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Operator
Good day and welcome to the American Airlines Group second-quarter 2014 earnings call.
Today's conference is being recorded.
(Operator Instructions)
Now I would like to turn the conference over to your moderator, Managing Director of Investor Relations, Mr. Daniel Cravens.
Daniel Cravens - Managing Director of IR
Thanks, Whitney, and welcome everybody to the American Airlines second-quarter 2014 earnings conference call.
In the room with us today for the call is Doug Parker, our Chairman and CEO; Scott Kirby, President; Derek Kerr, our Chief Financial Officer.
Also in the room for the Q&A session is Robert Isom, our Chief Operating Officer, Elise Eberwein, our EVP of People and Communications; Bev Goulet, our Chief Integration Officer; Maya Leibman, our Chief Information Officer; and Steve Johnson, our EVP of Corporate Affairs.
LIke we normally do, we are going to start the call today with Doug and he will provide an overview of our financial results.
Derek will then walk through the details on the quarter and provide some color on our guidance for the remainder of the year.
Scott will then follow with commentary on the revenue environment and our operational performance.
And then after we hear from those comments, we will open the call for analyst questions and then 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 events; our future revenues and cost; 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 and our Form 10-Q that was also issued this morning for the quarter ended June 30.
In addition, we will be discussing certain Non-GAAP financial measures on the call, such as a net profit and CASM, excluding unusual items.
A reconciliation to those numbers to the GAAP financial measures is included in the earnings release and that can be found on our website on AA.com under the More About American Investor Relations section.
A webcast of this call will also be archived on the website and the information that we are giving you today on the call is as of today's date and we undertake no obligation to update the information subsequently.
So thanks again for joining us and at this point I'll turn the call over to our Chairman and CEO, Mr. Doug Parker.
Doug Parker - Chairman & CEO
Thank you, Dan, and thanks everyone for being on.
This is a great day for American Airlines.
We announced our second-quarter financial results, as Dan said, a profit of $1.5 billion, excluding special charges.
That's the best financial performance for any quarter in the long and proud history of American Airlines and by a wide margin.
These results are due to the great work of our 100,000-plus team members who are coming together really well and doing a great job of taking care of our customers.
Want to be sure think all of them and congratulate all of them for these results.
Then in addition to announcing our record earnings today, we announced a capital deployment program.
The program includes over $2.8 billion in debt and aircraft lease payments, a $1 billion share repurchase plan, a quarterly cash dividend to shareholders, and $600 million of pension contributions in 2014 beyond the required contributions.
As part of the program, our Board of Directors declared a cash dividend of $0.10 per share.
This is the first cash dividend paid to American shareholders since 1980 and further evidence of the transformation underway at our Airline and also within our industry.
As I said, this is a great day for us.
It's sometimes hard to remember that just less than eight months ago, American was in bankruptcy and getting ready to emerge from bankruptcy through our merger with US Airways.
Yet today, here we are reporting record profits, prepaying debt, make additional pension contributions, and declaring dividends to shareholders.
We are really proud of our team and what they've accomplished by working together in a very short period of time.
We're not done.
There's a tremendous amount of work ahead, as we all know.
But what we do know is this performance is evidence that we are on the right track and it gives us confidence as we move forward.
We are very much looking forward to continuing to work together to restore American Airlines to the greatest Airline in the world.
We're very happy to be on this track and to report these results.
With that said, I'll turn it over to Derek and Scott.
Derek Kerr - CFO
Thanks, Doug.
Good afternoon, everyone.
In our earnings release in the 10-Q filed earlier today, you will find information pertaining to our second-quarter results.
As we talked about last quarter, please note that the GAAP results for the second quarter shown today compare our post-merger performance to that of legacy AMR Corp on a standalone basis.
This makes the year-over-year comparisons not meaningful.
As such, for the second quarter 2013, we have provided our financial results on a non-GAAP combined basis, which is the sum of American Airlines and US Airways results for the period.
We [believe] this is the best way to review our quarterly financial results.
Unless otherwise noted, all my comments will be based on the comparison to the 2013 non-GAAP combined results, which can be found in the press release tables under the heading, American Airlines Group Non-GAAP Combined Consolidated Statement of Operations.
As Doug said, for the quarter, the Company recorded a record GAAP net profit of $864 million.
This compares a non-GAAP combined second-quarter 2013 net profit of $220 million.
Excluding net special charges, we reported a record net profit of $1.5 billion in the second quarter of 2014; this represents 114% improvement over the combined non-GAAP net profit excluding special charges of $681 million for the same period in 2013.
Using 734.8 million diluted shares outstanding, we reported earnings excluding special charges of $1.98 per diluted share for the second quarter.
Our pre-tax margin, excluding net special charges improved by 540 basis points year-over-year to 12.8%.
Total capacity for the second quarter of 2014 was 68.1 billion ASMs, up 3.1% for the same period in 2013.
Mainline capacity for the quarter was 61 billion ASMs, up 3.5%.
Regional capacity for the quarter was down 0.4% to 7.09 billion ASMs.
In the second quarter, we took delivery of 21 mainline aircraft and we retired 14 aircraft.
We do plan to retire additional 54 aircraft while taking 43 more new mainline aircraft for the remainder of 2014.
On the regional side, we retired 14 aircraft and took delivery of 11.
For the remainder of the year, the Company expects to take delivery of 20 CRJ-9 aircraft at its wholly owned subsidiary of PSA Airlines, as well as 12 Embraer 175 aircraft to be operated under our capacity purchase agreement with Republic.
We also expect to retire another 24 Embraer 140 aircraft by the end of the year.
Second-quarter total operating revenues were a record $11.4 billion, up 10.2% from the same period last year on a 3.1% increase in system capacity.
Passenger revenues for the quarter were $9.9 billion, up 9.2% over year-over-year, with yields up 6.5%.
Cargo revenues were up 8.3% to $221 million, due primarily to higher freight volumes.
Other operating revenues were $1.2 billion, up 20% year-over-year due to higher frequent flyer revenue, driven principally by our affinity card deal with Citibank announced in late 2013.
[First] in second quarter 2013, total PRASM was up 5.9% in the second quarter 2014 to a record $0.1457.
Total RASM in the second quarter was also record, at $0.1668, up 6.9% versus 2013.
Scott will go into more detail about the revenue performance.
The Airline's operating expenses, excluding special items, for the second quarter of 2014 were $9.7 billion, up 4.7% year-over-year.
