Michael Linenberg

Michael Linenberg inquired about the sale of Aeroméxico's MRO joint venture (TechOps), asking who it was sold to, if Delta still owned its share, and how the sale would impact the P&L and future maintenance expenses. He also requested an update on the U.S. DOT restrictions on flights from Mexico City to the U.S., specifically regarding cargo and slot management.

Answer

CFO Ricardo Sánchez Baker explained that both Delta and Aeroméxico divested their stakes in the MRO facility to a third party that had been operating the business since 2022, resulting in a $71 million profit. He clarified that the loss of lease income from the facility is not material, and Aeroméxico continues to rely on competitive long-term maintenance agreements. CEO Andrés Conesa stated that the U.S. DOT restrictions are due to the U.S. government's argument that Mexico is not complying with the Open Skies Agreement, mainly concerning cargo operations moving from AICM to AIFA. He expressed optimism that talks between the governments are progressing well and the issue is expected to be resolved relatively soon, noting that Aeroméxico's current U.S. routes from Mexico City are unaffected for 2026.

Michael Linenberg asked for details on the sale of Aeroméxico's MRO joint venture (TechOps), including the buyer, Delta's continued ownership, and the transaction's impact on the P&L and future maintenance expenses. He also requested an update on the U.S. DOT restrictions on new routes from Mexico City airports to the U.S., particularly regarding cargo operations.

Answer

CFO Ricardo Sánchez Baker clarified that both Aeroméxico and Delta divested their MRO joint venture to a third party, resulting in a $71 million profit, with no material impact on future lease income or maintenance costs due to existing commercial agreements. Ricardo Sánchez Baker and CEO Andrés Conesa explained that the U.S. DOT restrictions are related to the Mexican government's compliance with Open Skies, primarily concerning cargo operations. They anticipate a resolution soon, noting that Aeroméxico has already significantly grown transborder capacity since returning to Cat One.

Michael Linenberg asked about Wingo's Venezuela service and its growth potential in 2026, and Copa's ability to fly to Cuba from Panama City without tech stops for fuel, including any capacity impacts.

Answer

CEO Pedro Heilbron clarified that Wingo has resumed service with daily frequencies from Bogotá to Caracas and will restart Medellín to Caracas soon. Wingo received its 10th 737-800 in H2 2025, with its impact expected this year, but Wingo is not projected to grow significantly in 2026. For Cuba, Mr. Heilbron explained that Copa can tanker fuel from Panama City, avoiding tech stops, with a minimal reduction of 10-15 passengers and no belly cargo. Wingo, however, needs a tech stop in Barranquilla for its Bogotá-Havana flights due to Bogotá's high altitude.

Michael Linenberg asked about Copa's Venezuela service, specifically if Wingo's operations are included and the outlook for Wingo's business in 2026, including fleet size and growth potential. He also inquired about Copa's Cuba service, asking if flights from Panama City can be operated round-trip without tech stops and the impact on passenger/cargo capacity.

Answer

CEO Pedro Heilbron clarified that Wingo operates its own Venezuela service (Bogotá to Caracas, soon Medellín to Caracas). He noted Wingo received a 10th 737-800 in H2 2025, used for C checks, and expects stable operations without significant growth in 2026. For Cuba, Mr. Heilbron explained Copa can tanker fuel from Panama, avoiding tech stops, with minimal impact (10-15 fewer passengers) and no belly cargo. Wingo's Bogotá-Havana flights require a tech stop in Barranquilla due to Bogotá's altitude.

Michael Linenberg inquired about the expected unit revenue trends for 2026, considering the significant capacity growth driven by annualization and increased frequencies, and the potential pressure this might exert.

Answer

CEO Pedro Heilbron responded that since most of the growth comes from the full-year effect of existing aircraft and adding frequencies to high-demand routes (many above 90% load factor), the impact on unit revenues should be much less than typically expected from double-digit ASM growth. Michael also asked about the capacity at Panama City airport, specifically the number of defined banks and room for additional frequencies.

Michael Linenberg asked about the expected unit revenue trends for 2026, considering the significant portion of growth from annualization and increased frequencies, and inquired about the capacity and connectivity at Panama City's hub.

Answer

Pedro Heilbron, CEO of Copa Holdings, indicated that while not providing specific guidance, the focus on adding frequencies to high-demand routes (many above 90% load factor) should result in less pressure on unit revenues than typically expected from double-digit ASM growth. Regarding the Panama City hub, Heilbron stated the airport is undergoing expansion (T2 terminal, taxiways, runways) over the next 3-4 years. Copa currently operates six defined banks, with ample room for additional wingtips or new banks with the planned expansion.

