Good day, and welcome to the American Airlines Fourth Quarter 2013 Earnings Call. Today's conference is being recorded. [Operator Instructions] And now I would like to turn the conference over to your moderator, Managing Director, Mr. Daniel Cravens. You may begin.

Thanks, Marquita, and welcome, everybody, to the American Airlines Fourth Quarter 2013 Earnings Conference Call. Joining us on the call today are Doug Parker, our CEO; Scott Kirby, President; and Derek Ker, our Chief Financial Officer. Also in the room for our Q&A session are Robert Isom, our Chief Operating Officer; Elise Eberwein, our EVP of People and Communications; Bev Goulet, our Chief Integration Officer; and then lastly who's on the call is Steve Johnson, who has dialed in, is our EVP of Corporate Affairs. We're going to start the call this morning with Doug, and he will provide an overview of our financial results. Derek will then walk us through the details on the quarter, and provide some color on our guidance for 2014. Scott will then follow with commentary on the revenue environment and our operational performance. And then after we hear from those comments, we'll open the call for analyst questions, and lastly, questions from the media. But before we begin, we must state that today's call does contain forward-looking statements, including statements concerning future revenues and costs, forecasts of capacity, traffic, load factor, fleet plans and fuel prices. These statements represent our predictions and expectations as to future events, but numerous risks and uncertainties could cause actual results to differ from those projected. Information about some of these risks and uncertainties can be found in our earnings press release issued this morning, AMR Corp. and US Airways Form 10-Q for the quarter ended September 30, 2013, as well as the 2012 Form 10-K for both AMR Corp. and US Airways. In addition, we'll be discussing certain non-GAAP financial measures this morning, such as net profit and CASM excluding unusual items. A reconciliation to those numbers to the GAAP financial measure is included in the earnings release and that can be found on our website, at aa.com, under More About American Investor Relations. A webcast of this call will also be archived on our website. The information that we're giving you on today's call is as of today's date and we undertake no obligation to update the information subsequently. So thanks again for joining us this morning, and at this point, I'd like to turn over our call to our CEO, Doug Parker.

Thanks, Dan, and thank you, all, for being on. We are happy to announce our fourth quarter and full year 2013 results. There are -- Derek will walk through the GAAP results. There are, of course, as the company has merged and as American has emerged from bankruptcy, there are a number of special charges. On top of that, through a merger accounting, we can only account -- we can only compare results from the time of the merger. So the GAAP results on this period, we don't find particularly -- find it somewhat confusing. So to help them be less confused, we have gone through a reporting all of it, everything on a combined basis, non-GAAP basis, but I think much more in line with what our investors want to analyze. So anyway, my comments will be on all those non-GAAP combined results. The fourth quarter, we made a profit of $436 million on a combined basis, excluding special charges. That compares very nicely to a loss of $42 million in the fourth quarter of 2012. Our full year 2013 combined profit, excluding those special charges, was $1.9 billion, a $1.5 billion improvement versus the $407 million the companies made on a combined basis in 2012. So look, it's really early in the merger, but we are off to a great start. The teams are working extremely well together both at the management level, and also, all of our employees are out in the field during difficult times as we're working through tough weather situations, and bringing these 2 companies together, just been doing a fantastic job in taking care of our customers. So I want to begin by thanking all of them for what they're doing to help build the new American. Our customers are already experiencing the benefits of our combined network, with more of that to come soon, and Scott will talk more about that. So we have a lot of work ahead, we know that, but these financial results are evidence to the strong foundation we have in place as we go into this merger. We are looking forward to improving on these results in 2014, as we further integrate our airlines. So with that said, I'll turn it over to Derek, who will give you some more details on the financials, and then Scott will tell you more about the revenue environment. Derek?

Thanks, Doug, and good morning, everybody. As everyone is now aware, we did report our fourth quarter and full year results this morning. As you have seen, there's a lot of information contained in the tables of our press release, including financial statements for the new American on a GAAP basis, which include the results for US Airways only for the period from the completion of the merger on December 9, 2013 through the end of the year. We have also included stand-alone American Airlines, standalone US Airways and combined financial results that include both airlines on a non-GAAP basis. And as Doug said, because the merger closed during the quarter, we believe reviewing the results, the financials on a non-GAAP combined basis, that is American Airlines and US Airways for the entire quarter, is the best way to review the financial results. Unless otherwise noted, all of my comments will be based on the non-GAAP combined results, which can be found in the press release tables under the heading, American Airlines Group Inc. Non-GAAP Combined Consolidated Statements of Operations. For the fourth quarter, the combined recorded GAAP net loss of $2 billion or $8.66 per share, which includes $2.4 billion of net special charges. This compares to a fourth quarter 2012 GAAP net profit of $2.62 or $3.46 per share. On a non-GAAP combined basis, as Doug said, the company reported a fourth quarter net profit, excluding net special items of $436 million as compared to a net loss of $42 million in the fourth quarter of last year. Using a diluted share count of 742 million shares, this equates to fourth quarter 2013 earnings of $0.59 per diluted share. Total combined capacity for the quarter of 2013 was 64 billion ASMs, up 3.4% from the same period of…

Thanks, Derek. Today, I'm going to talk briefly about the fourth quarter, the integration process, what we see as some of the future opportunities and then a more specific outlook for the first quarter. I'd like to start by thanking the 100,000 people of American Airlines who have managed to run a very strong operation over what has been several very difficult weather weeks. During the fourth quarter, both US and AA had strong revenue results, with our combined consolidated PRASM up 5%. Our original forecast were off for November and December due to the holiday shift, with what appeared to be a weak November, followed by a very strong December, but in reality, we saw strength across the quarter. For some regional color, domestic RASM was up 4%; Atlantic was up 7%; Latin, up 9%; and Asia was down 6%. We're obviously early in the integration process, but as Doug said, it is proceeding well thus far. Customer day 1 was on January 7. And while we had some minor issues, we worked through those quickly, and we're happy with the first piece of customer-facing integration. We also started code sharing on hub-to-hub routes 3 weeks ago, and that has also gone well. In fact, we already booked over 70,000 code share tickets in just the first 2 weeks of Phase 1. We'll continue to roll out more code sharing throughout February, and hope to be done with the entire system in February. We're still on track for US Airways to exit Star at the end of March and transition the next day into oneworld. We've already selected Sabre as our new reservation system. I know it's admittedly very early. We're making good progress on moving to Sabre and getting a single op certificate in late 2015. We expect…

Thanks, Scott. Thanks, Derek. All right, operator, we're ready to take questions, please.

[Operator Instructions] We'll take our first question from Jamie Baker with JPMorgan.