Mainline operating cost per ASM, excluding special items, was $0.1319, up 1.2% year-over-year, due principally to higher salaries and benefits expense.
Salaries and benefit costs were up 10.2% due primarily to the impact of merger-related labor contract cost increases.
Our average mainline fuel price, including taxes and hedges, for the second quarter of 2014 was $3.02 per gallon versus $2.98 per gallon in the second quarter of 2013.
During the quarter, the Company monetized its remaining fuel hedges at a Brent-equivalent price of $111 per barrel.
This transaction resulted in cash proceeds of approximately $70 million and a net gain of approximately $49 million, which will be included in our fuel guidance over the next four quarters.
Excluding special items and fuel, our mainline cost per ASM was $0.0855 in the second quarter of 2014, up 2.2%.
Regional operating cost per ASM excluding special items was $0.158, which was 5.2% higher, primarily due to contractual rate increases.
Excluding special items and fuel, our consolidated CASM was up 2.5% in the second quarter of 2014.
We did the quarter with $10.3 billion in total cash and investments, of which $882 billion was restricted.
The Company also has an undrawn revolving credit facility of $1 billion.
Approximately $791 million of the Company's unrestricted cash balance was held in Venezuelan bolivars, valued at the weighted average applicable change rate of VEF6.53 to the dollar.
Doing the second quarter, the Company generated $1.4 billion in cash flow from operations and made $502 million in debt and capital lease payments.
In addition, we prepaid $113 million of obligations associated with certain aircraft debt and $51 million of special facility revenue bond obligations, of which approximately $29 million was reflected as debt on the balance sheet.
We also purchased aircraft off of lease for approximately $630 million in the second quarter.
As Doug mentioned in his opening remarks, our Board of Directors has authorized the commencement of a capital deployment program.
The program has three key components.
Debt and lease payments, since the merger closed in 2013, the Company has prepaid $420 million of aircraft debt and bond obligations.
In addition, the Company plans to pre-pay $480 million of special facility revenue bond obligations by the end of 2014.
It is anticipated that these payments will represent a reduction of the Company's debt going forward.
The Company has also used $630 million of cash to purchase aircraft that were previously leased to the Company and anticipates utilizing an additional $370 million of cash in this manner through the remainder of 2014.
In addition, this morning -- or yesterday afternoon, the Company called for a redemption of the remaining $900 million principal amount of the 7.5% senior notes due March 15, 2016.
In total, these steps represent approximately $2.8 billion of prepayments that will be completed by the end of the 2014.
The Company also plans to make supplemental contributions of $600 million to its defined benefit plans in 2014.
These contributions would be above and beyond the $120 million required contribution for 2014.
Also, the Company included a share repurchase program and the initiation of a quarterly dividend.
The Company's Board of Directors authorized $1 billion share repurchase program to be completed no later than December 31, 2015.
The Board also declared a dividend of $10 per share for shareholders of record as of August 4, 2014.
A dividend will be paid on August 18, 2014, and as Doug said, this is the first cash dividend declared at American Airlines since 1980.
Since the merger closed, the Company has paid $737 million to reduce its shares outstanding by approximately 25 million.
This includes payments of $561 million in payroll taxes withholdings, primarily for employees in lieu of issuing shares of common stock, which reduced the number of shares expected to be issued under the plan by approximately 20 million.
In addition, during the second quarter, the Company utilized the cash settlement feature, paying $176 million to redeem the remaining $22 million principal amount of US Airways Group 7.25% convertible notes due in May, which further reduced diluted shares outstanding by approximately 4 million shares.
Turning to guidance, and Scott will speak more about this in his remarks, we have reduced our international capacity plans for the fourth quarter of 2014.
We now expect overall system capacity to be up approximately 2.5%.
Mainline is expected to be up approximately 2.5% in 2014, of which international capacity is expected to be up approximately 5%, which is down 1% from our previous guidance, and domestic capacity up approximately 1% for 2013.
Regional capacity in 2014 is planned to be up 1% year-over-year.
The breakdown of ASMs for the remainder of the year is as follows: 61.8 billion in the third quarter, 58.2 billion in the fourth quarter.
Regional capacity is 7.33 billion in the third quarter and 7.31 billion in the fourth quarter.
Our CASM guidance takes into account the effects of the merger on our cost structure, including the anticipated synergy benefits and the impact of higher labor costs that were agreed to in connection with the merger.
For the full year 2014, we are now forecasting mainline CASM ex special items and fuel to be up 2% to 4% versus 2014.
This is driven by the cost of new labor contracts, higher depreciation due to owned aircraft, and higher maintenance costs due to engine overhauls, offset by realized synergies.
By quarter, the third quarter and the fourth quarter are expected to be up 1% to 3%.
The fourth-quarter and full-year CASM guidance was adjusted up slightly as a direct result of the decrease in the ASMs in the fourth quarter.
We still believe full-year 2015 CASM will grow less than inflation and be in the plus 1% to minus 1% range.
Regional CASM is forecast to be up approximately 3% to 5% in 2014.
Using the July 17 fuel curve, we are forecasting mainline fuel to be in the range of $2.98 to $3.03.
Our mainline fuel forecast breaks down by quarter, in the third quarter $2.93 to $2.98, and in the fourth quarter $2.92 to $2.97.
Using the midpoints of the guidance we have provided, we expect our third-quarter pre-tax margin to improve by approximately 350 basis points year-over-year and to range between 10.5% to 12.5%.
Looking at CapEx, we will focus the remainder on integrating the Airline, while also making important investments in our fleet, product, and operations.
We're forecasting total cash CapEx to be approximately $2.1 billion in 2014.
This includes non-aircraft CapEx of $880 million and net aircraft CapEx of $1.2 billion.
In summary, while still early in our integration, we continue to be very pleased with the record financial results produced thus far, which will allow us to return cash to our shareholders earlier than anyone anticipated.
These outstanding results, of course would not be possible without the hard work and dedication of all of our team members, and I would like to thank them for their outstanding efforts.
We have taken a nice step over in achieving our goal of restoring American to the world's greatest airline and we look forward to reporting on our progress in the future.
With that, I'll turn it over to Scott.
Scott Kirby - President
Thanks, Derek.
I'd like to start by thanking all the people of American Airlines for the great job they continue doing operationally during the second quarter in spite of the difficult weather challenges.
We are still seeing large improvements in our operating statistics as we go through the difficult summer months.
On the revenue front, our second-quarter PRASM was up 6%.
The revenue environment remained strong throughout quarter.
