American Airlines Group Inc. (AAL) Q4 2020 Earnings Call Transcript

American Airlines Group Inc. (NASDAQ: AAL) Q4 2020 earnings call dated Jan. 28, 2021

Corporate Participants:

Daniel Cravens — Managing Director of Investor Relations

Doug Parker — Chairman and Chief Executive Officer

Rob Isom — President

Derek Kerr — Chief Financial Officer

Alison Taylor — Chief Customer Officer

Vasu Raja — Chief Revenue Officer

Stephen Johnson — Executive Vice President of Corporate Affairs

Analysts:

David Vernon — Bernstein — Analyst

Savi Syth — Raymond James — Analyst

Mike Linenberg — Deutsche Bank — Analyst

Catherine O’Brien — Goldman Sachs — Analyst

Hunter Keay — Wolfe Research — Analyst

Dan McKenzie — Seaport Global — Analyst

Jamie Baker — JP Morgan — Analyst

Helane Becker — Cowen — Analyst

Joseph DeNardi — Stifel — Analyst

Andrew Didora — Bank of America — Analyst

Scott Forbes — Jefferies — Analyst

Mary Schlangenstein — Bloomberg News — Analyst

Alison Sider — Wall Street Journal — Analyst

Dawn Gilbertson — USA Today — Analyst

Leslie Josephs — CNBC — Analyst

Tracy Rucinski — Reuters — Analyst

David Koenig — The Associated Press — Analyst

Presentation:

Operator

Good morning, and welcome to the American Airlines Group Fourth Quarter 2020 Earnings Call. [Operator Instructions] Following the presentation, we will conduct a question-and-answer session. [Operator instructions]

And now, I would like to turn the conference to today’s moderator, Managing Director of Investor Relations, Mr. Dan Cravens.

Daniel Cravens — Managing Director of Investor Relations

Thanks, Victor, and good morning, everyone. And welcome to the American Airlines Group fourth quarter 2020 earnings conference call. Joining us on the call this morning, we have Doug Parker, our Chairman and CEO; Robert Isom, President; and Derek Kerr, our Chief Financial Officer.

I’ll turn the call for the Q&A session — several of our senior executives, including Maya Leibman, Steve Johnson, Vasu Raja, Alison Taylor and David Seymour. Like we normally do, Doug will start the call with an overview of our quarter and the actions we’ve taken during this pandemic. Robert will then follow with some remarks about our commercial and other strategic initiatives. After Robert’s remarks, Derek will follow up — follow with the details on the quarter and our operating plans going forward. After Derek’s comments, we will open the call for analysts’ questions and lastly questions from the media.

Before we begin, we must state that today’s call does contain forward-looking statements, including statements concerning future revenues, costs, forecast of capacity fleet plans and liquidity. These statements represent our predictions and expectations as to future events, but numerous risks and uncertainties that could cause actual results to differ from those projected.

Information about some of these risks and certain uncertainties can be found in our earnings press release filed within 8-K this morning as well as our Form 10-Q for the quarter ended September 30, 2020. In addition, we will be discussing certain non-GAAP financial measures this morning, which excludes the impact of unusual items. A reconciliation of those numbers to the GAAP results is included in the earnings press release and that can be found on the Investor Relations section of our website. A webcast of this call will also be archived on the website. The information that we’re giving you on the call is as of today’s date and we undertake no obligation to update the information subsequently.

So thanks again for joining us. And at this point, I’ll hand the call over to our Chairman and CEO, Doug Parker.

Doug Parker — Chairman and Chief Executive Officer

Thank you, Dan, and thanks everybody for being with us. So before I begin my prepared remarks, I want to preemptively state that we will not be commenting nor answering questions on the recent activity in our stock price. As a rule, we don’t speculate on the day by day movements in our share price. We will stick to that rule today. So, we do a lot — we do want to talk about. So I’ll get started, and then Robert and Derek will add some more and we will take questions after that as we always do.

So 2020 was, obviously, an incredibly difficult year. But we couldn’t be prouder of what the American Airlines team accomplished in the face of extraordinary challenge. Our team kept the country and economy booked and did so safely with great care. American Airlines with more customers last year than any other airline, and our team did so. We’re running a solid operation in sharing our aircraft, and airport facilities were clean and safe for every customer needs.

The airline was on [indecipherable] with the extension of the Payroll Support Program as positive outcome is the result of the company and union leadership working on and off bringing PSP2 over the finish line. It’s clearly a great thing to come about when we raise our voices together for the greater good. Of course, we’re also grateful to our elected officials who recognized that the airline industry plays a vital role in the recovery from the pandemic.

We talk a lot about the best days of airlines. We use that term to describe moments to make American truly unique, and why our team believes it’s the best airline in the world. December 24 was that best day for me. We welcomed back all of our fellow team members and reinstated their payment benefits. Thanks for our tremendous support teams working around the clock. We were able to deliver thousand colleagues, their first paycheck in months.

A lot happened in 2020 on top of navigating the pandemic. Yes we took aggressive steps to permanently lower our costs, increase the liquidity and care for customers in ways we’ve never seen before due to COVID-19. But we also accomplished significant milestones like entering into groundbreaking new partnerships and reaching a new joint venture body agreement covering our fleet and maintenance costs.

In just last month, we seamlessly returned Boeing 737 MAX to commercial service. We’ll talk more about the accomplishment shortly as we sit here today, I can unequivocally state that despite every challenge thrown our way I’ve never been proud of a company in my entire career. The American Airlines team and our industry is incredibly resilient, and this past year has proven that.

As we turn our attention to the year ahead, 2021 will be a year of recovery. There are still a lot of unknowns, of course, when or how quickly demand will return. Make no mistake, it will return. The good news is there are vaccines. And well, it will take some time for them to be widely distributed, progress is being made every day and that’s encouraging. We don’t know exactly when we may return to prior levels of demand. What we do know is that we’ll prepare to withstand the ongoing crisis irrespective of how long recovery takes. We ended the year with over $14 billion of total available liquidity. And more importantly we’ve used this opportunity to make American much stronger. When the recovery does occur, we will be prepared and even better positioned than we were prior to the pandemic, and we will do so, I think our team, our customers and our company.

On the team front, we’re proud of the progress we made, especially in 2020. This crisis has brought the American team together, strengthen the relationship between management and our union partners in incredible ways. Since the onset of the pandemic, we’ve been meeting with our unions every two weeks to discuss the company’s response to the crisis and our path forward. And we sit side-by-side as we worked to advocate the PSP and PSP2. It will be even difficult decision to furlough 19,000 team members last fall. We prepared to that reality in a way that was cooperative and collaborative with our union partners.

Our hope is to expand what we’ve accomplished in the past year knowing that together we can be the best in the industry at advocating and caring for our team. For our customers, we’re doubling down on operational excellence. Once we are back at full speed, we’re positioned to run the best airline the American Airlines is ever running in terms of operating reliability. We would reset our network to focus even more on our strongest and best performing hubs and migrate to a much and more modern fleet.

We talked before about efficient growth in Dallas-Fort Worth, Charlotte, and that work is not yet done. We continue to modernize our facilities in Washington Reagan and improve the connectivity of Chicago O’Hare, Phoenix, Philadelphia and Miami. And we’re building a much stronger network than we had before.