Scott, the first question. Just based on your estimates for industry RASM this year, do you expect that American is going to outperform, and if so, what are some of the driving assumptions behind that?

Yes, I do think we're going to outperform. And I think some of the things I talked about, one, I think we're going to -- we already are realizing synergies, and I think that's going to accelerate as we go through the year. In addition to the traditional synergies are some of the kinds of things that I've talked about. I talked about network initiatives, but there's literally less of probably 100 items that are revenue opportunity ideas that we have, and so I believe we have to prove it. I know we still have to prove it, but I think we will outperform the industry this year on RASM.

And I've never focused singularly on some of the synergy targets that you put out initially. But would it be safe to assume that some of what you've learned, now that you're fully ensconced in all things American, is perhaps incremental to those targets, some of the stuff you identified before?

Yes. We always thought that we were under-promising and intended to over-deliver. Hopefully, we're still under-promising, and we'll still over-deliver from today, but it is fair to say that our view has -- some of the stuff I talked about. So the $400 million in network initiatives, for example, weren't included in our synergies when we went through the merger, and some of the other changes that you'll see in the coming months, some of them are things that weren't included in our synergies. To date, on some of the synergy stuff that was included, partner revenue, the credit cards, for example, we've exceeded those items. Now there may be some things that we missed on, but today, we either -- for the pieces that we included in the original work, we either believe we're going to meet or exceed and we've added to that list. So we feel pretty confident that we're going to exceed our numbers.

Okay. And for Derek, in terms of the cost range that you gave for the full year, up 2% to 4%, how do we get a handle around those goalposts? What's the scenario? What needs to happen when you come in at the lower end versus the higher end? Does the timing of achieving the SOC impact that outcome or are you just kind of playing it safe?

No, no, I think it really is -- we're really trying to understand, as I said, from a budgeting process. Because the merger happened so late in the year, the American team did the American budget. The US team did the US budget. So nobody has really -- as we combine the 2, so the guidance is combining the 2 budgets. We haven't been through and scrubbed through those. The other thing we would like to do, we know some of the synergies we have built into that guidance from a cost perspective, but we'd like to go through and scrub a little bit more as we go through and understand both of the budgets and understand the expenses of either side. So that is what, I believe, where we're at today, as we just combined the 2 budgets. But I believe as we have time to dig through where everything is and understand both expense structures, that there'll be some more opportunity.

And how should we think about potential milestones for returning cash to shareholders down the road? I mean, by our numbers, it looks like you have almost twice the cash to liquidity that you actually need on a run-rate basis? And this will be my final question.

A good one. Look, Jamie as you know, we just closed this merger a little over a month ago, and we got a number of things to go address. What's -- the cash balance, we agree holding more cash than the company needs to hold is not a good use of our shareholders' capital. We understand that. So what we do need to do and what the company, what the team has set out to do, is go figure out what the best uses of that cash are right now. There's certainly some amount of debt that probably could and should be paid down or restructured. And once we get through the exercise, we should figure out what's the best use behind that. So still to come, it's early on, but we understand the point and share the view that you have, and there's no reason to hold more cash than we need. I would point out, as Derek noted and as we noted in the press release, the company did make -- did elect to essentially buy back shares already. We knew our employees have -- were distributed a number of shares to employees as a result of American's restructuring. We -- both as a service to those employees, but also as a show of our confidence in the equity. It ended up distributing those on a net basis to our employees. In fact [indiscernible] to buy the shares that were necessary to cover the tax benefit, to cover the taxes on those shares. So that, I think, is a good indication for all of you as to what we think about our cash balances and our views about the equity today.

We'll go next to Hunter Keay with Wolfe Research.

Derek, question for you on CapEx. How closely should we look at that disclosure statement that shows about $4 billion on average of annual CapEx over the next few years? It's a two-part question. Is that viable? And if we assume for a second that you're going to spend all the CapEx that was in the disclosure statement and the order book in terms of the units on order don't change. How much flexibility do you have to at least maybe smooth it out? Because there are some really, really, really big choppiness in terms of CapEx spend, particularly when you go from 15 to 17. You're looking at something close to $5 billion of CapEx in a few years from now. So I guess how flexible are you on the actual spend amount and how flexible are you on the smoothness of it?

Well, as of right now, I think it is -- this year, the aircraft CapEx number is about $4.8 billion. I think, as you said, it's up in that range. We have financing for a significant amount of those aircraft. So the only -- the cash that will go out the door is $1.2 billion. We are now looking at the fleet plan, looking at deliveries, understanding what commitments we do have and what we can do with that. But as of right now, we don't plan to make any changes moving forward in that delivery. We want to continue to replace all the older aircraft and bring on the new aircraft. I think every aircraft that comes on is NPD positive. So it's the right thing to do. But as you said, we need to look at the CapEx going forward and from '15 to '18, it's pretty much the same as where it is today. It doesn't dip as much out there, but I think we will look at that. We need to understand how much we're committed to and how much financing is committed in those years. Because there are, as part of the Airbus deal, there are lesser financing that's been committed, and we need to understand that. So the treasury team is going through that with the aircraft guys, and more to come on that. But as of right now, our plans are, and our 5-year plan is to take all of these deliveries.

Hunter, it's Doug, just to be -- I mean, to be clear, to reinforce one of Derek's points there, this is an NPD-positive use of our cash. We have older airplanes that need to be retired. And the sooner you can get them retired and have new airplanes come in, that actually will be positive, and would be a positive cash flow thing to do. So this isn't something we're concerned about in terms of the investment. Your question is about maybe is it coming in at the right -- since we're bringing 2 aircraft orders in at the same time, is there something we can do, perhaps? But I wouldn't want you to think or expect that we're going to make major modifications in these fleet orders because we're happy with the way they are. We want these airplanes. They are a good use of capital, and one of -- and something that we're excited about getting the aircraft in to replace the older aircraft.

Yes, I know, it wasn't my expectation at all, that canceling orders. Thank you, Doug. And while I have you Doug, I wasn't going to ask about your comp but you wrote a letter about it, so I think it's fair game. The $2.5 billion pretax threshold that the Board has decided was going to be at the level or you'd be paid out 200%. Typically, you guys, correct me if I'm wrong, I thought you were generally paid your short-term compensation on a pretax margin level, not an absolute number basis. So did that change? And b, why $2.5 billion? Because if that's the 200% of your comp payout, should that imply some sort of like best case scenario?

No, no.

So how do you guys get there, is the question?

Okay, so I'm glad you asked that. Certainly we don't want you to think that -- look, let me just go back to -- we'll answer your first question, which is what we've done historically. And we, meaning US Airways, not American, did the following: our incentive comp, the financial targets in the past I'm going to look into, I think, last year, it started at 0 and capped out at $500 million or something.