We saw particular strength in our domestic network, with RASM up 8% year-over-year.
Our Pacific RASM was up 11%, even in the face of significant industry capacity growth.
AA is benefiting from many actions that we are taking to close the gap in the Pacific that we've historically had against the much larger networks of our competitors.
And as a result were experiencing outsized performance.
Our Atlantic RASM was up 2%, a result that we felt quite good about given the significant industry capacity growth across the Atlantic and the continuing headwinds from the US network switching alliances.
Latin RASM was down 2%, due partly to the World Cup in Brazil, which we believe reduced business demand while the World Cup was happening, and some vacation customers from Latin America substituted travel to Brazil for the World Cup instead of going to the US for their normal vacations.
We are still making solid progress on our integration efforts and are pleased with the progress so far.
Some of the second-quarter integration highlights included that we harmonized most of our fees and our frequent flyer award structure; we launched the day of departure reciprocal upgrade program for AAdvantage and Dividend Miles customers; we co-located at another 20 airports; we've now painted 240 aircraft in the new AA livery; we broke ground on our new operations center designed to house he world's largest airline; continued making good progress on our single operating certificate, reached tentative agreements, which have since been ratified with the IAM covering legacy US mechanics fleet service agents and mechanic training specialist.
We also feel really good about the early progress we're making on winning corporate business.
While it's hard to give objective overall statistics, one of the things that we expected in the merger was large synergies in New York by combining the legacy AA presence in trans-con and international markets, with US Airways shuttle and East Coast network.
We are already seeing those benefits, with domestic New York PRASM up 16% in the second quarter, and our Atlantic PRASM up 8% in the second quarter out of New York.
Consistent with what we've said previously, all of our work we're doing leaves us even more confident that we will be able to meet or exceed our prior synergy guidance.
Turning to the outlook going forward, we still feel quite good about the demand environment.
Demand around the world remained strong, with few exceptions.
The year-over-year comps are much more difficult moving into the third quarter.
In last year's second quarter, consolidated AA PRASM was down 0.9% due mostly to the government sequestration last year, and it was up 3.4% in 3Q, so from that perspective, the comps get over 4 points more difficult year-over-year.
Despite the challenging comps, the domestic environment remains strong and we expect domestic PRASM to be up mid-single digits.
In the Pacific, double-digit capacity growth from the industry and AA; in spite of that we expect positive year-over-year PRASM.
Industry capacity is also up significantly across the Atlantic.
Demand as measured by revenue growth is strong, but not strong enough to absorb close to 10% capacity growth and so we expect a modest decline in trans-Atlantic PRASM.
In Latin America, the World Cup effect will extend into the second quarter and we will also the large year-over-year impact from our reduction in services to Venezuela.
Last year as the [black] dollar bolivar exchange rate began to spike in June, American Airlines revenues from Venezuela jumped significantly.
In the third quarter of last year, Venezuela was only 0.5% of AA system capacity, but would have been 2% of our total combined consolidated revenue.
This year, we've canceled most of our Venezuela flying, so we will be losing most of the 2% revenue, but only 0.5% of the ASMs, which means that our system PRASM in 3Q is negatively impacted by almost a full 1.5% just from canceling the Venezuelan services.
When considering the fundamental demand environment, it is probably best to think about it excluding Venezuela.
Excluding Venezuela, we expect the rest of Latin America PRASM to be flat to down, but the Latin American entity including Venezuela will obviously be down much more.
At a system level, we expect PRASM to be up 2% to 4% in the third quarter excluding Venezuela, but subtracting the 1.5 points hit from Venezuela means that we expect our reported PRASM will be up 1% to 3%.
While international demand is strong as measured by growth in revenue, it hasn't been growing fast enough to keep up with double-digit capacity growth rates so we're taking action going forward to moderate some of the international capacity growth.
Across the Atlantic, we will be reducing our capacity for the remainder of the year by approximately 3% compared to our prior plan.
Latin America, for the remainder of 2014, we're planning to reduce our capacity by approximately 5% from our previous plans.
In conclusion, we're very encouraged with the operating and integration results at the new American Airlines.
The demand environment remains strong with the exception of our Venezuela exposure.
Doug Parker - Chairman & CEO
Thanks, Derek.
Thanks, Scott.
Operator, we are now ready for questions.
Operator
(Operator Instructions)
Michael Linenberg, Deutsche Bank.
Michael Linenberg - Analyst
Doug, just big picture question here.
When I think about American as a standalone, it was seasonally more of a third-quarter Company, that's where we saw usually the top margins, the best profitability.
US Airways was more of a second-quarter company.
You put the two together, how should we think about it?
I know there some puts and takes there.
If I think back, when we were going into the June quarter, you guys were guiding to a pre-tax margin of 10% to 12%.
For the third quarter, you're guiding to a 10.5% to 12.5% so it seems like maybe when the dust is settled maybe you're still -- your third quarter is your better quarter than the June.
Anything else going on there that may have some impact or beyond what I've said?
Scott Kirby - President
Mike, when we combined American and US Airways, the second and third quarter are really close to the same in terms of seasonality.
Actually if you look at the midpoint of our guidance, at 11.5% and if you added back the 1.5 point hit from Venezuela, it would have been a slightly higher margin than we had in the second quarter but in the same ballpark.
Our seasonality, you should normally expect to be about the same.
In this case, we stopped service on July 1 to Venezuela so were taking a big hit from Venezuela in the third quarter.
That probably really explains the difference for this particular quarter.
Michael Linenberg - Analyst
Perfect.
Then just my second question, you mentioned that you would getting out of some Embraer 145s -- it was either 145s or 140s, getting out of 24 this year.
Presumably, if they're 145s, they're Eagle or Envoy airplanes.
Maybe there's some Republic airplanes there as well.
Longer term, where do things stand now with Envoy?
I know there was some back-and-forth about whether or not they were trying to get to a contract.
What's the status on that right now and going forward, as airplanes come in -- presumably, it sounds like they're going to be flown by other partners.
Can you just give us an update?
That would be great.
Scott Kirby - President
At the moment, there's no change to the status.
Envoy is still a very large and incredibly important partner for AA, though the new large regional jets are going elsewhere, at least the ones that are being delivered in the next 12 months or so.
We remain hopeful that at some point, we will reach a deal with our pilots that allows us to put large regional jets there, but no change in the near term.
Michael Linenberg - Analyst
Perfect.
Great.
Thank you.
Operator
Jamie Baker, JPMorgan.
