Good morning and welcome to the American Airlines Group First Quarter 2018 Earnings Call. Today's conference is being recorded. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. And now, I'd like to turn the conference over to your moderator, Managing Director of Investor Relations, Mr. Dan Cravens.

Thank you. Good morning, everyone, and welcome to the American Airlines Group first quarter 2018 earnings conference call. In the room with us or joining us in the call this morning is Doug Parker, our Chairman and CEO; Robert Isom, our President; and Derek Kerr, our Chief Financial Officer. Also in the room for question-and-answer session is Elise Eberwein, our EVP of People and Communications; Maya Leibman, Chief Information Officer; Steve Johnson, our EVP of Corporate Affairs; and Don Casey, our Senior Vice President of Revenue Management. We're going to start the call today with Doug, and he will provide an overview of our financial results. Derek will then walk us through the details on our first quarter and provide some additional information on our guidance for the remainder of the year. Robert will then follow with a commentary on the operational performance and revenue environment. And then after we hear from those comments, we'll open the call for analysts' 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 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 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 press release that was issued this morning and our Form 10-Q for the quarter ended March 31, 2018. In addition, we will be discussing certain non-GAAP financial measures this morning, such as pre-tax profit and CASM, excluding unusual items. A reconciliation of those numbers to the GAAP financial measures is including in the earnings press release and that can be found on our website at aa.com. A webcast of this will also be 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. Thanks, again, for joining us. At this point, I would like to turn the call over to our Chairman and CEO, Doug Parker.

Thanks, Dan, and thanks from everybody with us. We reported this morning first quarter results of $357 million income, excluding net special items, that's $0.75 per share, thanks to the hard working people at American Airlines, who are doing a phenomenal job of taking care of our teams and keeping us on track with all of our strategic initiatives. We feel very good about where we're now. Those earnings, of course, are down year-over-year, that's driven by an increase in fuel year-over-year, which Derek will talk about. And indeed that fuel prices have increased yet again just in the last – since we closed the quarter. So, we've adjusted our full year earnings estimate accordingly. Excluding the fuel price increase, is as I say though everything else feels very good at American. We continue to work against our strategic objectives and made really nice progress in each of those. First, in creating a world-class customer experience. We continue to bring in new aircraft, retire older airplanes in what is the most aggressive modernization of aircraft fleet in the history of commercial aviation continues, with our aircraft age now well below those of our large competitors. We put in place the best property, the best lounge product ever created by a U.S. carrier with Flagship Lounges in Miami, LA, JFK, Chicago, coming soon to Dallas. We've, with the introduction of the Boeing 737 MAX's, we now have satellite Wi-Fi on domestic aircraft, something that will be continued to roll out through the entire fleet through 2019, just a huge advancement in the product for our customers allowing customers to stream. Everyone in the aircraft can stream at the same time, much different than the ground-based Wi-Fi that is in place on most of the American fleet and most of the industry'…

Good. All right. Thanks, Doug, and good morning, everyone. To start, I'd like to recognize and thank our team members who did a great job looking after our customers despite some very difficult weather events over the past few months. Even in the face of some very challenging operational conditions, their hard work allowed us to continue showing the strong revenue growth that we have achieved in recent quarters. We filed our first quarter earnings press release and 10-Q this morning. And as a reminder, on January 1, 2018, we adopted new accounting standards relating to revenue recognition as well as the income statement classification of certain pension and benefit costs. As a result, our 2017 statement of operations was recast to reflect these changes. All the period over period comparisons I will talk about today are based on these recast results. Just refer to the first quarter 2018 10-Q filed this morning as well as our 8-K filed January 25, 2018 for our recast 2017 financial statements. Higher fuel prices led to a decline in year-over-year earnings. Our first quarter 2018 GAAP net profit was $186 million or $0.39 per diluted share, as compared to our first quarter 2017 GAAP net profit of $340 million or $0.67 per diluted share. Excluding net special items, we reported a net profit of $357 million in the first quarter of 2018 versus our first quarter 2017 net profit excluding special items of $414 million. Our diluted earnings per share excluding net special items was $0.75, $0.03 better than analyst consensus. The winter storms I mentioned earlier in my remarks resulted in more than 8,000 flight cancellations primarily in the Northeast, and these negatively impacted first quarter earnings by approximately $42 million. On a pre-tax basis, our GAAP first quarter pre-tax profit was…