$600 million.

$600 million, I'm being corrected. So $600 million. The target was there...

$300 million.

$300 million. Something we exceeded by a good bit. The goal here is to have -- is to pick a target that we can really tell people that's a target incentive, so, and one that over time, should average 1, right. So at any rate. You shouldn't -- we never, we've never tied those projections to a budget or a forecast or anything like that. We go look, the Board looks, the company looks, that prior years, history, what the payouts have been of late, what they're trying to accomplish. We're trying to bring 2 teams together and making sure there's some certainty of payment in the first year. The American team, by the way, hasn't seen an incentive payment since 2001 annual bonus. So without getting into a lot of detail about our forecast, or anything like that, I think -- I have no problem telling you that you shouldn't look at the $2.5 billion and think that we -- that, that is our forecast or a number that we think represents our budget or anything like it. It's a number based on the Board looking at the history of payouts and wanting to be sure that there was a payout for -- again, $2.5 billion for this company is going to be something so in excess of the highest profits, probably, it's ever seen. So we think that's the good number but it's also not one that we set in a way that was meant to -- giving by kind of guidance to earnings.

We'll take our next question from Mike Linenberg with Deutsche Bank.

Two questions here. Scott, I want to go back to you talked about rebanking Miami this fall and then following, you'll do Dallas and Chicago. What's in store for New York and L.A.? I mean, you did talk briefly about some of the new service out of LaGuardia to some of the markets that are core to the US Airways network. But correct me if I'm wrong, my sense is that every carrier is losing money in L.A. on a fully allocated basis. What can you do to improve the profitability of those 2 big operations for you?

So we don't have any big initiatives like rebanking at Los Angeles or New York coming up. New York, the biggest thing we have going on is the introduction of the new A321 Transcom product, which has had great customer feedback so far which is to be expected such a fantastic product. And the early returns are good. They're very early returns but the early returns are good in New York. In Los Angeles, after the merger, the new American Airlines is now the largest carrier in Los Angeles and we think that creates the platform and I think we're #1 in terms of premium business in Los Angeles and Los Angeles is an important gateway over the long-term for us to Asia. A really important market. And Los Angeles actually was profitable in the last 12 months. Not by a lot, but Los Angeles is already profitable. Certainly, we expect it to be nicely profitable this year, just with the kind of rising tide past American Airlines and the effect of all those synergy. And a market that benefits more than most by going from not being the largest carrier to being the largest carrier. So our expectation in Los Angeles, in particular, that it is -- it will be nicely profitable this year.

Okay, great. And then my second question is to Steve Johnson. Steve, there are still some loose ends with respect to labor and I was just -- if you could walk through maybe the timeline? My sense is that there are some smaller unions at US Airways that I think representation has to be determined. What are the next steps before, I guess, we get to a single seniority list for all the groups? Or maybe some of that, maybe the bulk of that is behind us. Can you just update us on that front?

I do apologize, it looks like Mr. Johnson's line has disconnected.

Sorry, Mike. He's traveling. Let me try.

It's not a problem.

Yes, sure. You're right. I mean while we have -- we haven't had full employee support for the merger, they're not very [ph] excited about that. We do have to go through the process. And our employees need to go through the process to determine who the collective bargainers will be in each group. So that work is -- first off, when you said seniority list, that relates almost entirely to pilots and flight attendants. Both of those have been determined. So the flight attendants just this last week, they have come to an agreement on how they're going to be represented. So I don't think -- and I say determined, meaning they determine how they will do it, they haven't turned in the list, let's be clear about that. But they determine how they will -- the process they will go about to get to the list. So anyway, they are working together well on those. Other groups still need to go through the process of determining who will be their bargaining agent and you'll see some of that as we go forward. It's what happens at their mergers. I don't anticipate any major issues as a result of it. But it's up to our employees to go decide so that's true of our -- in our mechanic workforce, in our ramp agents. American has non-representing classes for things like gate agents and reservations agents, whereas US Airways does have representation in those groups. So those employees will need to decide whether they want a representative or not. All that work will take place here over the coming years, so, and again it's something -- we can't actually integrate a lot of workforce until we have a single operation anyway, [ph] so we -- it's part of what we expect that would occur.

Doug, do you have a goal? I mean, is the hope that this is done before the year is out, or is this something that may even linger into 2015? I'm just trying to establish or set expectations here.

It's just sort of specifics, Mike. With the pilot, we have an MOU that's been approved by both sides. But that process of getting to a single seniority list will take into next year. We can't combine operations until we get the single operation certificate, which is the back half of 2015. So that timing is going to dictate when the single seniority list gets done. But we have a contract done with the pilots and the pilots will be doing their own process on the seniority list. With the flight attendants, just in the last week, we got an agreement that wraps the US Airways flight attendants into the process and makes them officially a part of the process, so we were very excited to have them in the process with APFA from American. That process will take into next year to complete the combining of the contracts and getting through the seniority list, but again, something that everyone has agreed o,n, the process and how we do it going forward. And some of the other work groups, it depends on when they -- when 1 group or the other files for a representation election. Those will likely take into next year. Those are typically are easier to combine because you don't have as much of the seniority issues with mobile workforces that you have in pilots and flight attendants. But having the pilots and flight attendants and the union on both sides now signed on to a process, I think, puts us leagues ahead of, certainly, of where we were in the last merger, but even where other mergers have been historically.

We'll take our next question with Dan McKenzie with Buckingham Research.

Scott, I'm wondering if you can help us to reconcile the revenue outlook with corporate travel trends? And I guess the view among investors is that American Airlines has lost corporate share. And please correct that, I don't know if that's correct or not. But how do we think about share gains and losses embedded in your outlook, as we look to the first quarter and I guess just looking ahead in general?

Well, it is right that over the last few years, American did lose corporate share. Embedded in our guidance is no explicit assumption about share gains or taking share back from someone else. I think we will win share back by virtue of the network that we now have. I think we will win some of American's natural share back. But we don't have explicit assumptions about winning share back in our guidance. Corporate demand has been and continues to be strong for us so we feel really good about the outlook. In the fourth quarter, our corporate revenues, combined corporate revenues were up 7% year-over-year. And we've got a strong start for 2014. So we have a sales team that is engaged. I think they're really a good sales team. We have a great product, a great network to sell and they're out doing that. And I think you'll see us improve even beyond where we've been historically in corporate. But there's nothing explicit in our guidance that assumes kind of share gain.