Michael Linenberg from Deutsche Bank AG asked for more detail on regional demand, specifically Central America-to-U.S. and domestic Colombia, and inquired about the growth and strategic importance of Copa's premium and ancillary revenue streams.

Answer

CEO Pedro Heilbron confirmed the Central America-to-U.S. market is currently weaker due to overcapacity, but it is not a major market for Copa. He also noted that domestic Colombia is performing well, benefiting the Wingo subsidiary. On premium revenue, Heilbron agreed Copa has a competitive advantage and is improving monetization, seeing 'a lot of upside' in this area.

Michael Linenberg asked for the rationale behind the resilient RASM guidance despite lower fuel costs, questioning if slower capacity growth was a factor. He also requested details on the new codeshare agreement with Volaris and its potential impact in Mexico.

Answer

CEO Pedro Heilbron explained that the RASM guidance reflects current, limited visibility and that the airline is capacity-constrained, not oversupplied. He described the Volaris agreement as a positive development that will provide valuable feed from Mexico's large domestic market, which is separate from the more pressured Mexico-U.S. market.

Michael Linenberg asked for clarification on Wingo's capacity plans, which appeared to be shrinking, and questioned the strategy behind adding a second cargo freighter, including its potential impact on revenue and margins.

Answer

CEO Pedro Heilbron clarified that Wingo is not shrinking; it is receiving a tenth aircraft in H2 and any temporary schedule changes are for maintenance during the low season. Regarding cargo, he stated that while the first freighter was very successful with high margins, adding a second one (via an operating lease) will not have a significant overall impact, as most cargo revenue still comes from passenger aircraft bellies. The second plane provides backup and supports a niche operation.

Michael Linenberg asked about the competitive environment in Colombia, the rationale for temporarily exiting four markets, and the nature of compensation from Boeing for aircraft delivery delays.

Answer

CEO Pedro Heilbron stated that Copa remains pragmatic about growth in Colombia and that market stabilization would be positive. He clarified that the temporary exit from four markets (two in Mexico, one in Colombia, one in the Dominican Republic) is a strategic redeployment of capacity due to Boeing delivery delays, not market failure, with plans to return by late 2025. CFO Jose Montero added that while contractual relief for Boeing delays is confidential, it would flow through as reduced capital expenditures.

Michael Linenberg inquired about the redelivery costs for the 24 returning aircraft, specifically if there was a liquidity penalty and if any P&L impact was reflected in the full-year guidance range. He also asked about the increase in the revolver size and the current unencumbered collateral position.

Answer

President and CEO Jimmy Dempsey confirmed a one-time non-cash expense, likely non-GAAPed out, but stated the guidance range accounts for real costs related to return conditions. Chief Financial Officer Mark Mitchell explained the revolver is backed by loyalty assets, which saw over 30% growth in Q4, and a bank increased its position. Dempsey added that deferring aircraft with Airbus reduces PDP payments, leading to a lower net debt position.

Michael Linenberg asked about the financial implications of returning 24 aircraft, specifically if the guidance range accounts for any P&L impact from redelivery costs, given the stated lack of a liquidity penalty. He also inquired about Frontier's unencumbered collateral position, following the increase in its revolver size, which is backed by loyalty assets.

Answer

President and CEO Jimmy Dempsey confirmed that a one-time, non-cash expense related to the final agreements would likely be non-GAAPed out, and the guidance range does account for real costs linked to the deal's return conditions. Chief Financial Officer Mark Mitchell added that the revolver is backed by loyalty assets, which showed over 30% growth in Q4 2025, and that the increased bank position reflects confidence. Dempsey also noted that deferring Airbus aircraft reduces PDP payments and debt, improving net debt and leverage ratios.

Michael Linenberg questioned the rationale behind the unusually wide Q3 guidance range and asked for clarification on the comment that all domestic airline capacity is currently losing money.

Answer

CEO Barry Biffle attributed the wide guidance range to recent market volatility, including a sales dip in June, and the uncertainty of booking the remainder of the quarter, despite currently strong forward yield trends. He clarified his belief that when stripping out international routes and ancillary benefits like co-brand revenue, the core domestic flying operations for most U.S. carriers are unprofitable at present.

Michael Linenberg of Deutsche Bank inquired about the decline in average fares despite the launch of premium products and asked if shrinking capacity in the latter half of the year would lead to a greater focus on core, profitable markets.

Answer

CEO Barry Biffle explained that the average fare was dragged down by a significant, unexpected drop in demand and load factors in March, which constituted a large portion of the quarter's planned capacity. He confirmed that premium products are performing well. Biffle also affirmed that shrinking the network would create a "good tailwind" by reducing developmental routes and focusing on core markets, noting that booking trends have recently begun to stabilize.

