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

Thank you for standing by, and welcome to American Airlines Group's Fourth Quarter and Full Year 2024 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Scott Long, VP of Investor Relations and Corporate Development. Please go ahead.

Thank you, Latif. Good morning, and welcome to the American Airlines Group Fourth Quarter and Full Year 2024 Earnings Conference Call. On the call with prepared remarks, we have our CEO, Robert Isom; and our CFO, Devon May. In addition to our Vice Chair, Steve Johnson, we have a number of other senior executives in the room this morning for the Q&A session. Robert will start the call with an overview of our performance, and Devon will follow with details on the fourth quarter and full year in addition to outlining our operating plans and outlook going forward. After our prepared remarks, we will open the call for analyst questions, followed by questions from the media. [Operator Instructions] Before we begin today, we must state that today's call contains forward-looking statements, including statements concerning future revenues, costs, forecast of capacity and fleet plans. These statements represent our predictions and expectations of future events, but numerous risks and uncertainties could cause actual results to differ from those projected. Information about some of these risks and uncertainties can be found in our earnings press release that was issued this morning as well as our Form 10-Q for the quarter ended September 30, 2024. In addition, we'll be discussing certain non-GAAP financial measures which exclude the impact of unusual items. A reconciliation of those numbers to the GAAP financial measures is included in the earnings press release, which can be found in the Investor Relations section of our website. A webcast of this call will also be archived on our website. The information we are giving you on the call this morning is as of today's date, and we undertake no obligation to update the information subsequently. Thank you for your interest and for joining us this morning. And with that, I'll turn the call over to our CEO, Robert Isom.

