CNBC Exclusive: CNBC Transcript: American Airlines CEO Doug Parker Speaks with CNBC’s Phil LeBeau on “Fast Money Halftime Report” Today

WHEN: Today, Friday, July 28

WHERE: CNBC’s “Fast Money Halftime Report”

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with American Airlines CEO Doug Parker on CNBC’s “Fast Money Halftime Report” (M-F 12pm ET) today, Friday July 28.

Following is a link to the interview on CNBC.com: http://www.cnbc.com/video/2017/07/28/american-airlines-ceo-doug-parker-were-fighting-like-crazy-on-qatar-airlines.html?play=1

All references must be sourced to CNBC.

SCOTT WAPNER: SWITCHING GEARS TO AMERICAN AIRLINES NOW. SHARES LOWER, DESPITE A BEAT ON THE TOP AND BOTTOM LINE. OUR PHIL LEBEAU IS LIVE IN DALLAS NOW WITH THE CEO OF AMERICAN AIRLINES, DOUG PARKER. PHIL.

PHIL LEBEAU: THANK YOU VERY MUCH, SCOTT. DOUG, THANKS FOR JOINING US HERE ON “HALFTIME REPORT.”

DOUG PARKER: ABSOLUTELY. THANKS FOR BEING HERE.

LEBEAU: LET’S START OFF WITH Q2 NUMBERS. YOU BEAT THE STREET ON THE TOP AND THE BOTTOM LINE. $1.82 COMPARED TO $1.87. WHAT STOOD OUT TO YOU IN THE SECOND QUARTER?

PARKER: WE HAD UNIT REVENUE GROWTH OF ALMOST 6%. IT’S MORE THAN THE INDUSTRY IS UP. IT’S EVIDENCE TO US THAT THE INVESTMENTS WE’RE MAKING IN OUR PRODUCT AND OUR PEOPLE ARE WORKING AND THE CUSTOMERS ARE SHOWING UP. 6% UNIT REVENUE GROWTH WAS, I THINK, THE HIGHLIGHT.

LEBEAU: WHAT I THINK IS INTERESTING IS BASIC FARES. WHEN YOU GUYS INTRODUCE THESE, A LOT OF PEOPLE SAID, “HERE YOU GO. YOU’RE UNDERCUTTING YOURSELF, YOU’RE GOING TO BE HURTING YOUR MARGINS IN THE END.” BUT YOU’RE NOTICING THAT ABOUT HALF OF THE PEOPLE WHO BUY ONE OF THESE BASIC FAIRS HAVE DECIDED, “YOU KNOW WHAT – I’M GOING TO UPGRADE TO THE MAIN CABIN SEATING WHERE THERE ARE MORE OPTIONS FOR ME.” DID THAT SURPRISE YOU THAT YOU WERE GETTING THAT MUCH TRACTION THERE?

PARKER: NOT SO MUCH. IT’S ABOUT WHAT WE EXPECTED. INDEED, THAT PRODUCT IS THERE FOR TRULY PRICE-SENSITIVE CUSTOMERS THAT ONLY CARE ABOUT PRICE AND THERE ARE OTHER PRODUCTS THAT YOU KNOW, PEOPLE ARE WILLING TO PAY A LITTLE MORE FOR. WE’RE TRYING TO MEET THE CUSTOMERS NEEDS AND DESIRES, SO WE DO HAVE A PRODUCT THAT IS, YOU KNOW, REALLY, TO MATCH THE ULTRA-LOW COST CARRIERS THAT YOU CAN BUY. OUR PRODUCT WOULD BE BETTER WHEN YOU GET ON THEM. BUT IF YOU WANT ASSIGNED SEATING A DAY IN ADVANCE OR THINGS LIKE THAT, YOU BUY UP AND A LOT OF OUR CUSTOMERS PREFER THAT.

LEBEAU: WE’VE GOT MORE QUESTIONS ABOUT YOUR FINANCIALS. WE’LL GET TO THOSE IN A BIT. BUT A LOT OF PEOPLE WANT TO FIND OUT, WHERE DO THINGS STAND WHEN IT COMES TO QATAR AIRPORTS AND ITS DESIRE TO TAKE UP TO A 10% STAKE IN AMERICAN. WE KNOW THAT AFTER 4.75% – THE BOARD WOULD HAVE TO APPROVE THAT. WHERE DO THINGS STAND RIGHT NOW?