Michael Linenberg asked about the exceptionally strong RASM in December, the potential impact of the Easter holiday shift on Q1, and for clarification on the company's Net Operating Loss (NOL) position and future cash tax obligations.

Answer

CEO Barry Biffle confirmed December was very strong and noted the Easter shift is a 1-2 point drag on Q1 but is generally beneficial for the first half overall. Chief Commercial Officer Bobby Schroeter added that spring break demand in March is strong. President James Dempsey highlighted that capacity is deployed to match peak travel weeks in March and April. CFO Mark Mitchell explained that the remaining $19 million valuation allowance will be released as earnings are generated, impacting the tax rate. He stated the NOL benefit is not a multi-year item and will likely be utilized this year.

Michael Linenberg inquired about the overall impact of a weaker US dollar on LATAM's business, considering cost headwinds, and asked for an update on the 2026 CapEx plan and expected aircraft deliveries.

Answer

CEO Roberto Alvo explained that a stronger local currency is generally positive for LATAM, as it benefits domestic markets and increases purchasing power for international travel from South America. CFO Ricardo Bottas detailed the 2026 CapEx plan of $1.7 billion net of financing, with 41 aircraft deliveries expected, including three 787s, twelve Embraer E2s, and twenty-six A320 Family aircraft.

Michael Lindenberg asked about the overall impact of a weaker US dollar on LATAM's performance, considering both cost headwinds and potential benefits, and sought clarification on the 2026 CapEx plan, specifically the number and types of aircraft deliveries.

Answer

CEO Roberto Alvo explained that a stronger local currency is net positive for LATAM, as domestic revenues are in local currency while significant costs are in USD, and a stronger currency boosts purchasing power for international travel from South America. CFO Ricardo Bottas confirmed 41 aircraft deliveries for 2026, including 3 Boeing 787s, 12 Embraer E2s, and 26 A320 Family aircraft, with a CapEx of $1.7 billion net of financing.

Michael Linenberg from Deutsche Bank questioned the decline in 'other revenue' and asked for a structural explanation for the record-breaking Q2 margin, probing whether the company has permanently mitigated historical seasonality.

Answer

Head of IR Tori Creighton clarified that 'other revenue' is a minor category comprising items like the LatAm travel business and asset sales, and is not a material driver. CEO Roberto Alvo Milosawlewitsch attributed the strong Q2 performance and reduced seasonality to the network's diversification, disciplined cost control, and significant growth in less-seasonal premium traffic revenue, which he identified as a previously untapped opportunity.

Michael Linenberg from Deutsche Bank asked for clarification on the decline in 'other revenue' and questioned whether the record Q2 margin indicates a permanent structural shift mitigating historical seasonality for LATAM.

Answer

Head of IR Tori Creighton and CEO Roberto Alvo Milosawlewitsch clarified that 'other revenue' is a minor category comprising items like the LatAm travel business and asset sales, and is not material. Regarding seasonality, Alvo acknowledged that while Q2 will remain seasonally weaker, the impact is lessening due to network diversification and significant growth in less-seasonal premium traffic revenue, which is a key factor in the improved performance.

Michael Linenberg asked why LATAM is raising its guidance amid a weakening global economic outlook and inquired about the relative strength of its various regional markets.

Answer

CEO Roberto Alvo Milosawlewitsch explained that LATAM's markets have not yet seen the negative trends from the Northern Hemisphere and that the company has a 'relative advantage' to capitalize on volatility. He noted that domestic Colombia has stabilized, Ecuador is a minor weak point, and international travel within South America remains strong. He added that cargo sales are stable but the company is monitoring potential tariff impacts.

Michael Linenberg asked about LATAM's confidence in its 2025 guidance despite recent currency depreciation and rising fuel costs, and inquired about potential restrictions or gating factors for its proposed $150 million share repurchase program.

Answer

CEO Roberto Alvo Milosawlewitsch expressed confidence in the 2025 guidance, noting it already accounts for volatility ($90/barrel jet fuel, BRL 5.8) and that the company's diversified portfolio provides relative strength. Regarding the buyback, he explained that under Chilean law it requires shareholder approval and the proposed size is intentionally limited to avoid impacting the share's trading liquidity.

Michael Linenberg questioned American Airlines' strategy for building DFW into the world's largest single airline hub, considering the hub's historical susceptibility to severe weather and its potential knock-on effects across the system. He also asked about the current connect versus local passenger split at DFW and how this mix is expected to evolve with the planned expansion.

Answer

Chief Commercial Officer Nat Pieper acknowledged the unprecedented nature of Winter Storm Fern but emphasized DFW's long-term growth potential and American's investments in operational reliability, including a new 13-bank structure and facility upgrades. CEO Robert Isom stated that the connect versus local mix at DFW is expected to remain similar, with the expansion primarily enhancing utility for both local and connecting customers.