Okay, very good. And I guess if I could come back at you with a network question here. Given the global volatility or global, I guess, stock market instability in the emerging markets, how big a curveball, I guess, is the weakness in emerging markets relative to international growth plans? And I guess, specifically, are the primary drivers based on what your corporate travel managers are asking for, are they being driven by slot opportunities or network goals? And I guess again just trying to recognize international -- reconcile, pardon me -- international growth, just given some of the global instability we're seeing.

Sure. Well, most of the -- well, we do have some of the markets there are part of the issue, so I'll just talk regionally. South America, clearly, of late, Venezuela and Argentina have each been in the news. Two long-time markets for American Airlines that do quite well and that are important to us. To put some context around it, Venezuela is about 1.4% of our annual revenue. Argentina is about 1.3%. South America is obviously an important part of our network and goes through some these ups and downs over time. We are committed to it for the long term. It's a growth region, so there may be some bumps in the road along the way but the long-term trajectory is good. Much of our growth next year is overlapping growth that happens from last year as opposed to new growth that's starting in 2014. In Asia, long-term it's a place that we're behind, a region that we're behind Delta and United, it's important for us to grow. We were very excited to get the slot times that we got for our Dallas to Shanghai service. So we look forward to launching that new route and expect it to be successful. That's a lot of our ASM growth. Obviously, a long haul route on the big airplane is a lot of our ASM growth. So emerging markets, per se, I don't think are going to have a huge impact, even with the recent volatility on our revenues, where it's more likely to have an impact if the -- is if you have some kind of effect on the global economy, a confidence of the global economy. We've certainly seen airlines in the past that when there's a worry about the global economy, it's easy for corporate travel managers or for businesspeople to cut travel. And so if something from the emerging economy turns into a contagion that spreads to the rest of the world, that's what I'd be more worried about, as opposed to something tactically that's happening in one of those individual countries.

We'll take our next question from Helane Becker with Cowen & Company.

My first question is do you have flow-up agreements from your wholly-owned regional airlines to the pilot to the main airline?

Helane, this is Robert Isom. The answer to that question is yes. We have flow-up agreements with Envoy, which was the formerly American Eagle, the mainline. And we also have guarantee interview programs from our FAA [ph] regional to US Airways.

Okay. And then my other question is are you going to call out the amount of flying that was canceled earlier this month and actually yesterday and today because of weather?

Helane, this is Derek. It was already in the guidance because it's already happened so we put that in the ASM guidance so it would've been a little bit higher but it is less because of the fact that the storms happened.

Okay. And so when you said that your completion factor, you're assuming a higher completion factor going forward that, that includes what you've already done? Or that's just from here, forward?

That's from here forward.

Okay. And then my last question is do you have a debt number we can use for the balance sheet?

The year end debt number on the balance sheet is about $16.8 billion.

Okay. And then Doug, can I just ask a question about the letter you wrote yesterday to your employees with respect to your compensation. You mentioned in the letter that you are taking less than your peer group and, in fact, you're taking substantially less than your peers. And given the fact that your job seems to be harder than your peer group going forward, I was just kind of wondering the thought behind that. Like why did you ask for less when you probably deserve more?

Why, thank you, Helane. Look, it's an easy answer. Well, we still have some of our employees working for less than their peers at Delta and United. And given that, we don't -- that's the result of the bankruptcy and the agreements that were met with our employees about the merger. So as long as that's the case, I think the right thing for me to do is also have mine lower than my peers at Delta and United. So it's as simple as that. And to be fair, as I also say on that note, this is -- they are amounts that are being expensed to the company. So I'm not trying -- this is -- I'm not complaining for a second and really, really happy to be here and honored to be doing this and looking forward to doing it and one day, hopefully we'll all be making the same as our peers. But right now, it's the right thing for me to do.

We'll take our next question from Duane Pfennigwerth with Evercore.

One of the most -- one of the most common questions we get from new investors who have historically avoided the group is how we measure the difference between a restructured industry that folks are excited about and just now they're up cycle, in what remains a fickle industry. So my question for you is how does your aircraft order book today or as it stands today relate to this question? It will no doubt drive fuel efficiency and maintenance savings. But wondering if you would comment on whether or not that $5 billion level of aircraft CapEx is consistent with the restructured industry thesis.

Yes, it's night and day different. In the past, when the industry got a whiff of profitability, you would see airlines will start going and making aircraft orders not for replacement but for growth under -- again, we can all -- it doesn't really matter why but my own view is largely because the industry -- because it was so fragmented and there's so much value to consumers by being able to get them to all the places they want to get, every time any of us had a whiff of profitability management would go out and buy and put in new aircraft orders thinking if I'm making money with 100 aircraft, I can really make money with 150. And that didn't work, of course. And we'd go into these terrible down cycles of having too much capacity and then the economy will turn down, you'd go into a really bad tailspin. That's not what's going on here or anything close to it. Our aircraft orders as well as the aircraft orders in place at our competitors are designed to replace aging aircraft to modernize fleets that, in the case of American, has gotten to the point where it seriously needed some modernization and haven't had the capability to do it in the past. And those are NPD-positive. It doesn't commit us to growth. It gives us some flexibility to grow modestly. But they're there for replacement. It is -- it couldn't be further from what you've seen in the past. And in terms of aircraft orders that were made back in the '80s and '90s, when [indiscernible]

And then just a follow-up on Dan's question, the 9% international growth, what flexibility do you have in your plan if the environment does not support that?

We do have flexibility with aircraft. Particularly, we've got a very large fleet of 767s that are all scheduled to be retired. We could accelerate those retirements and change that pretty quickly if we decided to.

Okay, thanks. And then just lastly, it'll probably be in the investor update. What do you expect full year aircraft rent to be?

Full year aircraft rent, we believe to be about $1.35 billion.

We'll take our next question from Savi Syth with Raymond James.

Just a follow-up on the capacity. 3.5% seems a little higher than I would've expected. I mean it's not much higher than your competitors who are growing like 0% to 2%. But are we starting to see a little bit of capacity creep here? And also, as a follow-on to the previous question on the flexibility on maybe it's not growing as much as the environment saw for it, I recall with US Airways there was a kind of limit to how much you could use -- you could reduce flying because of some of the pilot contracts. I wonder is that still there? Or how much did you -- what level could you grow at a minimum?