Jamie Baker - Analyst
Scott, it's still difficult for me to reconcile how an airline that's starting to generate revenue synergies, that you expressed confidence you would outperforming industry RASM this year, turns around and provides a RASM guide that is well below the competition.
I appreciate the Venezuelan commentary, but presumably you were aware of that phenomenon when you sounded such a bullish tone earlier in the year.
So if you look towards the fourth quarter, is the Venezuelan hit expected to be about the same and do synergies start to recover that?
Or put differently, and I'm not going to hold you to this, when if ever should we be expecting your RASM to recover and start the industry outperformance that the merger all along would have suggested was feasible?
Scott Kirby - President
If you look, excluding Venezuela, at our performance as we're going forward, one at a system level, our guidance is the same as Delta and United for RASM and that's despite much bigger exposure to the rest of Latin America, which is going to be the worst region in the world, and despite the fact that we have higher capacity growth.
Further if you look at it, entity by entity, in the second quarter and in the third quarter, we outperformed the industry.
We underperformed across the Atlantic, which we've said all along we expected to do that this year, as we switched alliances.
We've outperformed by a wide margin across the Pacific.
And in spite of the Venezuela exposure, we've actually outperformed even to Latin America, so we already are outperforming, we will continue to outperform.
When you roll everything together at a system level, you miss some of those nuances that just is where were flying individually and the fact that Latin America is weak is going to hurt us in the third quarter.
The Venezuela situation is going also to hurt in the fourth quarter.
It's actually larger in the fourth quarter; it will be almost a full 2 points in the fourth quarter, but then it moderates and essentially goes to [zero] as we moving into next year.
Really on Venezuela what happened last is the black market bolivar rate spiked to about VEF60 per dollar from the official exchange rate of VEF6.30 and what the government -- what we were allowed to do is you could buy airline tickets, but they were at the official exchange rate of VEF6.30, so you were buying them at a 90% discount to the black market rate.
Further, you were allowed to convert bolivars at the VEF6.30 rate into $3,000 of cash (laughter) so you could buy your ticket in Venezuela and go to the US and make money because of the differential in exchange rate.
So just everyone was buying tickets.
You wound up selling out every flight to the highest inventory class.
One of the remarkable statistics is, we had one for today between Caracas and San Juan.
We have six flights a day between Miami and San Juan.
30% of the revenue on the Miami-San Juan flights last year was people leaving Caracas [instead of] going to and from, just because it was just -- any way you could get out of Venezuela, you could make money and actually put dollars in your pocket to leave Venezuela.
So it just had an outsized effect and we already are outperforming.
We will continue to outperform.
That outperformance can accelerate, but we've got a 1.5 hit this quarter and a 2 point it next quarter.
They're not merger-related.
Jamie Baker - Analyst
But Scott, are you assuming that there's no replacement RASM associated with whatever capacity was displaced from Venezuela?
Did you sit it down or are these figures net of what RASM you picked up putting those planes elsewhere?
Scott Kirby - President
There is replacement RASM and so that is included in my numbers when I say less than 1.5%, but when you had legs that had RASM that was 4 times the system average, which is what Venezuela was, RASM during that third quarter.
Again, it's just because you wound up selling an awful lot of tickets at the very highest fares, but they were priced cheaply in bolivars.
When you did that, you wound up with RASM that was 4 times the system average.
So yes, you can replace that, but it comes in at something less than the system average and that's how you wind up with a 1.5 point hit.
Jamie Baker - Analyst
Yes, yes.
All right.
I get it.
I'll let you move on.
Thanks a lot everybody.
Take care.
Operator
Hunter Keay, Wolfe Research.
Hunter Keay - Analyst
Derek, I'm sorry, I may have missed if you said this earlier, but did you say 2015 CASM ex fuel would be down 1% to up 1% 2015?
Derek Kerr - CFO
2015, yes.
We believe that -- we've had questions before of where do you believe it can go in 2015 and basically, with the synergies that we have and where we go, we're looking at it to be lower than inflation growth and in the flat range.
Hunter Keay - Analyst
Okay, great.
Does that imply 2% to 3% capacity growth, as well, right?
Derek Kerr - CFO
We haven't given out the capacity growth for next year yet, because were still doing that for the plan, but it would be in that range, yes.
Hunter Keay - Analyst
Okay, helpful.
I heard you guys say Maya is there.
Is she available to chat for a minute?
Doug Parker - Chairman & CEO
She is (laughter).
Hunter Keay - Analyst
Hi Maya.
A lot of people don't know you.
You're driving the integration from the IT side and I know from where we sit, it looks like you're doing a pretty good job.
I was wondering if you could help us out, think about some of the benchmarks that we can see externally, from the investor community, of what you're working on now,
[Red] system cutover is still a long way away, but what are some of the benchmarks that we should be looking for in the near-term that you're working on, you and your team.
And second to that, as well, is what leeway do you have as your integrating the systems, when you find things that you think are sub-optimized?
What leeway do you have to make changes now versus just picking what's good enough for the time being and punting it until a later date?
Maya Leibman - Chief Information Officer
Thank you for saying that I am driving the integration, please keep telling Doug that (laughter).
From an external standpoint, the things that you and our customers will see in the near-term probably surround the frequent flyer program.
We have made a lot of small changes with respect to that, so for example -- and on the websites.
So things that our frequent flyers can see when they come to the website, for example, the ability to earn and burn miles regardless of which carrier they are traveling.
So if you're an AAdvantage member, you can earn AAdvantage miles when you're traveling on legacy US Airways [metal].
In addition, a lot of things around how you use the functionality in the website.
So you can, if you come to AA.com, but you have a legacy US Airways ticket, you will -- and you come to check in, you will be gracefully taken over to the legacy US Airways check-in system, you will complete your check in, and then be returned to AA.com.
So there's a lot of things that we have done, absent having full integration of the systems, to make the customer experience better.
If you benchmark those against what United and Delta and others have done at this point in the merger, you'll find that it is comparable or in some cases a little bit ahead.
As we look forward, there's also a lot of things I should mention that are happening behind the scenes.
For example, we are working on things that you will never see like the integration of the revenue accounting systems.
A lot of the products -- both airlines brought to this merger about 700 systems, so collectively we have about 1,400, when both of us were running pretty big enterprises under 700 systems each.
We need to get back down to something.
So there's a lot of things that are happening behind this scenes right now to get back down to that footprint.
As far as your other question, we have a lot of leeway to make decisions right now about what positions us best for the future and we are making those decisions each day.