Michael Linenberg asked about American Airlines' strategy for building DFW into the world's largest single airline hub, considering the impact of severe weather events and how this factors into operational calculus. He also inquired about the current and projected connect versus local passenger split at DFW.

Answer

Chief Commercial Officer Nat Pieper acknowledged the unprecedented nature of Winter Storm Fern but emphasized DFW's long-term growth potential. He detailed operational improvements, including a new 13-bank structure, facility upgrades (Terminal F, A, C satellites), and airspace work, aimed at enhancing reliability. CEO Robert Isom stated that the connect versus local mix is expected to remain similar, with a focus on maximizing system-wide revenue.

Michael Linenberg inquired about the decision to invest in a nose-to-tail retrofit for the 777-200 fleet, asking if it was driven by a lack of new wide-body availability and what the cash payback period for these investments is.

Answer

Devon May, CFO, stated that the 777-200 retrofit has been planned for a while, as the aircraft is expected to operate well into the next decade. He believes the new flagship suite will be a fantastic addition, paying back nicely over the aircraft's useful life and supporting future CapEx requirements. Robert Isom, CEO, added that American aims to get full use out of its assets, focusing on a product that appeals to customers rather than solely having the youngest fleet. Regarding the government shutdown, Robert Isom noted a revenue impact of less than $1 million per day from government travel, with confidence in pent-up demand upon reopening. He also mentioned temporary operating delays and air traffic control issues at Reagan National Airport.

Michael Linenberg asked about the decision to invest in a nose-to-tail retrofit for the 777-200 fleet, considering its age, and whether it was influenced by a lack of new wide-body availability, along with the cash payback period for these investments.

Answer

Devon May, CFO, stated that the 777-200 retrofit has been planned for a while, as the aircraft is expected to operate well into the next decade. He noted that the new flagship suite would be a fantastic addition, providing a strong payback over the aircraft's useful life and supporting future CapEx requirements. Robert Isom, CEO, added that American aims to maximize the utility of its assets. Regarding the government shutdown, he noted its impact on revenue was less than $1 million a day, with confidence in pent-up demand upon reopening, and temporary operating delays at Reagan National Airport.

Michael Linenberg of Deutsche Bank asked if managed business revenue growth would accelerate in Q2 from the 8% seen in Q1, and inquired about the company's net gate position in Chicago following upcoming reallocations.

Answer

Vice Chair Steve Johnson stated that while he expects to continue growing corporate share, the absolute revenue depends on the broader economy. Regarding Chicago, he noted the company is appealing the gate reallocation but can accommodate its planned growth with its existing footprint.

Michael Linenberg of Deutsche Bank inquired about the number of A321neo XLR aircraft expected by 2029 and questioned the company's long-term strategy for widebody fleet replacement, including sourcing from multiple OEMs.

Answer

CFO Devon May confirmed that American expects to have 40 A321XLR aircraft by 2029. CEO Robert Isom emphasized the efficiency benefits of fleet simplification, highlighting the 787 as the widebody workhorse. He noted the company's young fleet and modest long-term CapEx needs provide a competitive advantage while a decision on the 777-200 replacement is pending.

Michael Linenberg asked if the previously mentioned $1.5 billion revenue hole from the distribution strategy is still the expected impact for this year and why the recent booking improvements aren't more reflected in the Q4 RASM guide. He also inquired about the impact of wide-body aircraft reconfigurations on international capacity.

Answer

CEO Robert Isom clarified that while forward bookings show progress, the financial impact was minimal in Q3 and is expected to build through Q4 before accelerating in 2025 as new corporate and agency contracts take full effect. Regarding capacity, he stated that the 777-300 reconfigurations are not scheduled to begin until 2025 and that current international capacity adjustments are primarily about optimizing aircraft deployment, such as balancing supply in London Heathrow to improve yields.

Michael Linenberg from Deutsche Bank asked about the impact of a competitor's growth in Chicago on United's domestic performance, and whether United's diversified network or strength in other markets like Newark would overshadow this drag.

Answer

CEO Scott Kirby stated that United's decade-long brand-loyal strategy inoculates it from competitive activity, noting United's significant lead in local and business market share in Chicago. He confirmed United's Chicago hub made a $500 million profit in 2025, outperforming the system, and committed to maintaining gate count in 2026, expecting continued profitability despite competitor losses.

Michael Linenberg asked if the prevailing view of domestic being the best-performing geography in 2026 would be impacted by a competitor's significant, loss-making flight additions in Chicago, or if United's diversified network could overshadow this drag.