Thanks, Derek. Good morning, everyone, and thank you for joining us. Like both Doug and Derek, I'd like to thank our team members for their impressive work throughout the quarter. They worked through challenging weather conditions, including an unprecedented four Nor'easter storms in the first 20 days of March. And as Derek said, during the quarter, we canceled more than 8,000 main line and regional flights due to severe weather. This past winter, our Philadelphia and Chicago O'Hare hubs de-iced on nearly 80 days each. Throughout it all, our front-line teams did a great job of taking care of customers despite the difficult conditions and once again, demonstrated to the world what collaboration and teamwork means. So again, thanks from all of us. During the first quarter, we made tremendous progress on many of our commercial initiatives that we outlined in our Media and Investor Day last fall. As part of that plan, we said that we'd take advantage of the power of our hubs and gateways, strengthen out the domestic network and leverage our existing and potential partnerships to improve our international network. Domestically, we will launch new service to seven markets this summer. These markets not only strengthen the cities with new service, but will also add more connecting routes to our network. For example, the addition of twice-daily from Panama City, Florida to our hubs in Charlotte and DFW, add more than 175 potential O&Ds to our network. The additional of new destinations like Panama City is just one example of how we can unleash the power of our global network which not only has new destinations for our customers but also drive new, margin-accretive, high-quality revenue into our network. Another objective that we outlined was to focus our network where we believe we a have competitive…

And we'll go first to Andrew Didora with Bank of America.

Hi, good morning everyone.

Hi.

Robert, can you give us a little bit more color around where your corporate negotiated rates are right now? Can you maybe give us some reference to where they are relative to prior peak and have you even seeing a traction accelerate of late on corporate pricing?

I'm going to let – I'm looking at Don here to...

Yes. I mean the market, corporate market continues to be pretty competitive and we're seeing much stronger close-in unit revenue growth. And part of that is related to kind of corporate and business market. In the first quarter, our total revenue related to business travel, it's with our (24:54) corporates, was actually up 7%. So we're seeing quite strong demand. And part of that 7% growth was an increase in average ticket value. So we're seeing the yields and average values go up.

Got it. And Doug, I guess, what's it going to take to get back into the $5 billion kind of pre-tax income range that you talk about as being almost a baseline earnings number. Is there anything that the team can do to offset this higher fuel right now, because it just seems like maybe some of the domestic capacity out there in the schedules might keep a little bit of a lid on pricing? So is there anything that you can do accelerate on the cost side to help try to get back towards that $5 billion number?

Yeah. Thanks. The answer, of course, is yes. And we can talk about this. Because let me just talk in first about kind of what's going on here and what it does to earnings. The reality is – I'll start with this. At this level of fuel price, I'm highly confident American Airlines could produce $5 billion of pre-tax earnings. Not right now. But what I'm getting at is this fuel price increase is one of these that's happened very quickly, and it takes time to – for what's required to get – to react to that to take place, a lot of which is capacity changes, as you know. So anyway, the facts are these, since last summer, oil prices have increased over 60%. That's a big increase over a short period of time. And the last 12% of that's happened in the last two weeks. So that kind of an increase is going to have a material – is going to have an impact on airline financials. And you don't see the impact in revenues as that happens. The way revenues respond of course is through either higher fares, higher revenue, PRASM, as you know. So that's what I think. And look, the one good thing, I guess, about higher fuel prices, is it affects everybody. We all end up in the industry, needing to pay for fuel, of course. And as it increases, all of our costs increase. And indeed, the lower cost carriers' costs increase at a greater rate. That's because their cost increase of course has nothing to do with fuel prices. It's all about having a lesser product and about paying people less. So as fuel prices increase, their costs increase at a – greater than rest of us. And the good news on…

We'll go next to Jamie Baker with JPMorgan.