So first question, the answer is no. I don't think this is capacity creep or a change. You've got to look at our 3.5% capacity to understand what it's coming from. 2.6 points of that 3.5% is coming from just having higher density aircraft, one of the things I talked about. One of the things that you've seen happen, at Delta particular is putting more seats on airplanes. While it is capacity growth, at least for the airlines that are doing it, it's very P&L-positive because your cost for those extra seats is very, very low. And so it's most of the incremental revenue flows to the bottom line. That's the kind of -- that's going to happen and when that's done, it's kind of done. The other pieces of the capacity growth are, one, having fewer aircraft in out-of-service. So fewer aircraft in maintenance. Lines, for example, again, efficient in a capacity growth and then a higher completion factor. A lot of weather last year and that's just an assumption that we'll have a more normal weather year. That hasn't started off to be the case in January. But just a normal assumption. So that really explains all of our capacity growth. This isn't capacity growth of going and buying airplanes and adding a bunch of new markets. It's those factors that are guiding the capacity growth. On your second question, we no longer have any restrictions. Well, those restrictions that were in the old US Airways agreement no longer exist.

Okay, understood. And then just on the ancillary front, I was just wondering what your ancillary revenue was. And is there anything in the revenue synergies from just being able to grow ancillary revenue?

Ancillary revenue, total of the revenue is about $4 billion. And of that, from an ancillary side, it's approximately -- baggage is about $1 billion and then refund/reissue is about $700 million. There are some other little small of them. So about $2 billion in ancillary.

And yes, we expect to be able to grow that. When I talk about some of the other initiatives, before I talked about network initiatives in my opening remarks, some of those are ancillaries. And that's part of our -- we will announce some of that stuff soon but we're waiting on the technology to support it before we actually make the announcement.

Got it. And just one last question on the cargo side. It looks like some miles are up strong but yields are pressured. Is that just where you're focused on? Or I was kind of curious as to why the yields are down so much. And secondary to that is, is there opportunity on the cargo side now with the combined system to really grow it and do more with the cargo side?

Yes, again, it's Robert Isom. You're right in terms of overall cargo. While we've seen overall revenue maintain steady, we've seen a lot of demand out there. But there's various pressure on the pricing side. And as we take a look to integration, we do think that there's a lot of benefit by combining the 2 networks and we look forward to putting the 2 systems together later on this year and getting to a common product for our customers.

We'll take our next question from David Fintzen with Barclays.

Maybe just something for Scott. Just on following up on the hub rebanking. I mean, should we be thinking of this process as just sort of sliding around flight times and stiffening up the connectivity? Or particularly when you get to Dallas and Chicago, is there the re-fleeting component to this where we should be looking for changes to the local schedules and frequencies, particularly in a market like Chicago?

There will be -- a lot of it will be sliding the flight times. There will be a re-fleeting that happens. There's a bigger re-fleeting that's going to go on. American, historically, went from 140-seat MD-80s, mostly down to 50-seat regional jets, a handful of 70-seat regional jets. So there is a lot of opportunity to re-fleet, to put the right-size aircraft on the right route. And some of that, you will see happen as part of the rebanking. When you go from -- when you increase the number of connections available for a given flight. You have an opportunity to change gauge on that flight. And in markets like Chicago, Dallas probably not going to be much different, those are 2 big hubs and there's already a lot of capacity and a lot of traffic flowing and you kind of hit every connection possible because you have so much capacity between those 2 hubs. But in some markets, you will see the opportunity. I think it will be most dramatic probably actually in the smaller markets. The Lubbock or in Abilene, Texas that now have more connectivity and that's part of the reason you're going from 50-seat to 76-regional seats -- regional jets in markets like that because it causes those updates. Gives you an opportunity to take some of the larger regional jets up the mainline aircraft. And so it's increasing the average gauge. One of the things we've talked about, where the capacity growths are coming from will be helped and supported by rebanking the hub.

Okay, and then, in a nutshell then historically, American's kind of had a frequency disadvantage in a lot of Chicago markets to United. Do you then believe that would begin to -- with the re-fleeting in the 76-seaters that would begin to put -- you could match frequency a little more effectively? Is that kind of the Lubbock example, in a sense?

I don't think you can draw that conclusion from Chicago.

Okay. All right. Now that helps a lot. And then just a quick one for Derek. In terms of cash integration costs for '14, any sense of sort of how that $1 billion flows in?

Yes. I think we have about $400 million in 2014 of the integration cost.

We'll take our next question from Bob McAdoo with Imperial Capital.

Guys, have you talked to anything about what's going on with fuel hedges? You used the word legacy American fuel hedges. Have you announced what you're going to do with that going forward?

Well, there's nothing really to announce. We haven't entered any hedges since the merger and the hedges that were in place in American are still in place. But at this time, we don't intend to enter into any additional hedging transactions. We've been happy with our...

So your policy of -- the US Air policy will move forward for the combined entity?

Yes. We've been having that policy to date. And that's where we have been since the merger and don't intend to change that. But we could at some point, I suppose, but no intent to do so.

The other thing I want to ask about, when we talked about code sharing and a more complete code sharing in February, well, by the time we get to that, will we be able to see code sharing for Philadelphia to Europe and things like that? Is that going to be included by then or.

Yes.

We'll take our next question from John Godyn with Morgan Stanley.

Scott, I appreciate a number of those sort of capacity one-timers that you highlighted, inflating the growth rate in 2014. But we've also seen some of the other legacy airlines go out with multiyear stub real GDP capacity commentary. And I'm just curious, should we expect the commitment like that out of the team?

Well, I don't know if commitment is the right word. I think it is the right strategy certainly until the industry gets back to margins that are reasonable and consistent with other large industrial companies that the growth rate should be sub-GDP. There is an exception, I think, that applies to everyone for just kind of putting more seats on airplanes that I think is different because that improves your profitability. But the domestic market, in particular, is mature. And so you certainly shouldn't have growth that exceeds GDP in the domestic market. In international, you've got to look, I think, at the combined GDP of the U.S. and the international markets that you're growing to. But conceptually, I agree.

That's very helpful. And I was hoping that, Scott, you or perhaps Derek could clarify what's happened with the affinity card agreements here? It seems like there has been a round of renegotiations. On the other hand, I'm not sure if you get another step-up in economics or another bite at the apple for the negotiations in mid-2015.

So we have completed deals with both Barclays and Citi. Both issuers will continue to issue cards throughout this year. Either at the end of this year or sometime in early 2015, Barclays will stop issuing cards and will convert all of their existing cards to be branded American Airlines and will continue manage that portfolio. Citi will continue issuing cards throughout. Both great partners, those deals are coterminous and now set to expire in 2017. The economics for US Airways has improved in both for those -- for American Airlines, sorry, have improved in both of those deals. And I think both of those partners got a lot out of it. On the Barclays side, access to a lot larger frequent flyer base. Citi got access to a much larger frequent flyer base. Citi now also has access to the American Airlines lounges. So a deal that, I think, all 3 parties are happy with. And as I at least hinted in my opening remarks, a deal that by a pretty wide margin exceeds what we expected in terms of synergies and improved economics for the new American Airlines going forward.