Answer

Scott Kirby, CEO, addressed the Chicago situation, emphasizing United's decade-long strategy of building a brand-loyal airline. He highlighted United's substantial lead in local market share and business customers in Chicago. Despite competitor growth, United's Chicago hub outperformed the system and generated a $500 million profit in 2025, while the competitor incurred similar losses. For 2026, Kirby stated United would 'draw a line in the sand' to prevent losing gates and would add flights as needed, expecting to grow earnings in Chicago while the competitor's losses likely increase to $1 billion.

Michael Linenberg of Deutsche Bank inquired about the future of the flight caps at Newark and the considerations for returning it to a Level 3 slot-controlled airport. He also asked for the delivery timeline for the Airbus A321XLR aircraft.

Answer

CEO Scott Kirby expressed strong support for the FAA's actions, stating that he expects Newark to remain effectively capacity-controlled to ensure operational reliability, which is key to the hub's long-term success. Regarding the fleet, EVP & CCO Andrew Nocella confirmed that the first A321XLR deliveries are expected in the summer of 2026.

Michael Linenberg of Deutsche Bank asked about the drivers behind the growth in Basic Economy volume and the potential operational impact of the upcoming REAL ID deadline.

Answer

EVP and CCO Andrew Nocella stated that while Basic Economy volume was less of a factor in Q1, he expects it to increase in Q2 as United becomes more competitive at the lower end of the fare structure to manage load factors, effectively spilling less traffic to competitors. On REAL ID, he expressed hope for another extension but noted the company is working with the government on the issue.

Michael Linenberg asked about the revenue impact from the CrowdStrike outage and whether United plans to bring back service to smaller cities that were cut during the pandemic.

Answer

CEO Scott Kirby and EVP & CFO Mike Leskinen emphasized a 'no excuses' philosophy, explaining they build contingencies for such events into guidance rather than quantifying their impact. EVP & CCO Andrew Nocella stated there is no large-scale plan to change small community service, as the long-term strategy favors larger gauge aircraft over higher regional jet frequency.

Michael Linenberg inquired about the discrepancy between Allegiant's full-year consolidated and airline-only EPS guidance, specifically questioning the impact of Sunseeker Resort's losses. He also sought clarification on the terms of the Sunseeker sale, asking if the $200 million proceeds were clean or had other associated impacts.

Answer

President and CEO Gregory Anderson clarified that the guidance assumes the Sunseeker sale closes in September, after which its results will be excluded. He confirmed the transaction is a 100% sale to Blackstone for $200 million in cash proceeds to Allegiant upon closing, with no other residual stakes or complex impacts mentioned.

Michael Linenberg asked for key modeling inputs, including the fuel price assumption for the year and the revised full-year 2025 capacity growth forecast. He also sought clarification on the significant year-over-year decrease in 'other operating expenses' and the size of the associated gain on asset sales.

Answer

CFO Robert Neal provided a fuel price assumption of $2.40 per gallon. CCO Drew Wells stated the current full-year capacity growth forecast is around 13%, though CEO Greg Anderson added a bias to cut further if demand weakens. Neal explained the drop in 'other operating expenses' was driven by a gain on asset sales (smaller than in Q4 2024) and a reduction in non-salary flight crew expenses. He noted no gains are planned for Q2, but the asset sale program will continue in the second half of the year.

Michael Linenberg asked about the typical seasonality of the Sunseeker resort and requested an update on the total accrued amount for the pilot retention bonus.

Answer

President and CEO Gregory Anderson explained that for Sunseeker, Q1 is the strongest quarter, followed by Q4, with summer being the softest period. Chief Financial Officer Robert Neal stated that the pilot bonus accrual was just under $140 million at year-end 2024 and is expected to increase by approximately $22.5 million per quarter in 2025.

Michael Linenberg sought to clarify if the revised Sunseeker guidance accounts for potential insurance claims for damages or just booking impacts. He also asked for the total value of Allegiant's unencumbered assets, including its fleet.

Answer

President and CEO Gregory Anderson confirmed the Sunseeker guidance reflects revenue loss, while any physical damage claims would be handled separately. CFO Robert Neal quantified the company's unencumbered assets, stating that 51 aircraft are unencumbered, and the total value including spare engines and under-levered assets is approximately $650 million to $700 million.

Michael Linenberg of Deutsche Bank sought to quantify the expected margin drag in Q3 due to the cargo ramp-up and underutilized passenger fleet. He also asked about any observed changes in consumer booking behavior and the booking status for the December quarter.

