Categories Earnings Call Transcripts, Industrials

American Airlines Group Inc (AAL) Q3 2020 Earnings Call Transcript

AAL Earnings Call - Final Transcript

American Airlines Group Inc  (NASDAQ: AAL) Q3 2020 earnings call dated Oct. 22, 2020

Corporate Participants:

Daniel Cravens — Managing Director of Investor Relations

Doug Parker — Chairman and Chief Executive Officer

Robert Isom — President

Derek Kerr — Executive Vice President and Chief Financial Officer

Analysts:

Brandon Oglenski — Barclays — Analyst

Vasu Raja — Chief Revenue Officer

Mike Linenberg — Deutsche Bank — Analyst

Joe DeNardi — Stifel Nicolaus — Analyst

Helane Becker — Cowen Securities — Analyst

Hunter Keay — Wolfe Research — Analyst

Alison Taylor — Chief Customer Officer;

Jamie Baker — J.P. Morgan — Analyst

David Vernon — Bernstein — Analyst

Joe Caiado — Credit Suisse — Analyst

Duane Pfennigwerth — Evercore — Analyst

Andrew Didora — Bank of America – Merrill Lynch — Analyst

Alison Sider — Wall Street Journal — Analyst

Leslie Josephs — CNBC — Analyst

David Koenig — Associated Press — Analyst

Justin Bachman — Bloomberg — Analyst

Edward Russell — TPG — Analyst

Kyle Arnold — Dallas Morning News — Analyst

Presentation:

Operator

Good morning and welcome to the American Airlines Group Third Quarter 2020 Earnings Call. Today’s conference is being recorded. At this time, all participant lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions].

And now, I’d like to turn the conference over to your moderator, Managing Director of Investor Relations, Mr. Dan Cravens. Please go ahead.

Daniel Cravens — Managing Director of Investor Relations

Thanks Operator. Good morning everyone and welcome to the American Airlines third quarter 2020 earnings conference call. In the room or on the call this morning, we have Doug Parker, Chairman and CEO; Robert Isom, President; and Derek Kerr, Chief Financial Officer. Also on the call for our Q&A session are several of our Senior Executives, including Maya Liebman, Chief Information Officer; Steve Johnson, our EVP of Corporate Affairs; Vasu Raja, Chief Revenue Officer; Alison Taylor, Chief Customer Officer; and David Seymour, our Chief Operating Officer.

Like we normally do, Doug will start the call with an overview of our quarter and the actions we’re taking during this pandemic. Robert will then follow with some remarks about our commercial initiatives. And after Robert’s remarks, Derek will follow with the details on our liquidity and cost outlook. After Derek’s comments, we will open the call for analyst questions and lastly questions from the media. To get in as many questions as possible, please limit yourself to one question and a follow-up.

Before we begin, we must state that today’s call does contain forward-looking statements, including statements concerning future revenues, costs, forecasts of capacity, fleet plans, and liquidity. These statements represent our predictions and expectations as to future events, but there are numerous risks and uncertainties that could cause actual results to differ from those projected. Information about some of these risks and uncertainties can be found in our earnings press release issued this morning and 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 exclude the impact of unusual items. A reconciliation of those numbers to the GAAP financial measures is included in the earnings release, and that can be found in the Investor Relations section of our website.

The webcast of this call will be also archived on our 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’d like to turn the call over to our Chairman and CEO, Doug Parker.

Doug Parker — Chairman and Chief Executive Officer

Thank you, Dan. Good morning everybody. Thanks for joining us. So there is no doubt, this continues to be an unprecedented time for our entire industry, our team, and our customers. At American, we continue to take actions so that we can manage through this pandemic and position our airline for success when demand returns.

So I’m going to start with a quick summary of our results for the quarter, which were improved versus early in the year, but still reflect the extremely challenging environment we’re in today. Our third quarter pretax loss, excluding net special items was $3.6 billion. Our revenues were down 73% year-over-year. In this environment, we continue to focus on controlling what we can, reducing cost and cash burn [Indecipherable]. In total we removed approximately $17 billion in costs from our business and our cash burn rate declined markedly versus the second quarter. We ended the quarter with a pro forma liquidity balance of approximately $15.6 billion, which is much more liquidity than we ever had before, and more than double where we began this year. And customer confidence is gradually beginning to return. We continue to evolve in this new era of travel.

The foundation of all that of course is our incredible team. These are difficult times for sure, and we couldn’t be prouder of how the American team is handling this situation. Our team is out there keeping our country moving, safely transporting hundreds of thousands of people around the globe every day. And we are doing an excellent job of generating revenue in this environment and is making a difference both for American Airlines and the United States in general.

That’s why it’s so difficult to see difficult to see October 1 pass, without having the Payroll Support Program and CARES Act extend, both in support of our team and the commercial aviation infrastructure that is going to be critical to an economic rebound. There’s enormous bipartisan support for an extension, but unfortunately our elected officials still haven’t been able to get it enacted because they have been unable to agree on broader COVID relief legislation. So without the extension, we had to furlough 19,000 [Phonetic] of our team members beginning October 1 and we do continued service to numerous markets around the country. We remain hopeful that our elected officials can come together on this important legislation on behalf of our team, our industry and working Americans and our economy at large.

Elections matter, but there is nothing polling higher than support for a COVID relief stimulus package and PSP extension will be an important component of any such package. Robert and Derek can talk more about our results and our path forward, but know that every action we took in the third quarter centered on our aggressive plan to bolster liquidity, conserve cash, and ensure that customers can fly with complete confidence when they travel with American.

On the liquidity part, American as I said, ended third quarter with approx. $15.6 billion of available liquidity and $15.6 billion when you pro forma for an additional $2 billion in authorized capacity for the CARES Act and loan program, which was finalized just this week. And also this morning, we announced on top of that authorization to issue up to $1 billion of equity in and at-the-market offering.

As to conserving cash, in this environment we’re focusing on what we can control. To that end, we’ve been — we worked relentlessly to right-size all aspects of the airline. This has been done primarily through cost savings resulting from reduced flying and long-term structural changes to our fleet and our infrastructure. We continue to realize the benefits, both financially and operationally of accelerating the retirement of more than 150 aircraft from our fleet. And basically the efforts along with gradual improvement in the revenue environment, we continue to bring down daily cash burn rate. Our burn rate improved by approximately $14 million per day during the third quarter from $58 million down to $44 million. And we expect our fourth quarter burn rate to be improved even more to between $25 million and $30 million per day. And we expect that number to continue to drop going forward as demand for air travel continues to gradually improve.

Also during the third quarter, we continued with our focus plan to capture the travel demand that does exist. Remarkably, one in every three domestic passengers flew in on American Airlines flight during the third quarter. And if we could say one thing that every American Airlines customer, it’s that it’s safe to fly. Others have shared this data as well, but it’s certainly worth repeating, IATA estimates that 1.2 billion people have flown so far in 2020. And among that group, there are only 44 cases of COVID-19 in which transmission is believed to be associated with air travel.