So the new economics are hitting American's results today and we shouldn't expect any kind of step-up until perhaps 2017. Is that the right way to interpret that?

Some of that stuff is going to happen a little bit over time. But they are hitting today. They do ramp up and get the better kind of over the course of the next 12 months. But into 2014, it's basically steady state until 2017.

We'll take our next question from Glenn Engel with Bank of America.

A question on the guidance. I calculated 3% operating margins last year and you're looking for 6% to 8% this year. Even though RASM, up 2% to 4%, and CASM, up 3% to 5%, it just doesn't seem to get me there. So what am I missing?

Well, first, the first quarter?

Yes, the first quarter.

What are you missing?

Yes. The margins were 3% last year and your RASM, up 2% to 4%, and your CASM is up 3% to 5%. Even with fuel being somewhat lower, it's hard to see how you have a 3 to-5 point improvement in margins.

Well, it's CASM x fuel, for one thing. [indiscernible] And it fuels a large percentage of the cost. So that's part of it. I don't know. I think we'd have to go through the specific math with you.

On the comp side, where are you right now relative to Delta, United and Southwest?

From a labor perspective?

Yes, from a compensation, labor cost per employee.

Probably about 5% to 10% below. Are you talking about pilots, flight attendants, that type of -- yes.

That's correct. And on the fleet side, by the configurations of the fleet, the way first class and economy comfort or whatever the upscale is called, is that going to be American's adopted? Or is that still in flux with how you're actually going to configure each aircraft?

We are making the changes to the aircraft configurations.

So that's still up in the air on what it will be?

Well, some of them we know, I mean. But yes, some of it is still up in the air.

We'll take our next question from Michael Derchin with CRT Capital Group.

Going back to Jamie's question earlier in the day, it seems, on how much cash is a normal cash on hand relative to revenues. Once you get into a normal situation, down the road in a few years, you derisk the company, things are rolling, what's your thoughts on the percentage of cash that you really need to normal operations?

Yes, that's a good question, Mike. We're just not ready to answer you because I don't know what normal means to tell you the truth. There's no doubt that over the last whatever, 10 or 11 years, we've gotten to the point where we needed to hold a lot of cash because we were so worried about what might happen. And indeed, those of us that did were very happy that we did in 2008 and 2009. So, but if we really have a transformed industry, if we really are producing profits that we believe are real and sustainable, it will always be a cyclical business, of course, as you know, Mike. But if it's not going to have these -- if the downturns are still profitable instead of downturns of having you losing billions of dollars, there's no need to carry cash, which is an insurance policy against that. How much less do you need? I just don't -- we don't know yet, Mike. What we know is what we held in the past, what was industry standard of whatever, 20%, 25% of revenues, is too much in a world that really has been transformed. But we prefer to make sure it's transformed before we start making those decisions. It certainly feels like it in every single indication that we have. But if you just let us have a little time to make sure that -- to get a little bit of time behind us here and also to go through the entire debt portfolio and make sure we're doing everything we can there first. Because we clearly have -- we're still highly leveraged. But anyway, let me say, I don't know the exact number, but it's lower than where it is, we know that.

We'll take our next question from Kevin Crissey with Skyline Research.

Just wanted to ask 2 quick ones, most of the detailed questions have been asked, I think. But kind of high level, if the industry grows the same that it would've grown otherwise, I look at you guys consolidating and consolidate 2 large carriers and you come up with 3.5% capacity growth. So it's not going to be much different than I would've thought had you guys been independent. So what I'm wondering is what's the difference between an industry that grows at the same rate but with, say, 2 more players or so versus having those 2 players out with the same overall ASMs or seats or however you want to look at that? What does taking 2 carriers out but not taking any additional capacity out do?

Well, first, as we said all along and as we said to the DOJ, this merger is about putting 2 complementary networks together and wasn't about reducing capacity. But what this does is create a better product and a better network for customers, which I think leads to improved revenues. And that was always the rationale for this merger. You look at our initial results. If you want to look at the world as simplistically as just capacity equals profitability, I don't think the world is quite that simple. Certainly, it wasn't in 2013. Matching capacity to demand and keeping capacity in line or below GDP growth is important. But you can also improve margins even when those things are equal, I think. And having a better network that's more appealing to your elite flyers and you can get them everywhere they want to go in the world is part of doing that. That happened at an industry level in 2013. I think it's going to happen in 2014. You look at our early guidance, that's clearly happening. So I think the view of the world that is just the only input variable to the profitability equation is capacity is too simplistic.

Okay. And when I think about -- what have you learned maybe from coming in, now having more detail about American than you guys did when you were outside? When I think about your Los Angeles strategy, it seems different than what I would've expected maybe a year before the merger. I would've thought that you would've been downscaling maybe Los Angeles. But it sounds like that's not the strategy. So what have you seen in American that's been different than you might have expected, kind of from more the outside?

Well, there's been a lot that's different in little details. I mean, there's hundreds of details. And I'm not going to go over them all in this call. But the things that we do at each airline that we can learn from the others. I told some of the guys recently that my favorite meeting, I think, that I've had so far at the new American was with the revenue management team talking about the details of the yield management system. And people on each side, the American side saying, "Oh, here's some great things that US Airways does," and US Airways side saying, "Here's some great things that American does." So we both learned and found opportunity from each other, and we're moving aggressively to implement those things on both sides. And it's not just revenue management, it's everywhere. And I think that's the reason we feel pretty confident about our results going forward.

We'll take our next question from Hunter Keay with Wolfe Research.

It's actually a folow-up. Scott, what are those things? That's obviously not my follow-up. But what are those things in terms of the yield management stuff that can be done better that you guys did so well?

Well, the overbooking model at US Airways is one of things we're going to implement as quickly as possible on the American side. And there's just a whole bunch of, they're down-in-the-weed mathematics. The American day departure process is much better than we had at US Airways, something run by revenue management, as an example. So we've got a team of people -- that group, too, by the way was the first group that we integrated. Those guys were sitting here in Dallas on December 9, which I think is indicative of how important we think it is and how much leverage there is in that group, and it's just going great so far.

Okay, cool. And let me just ask a quick follow-up on sort of this IT-driven ancillary source here you guys talked about in the next coming months. In the DOJ complaint, they talked about some internal documents that you guys had, about a $280 million fee harmonization revenue opportunity. Presumably this is somewhat part of that. And if it is, maybe to get back to the question of how you're getting to this margin guidance, should we maybe think about TRASM, total RASM, outpacing PRASM as the main driver of some of the margin accretion above just the traditional TRASM/CASM spread?