In addition to the inherent strength of our hubs, in 2020, we established new and innovative partnerships with Alaska and JetBlue. It will make us stronger on the West Coast and in the Northeast. We also worked over the past year to make American a much more efficient airline. We had a truly unique opportunity to shutdown the largest airline in the world and rebuild around our strengths. This enabled us to bring forward and accelerated a number of efficiencies in 2020 that we were originally planned for the longer term. And we are passionately pursuing those efficiencies as we recover through 2021.

Derek will elaborate on this in his remarks, but two of the best examples are the permanent retirement of more than 150 aircraft in five different aircraft types, and a 30% reduction in our management staff. We believe the efficiencies we’ve built into the business will drive more than $1.3 billion of permanent, non-volume related, non-fuel related savings in 2021, and, of course, beyond.

So in summary, we could not be more proud to work the American Airlines team’s accomplishment over the past year. We’re very well positioned and feel great about where American is going to be as demand returns.

With that, I’ll turn it over to Rob.

Rob Isom — President

Thanks, Doug, and good morning, everyone. I’d like to also thank the entire team for their tremendous efforts in navigating an exceptionally challenging year. Supporting our team members and customers was paramount in 2020, and it continues to be a priority as we move into 2021. We continue to expand our pre-flight COVID-19 testing to make travel easier, including pre-flight testing for certain international destinations and at-home testing for travel to all US cities requiring negative tests.

In the fourth quarter, we began the roll out of the digital health passport, VeriFLY. So customers can easily confirm testing and COVID-19 travel requirements and streamline airport checking. This tool is now available for travel to many international locations and for travel in the United States. Starting today, customers also will have the ability to use VeriFLY for travel to the US, to the UK and Canada as we will continue expanding our use of VeriFLY this year to open up international travel in key markets.

With cleanliness and safety top of mind, we were pleased to achieve STAR certification in the Global Biorisk Advisory Council for our entire fleet of aircraft and for our Admirals Club lounges. This is a testament to the effect of cleaning disinfection, infectious disease protocols we put in place over the past year. When customers return to the sky, we’ve taken a number of steps to give them flexibility and confidence when they book with American. We have eliminated exchange fees on both domestic and international itinerary. And fees for mileage reinstatement are canceled award bookings; domestic same-day travel standby — standby travel and reservations booked by phone.

We also made it easier for top-tier customer to earn AAdvantage elite status, paused mileage exploration through June 30, 2021, extended 2020 status into 2022 for all members. Each of these efforts is predicated on our philosophy and American Airlines to be the easiest airlines to do business with, and we’ll continue delivering on that commitment as more people return to flying.

On fourth quarter revenue — our fourth quarter revenue was down considerably versus 2019, 64% year-over-year, but we saw improvements compared to the third quarter when revenue was down 73% year-over-year. The momentum we saw heading into the fourth quarter was tempered by the surge in COVID-19 cases, and the increased travel restrictions in many parts of the country.

As we have done throughout the pandemic, we responded by making constant adjustments to our schedule, while maximizing the connectivity of our network. It is a testament to our team that our fourth quarter passenger unit revenues were by far the best in the industry. We will continue to be flexible and match our future capacity with observed booking trends, while playing to the strength of our hubs in the parts of the country where travel demand is great. On a year-over-two-year basis, we currently expect our first quarter system capacity to be down 45%. The recent CDC order to require a negative COVID test for entry into the US has had an impact on our international bookings.

So many countries and hospitality providers are planning to make testing available to travelers, the timing and scale of these efforts remain unclear. Given this continued demand volatility, we will remain as flexible as possible and match capacity to demand. Our ongoing engagement with leisure operators will pay dividends as we head toward recovery. I want to acknowledge our sales team and entire customer organization for their work. This team was recently named Airline Partner of the Year by the American Society of Travel Advisors, and the Best Overall Airline for Students & Youth by StudentUniverse, which are both important accolades during such a challenging year.

Cargo remains a bright spot for our business. For cargo revenue in the fourth quarter was up 32% year-over-year despite flying a significantly reduced schedule. In 2020, American operated more than 5,200 cargo-only flights transporting 167 million pound of critical goods and supplies around the world during the pandemic. Cargo will continue to be an area of focus in 2021.

We remain optimistic about the recovery because of the changes that we’ve made to our network. We will offer customers the largest and most compelling global airline network, thanks to the actions taken in 2020. We will have the full run rate benefit of our educates at Dallas-Fort Worth and Charlotte, our best performing hubs, and we have a fantastic new facility at Reagan National that will enable us to up-gauge the hub. By the third quarter 2021, all of our DCA flights will have a first-class product that we will eliminate the 50-seat regional jet operations there.

Our fleet simplification continued up-gauging and approved connectivity will also scale the cost of our other connecting hubs and improve their revenue generating capabilities as well. Earning partnerships with Alaska and JetBlue will also create the best and large network for our customers on the West Coast and in the Northeast. Customers will have access to a seamless network that allows us to focus our assets and what we do best. In New York, we will remove the 50-seat regional jet, upgrade our service and offer a much more competitive network for customers. As a result, we will launch new long haul international flights to New York this summer when we start service to Tel Aviv and Athens.

Similarly, we are working with Alaska on the West Coast. And this year when demand returns, we will begin service from Seattle to London, Shanghai and Bangalore. We have also announced a new integrated frequent flyer offering and have signed new corporate contracts. This partnership is already creating value for customers throughout the West Coast, including our hub in Los Angeles.

Lastly, while we anticipate international demand will be slower to recover, we will use our strength in Latin America and our partnerships to create a leading international network. Our Latin American network as long that uniquely valued by our customers and its performance during the pandemic has been standout. Despite near-term demand volatility, we expect Latin America to recover sooner than the rest of our international network and we will continue to offer customers the largest and most comprehensive network in the region.

We have rationalized many parts of our trans-Atlantic and trans-Pacific networks during the pandemic and integrated more deeply with our partners. As an example, through our partnership with Qatar Airways, we’ve been able to leverage Doha as a global connecting hub, which has opened up many new markets for our customers. As demand recovers, we anticipate leveraging these partnerships to start flights and increase global — and increase global connectivity even more.

We believe the structural changes we made in 2020 will enable us to produce industry-leading revenues on lower expenses through a focused customer proposition, broader network and a smaller fleet. We will continue to adapt our business customers’ needs and we’ll keep working hard to make sure that they have peace of mind when they travel.

And with that, I’ll turn it over to Derek.

Derek Kerr — Chief Financial Officer

Thanks, Robert, and good morning, everyone. Before I begin my remarks, I would also like to thank our entire team for their tenacity and resilience throughout the pandemic. While 2020 was certainly a financial difficult year for the airline, the collaboration team work and shared grid our team demonstrated was impressive.

This morning we reported a fourth quarter GAAP net loss of $2.18 billion or $3.81 per share. Excluding $32 million of net special non-operating items, we reported a net loss of $2.21 billion or $3.86 per share. For the full year 2020, we reported a GAAP net loss of $8.9 billion, and excluding net special items, we reported a net loss of $9.5 billion.