Thanks, Scott, and good morning, everyone. Earlier today, American reported a fourth quarter adjusted pretax profit of $808 million or an adjusted earnings per diluted share of $0.86, above the high end of the guidance we issued in early December. For the full year, we reported an adjusted pretax profit of $1.8 billion or an adjusted earnings per diluted share of $1.96. I want to thank the American Airlines team for a great year and for their resiliency, continued hard work and dedication to delivering a safe and reliable operation for our customers. As I have said previously, at American, we're focused on delivering results. As we closed out 2024, we achieved a number of notable milestones. With the ratification of a contract extension with our mechanics and fleet service team members in October, we now have multiyear agreements in place with all of our largest work groups, providing labor cost certainty through 2027. We delivered nearly $500 million of value through our reengineering initiatives, nearly $100 million more than expected. We announced a new 10-year agreement with Citi to become the exclusive issuer of the AAdvantage co-branded credit card portfolio in the United States, which we expect will drive substantial incremental value to American over the life of the agreement while unlocking even more value for AAdvantage members. We generated record free cash flow of $2.2 billion in 2024. And I'm excited to report that as of the end of 2024, we have reduced our total debt by more than $15 billion from peak levels in mid-2021, achieving our initial debt reduction goal a full year ahead of schedule. While there's still much work to do, these accomplishments are clear evidence that the American Airlines team is committed to delivering results and achieving our stated objectives. Now on to our fourth quarter performance. Total revenue grew 4.6% on 2.5% higher capacity year-over-year. This resulted in our unit revenue inflecting positive in the quarter, up 2% year-over-year and above the high end of our December guidance. Passenger revenue strength throughout the fourth quarter was broad-based. In the fourth quarter, American's year-over-year domestic, Atlantic, Pacific and total passenger unit revenue results led U.S. network carriers. While Latin unit revenue was down on a year-over-year basis, we expect short-haul Latin year-over-year unit revenue to be positive in the first quarter. This strong performance is the result of the actions we have taken, and we're encouraged by the trends we see early in the year. Demand for American's product remains strong as evidenced by the continued strength of our business, premium and loyalty revenue performance. In the fourth quarter, managed business revenue was up 8% year-over-year, a sequential improvement of 2 points versus last quarter, and we continue to see yield strength as we look ahead into the new year. Premium revenue increased approximately 8% year-over-year. Paid load factor in our premium cabins remains historically high and was up 3 points year-over-year, with strength in both domestic and international. In the fourth quarter, loyalty revenues were up approximately 14% year-over-year, with AAdvantage members responsible for 75% of premium cabin revenue. 2024 was a record year for AAdvantage. Throughout the year, we had a record number of customers enroll in the program with members earning and burning more miles than any year in our history. Spending on our co-branded credit cards was up 9.5% year-over-year in the fourth quarter, further highlighting the value of our loyalty program. American is proud to have an industry-leading travel rewards program that is frequently acknowledged as providing the best value for its members. Finally, we remain committed to providing a leading customer experience, especially for our premium customers. We're excited to introduce our new state-of-the-art flagship suite on our new Boeing 787-9 and Airbus A321 XLR aircraft later this year. Over the course of the next 4 years, we expect to grow our long-haul international-capable fleet from approximately 125 aircraft today to nearly 200 aircraft in 2029. Additionally, American has led the way in introducing premium lounges, and we're on track to open our fifth flagship lounge this summer in Philadelphia, which marks the ninth premium lounge across the system. In the fourth quarter, we introduced boarding automation as a first step to improving the boarding process, and customer feedback has been overwhelmingly positive. American was the first airline to offer streaming entertainment on our mainline fleet, and we're proud to offer high-speed WiFi on more aircraft than any other domestic airline. In December, we began the installation of high-speed satellite WiFi on our dual-class regional aircraft. We expect the entire fleet will be retrofitted by the end of this year. Additionally, we're in the process of redesigning our mobile app, making it easier to navigate and to provide more self-service options for our customers. Building on these customer-focused initiatives is one of our top priorities, and we'll have more to share in the months ahead. Momentum in recovering revenue from indirect channels continued in the fourth quarter, and we remain on track to fully restore our revenue share from indirect channels as we exit this year. Our indirect-flown revenue share improvement was driven by sequential gains in corporate revenue share, which has been the primary focus of our recovery efforts. Importantly, forward bookings continue to show strength into the first quarter. As we enter the new year, we're in position to continue recovering share in indirect channels. We've completed new contracts with all of our agency partners that serve our corporate customers and agreed to new agreements with the leisure agencies that serve our most profitable leisure customers. Additionally, we've reviewed and reworked agreements with our corporate customers most affected by the previous strategy and largely restored share of those travelers in our hub markets. Completing these steps provides a strong foundation for us to continue to compete for that business and restore our share in these important distribution channels and with those customers. Last year, we took steps to further grow and optimize AAdvantage. In December, we announced a 10-year agreement with Citi to become the exclusive issuer of the AAdvantage co-branded credit card portfolio in the U.S. American has had a partnership with Citi for more than 37 years. The strength of that partnership has enabled us to deliver first-class products and customer service to millions of AAdvantage card members, and we're excited to continue to partner with Citi. Our 2024 cash from co-branded credit cards and other partners were $6.1 billion, an increase of 17% versus 2023. The 2024 amount includes a onetime cash payment received in the fourth quarter related to our new credit card agreement. As we disclosed at the time of the announcement, we expect the agreement, set to begin in 2026, will enable cash payments from our co-branded credit card and other partners to grow by approximately 10% annually. As annual cash payments from co-branded credit card and other partners approaches $10 billion, we expect annual pretax income will benefit by approximately $1.5 billion compared to 2024. Our expanded partnership with Citi will unlock more value and provide exciting new benefits to our customers. With the agreement completed, the teams have turned toward building the business, and we look forward to making several exciting announcements over the coming year. Turning now to our operation. Thanks to the resiliency of the American Airlines team, we delivered another quarter of strong results despite a difficult operating environment. Operational disruptions are part of the airline business. And in American, we continue to show that operational resiliency and rapid recovery are part of our DNA. In the fourth quarter, American ranked second in completion factor and on-time departures among the 4 largest U.S. carriers. For the year, we achieved our second-best completion factor since the merger, carrying our largest-ever volume of passengers. Looking ahead, continued investment in the operation and the technology that supports it will drive further improvements in our operating reliability and resiliency. In closing, we've achieved a number of important objectives in 2024, and our performance in the fourth quarter shows what this team and what this airline are capable of. That foundation and the momentum we have built will serve us well in 2025. Before I turn the call over to Devon, I'd like to take a moment to acknowledge those impacted by the devastating wildfires in Southern California. Our hearts go out to those communities. American's AAdvantage members and team members have donated more than $1.7 million in funds to the American Red Cross to support relief efforts, and we've donated supplies and care packages to families and firefighters in the Los Angeles area. And with that, I'll turn it over to Devon to share more about our fourth quarter and full year financial results and our outlook for 2025.