Hey, good morning, everybody.

Hey, Jamie.

I'm not sure who wants to take this, but why shouldn't the ancillary revenue line also include revenue associated with domestic fuel surcharges? I mean, I get that they're not permitted at the moment, but what I don't understand is why the industry isn't pushing to change this? Airlines want to be compared to other high-quality industrial transports, at least I think they do. But those companies are permitted to levy fuel surcharges. You kick-started industry consolidation. I mean, why isn't this another area where American could take a leadership position?

We're all looking at each other. Who wants to answer this?

At the end of the day, it all hits the customer. And so it's a matter of being competitive in our offering. And so we're conscious of that. And we've got to be – ensure that we're incredibly competitive in terms of the pricing that we offer all-in.

Yeah. And Jamie, look, I could be wrong on this, but I don't think it will make a big difference in the actual price, this implies. It would just be a delineation, and one that we'd need to be moving around, is fuel prices. We know the right answer is to price your product in line with your cost of production. And whether or not it's played out the fuel surcharge or not, as Robert says, the cost – what matters is what the customer's willing to bear. And we should – again, certainly, we should all work to set our prices accordingly. We can't – we can't...

But don't you think that the pace of revenue recovery would be hastened, it would be faster if surcharge mechanisms were in place?

Yes. I don't know. I guess it's a fair question, but I don't think it's material. I don't think it'll have a material impact on revenues over time, and so it's not something that we've been pushing for.

Okay. And second for Robert, low-cost carriers have announced capacity reductions for next year, which most of them have. They're still growing but at a retarded rate. In your mind, is this evidence, the base of the economy is having an impact? I mean ULCC is obviously disagreeing with that, but that doesn't necessarily mean that they're right. Do you have any opinion on this?

Whether the base economy is affecting the ULCCs?

And whether that potentially lies at the root of their decision to reduce capacity next year.

Jamie, we can't talk about why others may or may not change their capacity. If you're asking about...

Okay.

...whether we think – if you're asking about whether we think the Basic Economy price is having an impact on ULCCs? Of course, it is. Well – but prior to Basic Economy, we were matching them across the board. So, and that was having an impact. The real impact on Basic Economy is back to 10 years, but we can actually – we have a product out there for those customers who don't want to purchase that product, where they can pay a little more and have a more – a slightly improved products or largely improved products. So anyway, that's helped us more than them. What is impacting ULCCs, I would imagine, is the fact that American and other airlines have dedicated themselves to making sure we're going into be competitive on price probably for – at any fair level they chose to go to. Jamie, left.

Next.

We'll go next to Joseph DeNardi with Stifel. Joseph William DeNardi - Stifel, Nicolaus & Co., Inc.: Yeah. Hey, good morning.

Good morning. Joseph William DeNardi - Stifel, Nicolaus & Co., Inc.: Good morning. Robert, just on the 15 extra gates at DFW. Can you just talk about what that means for Phoenix going forward? It would seem like those 15 gates could accommodate a lot of the flying being done through Phoenix. So how should we think about that?

At least right now, I'd tell you, the two aren't connected. We know that we have profitable opportunities in the long run in DFW, and these additional gates which I think are going to create a nice regional opportunity and thereby also create some – free up some capacity for other main line aircraft as well. I think it creates a nice opportunity for the growth that we do have in the future. And as we take a look whether it's DFW or Charlotte, those are great opportunities for us to build on our strategy that we've outlined, which is to make sure that our network is focused on our hubs and gateways and that we expand the places where we have the greatest competitive advantage. And right now that is absolutely focused on DFW and Charlotte.