PARKER: NOTHING HAS CHANGED SINCE THE LAST TIME WE TALKED ON THIS. WE GOT AN INDICATION OF INTEREST FROM THEM. THEY NEED TO GO THROUGH HSR, TO GET APPROVAL. ALL WE KNOW IS THAT THEY HAD A 30-DAY — THEY HAD A FILING WITH 30 DAYS NOTICE. AT THE END OF 30 DAYS, THEY FILED YET AGAIN. I SUSPECT THAT MEANS THAT THE DOJ HASN’T YET GIVEN THEM AUTHORITY, BUT WE DON’T KNOW SO WE HAVENT HEARD ANYTHING FROM THEM SINCE.

LEBEAU: NOT TO BEAT A DEAD HORSE, BUT YOUR POSITION HASN’T CHANGED REGARDING THESE GUYS AND THE SUBSIDIES THEY RECEIVE FROM THEIR GOVERNMENT. NOT JUST THEM, BUT OTHER PERSIAN GULF CARRIERS AND THE IMPACT IT HAS. HOW INFURIATING IS THIS FOR YOU, AS YOU RUN A COMPANY BATTLING THESE GUYS?

PARKER: WELL  IT’S NOT INFURIATING — IT’S NOT FAIR. AND OUR JOB IS TO MAKE SURE THAT WE POINT OUT THAT ITS NOT FAIR AND DO EVERYTHING WE CAN TO STOP THEM FROM BEING ABLE TO EXPAND INTO OUR MARKETS AND TAKE AWAY AMERICAN JOBS. SO, WE’RE FIGHTING LIKE CRAZY AND WE’LL CONTINUE TO FIGHT. WE TERMINATED OUR CO-CHAIR WITH THEM SINCE THE LAST TIME WE TALKED, BECAUSE EVEN THOUGH THAT WAS HELPFUL TO SOME OF OUR CUSTOMERS, WE DIDN’T THINK IT WAS HELPFUL TO AMERICAN AIRLINES. SO, ANYWAY, WE’LL SEE WHERE THIS ALL ENDS UP, BUT THE REALITY IS, THOSE THREE CARRIERS ARE SUBSIDIZED BY THEIR GOVERNMENTS AND THEY’RE COMPETING AGAINST AMERICAN AIRLINES AND OTHER U.S. CARRIERS IN AN UNFAIR WAY AND IT SHOULDNT BE ALLOWED.

LEBEAU: I’VE GOT ONE LAST QUESTION AND STEVE WEISS HAS A QUESTION FOR YOU. THIS QUESTION HAS COME UP ON THE CONFERENCE CALL TODAY. SO MANY PEOPLE HAVE LOOKED AT THE AIRLINES AND SAY, WELL DO I LOOK AT PRASM – PASSENGER REVENUE PER SEAT MILE AVAILABLE – AS BEING THE METRIC THAT TELLS ME THE STRENGTH OF AN AIRLINE. YOU BELIEVE ITS TIME THAT WALLSTREET AND INVESTORS MOVE ON BEYOND THAT. THAT THERE ARE MORE IMPORTANT WAYS TO VALUE AIRLINES AND LOOK AT THE HEALTH OF THE BUSINESS. TELL ME ABOUT THAT.

PARKER: I THINK WE SHOULD BE VALUED LIKE OTHER BUSINESSES. YOU KNOW, LOOK AT FUTURE CASH FLOWS AND VALUE ON OUR EXPECTED FUTURE CASH FLOWS.  I THINK IF YOU DO THAT, WHAT YOU’LL SEE IS, WE’RE VERY MUCH UNDER VALUE. WHAT IT FEELS LIKE TO US IS THE MARKETS STILL REMEMBER THE AIRLINES OF OLD AND IS A LITTLE SKITTISH, AND NOT QUITE READY TO BELIEVE WHAT WE’RE PRODUCING TODAY WE’LL BE READY TO PRODUCE IN THE FUTURE, SO THEY LOOK AT SIGNALS.  THINGS LIKE UNIT REVENUES AND FOCUS ON NEAR-TERM SIGNALS AND OVERREACT TO THEM, WELL, IT SEEMS, TO US SO, THAT’S FINE. I MEAN, THOSE TEND TO BE BUYING OPPORTUNITIES. WE THOUGHT WE WERE UNDERVALUED BEFORE YESTERDAY SO NOW WE FEEL REALLY UNDERVALUED OVER THE LAST COUPLE OF DAYS, BECAUSE THE MARKET SEEMS TO BE REACTING TO SHORT-TERM REVENUE ISSUES, AS OPPOSED TO LONG-TERM CASH FLOWS.

