Right now, we are looking at oil prices on a daily basis as is your share price. Before we get there, though, I want to start with just consumer demand. There have been a lot of questions about how resilient consumer demand actually can be as this conflict goes on. What have you seen so far?
People want to travel. I think that there's still some consciousness that travel is still a bargain. Really, we're just getting back to yields that we had in 2014 and 2019. So that sense of travel is a bargain, I think, is apparent. And what we've seen tremendous demand in the first quarter, American Airlines year-over-year revenue improved 11%, and we're forecasting revenue to improve 15% year-over-year. And that's some additional capacity in there, but a lot of unit revenue performance as well would suggest that people are finding great value in travel.
Where is the demand coming from? Is it leisure? Is it business? Is it both?
It's all of the above. And it's business, it's leisure, it's domestic, and also international is still leading the way. Premium is still outpacing leisure, but I really like what I see. And in terms of capacity, I think that it is responding to market dynamics. I think that the industry is stretched in terms of margins. And at least for us, I like what I see in terms of how we're set up.
You say capacity is adjusting. Does that mean capacity is coming down and prices going up?
Well, we've pulled a little capacity out, and we'll, of course, take a look at what's happening later in the year. We're very margin conscious. I mean, at the end of the day, that's what we're in business to do. But right now, demand is very robust. And as we look at closing out the second quarter, we're going to close out the second quarter in a really strong fashion.
Have you seen any businesses pull back on business class travel? We've heard some companies start to discuss that type of measure just because of the cost. Have you seen anything like that?
Not at American. Business travel is up 13% year-over-year, and I think it's really responding to some of the things that we've been laser-focused on. We have four pillars. One is elevating customer experience, growing back our network, really making sure we're driving premium revenue, and then leading in loyalty. And all of those are resonating with our customers right now. And American has done better year-over-year on a quarterly basis the last five out of six quarters in terms of unit revenue production. So I like what I see.
You've talked about how there's an estimated 4 to 5 billion dollars of costs for 2026 as a result of fuel prices being elevated. How much of that can you pass along to customers?
Well, it's a big shock right now, and I am very confident that as things even out, that will translate into gains for American and our shareholders. If you take a look back at the first quarter, we were projecting solid profitability in the first quarter, which is usually a tough quarter for us, but for the shock in fuel prices. And the same thing, think about in a year where price of fuel has spiked 4 or 5 billion dollars, we're still projecting the same type of profitability that we had last year. That means good things. In terms of what we hold, I really do think that there's some stickiness to a lot of what we're doing, and it's upside that's unique to American. But there's a rising tide as well. Everybody's got to be margin conscious. And, of course, there's been some struggles in the business among those that are serving the lowest cost demand or the lowest revenue demand.
Just to sort of put a bow on that. In other words, when you are passing along price increases, do consumers push back, or are they remarkably resilient and just accepting it because that is the status quo across the industry?
No. We're trying to give our customers something that they really value. So, you know, I know that our basic economy product offers incredible value to those who avail themselves of it, but we're giving people buy-up opportunities as well. And from a product perspective, you name it, flagship suites, the new flagship lounges, opening up new routes, all of those things appeal to our customers in a way that they say, hey, I can find real value in what American's offering.