Rob will talk about what we’re seeing with the revenue. So I’ll focus my remarks on the cost side of the P&L. Through aggressive actions, we have reduced our fourth quarter total operating expense, including net special items by 37% versus 2019. We remain focused on aligning our cost with capacity, while preserving the maximum amount of flexibility to respond to customer demand. We have accelerated several of our long-term efficiency plans, and as Doug mentioned, we are on track to permanently remove at least $1.3 billion from our cost structure in 2021 and beyond.

At the end of the fourth quarter, we had approximately $14.3 billion of total available liquidity. Costs were flat from the third quarter to the fourth and we continue to see a positive trend in our daily cash burn rate, which improved from approximately $44 million per day in the third quarter to approximately $30 million per day in the fourth quarter. The reduction was due to revenue improvements on higher capacity. As a reminder, our definition of cash burn includes $8 million per day of regular debt principal and cash severance payments.

During the quarter, our treasury team did a phenomenal job of continuing to strengthen our liquidity through a series of capital market transactions. We raised approximately $1.5 billion of incremental cash through two equity transactions to strengthen our balance sheet composition. And we still have $118 million left on our previously announced after market equity authorization.

I would like to take this opportunity to specifically thank our recently retired Treasurer, Tom Weir. Tom has been an invaluable member of our team for more than 20 years. His expertise will be missed. But I am confident our new treasurer Meghan Montana and her team will pick up right where Tom left off.

During the quarter, we took delivery of 10 MAX — 737 MAX aircraft, and we expect to take another seven this quarter. These aircraft were built on the MAX was grounded and we’re efficiently financed through sale-leaseback transactions. Also as a reminder, we reached an agreement with Boeing to secure deferral rights on eight of our 2021 MAX deliveries and all 10 of our MAX deliveries in 2022. We have deferred five of these aircraft to date. And as I mentioned last quarter to avoid exercising additional deferral rights, we would need to see substantial improvement in the demand environment.

As Doug discussed in his opening remarks, as we look ahead to a recovery in 2021, we are passionately pursuing the initiatives we have put in place to make the airline more efficient when we are back to a normalized demand and capacity environment. Like all airlines, our planning begins with our fleet. As we have mentioned on previous earnings calls, we have worked hard to rebuild our fleet into one that is simpler and much more efficient to operate, while offering our customers a consistent and improved product and experience. As part of that process, we have retired more than a 150 older non-core aircraft, including five total fleet types, lowering our average fleet age to 11.2 years, the lowest of the US network carriers.

Not surprisingly, the aircraft that we exited was a lease cost efficient aircraft in our fleet. With only four mainline aircraft types remaining, we will see improved aircraft utilization and operational efficiencies in the back half of 2021 through the increase in gauge, reduction in inactive aircraft, including spares and maintenance allocations.

Additionally, we have further accelerated our seat harmonization project and now expect the entire project to be complete by the end of 2021. When this work is done, we will have a more consistent product with more premium seats, larger overhead bends and in-seat power. These projects will provide significant opportunities to not only improve revenue production, but also lower our unit costs now and well into the future. As a result, when demand conditions improve, we could eventually reach 2019 levels of capacity with approximately 10% fewer aircraft.

We will also have a more efficient workforce on the other side of the pandemic. We reduced our management side by a third, resulting in an estimated $500 million of permanent cost reductions. For reference, that would drive more than entire pretax margin point on our total revenue base for 2019. Beyond that we have implemented $700 million in additional labor efficiencies that have been incorporated into our plans going forward. These includes, but not limited to optimized staffing plans and the utilization of technology to be more efficient across our operations.

For many of our work groups, these initiatives will allow us to achieve the best productivity levels that we have seen in years. Many of these projects would have come to fruition over time, but due to the extraordinary circumstances in 2020, we took the opportunity to accelerate and implement these efficiencies as part of our future foundation.

As we look into the first quarter, there continues to be a tremendous amount of uncertainty with bookings. Stubbornly high COVID-19 cases and more stringent travel restrictions continue to constrain demand. And as a result, we expect the first quarter demand environment to be very much like the fourth. As Robert noted, we expect capacity to be down 45%. We also expect total revenue to be down approximately 60% to 65% versus the first quarter of 2019 similar to our fourth quarter results.

When this flat revenue performance is combined with known cost pressures from higher fuel, restoring pay to our furloughed workers and volume driven expenses, we expect our first quarter pre-tax earnings, excluding special items, to be lower than the fourth quarter. We presently expect to end the quarter with approximately $15 billion in total available liquidity. This results in an average — our first quarter average daily cash burn rate of approximately $30 million per day flat with the fourth quarter.

The first quarter also includes approximately $9 million per day of debt principal and cash severance payments, which includes a $360 million WTC amortization, including the maturity of our 2011-1 WTC, which unencumbers 30 aircraft. Also included in our daily cash burn for the quarter is the $240 million contribution to our pension and $225 million at non-aircraft capex.

In terms of our balance sheet, we feel good about the flexibility and efficiency we have. Approximately 40% of our outstanding debt is pre-payable without penalty and we still do not have any large non-aircraft debt maturities until our $750 million unsecured bond matures in June 2022. After all the COVID related financings, we completed in 2020, our average cost of debt is just over 4%.

For guidance for the full year of 2021, our debt payments will be $2.9 billion and our pension payment is $695 million. Full year capex will be $900 million of non-aircraft capex. And due to our negotiated settlements with Boeing discussed earlier and attractive aircraft financing, our net aircraft capex, including PDPs, will be an inflow of $1.2 billion.

As we have previously stated, when demand recovers, we expect to use all excess cash to further delever our balance sheet. Earlier this month, we received the first installment of approximately $3.1 billion of PSP2 funds from the Treasury Department and negotiated an extension on the final draw date of the CARES Act loan facility from March 26 to May 28, 2021. This extension gives us more time to decide our liquidity needs for the year based on the pace of the recovery as well as to evaluate alternatives to drawing the CARES Act loan.

Our industry still has a long path to recovery ahead, but the actions we have taken in American to conserve cash bolster liquidity and drive permanent efficiencies across the business give us confident if we are well positioned for the year ahead and the long term.

And with that, I’ll open it up to questions from the analysts.

Questions and Answers:

Operator

[Operator Instructions] And our first question will come from the line of David Vernon from Bernstein. You may begin.

David Vernon — Bernstein — Analyst

Hey, good morning guys. I’m wondering if you could help us frame what the cost actions you guys have taken and the efficiencies that you guys put forth through this crisis. Frame how that — how we should be thinking about EBITDA margins in a perspective from a ’23 or maybe ’24 level? If you think about the $1.3 billion of non-operating cost take-out plus the efficiencies of a fleet, if we get the revenue levels that we saw in 2019, where should we be thinking the EBITDA margins will shake out at that point?

Doug Parker — Chairman and Chief Executive Officer

Hey, David. Really hard, of course, to project 2023 margins are going to be without knowing how the demand is going to be. So again, when I think for best answer as I tell you, the $1.3 billion, as we described is real sustainable. I think what we when other ways taken that is if we weren’t starting 2019 right now with this wave — with this way of organization, this management team in, our earnings in 2019 would have been $1.3 billion of that — consistent and other things to happen, we’ve added. We had a contract with our you know — so begin out with — those adjustments. But it’s real — and it’s fundamental difference in the airline right now. So it can give that to make your own 2023 projections.