In general, we have decided to go with the legacy American Airlines system because that's really the path of least resistance.
These systems are generally larger, they're better able to scale, we have fewer employees to train, fewer customers to train, and that is the direction that we're going to take, but as everyone has said, the real heavy lifting happens next year.
Hunter Keay - Analyst
Awesome.
Thank you very much.
Operator
Duane Pfennigwerth, Evercore.
Duane Pfennigwerth - Analyst
You addressed my main one, which is trying to get you to talk about 2015 CASM, but that is already out of the box here.
Just in terms of merger synergies, we will stay on that theme, if we think about fleet arbitrage, mixing and matching US fleet in the AA network and vice versa, how far along are you in ramping those synergies and what is the run rate today?
Doug Parker - Chairman & CEO
We've made decent progress on it, but we really -- those kinds of synergies of mixing and matching the fleet, we're doing our first route swaps, start on August 19.
Actually, they've already started; they started in July.
So it is really early and the big dollar values for those won't come for another year until we get to a single operating certificate, because the biggest of values are wide bodies.
While we may do some of those, it's just hard to do it when they are two separate fleets.
The customer issues and the other issues make it hard to do fully.
Those are the ones that will take the longest to ramp up and really won't start in earnest until after we get to a single operating certificate.
Operator
Helane Becker, Cowen and Company.
Helane Becker - Analyst
Doug, I asked this question of one smaller network carrier and one non-network carrier, and as a larger carrier, maybe you can comment on this.
The TSA fee pretty much a lot, there's a lot of stuff going on with segment fees and so on, and that fee went up July 21.
So are you finding you're able to pass that on -- it's only been a couple of days, recognizing that -- are you able to pass that on to your customers.
What do you think, going forward, the impact if any will be?
Doug Parker - Chairman & CEO
Look, Helane, we always talk about these fees and taxes.
We are never able to pass them on.
The airline, our Airline, as all do, work really hard to generate as high revenues as we can and maximize revenue and do anything we can to keep our costs down to produce a profit, but it is not as though all of a sudden our costs go up and you see all the fares go up, because that has impacts on demand.
I don't know, and Scott can probably talk a little more specifically, but I can't imagine we would tell you, that oh yes, we have seen increases related to changes in this tax.
What I can tell you is the shift in how it's charged now is certainly a better way to assess this fee, by having it, rather than being per enplanement, it essentially just -- each time someone goes through security, as opposed to every time you go onto an airplane.
That, we think, is a better way.
It certainly shifts some of that burden away from the network carriers to those where we have connections -- to those that don't have as many connections.
At the end of the day, it is an additional tax to the industry, yet again, it is just one that's in this case being borne more by those that don't have connections than those that do.
Helane Becker - Analyst
Okay.
Thanks very much.
That was really all.
The other things you answered in your prepared remarks.
Thank you.
Operator
Dan McKenzie, Buckingham Research.
Dan McKenzie - Analyst
A couple questions here.
With respect to the 2015 CASM, the down 1% to up 1%, just to clarify, was that specifically non-fuel CASM or CASM.
I was getting pulled in different directions?
Derek Kerr - CFO
Non-fuel.
Dan McKenzie - Analyst
Non-fuel.
Then I was just wondering, related to that, what are some of the cost categories that might be offsetting natural inflation?
Or should we just be thinking of it as just generally efficiency, more ASMs absorbing your general cost structure?
Derek Kerr - CFO
I would say more efficiencies and synergies coming in, in 2015.
Dan McKenzie - Analyst
Got it.
Okay.
Then circling back on the capacity to Europe, reducing it by 3% versus the prior plan and reducing Latin American 5% versus the prior plan, when will the cuts be uploaded to the schedules data?
Are they already there?
And when do these cuts phase in exactly?
Just lastly, tied to that, what was the plan initially?
Is it really what is in the schedules today and do we just take it off of that?
Doug Parker - Chairman & CEO
They are not in the system yet.
I'm not sure the exact date they will be in the system.
They start some of them as early as the back half of August.
Some of those will be a day a week cancellations that we will put in place.
We were planning across the Atlantic about 5% and this will get us down to about 2% and to Latin America, it was about 5% and it will get us down to flat.
Dan McKenzie - Analyst
Got it.
Scott, just tied to that, your partner British Airways, of course, is growing pretty aggressively.
They're growing 9%.
What coordination do you have with British Airways at this point and have they commented on their plans looking ahead to this winter?
Scott Kirby - President
They have not yet commented, but they have been earnings call next Friday and I suspect they will comment on their capacity plans at that time.
We have at least in the last six months started to develop a pretty close working relationship.
SkyTeam has been at this longer and has a more mature working relationship where they really do sit in the room jointly and work on capacity and revenue management issues.
We have started that with IAG.
It's not just British Airways, it is also Iberia and Finnair.
But we have started that a little behind, but we are ramping up pretty quickly, and as we move into 2015, you will see a much more consolidated view on capacity, a more clearly consolidated view on capacity, and we will have worked for it together, jointly, to develop those plans.
For the cuts that we are doing in the back half of the year, actually we worked pretty closely with IAG on those as well, but you'll see more of that in 2015 and that is an opportunity for both of our companies.
Dan McKenzie - Analyst
Okay.
Thanks.
That will do it for me.
Operator
John Godyn, Morgan Stanley.
John Godyn - Analyst
Derek, just in the context of a lot of these balance-sheet-related announcement and the capital returns plan, I was hoping you might lay out, maybe some longer-term metrics or ways of thinking about both the debt balance, the minimum cash balance, long-term thought processes around capital returns to investors.
Whatever you're willing to offer, just as we do our longer-term modeling because this is clearly a major change and a great one for the Company?
Doug Parker - Chairman & CEO
John, this is Doug, I'll start a little and Derek can chime in.
Our goal is to maximize return on investment capital to maximize profitability.
Not to say that we don't have projections and targets that we want to go hit, but we are reluctant to go give targets because a bit of a concern is that, that doesn't push us as hard as we should be going and that we can do even better than just setting at target and then suggesting once we get there, we're going to do something differently than try to produce the best results we possibly can.
What you see from us today is indicative of what you should expect to see, which is an Airline that knows that we have a lot of work to do in terms of getting the integration done, understands it's going to take some capital, understands that we need -- if we're going to go build the greatest Airline like we plan to -- we need to make sure that we are taking care of our people, taking care of our customers, but also taking care of our investors.
And to the extent we do that and determine we have enough cash to take care of our customers and our employees, that our job is to return it to investors, both debt and shareholders.