So it’s clear our efforts are working as an industry, even with our team members being on the front lines and working through the pandemics to support our communities and serve our customers, our team has a lower rate of COVID-19 infection than the national average. And notably we’ve seen fewer cases with our airborne team members, our pilots and flight attendants than with our other work groups. I personally have been flying multiple times every week and I see it everywhere I go. The level of cleaning, the safety measures, and the diligence from our team and our customers is truly incredible and we are greatly appreciative.

So in closing, we know we have a long road ahead of us. And our entire team remains fully engaged and we couldn’t be proud of the amazing work they’re doing each and every day. We’re focused not just getting through this pandemic, but making sure we’re prepared to succeed as demand returns and we are highly confident that we’re going to do just that.

So, with that I’ll turn it over to Rob.

Robert Isom — President

Thanks, Doug. And good morning to everyone. I want to second my appreciation to the entire American Airlines team. Despite this year’s remarkable challenges, they continue to rise to occasion and deliver for our customers and each other when it’s most needed and we are incredibly grateful.

Taking care of our team and customers continues to be our top priority. We’ve taken additional steps in recent weeks to provide customers further peace of mind as they return to the skies. We upgraded our Clean Commitment by adding SurfaceWise2 to our safety program. SurfaceWise2 is an approved — is approved by the EPA and is a long-lasting products to help fight the spread of the novel coronavirus, and it will be applied to Americans entire fleet in the coming months.

We’ve also made travel easier and less complicated by eliminating change fees and allowing customers to standby on earlier flight on the same day at no charge. These customer focused initiatives, along with changes to our Basic Economy product and new AAdvantage elite benefits give travelers tremendous flexibility when they fly American. Additionally, we launched a new travel tool to help customers quickly see the current COVID-19 travel guidelines for domestic and international destination.

As we entered the third quarter, US saw an increase in COVID-19 cases, which was followed by a slowdown in demand. We responded quickly and efficiently in a way that maintains scale at our largest connected hubs in DFW and Charlotte. Our approach has paid off as evidenced by our passenger revenue results. Notably, DFW and Charlotte where our best performing hubs year-over-year. Our cargo team continues to do outstanding work driving revenue and supporting the global economic — the global economy during the pandemic. We more than doubled our cargo only flying from August to September, now operating more than 1,900 flights serving 32 destinations during the third quarter. To date, these cargo flights have helped our customers move more than 85 million pounds of critical goods around the world amidst the COVID-19 outbreak. And despite a nearly 60% reduction in system capacity in third quarter, our cargo revenue was effectively flat year-over-year.

During the quarter, we started to see signs of a slow, but steady recovery in passenger demand. Although domestic net bookings finished the quarter down 50%, this was an improvement from the first part of July where bookings were down 80%. During the month of September, 45% of domestic flight had a load factor greater than 80%, compared to just 25% in July. As we look ahead with one-third of our flight being actively managed by yield management system, we see improving yield curves in the coming months.

And we are not just waiting for customers to come to us, we’re taking steps to reopen markets to travel through pre-flight COVID-19 testing. Testing options are now available to customers traveling to Hawaii and Costa Rica, with Jamaica and the Bahamas following soon. And we are engaged in efforts to expand that program across the Caribbean. These testing programs are important because they will ultimately help to reopen markets by further inspiring confidence in travel.

Pandemic has changed our business in many ways that we could have never expected, but the American team has re-imagined how to deliver a safe, healthy and enjoyable travel experience for our customers. Pre-flight COVID-19 testing is a quite example of that and it’s going to be an important part of advancing the industry’s recovery from the pandemic.

Our approach to fourth quarter capacity is straightforward. We’ll continue to focus on our large connecting hubs at DFW and Charlotte and to put capacity in markets that are showing positive recovery, such as the Sunbelt, Mexico, and the markets that are opening in the Caribbean. We expect our fourth quarter system capacity to be down slightly more than 50% year-over-year, with long haul international capacity down approximately 75% year-over-year.

While we are encouraged with the trends we’re seeing in our net bookings, we will continue to remain as flexible as possible and let demand serve as our guide for future capacity levels. As we look across competitive landscape, we believe there is no network better positioned than American. First, our network is big in the markets where customers want to go. With our Sunbelt hubs in Charlotte, Miami, DFW, and Phoenix, we are seeing demand resilience throughout the pandemic. This combined with our easy access to mountain ski destinations provides an outlet for customers to redefine the meaning of working remotely or just get away.

Secondly, we have the best short haul international network with the largest presence in Mexico and the Caribbean. Demand for this region has been strong and based on current trends, we expect our fourth quarter revenue for this region to reach 70% of 2019 levels.

Third, now is the time to be creative and find smart ways to strengthen our hubs in key markets. With our recently announced domestic partnerships with Alaska and JetBlue. We are raising the competitive bar and expanding our network in an asset light manner, while providing customers with more choice and a world-class product. Importantly, our extensive engagement with leisure operators is delivering results in the segment that is leading to recovery. And to that end, American was recently named Airline Partner of the Year by The American Society of Travel Advisors for the second year in a row.

So in conclusion, we remain committed to making sure our customers feel safe and comfortable and have flexibility when they travel. As we continue to manage the current environment, we remain focused on being flexible and nimble in all parts of the organization.

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

Derek Kerr — Executive Vice President and Chief Financial Officer

Thanks, Robert. And good morning everyone. This morning we reported a GAAP net loss of $2.4 billion or $4.71 per share in the third quarter. During the quarter, we recognized $540 million of pretax net special items. Net special items included a $2.1 billion credit resulting from the payroll support program financial assistance, which was offset in part by $875 million of severance costs associated with our voluntary and involuntary headcount reductions and $742 million fleet impairment charge. Excluding net special items, we reported a net loss of $2.8 billion or $5.54 per share. With the prolonged decline in passenger demand, our primary focus has been to ensure we have the financial strength for a range of recovery scenarios. We have moved quickly to raise incremental liquidity, reduce cash burn, and become as efficient as possible.

On the revenue front, our third quarter total revenue was $3.2 billion, down 73% year-over-year on a 59% reduction in total capacity. While our revenue was down materially, it was nearly double what it was in the second quarter. We expect fourth quarter to be down approximately 65%. While our current booking trends are positive, they are still down significantly and we continue to plan for a slow recovery. As Robert mentioned, we expect our fourth quarter capacity to be down slightly more than 50% year-over-year.

We have worked hard to rebuild our fleet into one of the more efficient to operate and offers our customers a consistent and improved product and experience. Our team has been actively engaged with Boeing and Airbus to provide flexibility in how we manage our fleet, giving us ample opportunity to adjust as demand conditions warrant. As announced this morning in our earnings press release, we have reached an agreement with Boeing to secure deferral rates on eight of our 2021 MAX deliveries and all 10 of our MAX deliveries in 2022. If the deferral rates are ultimately exercised, these aircraft can be deferred to the second half of 2023 through the first quarter of 2024. To avoid exercising these deferral rates, we would need to see substantial improvement in the demand environment.