Thank you, Robert. Excluding net special items, we reported a fourth quarter net income of $609 million or adjusted earnings per diluted share of $0.86. We produced record fourth quarter revenue of $13.7 billion, up 4.6% year-over-year, with unit revenue up 2% year-over-year. Fourth quarter unit cost, excluding fuel and net special items, was up 5.7% year-over-year. Our adjusted EBITDAR margin was 14.9%, and we produced an adjusted operating margin of 8.4%. In 2024, we achieved nearly $500 million of savings from our Reengineering the Business initiative, exceeding our goal by nearly $100 million. Most of the value in 2024 was due to better workforce management driven by process improvements and technology implementation, along with improved asset utilization and procurement savings. We also had nearly $350 million of working capital cash release, which exceeded our expectations and helped drive our 2024 free cash flow performance. We remain focused on running the airline as efficiently as possible while enhancing the customer experience. Moving to our fleet. In 2024, we took delivery of 20 new aircraft and 10 used aircraft, resulting in $1.9 billion of aircraft CapEx. Total CapEx for 2024 came in at $2.7 billion. Looking ahead, we expect to take delivery of 40 to 50 new aircraft in 2025. Based on our current expectation for new deliveries, our 2025 aircraft CapEx, which also includes used aircraft purchases, spare engines and net PDPs, is expected to be between $2 billion and $2.5 billion, and our total CapEx is expected to be between $3 billion and $3.5 billion. We continue to expect moderate levels of CapEx moving forward, with aircraft CapEx averaging between $3 billion and $3.5 billion for the remainder of the decade. We ended 2024 with $10.3 billion of total available liquidity and produced record free cash flow of $2.2 billion. During the fourth quarter, we prepaid $750 million of near-term debt maturities and strategically repriced 2 term loans. We ended the year with total debt of $38.6 billion and net debt of $31.6 billion, our lowest level of net debt since 2015. With these actions, we achieved our total debt reduction goal of $15 billion from peak levels in mid-2021 a full year ahead of schedule. We are thrilled to have delivered on this commitment and we remain focused on continuing to strengthen our balance sheet as we work toward our stated credit rating goal of BB. Previously, we committed to reducing total debt to less than $35 billion by year-end 2028. We are now committing to achieve that goal by the end of 2027. Now on to the outlook for 2025. In the first quarter, we expect capacity to be flat to down 2% year-over-year. This capacity is driven by lower capacity in the off-peak months of January and February, which combined are down approximately 3%, followed by growth of 3% to 4% in the peak travel period in March. We continue to expect full year capacity to be up low single digits, in line with expected economic growth and our prior guidance. Our growth in 2025 is focused on improving our schedule in markets that are not yet fully restored to historical levels, primarily in our northern hubs. We expect our year-over-year capacity growth rate to be fairly balanced between domestic and international operations. We will remain flexible and will adjust capacity in response to demand and the competitive environment in which we operate. We expect first quarter revenue to be up 3% to 5%. And for the full year, we expect revenue growth of approximately 4.5% to 7.5% versus 2024. This is driven by continued indirect revenue recapture, strong demand for our product and a constructive industry backdrop with supply in line with expected demand. First quarter nonfuel unit costs are expected to be up high single digits year-over-year. This unit cost growth is driven by the reduction in year-over-year capacity, the mix of that capacity and the new collective bargaining agreements that were reached in the second half of 2024. In the first quarter, regional ASMs will be up approximately 17% as we return to full utilization, and mainline capacity will be down 2% to 3%. Based on the timing of our labor agreements and the shape of capacity, we expect unit costs to improve sequentially throughout the year, from high single digits in the first quarter to low single digits as we exit the year. For the full year, we expect nonfuel unit cost to be up mid-single digits year-over-year, with a large majority of the cost growth coming from higher salaries and benefits. As we look out to 2026, we have certainty in our labor costs and the rate pressure from our new collective bargaining agreements will ease. We expect that in 2026, our year-over-year growth of our salaries and benefits per ASM will be well inside of inflation. We continue to focus on Reengineering the Business to become more efficient. Through best-in-class workforce management, efficient asset utilization and procurement transformation, we expect more than $200 million of incremental cost savings in 2025. Additionally, we are investing in a multiyear transformation in our IT and tech ops organizations to modernize technology, improve operations and optimize staffing costs. We anticipate continuing to productively utilize our workforce with mainline full-time employee counts staying approximately flat to 2024. This year, we also expect more than $100 million in additional working capital improvements. Based on our current demand assumptions and fuel price forecast, we expect a first quarter loss of approximately $0.20 to $0.40 per diluted share. For the full year, we are expecting to deliver adjusted earnings per diluted share of approximately $1.70 to $2.70. We expect another year of record free cash flow generation in 2025 and are currently forecasting more than $2 billion of free cash flow for the full year. Now I'll turn it back to Robert for closing remarks.