What I expect is, you will see us do more and more of this over time.
This isn't a one-off situation.
This really is an indication of how transformed this Business is, that we are all confident enough to be doing things like this and we'll just keep doing more and more in that.
But our goal is to be doing better at this than anybody else.
Like I say, rather than giving you set margin targets and set return on capital targets, our goal is to go be higher than anybody else.
John Godyn - Analyst
Got it.
That's helpful color.
Just on a separate topic, Doug, and maybe Scott, there was -- when we think that the synergy outlook over the next couple of years, there was this initial bucket of low-hanging fruit that you identified earlier in the year -- an overbooking model, rebanking of some hubs, which I know is still in front of us.
I was just hoping that you could update us maybe on the more near-term timeline for what's rolled on, what still has to roll on, as were bridging this gap, before a lot of the really hard work on integration occurs deeper into 2015?
Scott Kirby - President
On the things that we talked about earlier, there were three big ones.
One was putting more seats on the airplane.
That has started, but not a lot done.
The 787s haven't even started yet.
Really that's something that will be happening starting in earnest at the end of the summer and going all the way through the end of 2015, actually, to get the whole fleet done.
Second thing that we identified was rebanking the hubs.
The first hub to be rebanked is Miami; that will go into effect August 19, so clearly none of that is in the numbers yet.
Dallas and Chicago will go into effect -- we are currently targeting the end of March of next year.
Then the third one is variable scheduling, which is pulling some capacity out of peaks and flying more in the peaks.
That really hasn't started at all yet and will start in the fourth quarter of this year, although it will only be in its infancy, so certainly won't be fully at steady-state.
Those are the three things that we talked about and really none of those have kicked him in earnest yet, but they are coming.
There's a lot of smaller things that we have already done, that I don't think we've talked about on earnings calls, but bag fees and other things, that Are already flowing through in the numbers.
So there's a lot of things that are in the numbers, but the big ones that we've talked about on the earnings calls haven't started yet.
John Godyn - Analyst
It sounds like fourth quarter is a big quarter for that and is the annualized impact still this hundreds of millions of dollar number that you disclosed earlier in the year or has it gone up for one reason or another?
Scott Kirby - President
We haven't changed the number in our official guidance, but everything we've done makes us feel increasingly confident that we will achieve or exceed those numbers, but we haven't officially changed the guidance.
John Godyn - Analyst
Got it.
Doug Parker - Chairman & CEO
John, it's Doug again, there's one point that you ask that I missed that I should come back and get to -- it's important and somewhat interesting -- which is the leverage ratios.
That's one of these, again, where certainly, we want to work to, given where the balance sheet now is to delever, and you're seeing do some of that in the announcement today.
But it's also really important to understand that in our business, if you simply just go target leverage ratios or credit ratings, you would be making some really inefficient decisions for your company.
And that's due to the fact that aircraft debt, which is the vast majority of all airline debt, because, at least today, you can get so incredibly efficiently through EETCs, certainly the A and B tranches, that because the airplanes, of course, can be moved, and therefore very little [to do] with the underlying credit of the Company and a lot to do with the [fact] the asset itself.
Anyway, if all you were doing is targeting a debt-to-equity ratio, it would encourage you to do things like pay cash for aircraft, which may not be in the best interest of the Firm at all, because as we delever that way and the credit rating goes down, nothing happens to our cost of capital.
Indeed, it doesn't change a bit and we are not providing -- we are able to borrow at rates below the cost of capital.
Anyway, another one of these things, it's just another indication that, if it's not clear, we are not the biggest fans of setting targets for the sake of setting targets.
We know what our job is and we are going to do it and plan to do it really well.
We will produce results, but we're not going to try and run the Company for debt-to-equity ratios or anything other than just being the best we possibly can be in things like return on capital.
John Godyn - Analyst
It's been working so far.
Thanks.
Operator
Joe DeNardi, Stifel.
Joe DeNardi - Analyst
Derek, I'm wondering if you could, just given all the debt reduction efforts here, if you could just put into context, without setting a target obviously, what that puts the interest expense looking like next year?
Or if you have a longer-term thought on where you want that to be?
Derek Kerr - CFO
We have a guidance right now that interest expenses is going to be about [$0.0855] for this year, so that is the guidance that is out there for today.
That all depends on exactly what Doug just talked about is, what are we going to do.
We have a fair amount of aircraft coming in and we have a fair amount of unencumbered aircraft today, so it depends on what financing activities we will do in the near future.
Having it -- what you will see is, because of us having capital commitments of over $5 billion worth of aircraft coming in for the next few years, you'll see the debt level stay pretty much the same, but you'll see a lower cost of capital as we are able to finance it at better opportunities.
If I took that equation, you'd say it would be less than it was this year and driven down from an interest expense basis, but driven more down by rate than it's driven by debt reductions.
Joe DeNardi - Analyst
Okay.
Makes sense.
Thanks.
Operator
[Savi] Syth, Raymond James.
Savi Syth - Analyst
On the Latin America, I just wanted to get a sense of, where are you seeing the weakness?
Is a concentrated in Brazil or any specific region outside of the reductions that are obviously happening in Venezuela?
Scott Kirby - President
Venezuela is the worst region, the worst part of Latin America.
Then Argentina is probably second and has some macroeconomic weakness.
Brazil has been weak, but that's largely a World Cup effect and we've actually seen all of Latin America in the couple of weeks following the end of the World Cup actually start to bounce back.
The rest of Latin America -- the rest of South America is pretty strong.
The Caribbean and Mexico are actually, on a revenue basis quite strong, but there is huge capacity in growth in some of those markets -- markets like Cancun and Montego Bay with capacity up 25%.
So RASM will be down in those markets, but revenue growth of 20%.
So those markets are strong, really Venezuela, Argentina is a little weak, Brazil is a little weak, but Venezuela is the real story in Latin America.
Overwhelms everything else.
Savi Syth - Analyst
Understood.
And then, just closer to home, I know as you go to the fourth quarter, it seems like that there's a lot of capacity just being added to both the DC markets, as well as Dallas, because of the [slot] gains by some carriers and DFW with the Wright Amendment.
What are you seeing, early stages.
on fares and the impact of these capacity increases?
Scott Kirby - President
It's really too early for us to see any impact.
We don't see anything in our numbers yet that's identifiable, but we know there will be an impact from both of those.
The Wright Amendment impact will be larger than in DC, but we aren't seeing anything yet.