So first, I want to say on the ancillaries that a lot of our ancillaries are -- ancillaries are more broad -- much broader than just baggage fees. For example, we have some products that customers really like, like our products to be able to get to the front of the lines and go through the preferred access kind of products. Our seat products, preferred seating products. Our ability -- products that allow customers to upgrade to first class when there are no more elite flyers. And so much of the revenue comes from products like that, that are positive to customers. And yes, I think part of the -- back to Glenn's question, part of the answer on margin guidance is our forecast for TRASM is higher than our forecast for PRASM.

[Operator Instructions] We'll take our first question from Terry Maxon with Dallas Morning News.

Let me follow up on a question of the reseating of the 3 aircraft types that Scott mentioned. I think the MD-80 has what, 140, the 777-200 has 247 and the 800 has been kind of all over the place but let's say around 150 seats. Where do you see those going to? And where and what parts will be coming from? Will you be reducing the premium class, maybe?

Those are pretty good numbers you have Terry. The MD-80 was 135, it's now 140. The 737-800 is 150, and we're looking at 2 options, 160 or 164. And I believe the first-class cabin is the same size. The 777-200 is 247, as you said today, and will likely go to something between 260 and 289.

Well would that be same seats, just adding rows, moving them a little bit closer together in coach or...

Some of those are putting slim line seats on.

Okay. And when do you expect that conversion to begin? And when do you expect it to end?

The 737-800 begins second half of this year, and it will take a while -- I'm not sure how long it will take. The 777-200 conversion begins later this year, going from 247 to 260. And if we go bigger than that, we'll probably be a 2015 issue.

All right. And was that Scott talking?

Yes.

We'll take our next question from Mary Schlangenstein with Bloomberg News.

Scott, how many of the MD-80s are you guys going to keep longer term now? American was looking at one point to get rid of all of those. How many are you going to hang on to?

Sorry, could you say it again?

How many of the MD-80s are you going to hang on to longer time versus replacing them with an 800 or some other aircraft?

None, we haven't changed the retirement schedule for the MD-80s at all.

Okay. So when will they all be gone?

I'm looking around seeing if I have the numbers for that. 2018.

I think it's like 2018, I think was the timeframe.

We'll take our next question from Karen Jacobs with Reuters.

I have got a couple of questions, if I could. One is can you talk about what we're seeing with the slight divestitures you've got to make?

We've completed the process for LaGuardia. And we are involved in the direct conversations with the airlines that are authorized to bid for DCA. And we'll be able to announce that as soon as it's done.

Okay. And with respect to your first quarter RASM guidance, do you see any significant effect from the Easter shift?

There will be some effect from Easter of moving revenue from March into April. At the same time, the government shutdown happened last year in the back half of March. So those 2 things kind of balance each other out [indiscernible].

We'll take our next question from Andrea Ahles with Fort Worth Star-Telegram.

I have 2 quick questions, mainly about DFW airport. With the Shanghai routes that are supposed to start in June, based on some of the comments you guys made during the analysts' portion of the call, do you have now all of the government clearances that you need to run those routes? And what sort of flight times did you end up getting for the Shanghai routes?

We do have the authority and we've got the flight times we requested, but I don't remember the exact times. But we've got the flight times we requested, and so we're happy.

And the other question I had was in terms of the rebanking that you're doing at your hubs, I think that Miami is going first. Are you expecting DFW to be rebanked this year? Or is that a 2015 initiative for you guys?

That's likely a fall of 2015. I mean, spring of 2015, sorry.

Spring of 2015?

Yes.

We'll take our next question from Dawn Gilbertson with The Arizona Republic.

I just have a few quick questions. Scott, on the ancillary revenue, the stuff you're talking about announcing, since you have the technology together, are we talking about new initiatives? Are we talking about moving American stuff to US Airways and vice versa? Are we talking about increase in fees? What's the mix going to look like?

There will be some new initiatives. A lot of it is the kind of things I talked about on seating products. And first-class seating products, priority access, really making those more broadly available, introducing more comfort economy on the US Airways network, which we don't have today. So those are the biggest items around being able to offer customers the ability to get better seats on the airplane, whether it's a more comfort economy, whether it's seat upfront or whether it's ability to sit in first class.

And what's the timetable on that? I mean, when should passengers start to look for that?

It varies by item, and we'll announce them as soon as we know what the technology timeframe is.

Next few weeks, next few months, you think?

It'll vary. I mean, there'll be some in the next few months, but some of them will take longer.

Okay. Another question I have, can you give us an update on combining airport operations? Last I heard, Phoenix was going to be one of the first airports. And I thought the target was mid-February. Is that still the case?

Dawn, it's Robert. That is the case. Just in terms of overall airports, we have a number of airports, which have already been colocated. Phoenix it not one of them yet. But 17 to date, 28 that are going to come in the first quarter, and looking forward to getting our operations altogether.

So do you have a target date for Phoenix?

Target date? It's late February, early March.

Okay. One more, I think this is probably for you, Robert, but I'm not sure. In light of the announcement on the Pittsburgh, the flight operation center last week, what other big decisions on that front still need to be made? And what is the timetable for that in terms of maintenance and so forth?

So you were lost on what front?

Are there other flight centers that you have to consolidate that you likely will consolidate, you'll pick a location, whether it's Phoenix, Dallas or wherever they are in terms of other types of centers?

The operations control was really the big one that was out there, Dawn. I mean, that's one where you absolutely, positively have to have one. And the fact of the matter is that it will take some time to move out of the Pittsburgh operation. Obviously, we have -- we're running 2 separate airlines, and so that operations control center, it will move over the course of the next couple of years.

But really the rest of the operations are going to remain intact and are necessary for running the combined airline.

Yes. Dawn, the ops center really was like a headquarters function. It happened to be in Pittsburgh instead of in Phoenix. But we need all the airplanes, all the people. So we could anyway -- we don't have anything else announced on other facilities.

We'll take our next question from Mary Schlangenstein with Bloomberg News.

I had a quick follow-up on Karen's question. Scott, were you saying how many airlines were authorized to bid on the slots? And do you have any kind of a timeframe for when we'll see that decision, like a month, a week, anything like that?

If it wasn't disclosed by the DOJ, which it must not have been since you're asking me, I'm not going to disclose how many airlines were authorized to bid. And I'm not sure the exact timeframe we will certainly meet the DOJ-mandated timeline. And we may be early if we're complete.

So you're expecting the DOJ to disclose something on it?

I'm not sure if I understand the question. But we and the acquiring airlines will disclose what each one of them got as soon as we're done. Your question was how many airlines were authorized to bid, and I'm not answering that question. I doubt the DOJ will ever disclose that. But you could ask them.

Okay, I misunderstood.