David Vernon — Bernstein — Analyst

Yeah. I realized it’s difficult to nobody knows what demand is. I guess in our conversations with investors, it feels like people are framing your earnings power off of 2019 base when it sounds like with the fleet changes you’re making and with the cost reduction you’re actually taking that — that’s too low of a starting point. And I guess I’m just trying to understand if that is the right way to think about it? Or if you think that the earnings power of the businesses is going to be materially higher or higher than it was, again assuming the revenue environment stays?

Doug Parker — Chairman and Chief Executive Officer

Yes. David, we can appreciate the question. It’s really hard to figure out the margin mix so depending on revenues. But to answer your question, to the extent, people are modeling 2023 with whatever revenue assumptions they want to do. If you work and if you didn’t know that American Airlines is going to be $1.3 billion more efficient, you should go with your numbers, if you have already expected that, you only have to adjust with that. That’s where we are. Those are real differences in the way this company is not structured versus where it was in 2019.

David Vernon — Bernstein — Analyst

All right. Thanks for the time.

Doug Parker — Chairman and Chief Executive Officer

Thanks David.

Operator

Our next question will come from the line of Savi Syth from Raymond James. You may begin.

Savi Syth — Raymond James — Analyst

Hey, good morning, everyone. Just, if I might on the cost side of things, can you provide any color on like 1Q ’21? And what you’re expecting on the opex side, including what might be temporary because of PSP2? And just a follow-up on, Doug, your comment in response to David, I think, are you basically saying the 2019 capacity you should see $1.3 billion less and kind of non-fuel opex out of the system. Is that fair way to look at it?

Doug Parker — Chairman and Chief Executive Officer

Yes.

Rob Isom — President

Yeah. And Savi, to answer, I mean the one number that we do know is the number added back to salaries is about $300 million, which is the amount of money that we would have higher salaries due to PSP2 coming back. The other is volume. I think fuel price is definitely up. Fuel price — and we gave you a 45% capacity. So I think if you calculate where the price of fuel is now and that capacity increase — that fuel should be up right around $300 million where the curve is today. And then we had a little bit higher regional expenses because we are growing the regional little bit by about $100 million. So those are the key — the three key things. The rest is just depending on volume of growth that we have over the fourth quarter.

Savi Syth — Raymond James — Analyst

That’s helpful. Thank you.

Doug Parker — Chairman and Chief Executive Officer

Thanks, Savi.

Operator

Thank you. Our next question comes from the line of Mike Linenberg from Deutsche Bank. You may begin.

Mike Linenberg — Deutsche Bank — Analyst

Yeah, hey, two here. I guess, Robert and Doug — Robert you sort of alluded to the fact that the new testing requirement that went into effect, I guess, earlier this week. It was obviously having some impact on maybe bookings to, from Latin America, Caribbean, etc. What thoughts on — I know that the administration this week floated the possibility of domestic testing. And I just logistically, I just, I can’t get my arms around that and I’m not even sure if the airports would be able to facilitate it maybe, it’s an at-home type product, and it sounds like maybe you are gearing up for that, given what you’re doing sort of behind the scenes. Can you just talk about that? And whether or not that would even be feasible?

Doug Parker — Chairman and Chief Executive Officer

Hey, Mike, it’s Doug. We certainly have been informed that’s something that’s evidenced. And what we know is what Robert said about international testing is we’re doing that work. And Robert said it’s had an impact on demand serving on short haul international flying. But we’re supportive of that in anyway — domestic testing as reasons you stated, I mean — seems. So I think that would both be difficult and would have us testing Americans on airplanes that we all know our states to be on.

So we’ll obviously work with the administration of what they think makes sense to our best to make sure that we’re all doing everything we can to make sure that people are safe and also that we get through this pandemic as quickly as possible, which is our best interest, but also to know what kind of impact that would have on travel. But again to be — the bigger point is we have — what you say has been floated under-reported docs and — so we have that — directly from regulators or others about that possibility.

Mike Linenberg — Deutsche Bank — Analyst

Okay. Great. Very good. And then just a quick one to Derek. You gave us the growth or you gave us the pension contribution for the year. I think you said $695 million. How does that compare to the — what you anticipate expensing on the P&L? Thanks. Thanks for taking my questions.

Derek Kerr — Chief Financial Officer

So the expensing on the P&L is actually the credit of — I think it’s, but let me get you back on that number to make sure we’ve got it right.

Mike Linenberg — Deutsche Bank — Analyst

Not a problem. Thanks everyone.

Doug Parker — Chairman and Chief Executive Officer

Thank you, Mike.

Operator

Thank you. Our next question comes from the line of Catherine O’Brien from Goldman Sachs. You may begin.

Catherine O’Brien — Goldman Sachs — Analyst

Hey, good morning, everyone. Thanks for the time. So my first one is on the $1.3 billion — the cost-cut. I guess, could you just walk us through what some of the larger buckets are there? It sounds like fleet simplification, management team, if you sense management cuts percentage of that, I know you gave the $500 million from the management headcount reduction. And then you talk a bit in your prepared remarks, but can you help us think about what proportion of that was even it was pulling forward, initiatives you lead out versus maybe potentially some new opportunities that came from turning over additional tones without a COVID?

Derek Kerr — Chief Financial Officer

Yeah, I would say, I mean, the two big buckets as I talked about are the $500 million in management and then $700 million in other labor. And that goes through all groups. So it goes that say — as you get the summary — it’s through every group, pilots, flight attendants, maintenance, fleet service. So as we looked at every group, we look and see how can we be as efficient as we can in each one of these as we brought the people back. So there is no — the biggest time definitely as management, and that’s the $500 million, and the $700 million goes in other things.

We have a bunch of other items that are in that, these facilities consolidations, fuel efficiencies, benefits, a lot of other items that we have gone through to make sure that we’re as efficient as possible. We do have other savings that are out there that due to volume will be down, but we’ll have to see if those are permanent over time and whether they come back.

So I would say we did take advantage of this to do some of this earlier. All of it was on our plans over the next, probably three years, but we’ve brought all of that forward and as we went through the process of unfortunately having to furlough people and as we bring people back, how do we be as efficient as possible, and that’s what we’ve done. Dynamic manning into airport, single agent boarding at airports, all of that stuff has been accelerated through this process, and will be put in place as we grow back.

Catherine O’Brien — Goldman Sachs — Analyst

Got it. Understood. And actually maybe one more for you, Derek. Can you just walk us through the calculus in determining how much cash you want to get on your balance sheet for the coming months, just given the uncertainty? Is there a new minimum you want to have until demand gets back to a certain point? And you just kind of factor in your expectations on cash burn to help decide on potential incremental raises? Or is it really just more opportunistic either use equity to pay down debt in the future or keeping the pulls under the market, these are opportunities to raise both expense and debt…

Derek Kerr — Chief Financial Officer

Yeah, I think, I mean, we don’t have any requirements other than $750 million in 2022, and then we do have some payments, some term loans and some to come up in 2023. So right now we’ve gotten ourselves, at the end of this quarter, we will be at $15 billion, a significant amount above the $7 billion we had in the past. So I think the liquidity is there. But we — when people are [indecipherable] we have to keep watching it, see where the recovery is. But we are going to be opportunistic. Our biggest — we talked about the government loan, which we have $7.5 billion against the frequent flyer program for that government loan, which we would have to pull by May 28.