It's three months before Southwest -- before the Wright Amendment goes away, so it's just really too early in the booking curve to tell anything.
Savi Syth - Analyst
Understood.
And in Dallas, are there other markets that you've added that maybe help offset the impact there, or--?
Scott Kirby - President
Where were going to be impacted is in some of the Dallas local markets.
I think we'll still do quite well, an Dallas is a fantastic hub, we will still do really well in the markets that we serve.
We're going to have a much better pattern service really in all of those markets for frequent customers, which they care about.
We have a much better frequent flyer program, which the elite and frequent traveling business customers care about and we're going to compete aggressively with Southwest.
But just when you add more capacity in any market, it obviously has some impact.
We have grown DFW a little, although our biggest growth, actually, with a lot of ASMs has been new service to Shanghai and Hong Kong.
But we aren't explicitly trying to replace markets or anything.
We're going to compete with the strength of our great frequent flyer base in one of the best hubs in the world, a great customer base, and that's what were going to compete with.
Savi Syth - Analyst
Understood.
All right.
Thank you.
Operator
Thomas Kim, Goldman Sachs.
Thomas Kim - Analyst
What are your thoughts on forming strategic financial partnerships with other carriers, for example in Asia, where you're building out your franchise.
Obviously, one of your competitors has done that and it seems to have been beneficial, both financially and operationally, and particularly to LatAm.
So I'd be curious as to how you're thinking about your Pacific strategy in terms of growing and building it over the medium-term?
Scott Kirby - President
We already have a great joint venture partnership with [JA] and we think that they are fantastic partner.
To the extent that there are opportunities to add others to that, we are open to it, and we think about it, and talk about it.
No specifics that we're going to talk about on the conference call, but it is something we would want to do jointly with the good partner that we already have in Asia.
Thomas Kim - Analyst
Okay.
Thanks for that.
Then, just switching topics, on the single op certificate, can you give us an update as to the timing?
I know that you said that it would take roughly about a year or so?
Is it first half next year or second half and can you just post us all in terms of how that's -- those discussions are progressing?
Robert Isom - COO
Hi, this is Robert Isom, Chief Operating Officer.
We're making great progress and working very cooperatively with the FAA.
We have the single operating certificate process really broken down into nine chunks and we're midway through the process right now.
Based on the timing right now, we would expect some time late second quarter or shortly thereafter to be in position to work with the FAA on getting a single operating certificate.
Thomas Kim - Analyst
When that happens, how long will it take for us to start seeing the operational impact with improved synergies [with things of a salt metal] and staffing?
Robert Isom - COO
The good thing about the single operating process is that we'll see benefits all along the way.
It's not going to be like a light switch.
That said though, there are a number of things that really touch back to what Maya had talked about earlier.
They are really dependant on when we can get our systems aligned.
As Maya had said, getting to a single reservation system, that's something that is late next year, hopefully, and that will really facilitate a lot of getting our groups together at the airports and facilitating a lot of the other work that we can do in a more efficient manner.
Thomas Kim - Analyst
Great.
Thank you.
Operator
Darryl Genovesi, UBS.
Darryl Genovesi - Analyst
Can you just help us frame the opportunity set across the Pacific and I will refrain from asking for a target.
But you're underrepresented in the region, so just wondering if you can quantify, in terms of how much you think you can profitably grow the Pacific region as maybe a percentage of total system capacity and then whether or not you think you need to buy more wide-body aircraft in order to get there?
Scott Kirby - President
To start, we have an awful lot of wide-body aircraft on order and there is growth contemplated in the wide-body order to China, so I don't think we need to buy more airplanes to Asia to do that.
There are possible opportunities in Asia.
We don't have a target, and aren't going to set one.
Our growth will be predicated on making the existing flying we have in the new routes that we have added possible, which will give us the confidence to continue on and adding new routes.
But we are going to be focused on making what we currently have successful, and once that's successfully, that gives you the ability to grow.
So our growth will be not on a target, but will be dependent upon how well we do in the region.
Darryl Genovesi - Analyst
Okay.
So no real view on how big that might be.
Maybe I will try another one.
On your labor cost, you've characterized the synergy here as $400 million as that steps up, but when I look at your labor cost and add $400 million to it, per ASM, that still 15%ish percent below Delta and United on a per ASM basis.
Just wondering if maybe you can help us reconcile what that reported labor cost number looks like versus your peers and what the biggest differences you think there are between you guys and your nearest peers?
Scott Kirby - President
We would have to take some time to try to reconcile that with you.
I've never heard of anyone talking about labor cost per ASM.
It's not terribly -- it's not the right metric.
If you have 138 seats on and A350 and pay your pilots exactly the same as someone else that flies with 150 seats on an A350, you have a 9% difference in labor cost per ASM even though your labor cost is exactly the same.
We look at labor costs [black hour] by equipment type and we would have to do something more detailed to reconcile with you.
We do think our costs are a little below where others are and moving to get to the same levels as the other, as we complete the integration, and have profitability potential that's equivalent to an airline like Delta, but the 15% number is wrong.
It's probably because you're looking at it on an ASM basis.
Darryl Genovesi - Analyst
Okay.
Thank you.
Operator
(Operator Instructions)
David [Cohen], Associated Press.
David Cohen - Media
I wanted to ask a Tel Aviv question, and very simple, was the resumption of flights, was this a joint decision?
Did all three of the US carriers decide one-for-all, all-for-one, if one of us is going to go back, we're all going to go back in there?
Robert Isom - COO
David, no, the fact of the matter is we've been evaluating the situation in Tel Aviv for some time.
We do all the time, and of course, the precursor to resuming service was the pull down of the NOTAM by the FAA, which was done last night.
We reviewed the situation and are pleased to fly our scheduled service that's going out tonight.
And of course, the security and safety of our passengers and employees are first and foremost, and we evaluate internal, external sources, as well as working with the government to make the decision to do what's right.
Doug Parker - Chairman & CEO
This is a Doug, David, we obviously, as Robert just said, we make independent decisions, as do they, although it shouldn't be surprising that we all came to the same conclusion.
This is a really competitive business, but we don't compete on safety.
None of us would do anything that we thought was remotely putting any of our employees or customers at risk and we've all been working with the FAA and been working with each other and everyone has come to the conclusion that it's entirely safe.
And if we hadn't come to that conclusion, the others wouldn't have come to the conclusion either, because there are no degrees of this amongst industry.
We all put it is as our top priority and no one's more adamant about it than anyone else.