Thanks, Devon. As we start 2025, the long-term targets we outlined last March remain our focus: Growing margins, generating sustainable free cash flow and continuing to strengthen our balance sheet. Our priorities for this year will continue the momentum we've built in the back half of last year and further our progress toward achieving our long-term targets. In 2025, we plan to: Operate with excellence and efficiently deliver safe and reliable operations; take a fresh look at our product and service as we sharpen our focus on the customer experience; continue to strengthen our network, both organically and through our airline partnerships. Our December announcement with Citi was an important milestone for American. It will allow us to enhance AAdvantage and further strengthen our leading travel awards and co-branded credit card program ecosystem. All of these priorities, including the restoration of our core sales and distribution initiatives, will allow us to deliver on our revenue potential. And we'll continue our work to Reengineer the Business as we build a more efficient airline. We know that by delivering on our commitments, we'll unlock significant value for our shareholders. Operator, please open the line for questions.

[Operator Instructions] From the line of Catherine.

So we don't know exactly what low single-digit capacity growth means for the year. But if I just use 2%, that means RASM grows about 4% for the year versus the 5% going in 1Q in your guidance. I understand capacity growth accelerates over the year. But can you talk about your assumptions on indirect revenue improvement and the industry outlook underlying that full year guide? And just really wondering like what could go better than your base case?

Catherine, thanks. I'll start on our expectations for indirect revenue recovery, and Devon can speak to capacity, and Steve can add anything that he thinks is important as well. We're on track for recovering what we had lost. We feel really good about the progress we've made in a short 6-month period. And as we take a look, and you can see from our notes, as we take a look at forward bookings, it really suggests that we've got traction in the marketplace. So I have great confidence that we're going to recover fully as we move through the year. And then I'd just also note this, that we also believe that from a revenue performance perspective, even outside of indirect channels, we think that we're poised to perform and outperform. You saw it in our fourth quarter results. And I can't speak to others' assumptions, but in an environment where the economy is improving, I think that we're going to improve faster than our largest competitors. Devon?

Yes. And I don't think there's any big moves in the quarterly capacity numbers. We guided to first quarter, which should be down 0% to 2%. The remaining quarters will probably be all up in the neighborhood of 3% per quarter in terms of ASM capacity, which gets you about to that midpoint on low single-digit capacity for the year.

Catherine, this is Steve. I'll just follow up with -- you asked about sources of potential upside from our base case. I'll just offer 3. First, I think that there's a decent chance that we could restore our sales and distribution -- restore sales and distribution revenue faster than Robert's by the end of 2025. I think that's an upside. Second, I would point you to both the third quarter, and especially the fourth quarter. Ultimately, we're going to be judged on everything and certainly revenue by our results. And I think the fourth quarter shows what we're capable of. And then finally, I'd just point to our agreement with Citi. The new agreement doesn't start until 2026. And so the growth that we focus on probably won't start until then. But there is -- to get to that, there is a ramp-up effort underway that I think could provide upside in our co-brand revenue during the year.