Answer

CEO Jude Bricker estimated the Q3 margin drag to be around $10 million, or 4 percentage points. He stated that Sun Country is not seeing the same booking weakness as others, with strong demand and unit revenue improvements. He noted bookings are strong into the winter, and CFO Bill Trousdale confirmed the December quarter was booked in the mid-teens.

Michael Linenberg asked about demand trends through Q1 and into April, the rationale for tripling the revolver credit facility, and details on new gate capacity at the Minneapolis airport, including cost advantages.

Answer

CEO Jude Bricker noted a rapid acceleration in close-in fares for April and the summer, contrasting with some peers. CFO William Trousdale explained the revolver upsize was opportunistic, providing flexibility for asset buys or M&A. Bricker also confirmed they gained two new gates and are absorbing more common use gates at their dedicated, lower-cost terminal in Minneapolis, calling it a "strategic advantage."

Michael Linenberg from Deutsche Bank asked if Sun Country's planned capacity reduction in spring and summer could create opportunities for competitors to gain share. He also inquired about downside risk protection within the Amazon cargo contract, especially concerning potential tariffs.

Answer

CEO Jude Bricker explained that Sun Country's flexible model allows it to serve markets that are not viable for other carriers' daily, high-frequency models, so he is not concerned about competitors backfilling capacity. Regarding the Amazon contract, President and CFO David Davis and Jude Bricker clarified that the structure includes a fixed rate per aircraft plus a block hour rate, which functions as a de facto minimum and insulates them from risks related to aircraft load factor.

Shannon Doherty, on for Michael Linenberg, asked about the driver for the 48% year-over-year increase in 'other revenue' and inquired about the company's approach to balancing free cash flow between share buybacks and other uses, given the stock's limited liquidity.

Answer

President and CFO David Davis explained that the primary driver of higher 'other revenue' is income from aircraft leased to other carriers. On capital allocation, Davis stated the company is focused on rapidly amortizing debt and does not plan share buybacks in the near term but will revisit the possibility in 2025 as cash builds, acknowledging the trade-off with the stock's limited float. CEO Jude Bricker noted that Q3 represents the seasonal low point for cash balances.

Michael Linenberg from Deutsche Bank asked whether the observed acceleration in close-in bookings is a temporary or structural shift. He also sought to clarify the total size of the United partnership's contribution by asking for the original partnership placeholder value in the JetForward plan.

Answer

President Marty St. George responded that the company is not ready to call the close-in booking trend a permanent change, attributing it more to cautious consumer sentiment. CEO Joanna Geraghty clarified that they have not broken out the total value of the United deal, but the $50 million in incremental EBIT is largely from the Paisley subsidiary benefits, with the full run-rate not expected until 2028.

Michael Linenberg asked for an update on the Pratt & Whitney engine compensation, including the timing of a potential settlement and whether JetBlue is currently booking any related compensation in its P&L. He also inquired about plans for adding new destinations in 2025.

Answer

Financial Officer Ursula Hurley reported improvement in the Pratt & Whitney situation, with only 10 aircraft on the ground versus the mid-to-high teens expected, due to engines staying on wing longer and better supply chain performance. She confirmed JetBlue is not booking any P&W compensation and has no assumptions baked into its 2025 guidance. President Martin St. George added that multiple new destinations will be added to the route map later in the year.

Michael Linenberg asked how recent network changes have impacted the mix of corporate versus leisure travel and the booking curve. He also inquired about the sales launch timing for the new domestic first-class product.

Answer

President Marty St. George responded that there has been no significant change to the business-leisure mix or booking curve, as the exited cities had low business penetration. He clarified that the first installation of the new first-class product is scheduled for 2026, with no revenue expected in 2025, which aligns with the JetForward plan's phasing. CEO Joanna Geraghty added that many network changes are still in their early ramp-up phase.

Michael Linenberg from Deutsche Bank inquired about the potential P&L and cash flow benefits from Delta's fully funded pension. He also asked for color on the recent shift to a closer-in booking curve.

Answer

CFO Dan Janki explained that the fully funded pension provides a modest expense benefit and noted the GAAP surplus is now close to $1 billion, reflecting significant financial strengthening. President Glen Hauenstein confirmed the booking curve had shifted closer-in but added that there are early indications it is starting to lengthen again, which would be a positive for future cash flow.

Michael Linenberg asked about the financial tailwinds on the P&L and cash flow from Delta's now fully funded pension plan. He also asked for more color on the recent shift to a closer-in booking curve and its effect on forward load factors.

Answer

CFO Dan Janki explained the pension provides a modest expense benefit in the "other income" line and that its fully funded status is a testament to Delta's financial strength. President Glen Hauenstein described the booking curve shift, noting a drop-off in the 60-120 day window but said there are recent indications it is starting to move back out, which is correlated with consumer confidence and would be favorable for cash flow.