It's top of mind for everyone in the business, so it doesn't surprise me at all that everyone came to the same conclusion, because the facts are the same.
David Cohen - Media
Understood about the safety.
I just wondered, did you all talk before you -- as you developed your decisions?
Doug Parker - Chairman & CEO
Absolutely not.
It's possible, of course, that others might have come to a different conclusion with different facts.
We would not have decided to go if we didn't think it was perfectly safe independently.
David Cohen - Media
Right.
Thanks so much.
Operator
Ely Portillo, Charlotte Observer.
Ely Portillo - Media
You guys mentioned in your earnings release, specifically, the four new flights to Europe from Charlotte and the seasonal service.
I was just wondering if you can give any details on how those are doing and whether you think those will make it for, a, their full-length MP, and b, next year, given these less aggressive trans-Atlantic expansion you're talking about?
Scott Kirby - President
I'm not going to give specific route commentary, but given the double-digit capacity growth across the Atlantic, it's pressure all routes, and new routes are generally the most marginal of routes, so they've been under more pressure.
So they've underperformed what we'd hoped they'd do.
That doesn't mean they won't come back next year, but they've underperformed, not because the routes have done poorly, but just because there's been 10% capacity growth across the Atlantic at an industry level.
Ely Portillo - Media
Yes.
Another thing I noticed in yours and your competitors' releases was load factors continuing to increase, especially domestically.
Have you guys gotten any negative feedback from passengers?
Do have any concerns about that hitting a wall going forward or is there still room to grow load factor?
Scott Kirby - President
Our goal would be to run 100% load factor, but I don't know of any feedback that's anything different than normal about load factors.
We are probably near what is a structural peak because busy flights are 100% full, but then you have flights like the shuttle markets that run at 50% load factors and you're never going to turn a shuttle market into 100% load factor.
You have seasonal issues and early flights, late flights.
So we are probably near a peak and load factors really aren't growing.
In fact, ours may have even been down slightly in the quarter.
Ely Portillo - Media
Yes, your overall was, but your domestic was up.
Scott Kirby - President
We are near a peak on what's achievable on load factors.
Doug Parker - Chairman & CEO
I would just add Ely, the high load factors in theirselves are feedback from customers.
What that means is there's a lot of demand for the product and there are a lot of people that want to fly and we are happy to meet that need.
Ely Portillo - Media
Yes.
Great.
Thank you, guys.
Operator
Mary Grace Lucas, CNN.
Mary Grace Lucas - Media
Back to Tel Aviv, just briefly, can you guys talk about internal discussion that you have over the flight ban, how insurance plays into it, and how also you factor safety into that question?
What details can you give us about how you discuss a decision like this?
Robert Isom - COO
Mary, it is Robert again.
Again, this is not the first time that we've dealt with a situation in a region of the world or someplace that we fly.
We constantly monitor any threats in the system, whether they be civil unrest or issues with thunderstorms or at the end of the day, things that may be interrelated to FAA mandates.
We are on constant alert and we have our own internal security group that monitors all situations.
We have external advisors and then of course we have a government relations team that stays in close contact with the State Department, with the FAA, and a number of other government agencies.
We collect all of that information and at various levels within the Company analyze and use that information ultimately to make recommendations on what's best.
Of course, the work doesn't stop there.
We're certainly mindful of our customers and our employees, but we're also very concerned about our pilots and flight attendants that fly these routes and we consult with them and the labor unions as well to make sure that we are all coordinated when we make decisions.
It's exactly the process we went through this time; it's the process we will go through again and we're set up to do that on a regular basis.
Mary Grace Lucas - Media
But speaking less generally, speaking more about this particular instance, can you talk about some of the internal discussion that you had?
Also can you prove that flights are safer today than they were yesterday?
How can you be sure?
Robert Isom - COO
Mary, again, I went through the process that we go through, and again, we get information, and we have very good sources, and of course rely on the government, as well.
That's how we go about making our decisions so we feel very comfortable with the information that we have right now, that we are doing the right thing, and feel very confident that our employees and our customers are safe.
Mary Grace Lucas - Media
Was there any one factor that changed from yesterday to today that had a heavy influence in this decision, other than the pulldown of the NOTAM?
Robert Isom - COO
The NOTAM was pulled, Mary, and that is about all that we want to talk about it.
Operator
Mary Schlangenstein, Bloomberg News.
Mary Schlangenstein - Analyst
Carrying things a bit with the weakness in some of the international areas.
I wanted to ask you, if you look out, at least into the near term future, is there anything that you see that might threaten that domestic strength?
In terms of the economy or fuel prices or anything like that?
Or do you expect it to continue strong for some time?
Scott Kirby - President
There's nothing that we see.
As far out as we can see, we expect the domestic environment to remain strong and I would even say, the international environment is strong.
When you look out, you have 10% capacity growth across the Pacific.
We have even higher capacity growth and we are going to have RASM up.
That is huge revenue growth.
It goes across the Atlantic, where you've got 10% capacity growth.
We are going to have RASM down slightly, but that means revenue and demand is growing close to double-digits.
Really the only part of the world where there is weakness is Venezuela, at least significant weakness.
I don't see anything that's going to change it domestically.
You rarely see these things coming in advance, but it feels pretty good right now.
Mary Schlangenstein - Analyst
Scott, can I just ask, in a newsletter to employees, Doug talked about the wide-bodies that will be coming in the future and that you may use them for some international growth versus replacement and you mentioned that earlier.
Do you have ideas already where you're going to place some of those planes?
Where do you see your future longer-term growth?
Will we see you go into some new countries or anything like that?
Scott Kirby - President
We have a long list of potential markets that we've looked at and that we think are going to be good growth potentials, but we constantly -- and some of those are new countries and some of those are new cities and some of those are new routes to existing cities that we already serve.
But we constantly adjust that based on what's happening in the demand environment, so we cannot announce anything yet until we get to the point where we are actually ready to load those flights.
We do think that, over the long term, there are international growth opportunities.
In the short to medium term, we need to have time to let demand catch up with the capacity.
Again, demand is strong, but capacity growth has been even higher.
We need to let demand catch up with capacity before pursuing some of those growth opportunities, but there's a lot out there that we're going to have over the coming years.
Mary Schlangenstein - Analyst
Thank you.
Operator
This now concludes the question-and-answer session.
Doug Parker - Chairman & CEO
All right, thank you everyone for your interest, and any further questions, please let us know.
But we are now adjourned.
Thanks, everybody.
Operator
This now concludes the presentation.
Thank you for your participation.