During the quarter, we finalized series of sale leaseback transactions to finance our remaining A320 aircraft deliveries in 2021. As a result, we now have financing for all of our planned aircraft deliveries through 2021. As we have spoken about in the past, our long-held strategy has been to drive efficiencies through the simplification of our fleet. With the permanent retirement of our A330-200 fleet announced this morning, we now have only four aircraft types in our mainline fleet; 737, the A320 family, 787 and 777. Aside from the scale and fuel efficiencies, the operating efficiencies on the crew, maintenance, and schedule are permanent.

We also continue to pursue the harmonization of our 737 and A321 fleets. And expect to have all of our 737 aircraft operating in the same configuration by the end of the first quarter of 2021. We expect to have our A321 fleet harmonized by the spring of 2022. When combined with our fleet simplification strategy, these steps provide significant opportunities to improve revenue production and reduce cost now and well into the future.

Lastly, we retain inexpensive optionality in our total fleet count as we have 51 aircraft with lease expirations through the end of 2022. In addition, we have more than 200 older owned mainline and regional aircraft that could be efficiently part should demand conditions deteriorate.

We continue to take a zero-based approach to our expense planning and have moved quickly to better align our costs with our review schedule, producing $17b reduction in 2022 expenditures that Doug talked about. As we look to our team members, in addition to the cost reduction efforts we’ve outlined in the previous quarters, more than 20,000 team members have opted for an early retirement or a long-term leave. This is an addition to the painful, but necessary process of furloughing 19,000 team members. We are extremely grateful for their sacrifice and contributions these team members have made to our airline.

Finally on liquidity. We continue to take proactive steps to reduce our cash burn rate, improve our total liquidity position. In the third quarter, our operational cash burn rate was approximately $36 million per day and our debt principal and severance burn was approximately $8 million per day. In total, our third quarter average cash burn rate was approximately $44 million per day, which improved sequentially from the second quarter burn rate of $58 million per day.

During the quarter, we closed both Goldman Sachs Merchant Bank secured notes financings totaling $1.2 billion, in addition to the CARES Act loan, Doug mentioned that provided $5.5 billion of loan capacity. We also received the final payments of our allotted PSP fund, including an incremental $168 million of previously unallocated funds identified by the US Treasury. This week, we were able to increase the amount available under the CARES Act loan to $7.5 billion. When combined with our third quarter ending liquidity balance of $13.6 billion, we ended the third quarter with a pro forma liquidity balance of approximately $15.6 billion.

This morning we also announced the authorization to issue up to $1 billion of equity in an at-the-market offering to further bolster liquidity. We view this as another lever that the company has available at any time. As we looked into fourth quarter, we presently expect to end the quarter with more than $13 billion of total available liquidity, which excludes any proceeds from the ATM offering I just mentioned. This results in an average cash burn rate of between $25 million and $30 million per day, which includes debt principal and interest and severance payments. Our goal remains to get our daily cash burn rate to zero as quickly as possible. The timing of reaching this goal continues to be dependent on the demand recovery time line as many of our cost reductions have already been finalized.

In terms of our debt obligations, we believe the market is underappreciating our balance sheet flexibility and efficiency. Approximately 40% of our outstanding debt is pre-payable without penalty and we don’t have any large non-aircraft debt maturities until our $750 million unsecured bond matures in 2022.

Lastly, thanks to the tireless efforts of our treasury team, our weighted average cost of debt is just over 4%, despite higher coupon COVID-related financings that we completed this year. While we continue to be pleased with the outcomes on recent financings, the incremental debt to our balance sheet and dilution to our shareholders, has been significant. However, with the flexibility that I have outlined, we have the ability to proactively repay debt and delever our balance sheet over the next several years when we return to a normalized revenue environment.

To conclude, we still have a long road to recovery ahead of us. However, the actions we have taken to conserve cash, bolster liquidity and support our team members and customers give us confidence that we are well prepared when demand returns.

And with that, I’ll open it up the line with analyst for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Brandon Oglenski of Barclays. Your line is now open.

Brandon Oglenski — Barclays — Analyst

Hey, good morning everyone. And thanks for taking my questions. Look, I know it’s a really difficult environment right now and a lot of airlines are still burning through cash. But as we look forward, this is a real ability for the industry to rebuild itself, more specifically American, but I guess what is the strategy going forward, guys, because you will have a pretty large debt balance and I think competitor down the — across the city there won’t have that much and a lower cost structure. So in that type of environment, how do you navigate to differentiate and have the ability to pay down debt and be profitable? what’s the new American going to look like?

Doug Parker — Chairman and Chief Executive Officer

Hi Brandon, it is Doug. Thanks. We’re going to be more efficient, that’s for certain. We used opportunity, it’s a really terrific as always there as it is, it does provide some amazing opportunity to think largest airline in the world effectively shut it down and build back, I wonder if that will make sense. We’ve done things like reduce 30% of our management, we are not going to bring that back. I would accelerate the retirement of 150 aircraft and aircraft types that aren’t going to come back. So — and more and more [Indecipherable] as we do and as we build back schedule, we’re going to build back flying that is profitable and take out a lot of what used to exist that was less so. So we feel really good about what we’re — about how we will emerge from this both vis-a-vis where we used to be and vis-a-vis our competitive positioning. We do indeed have higher debt levels. We did before this because we had gone and modernized our fleet. So that’s behind us. We don’t have, as Derek noted, large amortization in the near term, we don’t have — we just certainly don’t think once we get to where we’re generating cash, you’re going to see us needing to do any more in terms of raising more. And we will do as we — as we move to cash positive. We will use those proceeds to pay down the debt. At the end you will see more competitors. So, but we feel really good about our ability to compete in the future as the industry gets cash positive. American is making best cash positive, we will use our proceeds to pay down debt first.

Brandon Oglenski — Barclays — Analyst

Appreciate that, Doug. And I guess if we are going to be more leisure oriented market for a few years, is there a fear that the fare structure in the industry could walk lower? Do you think you’re going to have a cost structure to compete in an environment like that?

Doug Parker — Chairman and Chief Executive Officer

Of course, because we have a route network that can do that. Vasu can expand more or Robert, but the reality is we have a huge competitive advantage in terms of our ability to connect customers around the United States and internationally when that rebounds this hub-and-spoke network of ours that many other carriers can’t compete with, a couple can, but not all. That’s a great revenue generator. We of course, will need to have our cost on one of them like I say, we’re going to get our cost down through the efficiency that I spoke. But again, I think you can see in our cash burn number now being similar to what our competitors are. As the industry gradually rebounds, we’ll rebound in a similar rate. You will see our cash levels, and therefore earnings — our cash burn level and our earnings rebound as the industry does. Vasu, anything else you want to add to it?

Vasu Raja — Chief Revenue Officer

Yeah, I will just add to it, Brandon though the benefit historically thought business and leisure is having the clearly different yield performances across our system that is not always the case. Indeed, in our airline business style revenue, people who don’t stay at Saturday nights, mid-week travel, single person in the itinerary are about a third of our revenue, but only about a third of that comes from the large global corporates that are most likely to delay travel. And even, this is a — one, we’re actually less exposed to that and historically have been than what may meet the eye. But two, the replacement value of air traffic is very different for American Airlines. In our largest hub such as Dallas Fort Worth and Charlotte, the non-corporate traffic that’s on the airplane can often produce yield there between 70% to 75% of the corporates, but indeed the non-corporate yields that what we — what you might call the leisure yields in some of these hubs outperform corporate yields in some of the big coastal metro areas that are there. So, really the strength of the American Airlines business is in so much of what we do. We create connectivity for customers that really wouldn’t exist if it weren’t for American Airlines flying in some of these markets. So that’s a core attribute of our business model. That will be something that takes us through this crisis and will absolutely be part of what hovers the revenue production of the airline on the other end of it.