The determination of what do we do there is one of our — one of the biggest things we’re going to do in the next few months. But we’re happy with the liquidity to level where we’re at. We are in a really strong position. We don’t have a lot of capex coming forward in the next two years at all. As I talked about our actual net capex is positive this year, which will bring in cash flow for us.

So our biggest thing to look at right now is the government loan, how do we refinance that. Actually we haven’t pulled it yet. So how do we — what do we do for using that collateral and how much liquidity do we raise in that transaction but we’re really comfortable where we’re at and we don’t have a lot of commitments going forward from an aircraft standpoint or capex standpoint or debt standpoint in the next two years.

Catherine O’Brien — Goldman Sachs — Analyst

Understood. Thanks.

Operator

Thank you. Our next question will come from the line of Hunter Keay from Wolfe Research. You may begin.

Hunter Keay — Wolfe Research — Analyst

Hey, good morning everybody.

Doug Parker — Chairman and Chief Executive Officer

Hey, Hunter.

Hunter Keay — Wolfe Research — Analyst

Hey, couple for you Derek, probably. What’s the latest on the 787 delivery schedule for this year? And just — can you just give us a rundown on what you’re planning for aircraft deliveries this year and next? And how many of them you’re already financing in place for?

Derek Kerr — Chief Financial Officer

Yeah. So we have — right now we haven’t changed the delivery schedule on 788 yet. We have 19 deliveries coming this year. All fully financed. And as of right now, they’re coming, but we are talking with our partners on those aircraft. The MAX, we have eight more coming, seven will come this quarter, all fully financed. And we have 16 NEOs coming, all of those fully financed. So our actual net aircraft capex, when we just talk about capex, it’s actually a positive. So those aircraft coming in will be positive cash flow.

Next year, we have 26 Airbus 321s coming in, no financing. We have backed our financing on those, but no permanent financing yet. So we’re working on 2022. We won’t take any aircraft that don’t have financing going forward. So we’re fully financed on all 2021 with really good financing and we still are looking at 2022 right now. And we will look — as we look at the Airbus planes next year in the 788s, we’ll continue to look at those aircraft as we talk to manufacturers.

Hunter Keay — Wolfe Research — Analyst

That’s super helpful. Thanks, Derek. And then, just two sort of quick clean-up ones. Interest expense, can you help me out with that this year and next will be great, even ’23, if you want to take a stab at it? And then what is your blackout period? And thanks.

Derek Kerr — Chief Financial Officer

This is number two. Blackout period ends today or tomorrow.

Hunter Keay — Wolfe Research — Analyst

Okay.

Derek Kerr — Chief Financial Officer

And I’ll get back to you on the net interest expense numbers.

Hunter Keay — Wolfe Research — Analyst

Okay, great. I’ll leave.

Operator

Thank you. Our next question will come from the line of Dan McKenzie from Seaport Global, you may begin.

Dan McKenzie — Seaport Global — Analyst

Hey, thanks. Good morning guys. Question on corporate demand, the broad view is that it’s permanently impaired. And I’m just wondering if you can elaborate on the latest conversations with your corporate travel managers, what that path to recovery might look like? I’m pretty sure there’s no airline planning for 50% permanent decline in the spin. And I’m thinking Americans got some share shift here. But I’m just wondering if you could just help us connect the dots on this part of the recovery story?

Doug Parker — Chairman and Chief Executive Officer

Yeah, I think I will hand to Vasu. I’ll start into that. Look, the reality is that corporate value demand is down, 5% to 10% of what its historical levels were. And though, we are very optimistic it will then return as vaccines are distributed, the timing, the speed, the rate of that is unclear at that. But also as important as that is the thing that I really never forget, I mentioned is a lot of due again here is the power of the network business, right? For us it’s the primary value we create. And we create more origin and destination markets for customers that creates more value for them and that results them — they’re paying more for that product.

And indeed, what we see right now is that 50% of the revenue that we’re drawing are from origin and destination markets where really American Airlines has the best network or in some cases, the only travel option. And indeed the yields in those markets are 50% higher than in markets where our product is the most commoditized and at time different carriers can provide the OMB.

So that’s a huge degree of leverage in the business because, of course, we are doing versus that we can move our capacity around. And so we’re aware — where corporate travel, it’s slowed to come back and we should expect that it is. What we really try to do is make the airline as limber as possible so that we can go and create as much connectivity where there is travel demand. And that something — in some cases that we are taking leisure — we’re taking it in some cases, where our origin and destination network is uniquely advantaged versus other airlines and the yields that we see in those are materially higher than what we can generate even from what the business travel is there and really commoditized.

Alison Taylor — Chief Customer Officer

Thanks. But one thing really close to our corporate travel managers and their risk management team to get the lot of the information they need to feel comfortable to get their travelers back on the road. And how you think that most of guys doing that and building confidence in travel through information and communication. We also stayed very close to GBTA and the other large association who provide great communication to these travel managers. Little early to say, but as you saw some of the surveys coming out from GBTA, they did indicate the back end of ’21 can start COVID travel. Thank you.

Dan McKenzie — Seaport Global — Analyst

Yeah. Thanks for the perspective. I guess just following up on that, I’m wondering if you can elaborate a little bit more on travel passport initiatives. What countries are you focusing on initially for adoption? And I appreciate, it’s early. But, is there a read on what is going to take for these — for countries to get a little more comfortable with this idea, maybe COVID metrics or what might they want to see?

Alison Taylor — Chief Customer Officer

Mostly we feel very positive as we don’t do this alone. So working with the tourism body, hotel partners, we have been able to spend very quickly in non-t plus markets, testing and posts. We have our VeriFLY help format that provides all the documentations you’re ready to travel. You bought your tickets you can go. And actually it makes sense — around Tuesday with thousand plus truckloads coming back from [indecipherable] to the US. Everyone checked in and boarded successfully and have their negative tests.

So we’ve been able to facilitate this through communication with our customers and being very proactive without notification and calling customers directly and working on the brand across every station led by Jose Freig, who has done a great job making sure that with our brand we’re ready to help our customers.

Dan McKenzie — Seaport Global — Analyst

I see. Thank you. Appreciate it.

Doug Parker — Chairman and Chief Executive Officer

Thanks, Dan. Thanks, Alison.

Operator

Our next question comes from the line of Jamie Baker from JP Morgan. You may begin.

Jamie Baker — JP Morgan — Analyst

Hey, good morning everybody. Very thorough call. Most of my questions have been answered. But Derek, you disclosed that you’re able to achieve 2019 capacity on 10% of your aircraft. Would you be able to express the capacity base that would be required to get you back to 2019 ex-fuel CASM? Apologies, if I missed that in your prepared remarks.

Derek Kerr — Chief Financial Officer

Capacity base meaning air — number of aircraft?

Jamie Baker — JP Morgan — Analyst

No. ASMs. And if 2019 is even the correct base to be using, that’s just sort of become the industry standard at the moment. How much capacity do you have to operate to get back to —

Derek Kerr — Chief Financial Officer

Yeah, what we’re trying to do it — I mean, obviously, we’re not back to those levels yet and we don’t know when we’re going to be back to those levels. All we’re trying to do is equate to the fact that if we did get back to 2019 levels, we could do it with a significant amount, fewer aircraft, because we got — we don’t have to add a bunch of aircraft to get to those levels. Our spares are down, our maintenance allocations are down, the MAX has come back, which were down in 2019.