Yeah. And like I said, Phoenix is doing well. And if you – relative to other hub performances, Phoenix is performing nicely, so nothing about that makes us think we should do – we should be doing anything with the Phoenix hub other than continuing to do much like it's doing today. We just think there's opportunities to doing more in Dallas and Charlotte. Joseph William DeNardi - Stifel, Nicolaus & Co., Inc.: Okay. And then Robert, you've mentioned before that you view the loyalty program and kind of selling miles as another distribution channel that the airline has. It would seem like a very good one, just given how opaque it can be. But I guess my question is, why not use it more – I get these e-mails offering to sell me miles pretty frequently, it's always a horrible exchange rate. And I don't understand anyone – why anyone would buy those miles. Why not offer consumers a fair rate to get their dollars into your ecosystem and kind of leverage that distribution channel more effectively?

We think that we're using the channel and the program appropriately. It's designed to attract and retain customers, and then a tremendous amount of utility is offered by expanding through the relationships that we've been able to establish with the co-brand cards and other partners. We look for opportunities, but we think we're making smart decisions. And in the areas that we see growth, especially with the co-brand cards, we think we're doing the right thing and are really confident in enhancements in those products that we see coming throughout the rest of this year and beyond.

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

Hey, Hunter.

Good morning. Hey, guys. Hey, Doug. So, I realize that this might be a timing issue, and if it is, you can please tell me that. But can you help me understand the rationale for lowering the earnings guide on fuel and then not concurrently at the same time reducing some of that incrementally on productive capacity, or is it just sort of like a timing mismatch between the reporting cycle and capacity planning?

Yes. Thank you. That's a good question, and I try to answer – I can do it better now with a more direct question. The answer, yeah, we – yes, we – look, just yesterday, as we get ready for our earnings call, it's at a new fuel price, and it's gone up from two weeks we last did it enough that we begin like 12% since – in the last two weeks. So that led to the EPS guide, and we haven't yet made decisions on capacity that I talked about. But there won't be any, by the way, Hunter, for this summer, nor should there be. So to the extent there are going to be any – we'll look to do as we start to build our fall schedule and we don't have anything to report on that yet. So does it mean that we're – you should expect that if fuel prices stay here, we won't make changes. But it's also, there's nothing for us to tell you right now as to what those will be.

Okay. Thank you. And then Derek, couple of years ago, on one of these calls, you said we should expect roughly flat interest expense over the next five years. But since then, your margins and earnings have been cut in half. Is there a – basically cut in half. Is there a thought to redressing that view now that sort of the margin for error above the line is so much thinner?

No. Oh, go ahead Doug.

Yeah, no. Sorry. I was just – Derek said no, and then I'll provide some color, which is – I mean, part and parcel of it, Jamie is...

Hunter...

Hunter, whoever you are.

I've been called worse.

I'm sorry, yes. You have. I'm sorry, Hunter. So anyway, the – look, the question, of course, if you're asking about lower interest expenses is about (40:23). And we feel really comfortable with our capital structure. In good or bad times, that's why we have it set this way. The way we protect against bad times is by carrying a whole lot of cash, and we continue to do so. More than our competitors, we don't think the right thing for our shareholders is to go pay down incredibly efficient debt, and which is what we have right now. We're paying down – we pay down debt and have paid down all the higher cost debt, but the debt we're adding now is tied to – the other point I would make, of course, is we have much higher asset values than our other competitors because of the new aircraft. So there's a reason for the higher debt and it's financed – it really get rich, we think it's in the best interest of our shareholders to make sure that we avail ourselves of those rates certainly much lower than the cost of equity. And do so – and then to protect ourselves against any sort of downturn by holding more cash dollars. We like that structure, we think it's best for our shareholders, we think it's best for America and our team.

Okay, thanks a lot.

Thanks, Hunter.

We'll go next to Rajeev Lalwani with Morgan Stanley. Rajeev Lalwani - Morgan Stanley & Co. LLC: Hi, good morning, gentlemen.