Brandon Oglenski — Barclays — Analyst

Thank you.

Operator

Thank you. And our next question comes from Mike Linenberg of Deutsche Bank. Your line is now open.

Mike Linenberg — Deutsche Bank — Analyst

Hey, good morning, everyone. Two very quick ones here. Derek, the $25 million to $30 million of burn, what is that number if we were — or you could just tell us roughly what is the piece that’s related to debt interest, principal payment and severance, just to do an –.

Derek Kerr — Executive Vice President and Chief Financial Officer

In the fourth quarter, it’s $8 million. It’s the same in the third and fourth quarter, so it’s $8 million of principal and interest payments in that $25 million.

Mike Linenberg — Deutsche Bank — Analyst

Okay, great. And then just second, you guys have done a nice job on the cost side pulling down costs. I think, ex-fuel profit — ex-fuel and specials, I think you were down about 30% — on [Indecipherable]. What — what are you — would the things shake out for the fourth quarter given the fact that you will have a bit more people off the table etc.? What should we be looking at?

Derek Kerr — Executive Vice President and Chief Financial Officer

Yeah, the way — we had reductions in costs, as we look at it, it was 40% in the third quarter and it’s kind of and as we — we’re adding back a little bit of capacity, so we said 59% down in the third quarter and close to 52%. So we had probably a little bit of cost due to capacity coming back in, so we should be in a similar range, maybe 38% — 36%, 38% range on our cost down in the fourth quarter.

Mike Linenberg — Deutsche Bank — Analyst

Great. Thanks for that. Thanks, everyone.

Doug Parker — Chairman and Chief Executive Officer

Thanks, Mike.

Operator

Thank you. And our next question comes from Joseph DeNardi of Stifel. Your line is now open.

Joe DeNardi — Stifel Nicolaus — Analyst

Hey, good morning. Derek, you talked about balance sheet flexibility and efficiency and your ability to pay down debt. You need to generate cash obviously to do that, part of that is capex. So if you want the market to better appreciate your ability to repair the balance sheet, can you provide some visibility around capex over the next few years?

Derek Kerr — Executive Vice President and Chief Financial Officer

Yeah, we look at capex — I mean we’ve already pulled down ’21 and ’22, so we were at $1.7 billion [Phonetic]. And we pulled $800 million out of ’21; we pulled $200 million out of ’22. So we would be at about a $1 billion is the run rate, and we can take that lower also. We just — right now, we’re at that run rate and we definitely can take it lower if there is — if we need to. From a capex perspective, we are sitting at about $1 billion in 2021 and about $1.7 billion in 2022. Now I also said that we had deferral rates on aircraft and we can push that and that would reduce those two capex numbers out in the years. And as you know, we don’t have many deliveries in ’23, ’24, so the capex profile is much, much smaller than we’ve had over the past years. And we’ll use — be able to use that cash that was going to buy aircraft and integrate the airlines into paying down debt.

Joe DeNardi — Stifel Nicolaus — Analyst

Got it. That’s helpful. And then Vasu, why were American’s earnings — why was American’s earnings power and margin so much lower than peers pre-COVID and why will that change on the other side of this? Thank you.

Vasu Raja — Chief Revenue Officer

Yeah, thanks. It’s a great question. And there’s a range of answers for it, but I will at least hit on one that we are starting to see emerging in the trends right now which is just how we mix capacity across our network. Look, as you look at 3Q results right now, our relative PRASM performance in the system is strong versus our competitors, that’s kind of an empty victory in the environment we’re in, but it’s an important lesson, because what we see right now is that about 75% of our airlines’ capacity is in our four biggest hubs. And in those hubs, we’re producing based on what we see today 30%, 40% RASM premiums to the industry. Our smallest hubs as we see them today are 10% of our capacity and still producing a RASM deficit. Well, in the old days, that was a much bigger mix. The things that we are outperforming on a RASM basis were, in some cases as big as Dallas Fort Worth, our largest hub.

So what that means for us, and this may relate to an earlier question, is that as we come out of here, one of our really guiding principles is that we will produce a revenue premium to the industry. The way we go about doing that is first and foremost that we orient more of our organic assets in the markets where we can produce an outsized level of value for customers, which as we see today, produces an outsized level of revenue for the airlines. That too through many of the partnerships that we’ve created, not just with Alaska and JetBlue, but with British Airways, IAG or JAL or many others around the world, in markets where we can’t produce outsized customer value alone, we’re going to work with these partners to make sure that we produce that value and get the returns that come with it. And third, and very importantly, we need to go increasingly across our commercial division, give our customers really good reasons to want to fly more and pay us more, which sounds very simple and indeed it is, but we think that by doing that, there is a real path out of it where American can produce at a different level than it might have before.

Joe DeNardi — Stifel Nicolaus — Analyst

Thank you.

Doug Parker — Chairman and Chief Executive Officer

Thanks, Joe.

Operator

Thank you. And our next question comes from Helane Becker of Cowen. Your line is now open.

Doug Parker — Chairman and Chief Executive Officer

Hello, Helane. Helane? Are you muted?

Daniel Cravens — Managing Director of Investor Relations

Operator, we can go on to the next.

Helane Becker — Cowen Securities — Analyst

No. I’m here.

Doug Parker — Chairman and Chief Executive Officer

[Speech Overlap] There we go.

Helane Becker — Cowen Securities — Analyst

Sorry about that. I don’t know what happened. So, here’s my question, Doug. If — on the stimulus program, if nothing’s opened and people don’t travel by March, won’t the industry be on the same place as it is now and need more stimulus money? Isn’t it better to work with governors to open and then get more stimulus money rather than getting it now?

Doug Parker — Chairman and Chief Executive Officer

Yeah, Helane, yeah, again, as the — you separate two things, stimulus of course, entire COVID repackaging would help stimulate the economy, I think is really important. So, yeah, and I think the sooner the better. I think our country needs it, and that would help in many ways to — yeah, I think. As to the Payroll Support Plan extension, that’s not about stimulus in our view. That’s about keeping critical infrastructure in place. That’s about the importance of the airline industry to that economic recovery. It’s entirely what the PSP program was put in place to do. What it does is, it has airlines keep more people employed than we would otherwise basically existing demand at a served markets. We wouldn’t serve otherwise basically existing demand, and the concept was that the government as a pass through gives money to airlines to pay those people and to fly those flights that we wouldn’t fly otherwise. So, as the economy returns that critical infrastructure is in place. I think that’s good policy. I think it has been great policy up to-date. I think it’s good policy. It should be extended. And I’m not alone in that. There is an enormous bipartisan support for that for exactly those reasons. It’s not about getting money into airlines, it’s about making sure that critical infrastructure stays in place. So, yeah, I think that’s really important to keep in place now. I feel that absent an extension, you will see the — you will see some of that infrastructure decline. And as the economy looks to rebound, we won’t be prepared as well as we should be to facilitate that rebound. So that’s what it’s about. And yeah, so therefore, I don’t think it makes sense to let that critical infrastructure get harmed or to go lower again, like I say, we’re not alone that matters. Virtually everyone we talk to now agrees that should happen.