So we have a significant amount of utilization increase and gauge increase in our fleet. So that we would not have — in order for us to get to 2019 levels, the point is that we would not need anywhere near as many aircraft to get to those levels because of those things. Whether that’s the right point it’s a level that we know and that we were at back at that point in time, hopefully, some day in the future we will be ahead of those levels.

Jamie Baker — JP Morgan — Analyst

Sure. Would you have a corresponding ex-fuel CASM number that would then equate to the 2019 capacity?

Derek Kerr — Chief Financial Officer

No, we don’t have that right now. Yes.

Jamie Baker — JP Morgan — Analyst

And second, I came into the call Mark and I also curious on with the net proceeds of PSP were going to be in it. And I think you answered this in response to Savi’s question. So is the $300 million in incremental labor, the only thing we net out? Or were there any other additional operating costs?

Derek Kerr — Chief Financial Officer

That’s what you would net out.

Jamie Baker — JP Morgan — Analyst

Okay. All right. Thank you very much. Take care.

Doug Parker — Chairman and Chief Executive Officer

Thanks, Jamie.

Jamie Baker — JP Morgan — Analyst

Thanks, Doug.

Operator

Our next question will come from the line of Helane Becker from Cowen. You may begin.

Helane Becker — Cowen — Analyst

Thanks very much, operator. Hi, everybody. Thanks for the time. Doug, you’ve been very close to Washington and you’ve done a lot to get this PSP in place. Has there been any discussion, and maybe it’s too early in the new administration, about changes going forward once we get post-pandemic to capital controls where anything else that would ensure the industry remains solvent in the event there is another crisis?

Doug Parker — Chairman and Chief Executive Officer

No. No, we have not. No, we certainly haven’t asked for that. So nothing like that Helane.

Helane Becker — Cowen — Analyst

Okay. That’s very helpful. And then, [indecipherable] that was my main question. And then the other thing is when you look at the fleet with, I think, you said eliminating five types and down to where you are now, and having 11.5 years. How does that compare from an ESG perspective? Like what will your — if your carbon goals were to be half by 2050, what would the new goals be now? Like where would you be in say 2030 or 2035? Thank you.

Doug Parker — Chairman and Chief Executive Officer

Yeah, I’ll try, Helane. The goals we already have in place are require things like this improvement. So you’re right. This is helpful to younger fleet, this is helpful to environment in terms of — and we at American have done a lot in that regard already or we have the youngest fleet now it gets slightly younger even though years go on through this. So we’re proud of that. But that’s a big part of our commitment to get to carbon neutrality is continuing to have a moderate fleet. We’ve done with these retirements.

Helane Becker — Cowen — Analyst

Okay. That’s very helpful. Thank you.

Doug Parker — Chairman and Chief Executive Officer

Thanks, Helane.

Operator

And our next question will from the line of Joseph DeNardi from Stifel. You may begin.

Joseph DeNardi — Stifel — Analyst

Yeah. Thanks. Good morning. Maybe a question for Doug or Derek, following up on Hunter’s, do you feel comfortable from a legal standpoint selling stock into this market? And how quickly can you increase your — I guess, your authorization?

Doug Parker — Chairman and Chief Executive Officer

Yeah, Joe, there is kind of others reference coming on, what — again, to Derek comment on other stuff. So I’ll first comment on. Again as business — we still have $118 million left on our previously announced after market equity optimization. And if we choose to do anything more than that, we obviously will need to inform our investors. But right now, that’s what we have to tell you. There’s $180 million on the ATM equity optimization. And whether or not we choose to do that or feel comfortable doing that, we can’t talk about.

Joseph DeNardi — Stifel — Analyst

Okay. And then Vasu, can you just quantify maybe what gauge looks like on the other side of this relative to pre-COVID? And then if you could just walk through the four geographic entities and speak to maybe the structural impact to capacity based on the fleet actions, if that makes sense? Thank you.

Vasu Raja — Chief Revenue Officer

Yes. The — we indeed, we will be getting a material on updating. And as you probably hear from Derek’s comments, by the time we get to December, we have the ability to produce 2019s level of capacity on about 110 fewer airplanes. So — and that will be gauge increase of about 4%.

Joseph DeNardi — Stifel — Analyst

Got it. Thank you.

Operator

Thank you. Our next question comes from line of Andrew Didora from Bank of America. You may begin.

Andrew Didora — Bank of America — Analyst

Hi. Good morning, everyone.

Doug Parker — Chairman and Chief Executive Officer

Good morning, Andrew.

Andrew Didora — Bank of America — Analyst

Most of my questions have already been answered. But just one for Derek. I know you’re talking about net cash flow in from capex. Can you just give us the gross aircraft capex number? How much financing you’re assuming there? I’m just trying to understand the bridge to that inflow number? Thanks.

Derek Kerr — Chief Financial Officer

Yes. Gross aircraft capex, it’s about $1.1 billion as the aircraft capex for the MAXs and NEOs. The 787s are fully financed and direct leased to us. And the net — that aircraft is approximately about $200 million, so positive. So we will over finance those aircraft that are coming in and then we have as part of the settlement, we have some difference in our PDPs schedule that goes forward. So that’s the difference between the 1.2 and the 200.

Andrew Didora — Bank of America — Analyst

That’s perfect. Thank you.

Operator

Thank you. Our next question comes from the line of Sheila Kahyaoglu from Jefferies. You may begin.

Scott Forbes — Jefferies — Analyst

Hi, it’s actually Scott Forbes on for Sheila. I was wondering if you could maybe elaborate a little bit more on the fleet. I mean you removed 150 aircraft from the fleet. You’re going to come out of this with the youngest fleet among the network carriers. I mean, can you talk about maybe how that plays into your planning for the recovery with its route structure and how you’re thinking about the competitive environment, post-COVID?

Vasu Raja — Chief Revenue Officer

Yes. This is Vasu. Indeed I need to gather it from my remarks. We would be able to produce similar level of capacity much more efficiently than what we could before. It doesn’t necessarily mean that we will do. So that’s all going to be a function of demand. But a lot of what you see is really the schedules that are out there flying right now. The strongest parts of our network, all of our core connecting hubs in Charlotte, Chicago, Dallas, Phoenix, Miami, Philie, we’ll continue to be that way and be it with larger gauge airplane.

We can operate there much more efficiently, right. We can space the other expenses on more seats, but also by having fewer departures in there, it’s more efficient and reliable product we would shutting fewer and fewer departures through the airspace. The biggest parts of our network, as Robert mentioned in his opening remarks that we have struggled and are really showed up through our partnerships with Alaska in the West and JetBlue in the Northeast. And through those we anticipate the combination of those partnerships plus larger gauge airplanes in a more efficient fleet will enable us to go and do things like say 50-seat regional jets out of those markets, which are uniquely high cost, but also really challenged to airspace.

And so, at large, we can go and provide more connectivity into the system, provide a better, higher quality network for our customers and do it in a much more efficient way than what we would have done in 2019.

Derek Kerr — Chief Financial Officer

And Vasu, I’ll just add that every time we move one of those 50-seaters out, we’re bringing in a two class product, obviously, with a first-class action as Wi-Fi and engine power as well. So it’s a much more compelling offer to our customers we’re really looking forward to.