That's great. Thanks for the additional color, Steve. Devon, maybe one more for you. As you've reached your medium-term debt goal, can you speak to how you're thinking about capital allocation between now and that longer-term goal in 2027? Understanding you have more deleveraging to do to hit that 2027 goal. And then you mentioned the BB credit rating. But what's the gating factor to consider shareholder returns?

Thanks, Catie. Well, to start, we are really proud of achieving the $15 billion goal that we set out to do 2 or 3 years ago at this point, and we achieved it a year early. But our focus still remains on improving the balance sheet. We've set another near-term goal here to have total debt down another $4 billion, to around $35 billion by 2027. So we'll focus on that. We'll continue to focus on reinvesting in the business. And as we continue to improve free cash flow and improve the balance sheet, we'll come back and talk more about other capital allocation priorities.

Our next question comes from the line of Conor Cunningham of Melius Research. [Operator Instructions] We'll go to the next question. Our next question comes from the line of Scott Group of Wolfe Research.

So Devon, I think you laid out CASM going from high single to start the year towards low singles ending the year. It doesn't seem like guidance implies a big deceleration in RASM throughout the year. So can you just talk about like how you see the progression of like price/cost on like a net basis trending throughout the year?

Well, I'll just start by talking a little bit about our cost performance, because right now we are seeing some more pressure in the first quarter than we are during the rest of the year. So to start, we are really proud of our cost performance over the last several years. I'm excited about what the company is doing to reengineer the business and drive more efficiencies. I think we're making really nice investments in technology. The operations team is really leaning into this. And I think we're delivering a more efficient operation, a better operation for our customers. In the first quarter though, we are seeing unit costs up high single digits. It's a handful of things. We have less capacity in the first quarter than we did a year ago. That starts to change as we grow capacity in the last 3 quarters of the year. We have a ton of regional capacity coming online. As you know, that's higher-cost capacity than the mainline capacity. It's actually driving average gauge to be down 4% to 5% in the first quarter year-over-year. Stage length is down as well. And then, of course, the labor agreements that were signed in the back half of last year weren't in our base for this year. So we see a lot of cost pressure in the first quarter. It eases throughout the year. We feel we're incredibly well positioned as we get into 2026. And we know we run the business as efficiently as anybody. On the margin side, I don't think there's any quarter that show outsized margin improvement year-over-year. We've guided EPS to midpoint of $2.20, so we are seeing a nice EPS improvement year-over-year. But I don't think you're going to see any 1 quarter pop really materially versus what we performed -- versus how we performed in 2024.

Okay. And then can you just talk about maybe the progression of RASM throughout Q4? And then just regionally how you see RASM playing out in Q1? Like transatlantic was up 12% in Q4, can that sustain itself in the near term? Just any regional color.

Well, Scott, thanks for that. I'd just point to the fourth quarter, in which we had strong performance across the board. So Atlantic, Pacific, and then also domestic, in terms of year-over-year improvement, led our network competitors. And overall, we led it as well. As we take a look at into this year, I see continued strength domestically. And the strong dollar is absolutely going to have an impact on buying and travel to Europe this summer. So we take a look to March, and as we look to some of our peak periods, spring break and getting into the summer, I see robust demand across the board. We've talked about premium traffic as being wind behind our sales and also something that I think that we're going to be able to do even better in. And Steve mentioned some of the things that are going to be additive as well in terms of potential for even better performance. So overall, really confident about the year and like what we see and how we can operate in this environment.

Our next question comes from the line of Jamie Baker of JPMorgan Securities.

So an interesting statistic that United threw out yesterday was that the margin gap between its best- and worst-performing hubs had narrowed to, I guess, the lowest gap in, I think it was 9 or 10 years. We've discussed American's relative hub performance on these calls and in person for quite some time, but I never asked about the range. Would you be willing to comment on that margin range between your top and bottom hubs and whether it's improving or widening? Obviously, a lot of moving pieces in many of your hubs at the moment.