Hi. Rajeev Lalwani - Morgan Stanley & Co. LLC: Doug, not to beat you up on the fuel and capacity question. But you make a pretty compelling argument about higher fuel leading to lower capacity but how do you reconcile that with last year where we've actually seen the opposite lower, high – we have lower capacity and now higher capacity, as fuel has moved up, and help me out with that.

I'll try. To be clear, when I said the capacity would adjust to higher fuel prices over time, I don't think they'll be less capacity. I think there'll be less capacity than there would have been otherwise. So it's hard to know what would have happened to capacity had fuel prices stayed where they were. But I do believe – and I would certainly agree with you, as fuel prices had risen, even through the back half of last year, I don't think you saw changes in people's capacity adjustment. My own personal view on that is, it ramped pretty quickly, and I don't know that everyone really believed that we're going to stay there. So if you're going to make capacity adjustments or – a lot – it requires some belief that out into the future, I think the belief out into the future about oil prices was probably one of – well, they ran up in a hurry, but there were a lot of fundamental reasons why they could go back to where they've been for the last few years. If indeed now we see they just continue to grow, I can tell you, I think, from our perspective and, therefore, I imagine for almost everyone, it leads you start questioning whether or not this is where we're going to be. This is where we are and there need to be adjustments, so that's what I think. I think you're going to see it run, and you can see changes that ran up in the back half of last year, largely because it was unclear as to whether or not that was the new normal. This is feeling somewhat more like the new normal. So we need to adjust our business plans accordingly. Rajeev Lalwani - Morgan Stanley & Co. LLC: That's helpful. Thanks, Doug. And then another question for you. Historically, you've done a pretty good job of taking advantage of the volatility in your stock. And you've even showed that in some of your presentations. And we've seen that again more recently with the weakness in your stock. I mean, would you consider doing what you did before, which is sort of lever up, buy back your stock and sort of take advantage of these dislocations, if you will, or do you feel like leverages is a bit full now relative to where you want it to be. Maybe that's a question for Derek as well.

Yeah. Well, first up, to be clear, I wouldn't describe what we did as levering up to our stock. It is not what we did. We increased the debt on the company. And as we acquired new long-life assets, which were aircraft and we did that at really efficient rates. So, and at the same time, we had after earnings and making sure we're taking care of our team and taking care of the exceptional amount of pent-up demand for capital in this airline, after making sure we paid off all of our high-cost debt to the extent we still had cash in excess of what we thought was the extremely high level that we like to keep, we did of course what we always do, which is return it to our shareholders, and that remains the commitment. So, to the extent we have cash over and above what we believe the minimum is, having done all of those things, we'll continue return it to our shareholders. And we really – we try very hard to do it in an intelligent way. And there is no doubt that where the stock is today, it looks like a nice buying opportunity for American Airlines shareholders.

We'll go next to Brandon Oglenski with Barclays.

Hey. Good morning, everyone. So, not to belabor this point up, but can you talk about at that target earnings level that you guys have put out there, like what kind of macro assumptions should we be assuming in the economy? And if we're assuming a stronger economy, shouldn't we also have baked in higher fuel prices, looking back when you set those targets?

I'm sorry. Can you repeat that? I'm sorry I missed it a little bit.

Well, I guess, what are you assuming underlying in the economy to hit your target earnings level? And shouldn't that also be associated with higher fuel prices? I mean, economic growth and higher energy costs kind of go hand-in-hand. Right?