Michael Linenberg asked about recent booking trends, specifically if there was a drop-off or an increase in cancellations in the past week. He also inquired about the state of the international booking curve for the summer and the effectiveness of recent pricing adjustments.

Answer

President Glen Hauenstein reported that after a brief single-day drop, sales have recovered to levels above the prior year, with no significant increase in cancellations. He confirmed the booking curve has moved further out, and Delta has adjusted to take more early bookings to mitigate close-in weakness. He noted international routes are well-booked for the spring and early summer.

Michael Linenberg from Deutsche Bank AG sought clarification on the organic domestic demand growth rate, which seems to be in sync with supply, and asked about the future cost impact of recent GDS renewals and the NDC strategy.

Answer

President Glen Hauenstein estimated that organic domestic demand growth is still around 4% and expressed encouragement about the improved supply-demand balance. Regarding distribution, he stated the strategy is to be present where customers shop and that while costs have historically decreased, future trends depend on consumer behavior.

Michael Linenberg questioned the severe Q1 TRASM decline, which resembled COVID-era levels, asking if fare stimulation was underperforming and what provides confidence for a second-half 2025 rebound.

Answer

Airline Executive Vice President Holger Blankenstein acknowledged that external pressures muted the typical Easter demand shift, leading to weak Q2 TRASM guidance similar to Q1. He expressed confidence in a second-half recovery, citing the historical resilience of VFR traffic during high seasons and cautiously optimistic booking trends for July and August.

Michael Linenberg asked for clarification on the drivers behind the guided 15% year-over-year RASM decline for the March quarter, questioning the specific impacts from U.S. vs. Mexico originating traffic, foreign exchange, stage length, and the Easter holiday shift. He also inquired about the cash flow impact of the reported $13.6 million sale-leaseback gain.

Answer

Holger Blankenstein, Airline Executive Vice President, attributed the RASM pressure to reduced travel willingness in the transborder VFR segment following the U.S. elections and a 20% peso devaluation, though noting high seasons remain robust. Chief Financial Officer Jaime Pous added that the sale-leaseback gain corresponds to six aircraft and that cash inflow is of a similar magnitude, around $3 million per aircraft.

Michael Linenberg asked for the expected number of grounded aircraft in Q4, whether a redelivery credit was anticipated, and if new southbound leisure routes might also attract a VFR (Visiting Friends and Relatives) customer base.

Answer

CFO Jaime Pous estimated an average of 32 aircraft on the ground for Q4. Airline EVP Holger Blankenstein stated no redelivery credit is expected, as lease extensions were already handled. He also confirmed that new leisure routes will absolutely have a mixed customer profile, including VFR traffic, by targeting markets with an existing presence.

Michael Linenberg of Deutsche Bank inquired about the delay in the final DOT approval for SkyWest Charter, the potential fleet size of the charter business, and the strategy for the company's third-party aircraft leasing portfolio.

Answer

President and CEO Russell A. Childs attributed the delay in final DOT approval to the 'chaotic' environment in Washington D.C. but expressed confidence it is coming soon. He noted the company is not getting ahead of itself on sizing the charter business until final approval is received. Chief Commercial Officer Wade Steel confirmed the third-party lease portfolio is stable at around 40 aircraft and that the company continuously evaluates whether to operate these planes itself or continue leasing them, also highlighting the strong demand and good business in engine leasing.

Michael Linenberg from Deutsche Bank inquired about the origin of the 40 CRJ550 aircraft for United, the remaining number of grounded CRJ700s, sought clarification on the 2025 maintenance expense forecast, and asked about the potential to restore service to cities previously cut due to pilot shortages.

Answer

Chief Commercial Officer Wade Steel clarified that of the 40 CRJ550s, 11 are purchased from United's storage and 29 are converted from SkyWest's existing fleet, leaving about 20 dual-class CRJs grounded. Chief Financial Officer Robert Simmons confirmed the 2025 maintenance expense forecast is approximately $800 million, or $200 million per quarter. CEO Chip Childs added that restoring service involves returning to abandoned cities, increasing frequency in current ones, and entering new markets, driven largely by prorate opportunities.

Michael Linenberg observed that the network buildup in San Diego appears to be funded by reductions in San Francisco, questioning if this signals a strategic shift. He also asked about potential real estate constraints in key hubs like Seattle and Portland for co-locating with Hawaiian Airlines.

Answer

Executive Andrew Harrison described the network changes as "smart" reinvestments from loss-making markets into the more profitable San Diego. CEO Benito Minicucci emphasized that San Francisco and Los Angeles remain key parts of their strategy. Regarding real estate, Harrison sees no material constraints, while Minicucci highlighted Portland as a "huge opportunity" with ample capacity to serve as a relief valve for Seattle.