Doug Parker — Chairman and Chief Executive Officer

Great. Thanks, Scott.

Operator

Thank you. And at this time, I would like to give the media a moment for questions.

[Operator Instructions] And our first question comes from the line of Mary Schlangenstein from Bloomberg News. You may begin.

Doug Parker — Chairman and Chief Executive Officer

Hi, Mary. Mary?

Operator

Mary, your line is open.

Mary Schlangenstein — Bloomberg News — Analyst

Sorry, I was on mute. Thank you. Doug, I know you were a little hesitant to talk about demand further out into the summer. But I’m wondering if you could talk about what you guys are seeing now in terms of spring break demand? Do you expect that that’s just going to be a non-event? Or do you see travel demand picking up a little bit maybe around that period?

Doug Parker — Chairman and Chief Executive Officer

We’ll look Vasu to give you that Mary. Thanks.

Vasu Raja — Chief Revenue Officer

Yeah. Hey, Mary. You can get mute — Vasu. And look that — what makes demand and forecasting so uniquely challenging in these times is that 75% of our booking curve happens inside of 45 days. So really so much of spring break is kind of a question mark right now. And there is — there are different tailwinds and headwinds for what might happen with demand there right now.

What we have seen, as Robert mentioned in his comments, is that, since there have been more restrictions on international travel, our international bookings have roughly halved in the last seven days versus the first two weeks of January. It remains to be seen how much that trend holds certainly a lot of the — of travel partners out there, that are working hard to go bring testing online. And so we’ll see how that goes for us. The biggest thing is to remain as nimble as possible and how we plan the airline, and we’ll continue to do that through the first quarter and beyond.

Mary Schlangenstein — Bloomberg News — Analyst

Great. Thank you very much. I had a quick follow up. I noticed that you guys mentioned the DoJ and the Attorney General of New York looking into the JetBlue Northeast US alliance. I’m wondering there have been some others filing objections to that. And I’m wondering if your expectation is that you may have to gear up for some kind of a second round of review by the DoT more heavy to go to a greater efforts to get that thing finally in place?

Doug Parker — Chairman and Chief Executive Officer

Thanks, Mary. I’ll give it to Steve Johnson.

Stephen Johnson — Executive Vice President of Corporate Affairs

Hi, Mary, how are you doing today? Let me start by saying that both the Alaska and the JetBlue alliances that we’ve announced our profoundly procompetitive and create enormous benefit for consumers. And that’s why we like them, that’s why we did it and that’s why we’re so excited and our partners are so excited about implementing those. But as you know, the Department of Justice has over the last, I guess, 12 or 13 years, looked really hard at all of the agreements between airlines, including all the mergers, taken a really good look at those. And that’s what they’re doing in connection with our JetBlue alliance. That investigation is going to continue.

My suspicion is that they’re going to allow us to be implemented and see and you take a look and determine whether the benefits that we promise actually do materialize. And if they do, I think we’ll be fine.

Vasu Raja — Chief Revenue Officer

Hi Mary, the only thing I’d add to that is that we are working very ardently both AA and all of our partners to deliver on exactly that. We anticipate in the first quarter, we will be rolling out some pretty comprehensive frequent flyer and connectivity codeshare with customer. And in second quarter, we anticipate being able to start ramping into new markets such as Tel Aviv and Athens, and certainly with JetBlue starts the process of deeper schedule integration.

Mary Schlangenstein — Bloomberg News — Analyst

Great. Thanks very much.

Doug Parker — Chairman and Chief Executive Officer

Thank you, Mary.

Operator

Thank you. Our next question will come from the line of Alison Sider from Wall Street Journal. You may begin.

Doug Parker — Chairman and Chief Executive Officer

Hi, Alison.

Alison Sider — Wall Street Journal — Analyst

Hi. I was wondering if there’s been any discussion yet about what will happen after March 31 with the employees that have been recalled, if you’re able to say yet whether they’ll be able to stay on or if there is discussion at this point about another round of government aid.

Doug Parker — Chairman and Chief Executive Officer

Yes. Thanks, Alison. Anyway to state the obvious — April 1 is approaching and demand hasn’t gotten much better by then. So we are definitely going to need to address this unless demand starts to pick up. We’re already talking to our unions about things we might be able to do. But anyway — nothing really to report yet other than what we had hoped, which is the demand would be — would have picked up, maybe not so much by April — but into the summers that we would be ramping up for the summer, hasn’t happened yet.

So we find ourselves with April 1 approaching, being concerned about this. Our unions being concerned about all work with them. I know our unions are already talking to the administration and Congress about this — with the current proposal to — for stimulus to be included in there. We would obviously be supportive of that. So that’s all I know right now, not enough to tell you but just telling what we know, which is something we’re going to need to address here before too long.

Alison Sider — Wall Street Journal — Analyst

Thanks. And on the management side, I know you mentioned just the cost savings of all the reductions in staff on the management side. But I guess do you worry at all at some point about brain drain? Is it hard to recruit new people into the airline, just given the state of the industry right now?

Doug Parker — Chairman and Chief Executive Officer

Definitely. We’re telling that we got brain to drain, we’ve got an amazing team here and frankly that those are here are engaged to do amazing work, and if anything we find ourselves, working more efficiently and better together just because there’s not enough — not in terms of — not people be doing inefficient things. So I feel really good about where the team is right now. We certainly have issues like all companies do in these times, to make sure we’re doing the right things to keep people engaged and retain. But so far so good. We really have an amazing team in place. It’s working better together than I think we ever have, and continue.

Alison Sider — Wall Street Journal — Analyst

Thanks.

Doug Parker — Chairman and Chief Executive Officer

Thank you, Alison.

Operator

And our next question comes from the line of Dawn Gilbertson from USA Today. You may begin.

Dawn Gilbertson — USA Today — Analyst

Hi, good morning, everyone. Hey two questions, the first one for you Doug, why — I know this proposal was just floated, but I’m unclear and you’re not the only one who had said this, why you support international testing on flights but not domestic? And my second unrelated question, I’m not sure who it’s for is. Can anybody give any color on what you’re seeing at international airports, especially in Mexico and the Caribbean in the first few days of international testing requirements? Any problems that have cropped up anything you’ve had to do differently? Thank you very much.

Doug Parker — Chairman and Chief Executive Officer

Yeah, I’ll take the first one and give Rob the second one. Again we support international testing because that’s about getting more people to be comfortable flying across borders. And we have worked with regularity with the administration to make that happen on very shorter. So and indeed hopeful of doing so that that allows the administration to get comfortable with Airline or just to be more open allowing people from for your, for example, to begin traveling to the United States at some point.

So anyway that’s — we worked together or supported with that. I didn’t actually say that we weren’t supportive of doing something more expansion in that. What I said is, we haven’t heard — we haven’t been asked to do. If we do, we certainly would want to make sure it was something that wouldn’t restrict demand. We have seen drops in demand, of course, on short orders and anyway — so we need to work with the administration to so what and if indeed. There are — any thoughts about doing something for having American supply within America. It certainly seems like — we would like to see what if indeed there is anything there you have also just said has been floated. No one has talked to us officially about doing that. If they do, from our best to work with them make sure we can stress how safe it is to fly, and — which I know and they’re improving that and we want to make sure that our customers feel comfortable flying. Robert?