Perhaps. Look, as we got – this may take a little longer than you wanted. Sorry. I got to separate the three, five, seven from like a near-term forecast versus what it really is. So what we have said and continue to say and continue to believe is that we have an airline that has steady-state earnings potential and at the current size of about $5 billion pre-tax per year. We believed that from about the time of the merger, it's been true in some years, not true in the last couple years that we made that or more. We continue to believe that's a good number. We believe in it so much that's how we set our annual incentive compensation for the executives of American Airlines. So if we make $5 billion pre-tax, then we have target bonuses for the team. If it's less than that, we pay less. If it's below $3 billion, there's no bonus. If it's as high as $7 billion, it's a maximum bonus. Those are not – so they're not just statements we make. Those are – that's how we compensate ourselves because that's what we believe. So then you ask – I think what you asked was, well, gee, why didn't your projections have higher fuel prices in it? We didn't go make that – we didn't go set that number based on projections of any given year. That's a – those are – that's a number again that we say should be true in kind of a steady-state year. So I guess a better – I prefer to answer the question this way, which is, well, then why in 2018, a steady-state year, because you just gave us earnings guidance which is lower than that. What I would tell you is, it's because fuel price alone is driving $2 billion higher expenses in 2018 than it did in 2017, a year where we made $4 billion. So that is what's driving us to not have 2018 currently forecast as one of those years. It's the increase in fuel prices year-over-year. And I do believe, as I said at the outset, that we have an airline that can make $5 billion at $75 a barrel oil. That's not the issue. This is a short-term, a more near-term issue. It happening so fast and going up so quickly. So but if everything stayed at this level, we still believe we have an airline that will make $5 billion in steady-state times.

I appreciate that. And then you guys laid out a lot of commercial initiatives at the Analyst Day last year. I mean, can you tell us where you're seeing the most traction right now across all the new product offering presentation?

So, yeah, this is exciting for us because there's still so much to come, and we've really accomplished a lot. So Don and I have talked about where we stand with Basic Economy. We think that there's still more room to go there. We've obviously expanded recently into the Atlantic and Mexico and Caribbean. But it's not quite as broad as we think it will be. Premium Economy is really just getting started. We now have, as I mentioned, 81 aircraft in – with Premium Economy seats, and offering it. So it's really getting started. We won't be done with the fit-out of all of our aircraft until May of next year. But we'll have a sizable chunk out there and selling. And we're – and as we said, we're seeing great traction on that. And we're seeing fares that are basically double the main cabin fare, which is great. I'll let Don talk a little bit more about revenue management initiatives that we've seen. But then the other things that we laid out at Investor Day were along the lines of making sure our network is producing everything that it can. And we've made good progress, but we're probably only a quarter to a third of the way through, where we think that that will ultimately lead us. You know about the investment that we've made with our sales team and making sure that we're really aggressive out in the marketplace. Good traction there but still really only just getting started. Frequent flyer programs and the work with our co-brand card, about half of the way through on that front, which is great progress. And then we haven't even started yet on the seat harmonization work that we talked about. And that is putting new seats on our [Boeing] 737-300 – or [Boeing] 737-800 fleet and then also making sure that we have common cabin configurations throughout the rest of our fleet types. That has not even started. And so we think that there is nearly $500 million of benefit that we'll see over the next few years as those installations progress. Don?

Yeah. I'll finish that on the revenue management front. We made our first kind of major enhancement to our kind of coach cabin management system that we put in place in the middle of 2015. And we put that out of place late last year. And just this month, we moved our premium cabin controls to bid-price controls. This is going to enable the system to make much better network decisions at the individual flight level. As Robert mentioned, we had outlined $2.9 billion in revenue initiatives. Everything is on track, and people should really – I guess right at 60% of that benefit is going to improve in the – through 2019 to 2021.

We'll go next to Duane Pfennigwerth with Evercore ISI.

Hey, thanks. I may have missed it in the commentary, but can you talk about what the implied domestic RASM is, if you see that positive in the second quarter? And then as my follow-up, United rolled out Basic Economy I think in May of last year, pretty aggressively, and a bit earlier than you did. It felt like there was some share shift positively to you. Do you – can you quantify what that impact was in the second and third quarters?

Sure. So first of all, just in terms of domestic performance, and as we look forward into the second quarter, we still seal expect our domestic unit revenue to be positive as we look into the second quarter. This will be the seventh consecutive quarter of positive revenue growth. Basic Economy will be a part of that. We rolled that out in September, so we're continuing to get the benefit of that as we roll through the second and third quarters this year. To be honest with you, we did not see any large impact related to United's rollout of Basic Economy. They did aggressively rolled up only at the fare ladder, when they rolled out in May. But by the time they got through the end of June, they had to have reverse that. And so we saw a little bit of benefit in the second quarter, very little in the third quarter, and so we don't see that as a material year-over-year impact. We just look at our own results.