Okay. Thanks, Jamie. And I'll start, Devon and Steve can add in. Look, it's no secret that we've had to build back our network, and we have a large portion of our network that is supported by our regional fleet. I feel great that, in 2025, we're going to have our regional fleet fully deployed. And what that's going to allow us to do is better fill out some of the hubs that, quite frankly, are ready and, I think, willing to support the network in a different way. But we've got to put the capacity there. So you're going to see the largest schedules that we've ever had in places like DFW and Charlotte, Miami in its peak will be bigger than it's ever been. DCA, which had been a laggard coming out of the pandemic, is now getting back to the performance levels that we had hoped. And we talked about some of the work that we're going to be doing in Chicago. So across the board, we see performance improving. Some of the weaker points in our network, as we take a look to the coast, in New York and out in Los Angeles. I'd say this that the schedule changes that we've made in LaGuardia, the largest schedules that we've run since the pandemic, I believe, just as we closed out the fourth quarter. We're really seeing nice results in terms of where we put that capacity. And so from that perspective, I believe that we have improved considerably our New York performance. And I hope and have confidence that will be something that we can maintain going forward. In Los Angeles, from that perspective, there are some capacity restrictions. But on that front, that's one where we really do partner well with our oneworld partner, Alaska Airlines. And we look forward to continuing that progress. So when you take a look at American, you've always known that DFW, Charlotte, DCA, and now DCA getting back into the ranks, have performed well. Philadelphia is getting back to where it should be. Phoenix has historically been strong. And then as I mentioned, we've got a focus on the coasts and Chicago.

That's helpful. And then while I have you, Robert, when I last saw you, which I think was in September, you mentioned you were spending half your time on efforts to reconcile with corporate accounts. And I think you said that publicly at a conference or 2. And I don't know if you actually meant precisely 50% or if that was just sort of metaphorical. But by the way you described the effort in your prepared remarks makes it sound like most of that effort is behind you. Is that the right interpretation? I guess I'm just confused on exactly where American is on the reconciliation front and how managed corporate recovery trends from here.

Thanks, Jamie. Look, I will give a ton of credit to our commercial team, led by Steve Johnson, for the enormous amount of work that had to be put in. And they absolutely enlisted me in that effort. And I will say, I don't know if it's 50% of the time, I spent a considerable amount of my time making sure that I was up to speed and talking to our corporate customers and agencies as well. That work is paying off. It's foundational in that, don't forget, these contracts are set up over a period of time, revenue doesn't show up right away. But we're not resting on that. We're learning from certainly the issues associated with our past strategy. And that, I believe, bodes well for the future. So Steve, why don't you spend some time talking about progress and how you feel about where things are headed?

Sure, Jamie. And let me start by saying the team and I feel good about that. As Robert said in his opening remarks and again just a second ago, we're on track to achieve the commitment that he's made to fully recover our share buy the end of 2025. As I said earlier, I think we can beat that. But it's not a linear process, and it's kind of event-driven, if you'll know what I mean. We saw in the third quarter, Robert's comments at Bernstein, when he said that we were abandoning the old strategy, that had an impact on share. The restoration of content into EDIFACT had an impact on share. The engagement with our partners in the third quarter, what Robert was just talking about that sometimes referred to around here as the apology tour, that had an impact on share. The fourth quarter was -- lots of work done in the fourth quarter, but a little bit different. And maybe that accounts for this, the non-acceleration that you might have been looking for, over the course of the last 3 months. But the fourth quarter task was actually infrastructure. It was making new agreements with all of our partners in the indirect community. It's an arduous task, kind of counterparty by counterparty. While it was going on, understandably, we were negotiating, so you didn't see a lot of share shift during that period of time. Indeed, some of our partners sent us even stronger messages during those negotiations. But it was ultimately successful, and we now have new agreements with 30 of the most important TMCs and agencies. And as Robert said earlier, we've modified the economics for all of our significant corporate customers who were impacted by our old strategy. And as we say, and our partners say even more frequently, 3 airlines are better than 1. And those agreements create real incentives to move business to American. And indeed, the agreements with the TMCs and the agencies create real incentives to reestablish the share equilibrium that existed at the beginning of 2023. So I expect those agreements are going to be big drivers of share shift in the first and second quarter. And so you'll see continued progress.