That wasn't our decision, Mary. That was theirs. They gave us a list of bidders.

We'll take our next question from Ely Portillo with Charlotte Observer.

You sort of touted the international expansion of the seasonal service from Charlotte's hub. And I was just wondering how bookings are looking for that and if you're exploring any more option for international routes here at CLT.

Ely, it's too early to tell on those. I actually haven't looked at those since they're for the summer. And we're looking at the whole network. Charlotte will be a part of that but nothing specific to announce in Charlotte.

Okay. And what's the timeframe like for the full network review? And when might other hubs start seeing changes?

Well, the full network review is ongoing, so this is not like some project that we do and it's done at the end of February and it's done. It's an ongoing and iterative process. So I would say for you and Charlotte, there's not a lot that you could expect in terms of changes, other than I know we are looking at some cities that American Airlines serve today that US Airways didn't serve to add once or twice a day service. Those are mostly small cities mostly in the Midwest, but to add some new dots to the map out of Charlotte but not any material changes for Charlotte.

We'll take our next question from Linda Loyd with the Philadelphia Inquirer.

With the new government pilot rest rules that went into effect January 4, will crews time-out more often in bad and inclement weather, which would result in more flight cancellations and customers being inconvenienced? In other words, what will be the impact of these new rules during bad weather?

Linda, it's Robert Isom. With the new rest rules, we just have to be more mindful of where our pilots are and how much time they've accumulated. We don't know the total impact, but we're anticipating that we will likely have to curate more crews on a system level. And we're monitoring the impact. It certainly makes things more difficult in inclement weather. But so far, we're managing through it fairly well.

What we're doing is we're changing the way we schedule. If we didn't change anything, it would lead to more cancellations. So we're changing the way we schedule pilots. And this will take time to figure out, but hopefully not have an increase in number of cancellations. But we will have more pilot expense because we'll have more pilots to fly the same schedule.

Now I know American announced in September it's going to be hiring 1,500 pilots in the next 5 years. Is that due to, like, more retirements, the need to schedule more pilots? Or is there a combination of reasons?

It's all of the above. So it's pilots now retiring at age 65. It's the change in the flight and duty time rules. And it's just the nature of the airline right now, we're all hiring.

We'll take our next question from Aaron Karp with Air Transport World.

Just wondering, what do you think has been the biggest surprise so far and what do you think is the biggest challenge going ahead as you integrate?

Well, I mean, the good questions aren't hard to answer at this point. I mean, so far I think it's gone well and we could expect no major surprises. I mean, I guess, if anything, it's given how the transaction came together and how well our guys are working together is a pleasant surprise. I mean, it's no secret we came about this in different directions. But once it was determined that it was the right thing to do, the American team has just been fantastic and we're working -- the teams are working really, really well together. So I don't really call that a surprise because it doesn't surprise me. But it may surprise others. But that's been a very nice thing to see is how well the teams are working together. Post merger, biggest challenge is definitely integration and making sure that we go do what we've set out to do. We have the right team in place. We have the right plan in place. It's down to execution, which is not easy to combine 2 airlines. But anyway, we feel good about the plan and the people we have in place to manage it.

We'll take our next question from Ted Reed with The Street.

I've got a couple of questions. First of all, in the fourth quarter, does CASM include all the contract gains for the employees at US Airways?

Not in the fourth quarter because they went -- most of them went into effect in the first quarter. So the flight attendant contract that was put in place is in the fourth quarter, but the guidance in the first quarter does include that. But most of the things went into effect -- they did go effect at merger, but the impact of them is very small in December. They're all in, in the first quarter of '14.

So the pilot increase is not until first quarter?

Well, it went into effect on December 1. I'm just saying the amount that you have in the CASM in the fourth quarter is very small because the full impact of it is in the first quarter of CASM.

Did you give an update in increased estimates for CASM in the first quarter?

Yes, I did. It's up 3% to 5%.

Okay. And secondly, on the Alaska call, they said they were talking to you guys about working together on things. What are you thinking about doing with Alaska? Is that to help at LAX or Seattle or what?

We have a great partnership with Alaska. And of course, we're talking to them about the partnership and how to make it better for both of us, particularly on the West Coast is what they add for us.

Okay. And when you talked about the changes at the hub, that's mainly just rebanking. That's mainly just in terms of gauge and scheduling. Is that what you're talking about, not new destinations from Miami and elsewhere?

That's correct.

And then last thing, after the 2005 merger, there were tremendous RASM increases. So I thought, I guess, I expected higher RASM increases. Did I miss something? Or was that merger so different that, that's not going to be replicated?

There were differences that time around. But I think we started off with our guidance, it was pretty good, pretty healthy RASM increases. And I think we're going to exceed the industry as we did then. In 2005, if you remember, US Airways cut a lot of capacity, but also Northwest and Delta filed bankruptcy in September of 2005, and they cut a lot of capacity. So you are coming from a real trough in industry revenues and profitability, so the year-over-year improvement was fantastic. Here, we're starting from a much higher plateau of industry profitability, so we're not going to have 20%, 25% RASM increases like we had in that merger. But I think we will be at better profit margins than we had following that merger.

We'll take our next question from Terry Maxon with the Dallas Morning News.

I should ask about the Dallas Love Field. You have 2 gates that you had to give up. Is there a lot of interest in those gates? And if you had your choice, would you prefer Southwest get them or Delta get them?

We haven't started the process for those gates. Delta has clearly publicly indicated an interest in them. If we had our choice, we'd just keep them and we would fly out of Love Field.

We'll take our final question from Dawn Gilbertson with The Arizona Republic.

Just one quick nonmerger question either for Scott or Robert. TSA is dramatically expanding precheck this year and you have a lot of chatter on FlyerTalk and Twitter and so forth from elite flyers saying they're finding the lines, saying that precheck lines are now longer than the regular lines. I'm wondering, a, if you're hearing anything from your elite travelers; and b, if you're noticing anything at the airports in terms of during busy periods, the precheck line, which is supposed to be speedier, is slower?

We're looking around the table at each other, nothing that's risen to anyone in this room.

I can't help but put a [indiscernible] on this, Dawn. So look, the precheck line was never meant to be a really short line. It's meant to be a faster line. It's a question for TSA, not for us. But indeed, the purpose of having a precheck line -- and we're happy to see TSA getting more people qualified for precheck because that means we get more people through security faster. Having that line be inactive at any point in time is unproductive time. So more people that move through, the better. Okay. Thank you all very, very much for your time. If you have any further questions, media contact [indiscernible] contact our Investor Relations group. We appreciate your time and interest.

That does conclude today's conference. We appreciate your participation. You may now disconnect.