Thank you.

We'll go next to Michael Linenberg with Deutsche Bank.

Yeah, hey. Just two here, one for Derek, the cancellation of the A350 order. Where does that show or where does that show up in your numbers or will it show up in things like equipment purchase deposits? Should we see any impact on the balance sheet?

No. You won't see any impact there. We can't talk about what we did to do that, but it's a very small portion. We had some PDPs that were out for that and we could use those for other things. So that's the – the biggest thing is no return of PDPs that we had.

Okay, great. And then just a second question to Robert. Robert, you brought this up, and maybe Don can help answer, but when you talked about strong or good close-in performance in the March quarter, I know you mentioned premium or corporate, but I think you also mentioned Basic Economy in the same sentence. Was that – so Basic Economy driving close-in, was that part of it, or did I not hear correctly?

Yeah. This is Don. Yes, so our Basic Economy helps close-in revenue because many of our corporate customers are not buying Basic Economy, and they're buying up the higher fares where they were being able to buy at the Basic Economy level before we had the Basic Economy product. So part of our kind of strong year-over-year PRASM performance, again, when we get within 7 days departure of is related to the rollout of Basic Economy.

Operator, let's go to media.

We'll go to Leslie Josephs with CNBC.

Hey Leslie.

Hey. On the fuel costs, are – I see some carrier imposed charges already. Are fuel surcharges included in that? And do you see that expanding to other markets? I know you can't for domestic, but for some other ones?

We'll just have to see, I mean we're not going to comment on forward pricing.

Okay. Okay.

It's going to have to – so we'll see what happens with...

Okay. And then just on the Basic Economy, do you see that moving to other markets too and if so where?

Right now as you know, we've recently rolled out into the Atlantic, and we're going to see how it does there and we do think that there's opportunity elsewhere, and it will just take time to see.

Okay. Thank you.

Thanks Leslie.

Okay. We'll go next to John Biers with AFP Capital (sic) [Agence France-Presse] (57:26).

We're back to the analysts. Hi.

Hi. Can you guys hear me?

Yeah, we can.

You can. Okay. Hi. It's John Biers with Agence France-Presse actually. My question is you guys talked a lot about higher fuel costs. I wondered we've been hearing some other company first of all do you expect ultimately at the end of the day that that will result in a high – if fuel prices stay high, that will result in overall higher fares by consumers maybe it's not tomorrow but in the coming months. That'd be my first question. And then second, I would say, we've heard some other companies about, just in general about cost inflation on material. I'm wondering if you had encountered that in for example you're talking with aerospace companies about building the new claims. Is that something you're hearing a lot about in general or is inflation – do you think inflation in general or something else there?

Yeah, okay. On the first one, oil is our second largest expense, a material amount of our total expenses. So when it increases, the cost of air travel increases. So I do believe that consumers will pay more not so much but they will in fact demand in a material way. But that's what happens in most businesses as you're referencing. With your next question as the cost production goes up and indeed the cost of the product generally follows. So if indeed, this is where fuel prices against – I would expect you would see higher fares to consumers over time. On the second one Robert you go ahead.

Yes. On the second one – yes, the answer is we're constantly engaged with aircraft manufacturers, engine manufacturers – all suppliers and partners to find new and better ways to work. And so whether that's aircraft design and work on fuel burn on aircraft, and reducing weight, and making things easier to maintain and service – those are all things that we work on all the time.

And at this time there are no further questions. I will turn the call back to management for further comments.

All right. Thank you very much, and thank you all for your interest. As always – if you – anybody has any questions you can contact the incredible media. If you have any questions, contact corporate communications. We appreciate your interest. Thanks.

That does conclude today's conference. We thank you for your participation.