace. So that's what I wanted to clarify. So thank you for doing that. And then just in that scenario, and again, I agree with your argument. People shouldn't be doing that. But there are some doing it, right? So I get the question all the time. If you need to raise incremental liquidity, what would be next? So Derek, that's for you as well. Where would you raise liquidity if you needed to?

Well, we've already paid off $1 billion of the spare parts loan. We have a lot of unencumbered assets. That number is in about the -- we have probably $5 billion of unencumbered assets. And we'd use that at this point in time to go raise some cash. But gladly, we don't have to do that right now. And we don't think we need to go raise any cash. And we're in a great liquidity position at $15 billion at the end of this quarter. So we're really happy where we're at.

Great. Questions in the room? I've got one more. I've got one more. Just to follow up on that.

We're out of time.

Yes. I know. We're going to go 30 seconds longer. damn it. My microphone, my room. Delta this morning mentioned on the ATL, a surge of bookings and so forth. They took in $2 billion. Can you talk a little bit about just what you're seeing in your ATL and your booking curve? And how that progression is moving throughout the year in terms of the duration, if you will, of your booking curve?

Yes, we're definitely seeing the same. We're in a similar category from an ATL perspective. We've seen strong bookings, as Doug said, in the last few weeks, for sure. And that curve is going out even further. The summer looks pretty strong. So we're seeing very similar aspects from a revenue perspective as Delta has and a similar build on the ATL.

Doug? God speed.

Thanks, guys. Appreciate it.