American Airlines held its third quarter earnings call this morning. There were several news items included today beyond just the airline’s financial performance. And there was a greater-than-normal amount of ‘color’ on the airline’s strategy going forward.

1. There aren’t many assets left to burn. American reports higher pro forma numbers for unencumbered assets than the market will probably actually provide them funds against. American will sell $1 billion more in stock ‘at the market’ though the timing of this hasn’t been announced.

2. They’ve got pro forma $15.6 billion in liquidity – that includes $7.5 billion in CARES Act subsidized loans. Excluding government support they’re down to $8 billion, the level JP Morgan Chase says American would need to file Chapter 11 (with nearly all their assets of value specifically pledged they may have to fund their own reorganization). Of course they’re pledging AAdvantage to the government, rather than the market as United and Delta have done.

3. American has been burning more cash than competitors – they say $44 million a day in the third quarter, compared to United’s reported $25 million a day. On CNBC this morning Doug Parker said they’ve cut costs as much as they can and improvement has to be driven by revenue. That isn’t really true of course since they continue to spend money retrofitting their domestic fleet of planes to squeeze in more seats and remove seat back video screens. That continues – the airline reports that 40% of 2021 capital expenses will be retrofitting planes.

4. The airline is retiring all of its Airbus A330s, so will operate an all-Boeing widebody fleet. Boeing has the better widebody product, while Airbus currently has the better narrowbody one (although may be willing to sell 737 MAXs for less…). American says this means only 737s (-800 and MAX), A320 ‘family’, Boeing 777s (-200s and -300ERs), and 787s (-8 and -9) in their fleet. It’s more complicated than the ‘only four aircraft types’ they’re promoting. Even the A321s have more than a single configuration, and not all of their Airbus narrowbodies are certified for overwater. President Robert Isom reports about 23 different fleets.

5. American says they’re going to be more efficient than before, but will still be cost-uncompetitive. They point to 30% management reduction, retired planes – but as their daily cash burn shows their costs are still higher than competitors, and since they didn’t successfully get senior unionized employee to take early retirements the way other carriers did they will have higher per-trip employee costs (with everyone at or near the top of the pay scale) and they’ll have higher debt payments.

6. Vasu Raja reports American has a 30% revenue premium to the industry at largest hubs. It seems odd to say that they generate a revenue premium if you ignore where they perform badly. And dropping capacity at their underperforming hubs will reduce both the premium they can earn elsewhere and the ability to generate credit card revenue in those markets. Their solution is partnerships like Alaska and JetBlue but it remains a bet that those will seamlessly replace American’s own flying and still generate interest in their co-brand card, which is crucial for revenue.

7. South America network should be restored by the New Year. Vasu Raja made that broad claim on the earnings call. In a question and answer with employees posted to the airline’s intranet on Monday he caveated the return of South America as if flying remains on trend then by December they’d have “most of our South American flights flying again.”

8. Major priority is to work ‘more closely’ with co-brand partners to drive increased card spend, and revenue hasn’t dropped ‘as much’ as airline revenue during the pandemic. They don’t offer the specifics or the positives that Delta does about its co-brand performance.

9. Thanksgiving and Christmas holidays should mean far more air travel. People are returning to life despite Covid case growth, and past holidays have spiked. More than half of flights for Thanksgiving are being yield managed – holding back seats for sale at higher prices.

American has real challenges ahead of them, with more debt and higher costs. As demand recovers they’ve got a couple of strikes against them compared to their competitors. They also have great opportunities in their airline partnerships and domestic-heavy emphasis compared to United and Delta. This is going to be incredible to watch.