Rob Isom — President

Yeah. And Dawn, thanks for the question. The biggest challenge is getting word out to people that the new testing requirements have to be complied with. And to that end, we’ve done a terrific job of getting word out through every imaginable channel and what we found, as Alison mentioned a little bit earlier, our largest international destinations these days are kind of good. We’ve had — on the first half of the box, nobody seems whatsoever, all passengers, they’re basically boarded.

So, we’ve also done tremendous work all international locations and making sure that testing resources are available. And so, yeah, we’ve seen some customers show up without the necessary proof and we’re re-accommodating them as required. But we’re getting out fortunately with all the work that we’ve done to put tools in place like VeriFLY, the digital health passport. We’re doing a pretty good job and we’re going to be able to handle this.

Dawn Gilbertson — USA Today — Analyst

Thank you very much.

Doug Parker — Chairman and Chief Executive Officer

Thanks, Dawn.

Operator

Thank you. Our next question will come from the line of Leslie Josephs from CNBC. You may begin.

Leslie Josephs — CNBC — Analyst

Hi, good morning, everyone.

Doug Parker — Chairman and Chief Executive Officer

Hi, Leslie.

Leslie Josephs — CNBC — Analyst

What are your pilot feeds and pilot training needs for summer 2020 with Delta calling back 400 pilots. Do you expect them all, including the 1200 plus that were furloughed to be active by summer? And then, just another question on capacity going forward with these partnerships. Do you expect American continue to or do you know the percentage of how much American will sort of outsource some of this capacity thanks to these new partnerships.

Rob Isom — President

I’ll try to take both. So just in terms of pilots, the question is how aren’t you flying? And so to that end, it’s a question mark out there. As demand comes back we know that over the long run will have a home for all of our pilots. Those — certainly those that have been furloughed in the past and hopefully that we will be able to keep everybody on board. And that — just because of the pilots and retirement age we anticipate that we will be hiring pilots in the not too distant future. Now, second question was in terms of —

Leslie Josephs — CNBC — Analyst

And having not playing your own metal versus —

Rob Isom — President

Oh, yeah, in terms of — yeah, thanks for that as well. The relationships are not about outsourcing any shape or form. It’s all about better utilizing those assets we have in finding ways in the long run for growth for us. And these partnerships are really creative in that sense that they’re going to be able to allow American Airlines to do what it does best, both domestically and internationally. So prospects in terms of the work that we do for the long run is very, very bright.

Doug Parker — Chairman and Chief Executive Officer

Yeah. And as a team that we really — in summer and what that means is that — you’re going to generate more demand just because we can connect with each other. So we think that’s actually more flying for American Airlines — more — bigger airplanes and smaller airplanes for example in New York because we’re able to compete better against other airlines who have larger networks in those areas we do.

Leslie Josephs — CNBC — Analyst

Okay. And just one follow-up, do you have any expectation of how long American will be so domestic-focused versus a pre-pandemic global network?

Vasu Raja — Chief Revenue Officer

Well, hey, this is Vasu. And right now, a lot of what you see in our asset footprint is more just we’re operating with where indeed there is demand. As you go and look out there and now March schedule — sorry, February, March schedule. You’ll see that Latin America network that we’re operating is indeed in many cases larger than what was there before the pandemic because that is the place where we see demand, and heard Alison and Robert comment, a place where we see a lot of testing getting stood up pretty quickly. And so for us, international will really be a function coming back. Again international bring that will be really a product of where demand is and test, we can get ramped up.

Leslie Josephs — CNBC — Analyst

Okay. Thank you.

Operator

Thank you. Our next question will come from the line of Tracy Rucinski from Reuters. You may begin.

Doug Parker — Chairman and Chief Executive Officer

Hey Tracy.

Tracy Rucinski — Reuters — Analyst

Hi. Good morning. Hi. So, given the strong rise in shares this morning, are you planning an equity offering or anything to delever the balance sheet?

Doug Parker — Chairman and Chief Executive Officer

Yeah, Tracy. So we said at the start of this comment on the recent stock price movement. What we did say is that we — $180 million of authority on a previously announced after market equity authorization. So and — as well, we might got in the future we can talk about.

Tracy Rucinski — Reuters — Analyst

I apologize. I missed that.

Doug Parker — Chairman and Chief Executive Officer

That’s okay. There are lot going on now. Thanks, Tracy.

Tracy Rucinski — Reuters — Analyst

Thanks.

Doug Parker — Chairman and Chief Executive Officer

Bye.

Operator

Our next question will come from the line of David Koenig from The Associated Press. You may begin.

David Koenig — The Associated Press — Analyst

Hey, guys. Good morning everybody. At the risk of maybe rephrasing something that you’re kind of getting at in what Mary and Dawn’s questions. I wonder if you can talk about how much travel restrictions, including what we saw from the US this week. And how the travel restrictions are changing your view about the pace of recovery this summer? And then secondly, what impact would you see if there is a testing requirement for domestic flights?

Doug Parker — Chairman and Chief Executive Officer

All right, Dave. I’ll try it. So first off, travel restrictions, again, on international has resulted in reduction in demand for international travel. But as we say couple of times now, we expect that to improve as it becomes easier to for people get those tests, which is happening already. So, and certainly it will have an impact on demand when our customers need to present a positive test to travel and we’re seeing that in the short-haul international travel things like Mexico and the Caribbean, non-US Caribbean destinations.

As it relates to any other travel restrictions at any — things like mask mandates, we’ve been doing mask mandates well before it was mandated by the government, we intend to keep continue doing that way. It was great things. We will continue to do so anything we want to make sure that the government doesn’t put in place exemptions other than the ones we have with children of two years old. So we are huge proponents of mask mandates, huge proponents of what the administration is trying to accomplish, and that’s what we’ve been asked to do so far, we are asked to do more. We’ll do aim to impress our desire to let right now we have a shared objective, which is to get the P&L behind as fast as we can, allow our country to keep moving.

In the meantime people are driving from state to state, and they’re flying from state to state. They’re doing so safely. And we just want to make sure that we continue that to happen with the goal of making sure we — the pandemic as soon as possible. I know the administration shares that goal and I suspect anything we come up with will be consistent with that.

David Koenig — The Associated Press — Analyst

Okay. Thanks. I think that’s more concise. And can — you must have an opinion though about what impact do you see if there is a domestic flight testing requirement?

Doug Parker — Chairman and Chief Executive Officer

I have to say what I understand, I was with them.

David Koenig — The Associated Press — Analyst

Okay. All right. Thank you.

Operator

Thank you. And that ends the media Q&A. I’ll turn it back over to Doug Parker for any closing remarks.

Doug Parker — Chairman and Chief Executive Officer

All right, thank you very much for your interest. We will meet again. Just going to proud of our team on what they’re doing. It gives great confidence as we go forward. I know everyone interested in how fast, things will rebound. We don’t know the answer to that. We’ve done it well. But when it does, we’re going to be there ready to take care of people when they want to travel. And we’re ready to list and how long it take — how long it may take because of the great job Derek and team have done to get our company its financial position. Thanks for your time.

Operator

[Operator Closing Remarks]