So, I guess, part of the question is another question we sometimes hear, which is okay, that’s all well and good. But if things will get better six months from now we will need it again. I don’t think so. I happen to believe we are seeing now, even in this environment gradual return of revenues. We expect that to continue. I think six months from now, certainly, you’ll see a better environment than we have today, irrespective of what may or may not have happened as it relates to the pandemic itself. Because people are getting more and more comfortable with travel and cities are opening up, and business is returning somewhat. So I think six months from now we’ll serve you better. And from an airline cyclicality perspective, we will be heading into a summer, which as always has higher demand. So anyway, at least our view anyway is that six months of PSP extension would be the last PSP extension you would need to keep that infrastructure in place. But after that, you’re going to — we’re not going to be in a good position to do what people wants to us to do which is to be here to help the economy to rebound.

Helane Becker — Cowen Securities — Analyst

Got you. That’s very helpful. Actually, thank you. And then my other question, how many aircraft are actually being scheduled right now?

Robert Isom — President

Helane, maybe the easier way to do it is how many airplanes are we not flying, and that number is in the order of magnitude of about 200 jets. We have a couple of airplanes that fly on relatively lazy lines good; it makes some of the maintenance and the operations of the airline easier. [Speech Overlap] 1,350.

Helane Becker — Cowen Securities — Analyst

Right. I knew that part. I just didn’t know the first one. Thank you.

Doug Parker — Chairman and Chief Executive Officer

Thanks, Helane.

Helane Becker — Cowen Securities — Analyst

Okay, thanks. Have a nice day.

Doug Parker — Chairman and Chief Executive Officer

You too, Helane.

Operator

Thank you. And our next question comes from Hunter Keay of Wolfe Research. Your line is now open.

Doug Parker — Chairman and Chief Executive Officer

Hi, Hunter.

Derek Kerr — Executive Vice President and Chief Financial Officer

Hey Hunter.

Hunter Keay — Wolfe Research — Analyst

Hey, fellas, good morning. Thanks for getting me on. Hey, Derek, your revenue in 3Q is like $3.2 billion. How much — what will be your cash receipts maybe net of refunds in the quarter?

Derek Kerr — Executive Vice President and Chief Financial Officer

Revenue is about 75-25 from a revenue perspective. So we did burn some of the historic value during the quarter. Our ATL still had about — we ended the ATL in about $4.9 billion at the end of the third quarter and there is about $2.5 billion that is still stored value that was from refunds and other things that were given out during the early part of COVID.

Hunter Keay — Wolfe Research — Analyst

Okay, cool. Thank you. And then I’ve got a question for Alison actually. I’m asking you this question, given your comment of the importance of TMCs in the press release you put out with the new Sabre deal. How much did you spend on TMC commissions in 2019 just roughly? And how much is your budget? How much are you being given to spend on agency commissions in 20 — 2021 and 2022 relative to what you said about the importance of agencies as business travel recovers, and of course, obviously the elephant in the room be the competitiveness of the corporate travel landscape and as it evolves over the next couple of years?

Alison Taylor — Chief Customer Officer;

For ’21 for our TMCs and our agencies, and we believe and always making sure our agencies are close partners for us to facilitate important corporate business. Whilst they are working out, what that would be, because as you know, we still are looking at the return of corporate business on hope of the largest complex global accounts being later in ’21. So it is little hard at the moment to predict what those commissions will be. All I would say is they continue to be important for us, and we believe once again they will be robust partners in the latter half of ’21. We are also working with them to open up markets like the corridor between the UK and the USA. And so they also are facilitating these opening of markets, which I think is important initiative for them.

Derek Kerr — Executive Vice President and Chief Financial Officer

To Alison’s [Indecipherable] we haven’t gone through the budget process for 2021 and we will go through that process and figure out the right amount that we need to do for — to get the corporate back.

Doug Parker — Chairman and Chief Executive Officer

And Hunter, what I think you’re getting at, given our scale of American and our ability to serve corporate customers, it is rarely American that is out there increasing commission rates in an effort to attract business travel. So I don’t think you’ll see that be the case in the future. That’s my grasp. We do often need to match others, and we need to be competitive, but it’s not — Alison is not the one who is out there cranking up commissions in general.

Hunter Keay — Wolfe Research — Analyst

Okay. No, that’s very helpful. Thank you very much.

Operator

Thank you. And our next question comes from Jamie Baker of J.P. Morgan. Your line is now open.

Jamie Baker — J.P. Morgan — Analyst

Hey, good morning, everybody. A couple for Derek presumably. First, based on the October 1st furloughs and the accompanying service suspensions, what’s the estimated level of cost savings there either on a quarterly or annual basis?

Derek Kerr — Executive Vice President and Chief Financial Officer

Yeah, I think, we’ve got as we’ve put together how much in savings we’ve got from a management perspective, it was about $0.5 billion, okay, that we had in the management side of things. The amount from efficiencies and other things that we got out from some of the management — I mean, sorry, some of the labor was about $400 million. So from a headcount perspective, we’re right around $1 billion of permanent efficiencies and headcount from those two areas. So of that $17 billion, $1 billion of it is definitely stuff that doesn’t come back. Fleet reductions is another area where we will see significant savings. And then the other part is, as we add back in the cost, as Doug said earlier, as we add back in the flying, how do we do that more efficiently to drive those costs down and keep most of the — keep everything we can from the savings that we’ve had in 2020 permanent as we move forward.

Jamie Baker — J.P. Morgan — Analyst

But the aircraft savings, I mean, you’re not counting that as part of the PSP exercise. I mean what I’m getting at is that in the event of another round of PSP, certain costs are going to be added back to the P&L, but then effectively taken out by the PSP. So what I’m really trying to calculate is what impact PSP would have on liquidity? So your aircraft comment is helpful, but that’s separate, correct?

Derek Kerr — Executive Vice President and Chief Financial Officer

Yeah, that is separate from PSP. PSP is all headcount related.

Jamie Baker — J.P. Morgan — Analyst

Right. And we should be assuming, so your net number on that was about $1 billion annually, correct?

Derek Kerr — Executive Vice President and Chief Financial Officer

With the amount reductions from furlough, yeah, that’s about $1 billion, $1.5 billion annually.

Jamie Baker — J.P. Morgan — Analyst

Okay. All right, that’s helpful. And then again, so on the planned retirement, I guess, you’re out of five aircraft families, altogether. What level longer term of cost, is that permanently removed, and is your estimate net of any revenue inefficiencies, maybe this is the question for Vasu, that might occur since you all just have somewhat fewer options in terms of aircraft gauge?