Michael Linenberg of Deutsche Bank asked for the approximate local versus connecting traffic mix in Seattle and Portland, noting the impressive growth was likely off a low base. He also requested a run-rate for freighter costs to help model CASM-ex fuel accurately.

Answer

CCO Andrew Harrison confirmed the local/connect mix numbers were in the right ballpark and clarified that the high connection growth occurred during the low season. He cautioned not to expect similar growth rates in peak periods when planes are already full. CFO Shane Tackett explained that freighter costs were almost at their full run-rate in Q4, with just four more of the ten Amazon freighters to be added, after which costs should be at a steady state.

Michael Linenberg asked whether the moderating domestic revenue environment is driven more by macro factors or a supply-demand imbalance. He also inquired about the revenue and load factor contribution from the oneworld partnership and its influence on the premium seat expansion.

Answer

CCO Andrew Harrison suggested the moderation is mostly a capacity story, noting that where capacity and revenue grew in tandem (like first class), performance was strong. CEO Benito Minicucci added that despite the environment, the business model is resilient. Regarding oneworld, Harrison stated that while international connections are not a huge component of the network, the real upside is loyalty member benefits. CFO Shane Tackett clarified that partner-enabled revenue is about 7% of the total and is expected to grow.

Michael Linenberg of Deutsche Bank asked about the potential scale of the sale-leaseback strategy, the 2025 target for these transactions, and the status of outright aircraft divestitures.

Answer

CFO Tammy Romo explained that the company has many levers, with the bulk of the fleet strategy's financial benefit expected to come from outright sales of excess aircraft, which is dependent on Boeing delivery rates. She positioned sale-leasebacks as an NPV-positive tool to manage the exit of the -800 fleet. CEO Bob Jordan added that outright sales are the strong preference and expressed optimism that Boeing will exceed its conservative 38-aircraft delivery estimate for 2025, enabling more sales.

Asked about the composition of liquidity, target levels, the cash impact of the Elevate plan, the value of the remaining claim on TAP Air Portugal, and the nature of the regulatory review of the GOL codeshare.

Answer

Current liquidity of BRL 2.5B excludes an available maintenance credit line; the target is 10-20% of LTM revenue. The Elevate plan's cash impact can exceed its P&L benefit. TAP owes Azul ~€150-165M, which could be a source of liquidity this year. The regulatory review of the codeshare is a procedural matter that they are addressing and expect to resolve soon.

Asked how much of the subpar revenue result is attributable to new market development and the time required for those markets to mature. Also inquired about liquidity, specifically the potential quarter-over-quarter change in the Air Traffic Liability (ATL) and the year-end liquidity forecast.

Answer

Executives responded that exposure to new, developing routes in Q2 is relatively low and not a major driver of results. On liquidity, they expect the ATL to turn around and revised the year-end liquidity forecast to the $1.2 billion to $1.3 billion range, anticipating being cash neutral to positive for the remainder of the year.

Michael Linenberg of Deutsche Bank sought clarification on whether the 4-6% block hour growth was sequential, asked about attrition for first officers required to upgrade, and questioned the financial impact of partner-directed cancellations.

Answer

Executive Jonathan Ornstein confirmed the projected 4-6% block hour growth is sequential. He stated that mandatory upgrades have not caused significant attrition, as most pilots are in the United Aviate program and wish to remain. Ornstein clarified that the primary financial headwind is not daily cancellations but rather being scheduled below maximum capacity by their partner, particularly on the CRJ fleet, due to industry-wide operational conservatism.

Michael Linenberg sought clarification on whether the 4-6% block hour growth target was sequential, asked if requiring first officer upgrades causes attrition, and questioned the financial impact of partner-directed flight cancellations.

Answer

Chairman and CEO Jonathan Ornstein confirmed the growth target is sequential. He stated that required upgrades have not caused significant attrition, as most pilots are in the valuable Aviate program. Regarding cancellations, he explained the larger issue is not day-to-day cancels but overall planned block hours being below potential due to United's conservative scheduling, which he expects to improve.

Michael Linenberg from Deutsche Bank asked about the long-term strategic plan for the 38 CRJ-900s, their cost competitiveness against the E-175 with new pilot pay rates, and their operational capability in high-altitude airports.

Answer

Chairman and CEO Jonathan Ornstein described the CRJ-900s as a medium-term solution for the next two years, with the ultimate goal being to operate the full fleet of 80 E-Jets. He confirmed the CRJ-900's fuel efficiency advantage but noted the E-175's superior passenger appeal. He also stated that the CRJ-900 is likely not capable of operating in challenging high-altitude airports like Aspen.