LEBEAU: DOUG, I KNOW STEVE WEISS HAS A QUESTION FOR YOU. STEVE, GO AHEAD.

PARKER: YES, DOUG.

STEVE WEISS:  I’ VE OWNED YOUR STOCK SINCE IT WENT INTO BANKRUPTCY AND HAVE STAYED THERE. AND THAT WAS ACTUALLY A QUESTION THAT I HAD, BECAUSE I AGREE THERE’S STILL A TENDENCY TO VALUE IT ON THE OLD METRICS AND GET TOO SKITTISH AROUND CAPACITY ISSUES, WHICH ARE TEMPORARY. BUT LET ME ASK YOU ABOUT HEDGING. HEDGING USED TO BE A BIG THING, ALMOST EVERY AIRLINE DID IT. NOW ITS LESS OF AN ISSUE. SO THAT MEANS YOU HAVE TO HAVE A VIEW ON JET FUEL. SO WHAT WOULD CAUSE YOU TO GO OUT AND REALLY HEDGE AGAIN AND WHERE DO YOU SEE YOUR FUEL PRICES GOING, SINCE ITS SUCH AN IMPORTANT INPUT INTO YOUR PROFITABILITY?

PARKER: WELL, LOOK, IT’S AN IMPORTANT INPUT INTO OUR COST INTO DELIVERING THE PRODUCT AND AGAIN, WE NOW HAVE A BUSINESS, UNLIKE THE OLD BUSINESS, THAT REACTS AS OTHER BUSINESSES WOULD. IF OUR COSTS OF PRODUCTION GOES UP, YOU SHOULD SEE FARES GO UP, IF OUR COST OF PRODUCTION FALLS, YOU WOULD SEE FARES FALL. THAT’S LARGELY WHAT HAPPENED OVER THE LAST COUPLE OF YEARS, AS FUEL PRICES FELL, WE’VE SEEN A DECLINE IN YIELDS AND IF THEY INCREASE, I THINK YOU WOULD SEE AN INCREASE IN FARES, AS WE SHOULD. SO IT’S A MUCH MORE RATIONALE BUSINESS NOW WE DON’T FEEL THE NEED TO HEDGE, BECAUSE WE THINK WE HAVE A NATURAL HEDGE IN OUR REVENUE STREAM. AND IT TURNS OUT, IN MOST CASES, AIRLINES HAVE GOTTEN THEMSELVES BURNT PRETTY BADLY BY HEDGING, BECAUSE YOU END UP NOT MATCHING IT WITH YOUR REVENUE STREAM.  SO WE’RE COMFORTABLE WITH WHERE WE ARE. WE DO FEEL PRETTY GOOD ABOUT THE PROSPECT FOR FUEL PRICES AND WE’RE NOT THE EXPERTS, BUT WE CERTAINLY ARE INTERESTED. AND, YOU KNOW, IT DEFINITELY FEELS LIKE, YOU KNOW, ONCE OIL PRICES START TO RISE A LITTLE BIT, MORE CAPACITY COMES ON, THAT PULLS THEM BACK DOWN HOPEFULLY THAT REMAINS THE CASE. BUT IF IT DOESN’T, WHAT YOU’LL SEE IS HIGHER FARES FROM AIRLINE CUSTOMERS.

LEBEAU: DOUG PARKER, THE CHAIRMAN AND CEO OF AMERICAN AIRLINES, THANK YOU FOR JOINING US EXCLUSIVELY HERE ON “THE HALFTIME REPORT.”