Derek Kerr — Executive Vice President and Chief Financial Officer

I might add from a cost perspective, I think there’s two things. One is, from a cost perspective, we should have a permanent reduction in those aircraft coming out from — because you have maintenance coming out, you have the — all that kind of stuff coming out, could be anywhere from — I mean, we haven’t calculated the 2021 plan yet. And as we just retired the 330-200s this morning and we still have some 737s that are on the ground whether they come back up as we move forward, but it’s up to $0.5 billion in this year, and if that stays next year from a maintenance and a cost perspective as we go forward. I know, Vasu can add to this. Go ahead.

Vasu Raja — Chief Revenue Officer

Jamie, just from a revenue perspective, the really nice thing about the retirement is that we’ve really accelerated where we wanted to be down the road. So I think one of the things that we had said before is that we are looking for efficiency just because of the different number of aircraft types seating configurations and also when you take into account regional partners, the number of operators as well. So over the course of last five years, we’ve gone from really over 50 different sub-fleet types down to now about I think 23 years or so. And in terms of being able to serve the marketplace, we’re ending up with fleet families that really work well. So from a 320 family perspective, look we are not losing out on anything in terms of retirements like the 75s — from a 787, 8 and 9, we’re not losing out on anything from a 76 and 330 perspective. So with the variance in the different fleet types, and the same holds true for our regionals, I think we’ve got the fleet to serve the spectrum of demand needs and doing a way that’s incredibly efficient.

Jamie Baker — J.P. Morgan — Analyst

Got it. And Derek just remind me unencumbered asset number and then I’ll — then I’ll be done.

Derek Kerr — Executive Vice President and Chief Financial Officer

We have about 11 — we have about $4 billion of unencumbered assets and then we have $7 billion of first-lien capability, so around $11 billion.

Jamie Baker — J.P. Morgan — Analyst

Perfect. Thank you, everybody. Take care.

Doug Parker — Chairman and Chief Executive Officer

Thanks, Jamie.

Operator

Thank you. And our next question comes from David Vernon of Bernstein. Your line is now open.

David Vernon — Bernstein — Analyst

Hey, good morning, guys. I wanted to ask the post-COVID cost question in a slightly different way. If you were to take a look at the actions you’ve taken on the fleet side and assumes some normal level of utilization, how would the gauge shift like if you were to just take a snapshot in 2019, what does your gauge look like pre-COVID, what’s it going to look like in the future? And then if you think about the reduction in hourly operating costs from all the simplification, is there a way that you can frame kind of a cost reduction potential just on the variable hourly operating cost of the new fleet? Investors are really trying to get their heads around this issue of, okay, American’s margins were x before the crisis, what are they going to be after the crisis. And I think, getting some more tangible data points around exactly what the fleet is going to look like could be helpful here.

Vasu Raja — Chief Revenue Officer

Sure. Hey, David, this is Vasu, and I’ll start and others can join in. And look what makes this a little bit complex is we’re still in the process of setting what our 2021 capacity is. So, as Derek mentioned, we’ve got 737s on the ground. We have 50 seaters that are on the ground, depending on how those come back or not that will impact our future gauge. So let me give you more of a conceptual answer. But if you think about it right, we have taken out and all the fleet simplification that Robert and Derek just spoke about, we have taken out roughly 50 widebodies from December until June of this year. And what all of that is, is taking out some of our lesser — our lower gauge airplanes, such as 757, 767, and now we have — more of our widebody fleet are in higher gauge, higher density products like 787. But importantly for the narrow-body fleet certainly versus last year and years prior, there is a material impact in up-gauging. First, we have the 190 and the MD-80s coming out replaced with larger gauge 737 and 321neo that are coming in. And in the regional side, we have more 50 seaters coming out being replaced with dual class regional jets. So all of that is a pretty material impact. And in the months ahead, we’ll get a better sense what that means for our average gauge year-over-year, but just through the basic fleet map I outlined, you could probably get a pretty good sense for what that impact is.

Derek Kerr — Executive Vice President and Chief Financial Officer

And we kind of looking at it over ’19, just because the ’20 is so strange, but I think we’ll have — you know, our average seat in ’19 from a main line was about 167, and as we do the Oasis projects and all the changes of the aircraft, that should go up somewhere in the neighborhood of 5% or five seats, and then region wise we make that change and regional, you’re going to get about three more seats as we make the change there. So there will be a significant — as we look into 2021, departures should be down, and gauge should be up, so that will give us a cost benefit from a CASM perspective as we fly less departures at higher gauge at lower costs.

David Vernon — Bernstein — Analyst

All right. And that’s helpful. And then maybe just as a quick follow-up. Could you talk a little bit about kind of rebuilding the regional footprint and the seater footprint? Is there going to be a shift in the owned model versus the contracted model? Or how do you — are you thinking about kind of how to start to rebuild fleet traffic as you start to look at what the network is going look like post-COVID?

Derek Kerr — Executive Vice President and Chief Financial Officer

We’ve done a really nice job over the years of following a strategy that speaks to simplification in terms of fleet types and simplification in terms of number of operators. With Piedmont, PSA and Envoy, and just really at this point a few partner carriers, we feel like we’re in a really good spot, and with carriers that are established and are fighting on the basis of quality and efficiency. So, we feel pretty good about it. In terms of building back, of course, putting the larger two-class regional jets into service in important place is really important. I take a look to 2021 when demand recovers and that we open up new regional facility and DCA, and think about the kind of changes that we talked about with up-gauging and what that will mean for the airline is going to be positive, not just from a cost efficiency perspective, but also from a revenue perspective, but also from a passenger perspective, in terms of quality of service. And we’re going to be able to provide them a product that they really wanted.

David Vernon — Bernstein — Analyst

All right. Thanks for that.

Operator

Thank you. And our next question comes from Joe Caiado of Credit Suisse. Your line is now open.

Joe Caiado — Credit Suisse — Analyst

Hi, thanks very much. Hey, good morning, everyone. Derek, quick question for you and apologies if you answered it in your prepared remarks. But would you consider using some of the $1 billion of the equity raise to retire near-term debt at a significant discount? I think you mentioned your 5% unsecured notes due 2022 or sort of your next big maturity, and those are trading at about $0.70 on the dollar, so is that something you would consider or do you really want to see that cash generation drive the debt pay down?

Derek Kerr — Executive Vice President and Chief Financial Officer

It is something we consider — would consider as we look out to — or planning for 2021 and see where our cash needs are. But it is something we would consider.

Joe Caiado — Credit Suisse — Analyst

Got it. Okay. Thank you. And then just one more quick one, did you say that there is retrofit in aircraft mod activity taking place today as part of the fleet harmonization initiatives so that stuff is no longer on hold. Is that right?

Derek Kerr — Executive Vice President and Chief Financial Officer

Correct. Yeah, for us we had not put it on hold. When I talk about our capex being what it is in 2021 almost 40% of that is actually that project. We’ve continued to push it with aircraft on the ground. We’ve been able to speed it up, which I think is the right decision to get the 738s done as quick as possible and the 737s, sorry, 737s and 8s get done as quick as possible, and then speeding up the A321s to get that project done. While the aircrafts are on the ground, we can speed it up, save costs and get the benefits sooner. So those have been in the numbers and remain in the numbers as we move forward.