Our next question comes from the line of Conor Cunningham of Melius Research.

Hi, everyone. Can you hear me now? Can you hear me?

We've got you, Conor. Go ahead, Conor.

Someday I'll figure out how to use this thing. Someday I'll figure out how to use this phone. Can you -- so I'm just trying to take all this. You sound like there's upside in indirect corporate share regains, and then the loyalty stuff, as well as just like sequentially improving costs throughout the year. But your full year guidance at the low end suggests a decline year-over-year in earnings, and I'm just trying to understand that part a little bit better. It just seems -- like are you assuming that the main cabin doesn't get any better from here? It just seems really conservative just given what we've heard from you today and what we've heard from others so far. Just trying to understand it a little bit better.

Conor, I'll start, Devon can add in here. Look, again, we can only forecast based on what we know and what we see right now. We don't know what others are putting into their models. We've told you that we think there's continued strength and that, in terms of revenue performance is, first, especially given the capacity that we're putting in, we see significant growth in our unit revenues. Now if there is a better overall performance in the industry, as I said, I think that we'll continue to show outperformance because of the things that we've been doing. So that's my comment in terms of questions about how is your forecast versus what the assumptions others are making. Devon, anything you want to add?

Yes. I'll just say, midpoint of our guide is $2.20. That's up more than 10% versus what we did in 2024. There's obviously variability in earnings. We think the midpoint is what we seek to achieve. We'd like to do better than that. But we put a range of outcomes because there is still some volatility that's there in things like fuel or some amount of economic risk at a macro level. But right now, we feel really good about the midpoint on the guide, and it's a nice year-over-year improvement, and we hope to exceed that.

Okay. That's helpful. And then on the Citi contract, or Citi, the renegotiation, I'm just trying to understand that a little bit better. So the economics change in '26. But I think that there's a volume and spend-related component in '25. So can you just help bridge the contribution of how that will evolve, earnings contribution, how that evolves over that -- the change from '25 to '26? It just seems, again, like there's potential for it to surprise, so just about that.

Sure. Let me see if I understand the question. Our existing agreement includes minimums for new accounts and new business that Barclays and Citi have committed to. Those, we expect them to overperform on those as part of the ramp-up into 2026. Is that helpful?

Yes, no, that is.

Our next question comes from the line of Ravi Shanker of Morgan Stanley.

I just wanted to start with a follow-up on the corporate normalization commentary. I think you said that you adjusted the economics for some of the biggest accounts there. Can you just unpack that a little bit more? How does the profitability of the corporate business compare to where it was before, now that -- or once the share is normalized?

Sure. Well, the adjustments, we evolved our business with our corporate customers over the course of the last 7 or 8 months. We talked about this on the last earnings call. Some of this had to do with macro changes that we made, like reestablishing what we call corporate experience, but a certain set of unique corporate experience advantages for our traveling corporate customers, employees; waivers and favors allowing travel agents to, in certain cases, book flights or change tickets that are not completely consistent with the general rules that apply. So some of that was, I think, very helpful. But as part of the former strategy, we had created a kind of one size fits all discounting system for corporations that, across the board, for anyone who is impacted by that, that reduced discounts to, I think, an uncompetitive level. And so -- and that impacted about 24% of our corporate customers. Those were the ones that, over the course of the strategy, their contracts came up and we were able to change them. So with respect to those customers, we've gone back, worked with them, negotiated with them and established economics that are more consistent with the past and more competitive. In all cases, those -- the revenue from those agreements, even with a little bit better discounting, is going to be very accretive.

Yes. And Steve, I think we've said this, that when we talk about sales expense and bringing back a sales team and potential impact on some of the things that we're doing, the overall cost impact is going to be a little less than 1 point of CASM. But again, all of this is going to be highly beneficial to the company.

Great. That's a helpful explanation. And maybe as a follow-up. You guys mentioned upgraded WiFi, which is great to hear. But kind of as we kind of enter like a new era of premium cabins, if you will. Obviously, you guys have new planes. But how do you think about bring your own device versus screens on seats, and maybe the ability to kind of monetize those screens over time?

So Ravi, can you say that one more time? I missed that part of that question?