Joe Caiado — Credit Suisse — Analyst

That’s very helpful. Thanks for the time, everyone.

Doug Parker — Chairman and Chief Executive Officer

Thanks, Joe.

Operator

Thank you. And our next question comes from Duane Pfennigwerth of Evercore ISI. Your line is now open.

Doug Parker — Chairman and Chief Executive Officer

Hey, Duane.

Duane Pfennigwerth — Evercore — Analyst

Thanks for the time. Appreciate it. So, you obviously have some improvement in the cash burn level here into the fourth quarter. Another way to say $25 million to $30 million a day is $10 billion annually, which is still a pretty big number. So maybe going back to Jamie’s cost questions, all of the opex savings that you’ve realized, how much of that run rate is being reflected here in the fourth quarter? And if it’s simply timing, absent revenue recovery, which we can model, where would that kind of $10 billion a year kind of cash burn go to based on the cash savings you’ve realized?

Robert Isom — President

Well, the way — we’ve said we had $17 billion of savings throughout the year, right, and $16.2 billion is expense. Now some of that is volume, right. So as we add volume back in, those expenses are going to go back in. Some of the permanent stuff is what we talked about which is the management headcount, the efficiencies, the fleet, a lot of the stuff we’re doing will be permanent as we move forward to reduce that. What we have all said is that, you know to get us back to cash positive, the cash burn to be break-even needs — we’ve always said, it’s a demand recovery and we need the demand to come back. So we will — we are holding flat expenses third quarter over fourth quarter, everyday as we add back in capacity, so being more efficient, but the burn difference is coming from the revenue recovery. And where we’re seeing it exactly today is what we’ve modeled out as we go out into the fourth quarter. So, I think as we look into next year and as we look forward that it is the demand recovery that gets us back flying our entire fleet, getting the revenue back and being as efficient as we can to cut those costs out in 2021.

Duane Pfennigwerth — Evercore — Analyst

Thanks. Just for a follow-up there, this morning on the CNBC interview, I think it was mentioned that there is nothing more. We’ve done virtually everything we can on costs at this point. I guess my question would be, are you at a structural disadvantage for some reason or what would you need to see in terms of this recovery for that view to change? And thanks for taking the questions.

Doug Parker — Chairman and Chief Executive Officer

Hey Duane, it’s Doug. Yeah, again, we haven’t done anything we cannot — [Indecipherable] we can by now we should have. So as you’ve heard, as anyways as you have hear from all the airlines right now, that’s where we’ve got it. We’ve reduced all the cost we can at this point. Clearly, as we’ve ramped back up, as Derek and others have already said, we don’t expect to see the same kind of cost rate going forward. But your question is, of the fourth quarter estimated $25 million, $30 million cash burn number how does that get better. We don’t want to get the impression that’s going to get a lot better, because we’re going to further be able to reduce costs with existing cost levels. Just as our other large competitors, these cash burn numbers are firstly exactly the same in the fourth quarter. Those numbers will get better for all of us at similar rates as demand recovers. And that is what’s required. If it doesn’t, we’ll stay at — we’ll stay at these kind of burn rates. I don’t think anyone expects that to be the case, and it hasn’t been the case through this year, or anything close to it. So we’ve gotten the improvement in these burn levels from the third to the fourth quarter, there’s some of that is cost savings because we get through some furloughs, but by far the biggest driver is revenue improvement. And that’s what we will be improving as we go forward, and we’ll get this industry back in cash positive again.

Duane Pfennigwerth — Evercore — Analyst

Appreciate the time.

Doug Parker — Chairman and Chief Executive Officer

Thanks, Duane.

Operator

Thank you. And our next question comes from Andrew Didora of Bank of America. Your line is now open.

Doug Parker — Chairman and Chief Executive Officer

Hey, Andrew.

Andrew Didora — Bank of America – Merrill Lynch — Analyst

Hi. Good morning, everyone. Thanks for the questions. Derek, maybe to ask Duane’s question a little differently on costs, maybe putting on the revenue side, so, what level of revenues versus 2019 do you feel like you need to be at in order to reach cash breakeven?

Derek Kerr — Executive Vice President and Chief Financial Officer

I mean, yeah, go ahead.

Robert Isom — President

No, Derek you start.

Derek Kerr — Executive Vice President and Chief Financial Officer

No, I mean we’ve said from a revenue perspective, we are building the airline back up and getting it, where we’ve got our aircraft back in, and we get loads in about the 65% to 75%, 70% range is kind of where it’s going to take to get us back to breakeven. And getting our aircraft back in is capacity much lower than where we were in 2019 because we’ve taken out 157 aircraft, and it will be much lower than what we had planned. So we’re all going to take capacity out in 2021. The industry will be smaller, but getting most of our aircraft back up, getting loads in the 65% to 70% range, which will drive the revenue recovery and get the revenue back in is kind of where we see where we would be breakeven from a cash perspective.

Andrew Didora — Bank of America – Merrill Lynch — Analyst

That’s great. Thank you. And then just my second question, maybe for Vasu, can you maybe just talk about how your discussions have gone with global authorities, and how you’re thinking about potentially the reintroduction of the long-haul international network? Maybe what regions are kind of routes do you think could come first, particularly when you think about your new — how your new fleet plan into all of this? Thanks.

Vasu Raja — Chief Revenue Officer

Actually, we would be happy to. And so that we mentioned earlier, we are actively working with a number of global regulatory bodies, no more so than with the UK. Really our largest international connect point is indeed our hub in Heathrow. So we — actually ourselves in IAG, we are closely working with the UK government to really create an air travel corridor, which could be not just the basis for further reopening in long-haul services to the UK, but indeed, the template for how we can do long-haul reopenings more globally. Now, other than that, well, that impacts primarily our European, some degree our Asian network. Really in many ways, our South American network is already coming back. Most — all of our Miami to South American schedule is in place and doing quite well. And by the time we get into December that will continue. So a big part of our long-haul network, which is South America, we expect to be back certainly by New Year or so. And then the other big chunk of it which is Heathrow, we are working on to reopen. And then we have some confidence, it’s good for the global aviation community, but more critically, it’s good for customers everywhere to figure out a really smart way to get a market reopen and that can be the template for doing it elsewhere. So that’s how we’re thinking about it.

Andrew Didora — Bank of America – Merrill Lynch — Analyst

Great. Thank you.

Operator

Thank you. And ladies and gentlemen, this does conclude our analyst Q&A. [Operator Instructions] Our first question comes from Alison Sider of Wall Street Journal. Your line is now open.

Alison Sider — Wall Street Journal — Analyst

Hi. Thanks so much. Just curious how you’re thinking about sort of changes in the competitive landscape seeing some of your competitors starting to announce plans to go into new cities, including some of your hubs, Chicago and Miami. Just — yeah, curious, how are you seeing that playing out and how you’ll respond?

Robert Isom — President

Hi. We welcome the competition. Look, we’ve got an incredibly strong network, as we’ve talked on the call today, and assets that will serve our customers really well. So — but we’re excited about the potential for return and demand and what we can do when it does come back, and we’re ready to take on competition, no matter where it comes.

Alison Sider — Wall Street Journal — Analyst

Thanks.

Doug Parker — Chairman and Chief Executive Officer

Thanks, Alison.

Operator

Thank you. And our next question comes from Leslie Josephs of CNBC. Your line is now open.

Leslie Josephs — CNBC — Analyst

Hi. Good morning. Thanks for taking my questions. How are you? Just I wanted to ask about the AAdvantage program. Do you have any sense of where revenue is going? Is it recovering? And what’s your outlook of for co-brand card spend going forward, maybe even in 2021?

Vasu Raja — Chief Revenue Officer

Hey, Leslie, this is, Vasu, and thanks for the question. We are indeed — at a time when there is so much has changed in our business indeed in such a state of crisis. Indeed our co-brand program has — our revenues from haven’t fallen nearly at the rate of overall passenger revenue, simply because people continue to keep spending out there. And indeed, as we look at consumers more broadly, savings are up, people are spending. Their spending on different things. And so we are actually — one of our major priorities in the year and years ahead is to work even more closely with our co-brand providers, Citi, Barclays, but even Mastercard as well to ensure that one, our cards are top of mind and the two, they’re driving increasing amount of spend for our customers and revenue for the airline.

Leslie Josephs — CNBC — Analyst

Thanks.

Operator

Thank you. And our next question comes from David Koenig of Associated Press. Your line is now open.

David Koenig — Associated Press — Analyst

Hi. Thanks. Good morning everybody. Can you discuss — I don’t know, to speak for Doug or anybody, but can you discuss Thanksgiving Christmas bookings, and what kind of load factors you’re expecting for those holidays? And also to clarify Derek; Derek, are you saying 65% to 75% — 65% to 70% load factors of breakeven, even with the current mix of business and leisure being heavily in leisure?

Vasu Raja — Chief Revenue Officer

Hey, this is Vasu, and I can answer both. For the second one first, really — the simpler way to think of maybe 65% to 70% of 2019 revenues, which what Derek was giving. He was holding our yield constantly thinking about load factors. So that’s really the simpler way to think about your second question.

And then to your first question, yes, we do anticipate that the Thanksgiving period and the December second half period will be relatively stronger. One, because we have seen in the last several holidays, Columbus Day, Labor Day, July 4th, and Memorial Day become sequentially stronger. And indeed, what we’re finding more and more is that as consumers start resuming life, returning to spending and full-service restaurants, going back to school, things like that, there — shortly thereafter searches resume and air travel spending resumes too. And even with current rates of case growth, we continue to see that at least in many geographies such as the Sunbelt that are most critical for American Airlines. So we do see that as we get into the Thanksgiving week, as Robert mentioned in his opening comments, more than half of our flights are being yield managed in some ways, which means that the airline is holding out, anticipating higher revenues closer departure. And so that’s a promising thing which we hadn’t seen in the past. Now, this is a volatile environment, the recovery will be choppy and should things change, we will respond accordingly. But right now, things are better than they were but far from sustainable.

David Koenig — Associated Press — Analyst

All right. Thank you.

Operator

Thank you. And our next question comes from Justin Bachman of Bloomberg. Your line is now open.

Justin Bachman — Bloomberg — Analyst

Yeah. Hi. Thanks for the time this morning. I’d love if you could clarify a bit on the timing around the 737 MAX deferrals that you announced as far as what period you’re thinking that those will come? And are you speaking or pointing about any other aircraft deferrals if the business is not returning as you’re hoping? Thank you.

Robert Isom — President

Thanks. The deferrals we have eight delivery — we have 18 deliveries in 2021, and we have deferral rates on eight of those aircraft, and then we have deferral rates on all 10 aircraft that come in 2022. We’ll make those decisions down the road as we look at the demand environment as they come back. Those can push to 2023 and 2024. So that’s where we’re at on those. We have also been working with Airbus and just making and re-spreading the delivery stream there. We have moved some of the ones that were coming in 2021 to 2022, so we pushed a little bit. And at this point in time we’re pretty firm on where we are from the delivery schedule with Airbus and Boeing.

Justin Bachman — Bloomberg — Analyst

Okay. Thanks.

Operator

Thank you. And our next question comes from Edward Russell of TPG [Phonetic]. Your line is now open.

Edward Russell — TPG — Analyst

Hi. Thank you for taking my question. I was wondering if you could talk a bit more about the MAX return to service or some reports earlier this week that you’ll be flying at around the Christmas time. But I know those dates get repeatedly, how confident are you about that return timeline?

Vasu Raja — Chief Revenue Officer

Thanks, Edward. Hey, it’s really just — it depends on what happens, you know, the aircraft is going to be returned and then ungrounded, when the FA says it’s okay, and after we and our team get to take a look at it this well. Based on what we’re hearing, that would allow for an ungrounding sometime in the month of November. If that holds true, we’ll likely have the aircraft up in service a month or so after that, so potentially by the very end of December. But it all remains to be seen and we’re incredibly flexible in terms of any type of time, just as we have done over the last — over the course of the last year or so.

Edward Russell — TPG — Analyst

Great. Thank you.

Operator

Thank you. And our next question comes from Kyle Arnold of Dallas Morning News. Your line is now open.

Kyle Arnold — Dallas Morning News — Analyst

Hi. I know that Chicago and New York, New Jersey, Connecticut expand some of their travel quarantine. How problematic are these for travel here domestically, and is there anything to be done that can stimulate travel in those areas in the West Coast, in the Northeast, where it’s not as strong as some other areas of the country.

Robert Isom — President

Travel will come back when there are things that are open and things for people to do. Certainly any type of restriction, quarantines are not helpful. Again, we’re trying to make things easier on customers where there are any type of difficulties such as the work that we’re doing in the Caribbean, and work that we’re doing in Hawaii, and as was mentioned earlier, the work that we’re trying to do in Europe, and especially the UK, and trying to open up travel corridors. But the real key to all of this is having things for people to do, well the things that we’ve talked about is a great indicator. Restaurants being opened is a good indicator of people being able to go to travel to those destinations and it’s just a critical key. So, and that’s all I can offer [Speech Overlap]

Alison Taylor — Chief Customer Officer;

We work with many of our partners, with the travel associations, hotel partners, car rental companies as well to make sure that we are all looking to get frankly to bring back tourism. One of the things to reduce confusion with our customers as you quite rightly say, one day an area might close and then start quarantine, etc. it’s we have just placed on our aa.com, a site where you could place in your destination, and it will tell you what requirements for travel are in place for that state or that country because it’s global. And this is really helping our customers understand and ease their travel as well and help them with bookings going forward.

Kyle Arnold — Dallas Morning News — Analyst

Thanks.

Operator

Thank you. And this does conclude our media Q&A. I will now turn the call back over to Doug Parker for closing comments.

Doug Parker — Chairman and Chief Executive Officer

Thanks everyone for your interest. And any further questions, please contact the Investor Relations or Corporate Communications. We appreciate your time. Thank you very much.

Operator

[Operator Closing Remarks]

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